Biohaven Pharmaceutical's European regulatory strategy faced a setback as the company withdrew its application for troriluzole in spinocerebellar ataxia (SCA) following communications with the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP). The news triggered a significant stock decline, reflecting investor concerns about the drug's regulatory pathway.
The withdrawal announcement comes at a challenging time for Biohaven (NASDAQ: BHVN), as investor sentiment has already been trending bearish in recent months. Market analysts note that many investors view U.S. approval for troriluzole in SCA as critical for the company's stock recovery.
RBC Capital Markets addressed the development in a recent investor note, acknowledging that the European withdrawal "puts additional pressure" on the U.S. approval process and explains the "outsized stock move" following the news. The firm estimates that a 6-7% share price decline is warranted based on this development.
Regulatory Context and Market Implications
Despite the setback in Europe, RBC Capital maintains its Outperform rating on Biohaven with a $61 price target, suggesting significant upside potential from current levels. The firm's analysis points to important contextual factors that may limit negative implications for the U.S. regulatory pathway.
"The EMA has been a stricter regulator on rare diseases of late compared to the FDA, which could limit readthroughs," noted RBC Capital in their assessment. This regulatory divergence between European and American authorities has been observed in several recent rare disease applications, potentially preserving Biohaven's prospects with the FDA.
Spinocerebellar ataxia represents a group of rare, progressive neurological disorders characterized by deterioration of the cerebellum and spinal cord, leading to impaired coordination, balance, and speech. Current treatment options are limited primarily to symptom management, highlighting the significant unmet need that troriluzole aims to address.
Pipeline Valuation and Investment Thesis
RBC Capital's analysis suggests that Biohaven's current share price fails to adequately reflect both the potential upside of a U.S. approval for troriluzole in SCA and the broader value of the company's development pipeline.
Troriluzole, a third-generation prodrug of riluzole, is designed to modulate glutamate, the most abundant excitatory neurotransmitter in the human body. The drug candidate has shown promise in addressing glutamate dysregulation, which plays a role in various neurological disorders.
Beyond SCA, Biohaven's pipeline includes several other clinical programs targeting neurological and neuropsychiatric disorders, providing multiple potential value drivers for the company beyond the immediate regulatory challenges with troriluzole in Europe.
The firm's $61 price target reflects confidence in Biohaven's long-term prospects despite the European regulatory setback, suggesting that current market reaction may present an opportunity for investors with a longer time horizon who believe in the company's broader clinical development strategy.
As Biohaven navigates this regulatory challenge, attention will now focus intensely on the FDA's upcoming decision regarding troriluzole for SCA, which represents a critical catalyst for the company's near-term performance and validation of its development approach in rare neurological disorders.
