Shares of Biohaven (BHVN -1.81%) are surging on Monday. The company's stock was up about 8% as of midday trading and had climbed as much as 10% earlier in the day. The move comes as the S&P 500 traded mixed and the Nasdaq Composite drifted slightly higher.
Shares of the clinical-stage biopharmaceutical company were rising after Biohaven announced a $600 million non-dilutive financing deal with Oberland Capital.
A big cash infusion
Biohaven revealed it has secured up to $600 million from the investment firm Oberland Capital Management. The deal includes an immediate $250 million with the remainder tied to regulatory milestones and strategic acquisitions. Critically, the deal is non-dilutive, meaning that Oberland doesn't get new shares -- a move that would reduce the value of existing shareholders' portfolios. Announced via press release, the deal provides "significant financial resources" to advance clinical trials and prepare for a potential FDA approval of troriluzole for spinocerebellar ataxia (SCA).
Troriluzole is Biohaven's lead candidate for SCA, a rare, fatal neurological condition with no approved therapies. Today's funding gives Biohaven significant runway to complete its late-stage development. The company is pre-revenue and relies on investment to develop its treatments; this cash allows the company to continue investing across its pipeline of drugs that includes treatments for oncology and immunology.
Biohaven is still seeking final approval
At around a $3 billion market cap pre-news, Biohaven isn't cheap for a pre-revenue biotech, but the non-dilutive $600 million infusion adds a big safety cushion. If troriluzole gains FDA approval, its valuation will make more sense. This is by no means a guarantee though, nor is any timeline. Regulatory setbacks remain a big risk. Still, its SCA treatment looks promising. If you have a high risk tolerance, Biohaven's stock could pay off.
