Some readers complain that the world of finance gives them headaches; the Biohaven Pharmaceuticals IPO may prove that the opposite can also be true. In the pharmaceutical industry, headaches can be big finance. The Biohaven Pharmaceuticals IPO of 2017 hoped to raise US$125 million from its Initial Public Offering, selling 8.33 million shares at a price which would average at a US$15 per share. One of the many developing products in Biohaven’s extensive repertoire was a treatment for migraines, which by 2017 had reached Phase 3 pharmaceutical trials. As headaches and migraines, in particular, are common throughout the world and can be debilitating conditions, it might seem that the opportunity to invest in a company that developing what could be a commercially available remedy would be attractive. However, concerns were voiced in April 2017 that stymied the prospects for the forthcoming IPO. It was pointed out that the final results of the final clinical trials would not be known until 2018; that Biohaven was competing in this area against many other Pharmaceutical companies, and that the company shortly faced the prospect of making not only significant royalty payments but also significant milestone payments. Against this background, many analysts advised caution when it came to investing in Biohaven. It was felt that in particular, the upcoming milestone payments would have a significant effect on the company’s performance. To understand why we must make a brief diversion into the field of pharmaceutical research into neurological conditions, such as migraines, and hope that we do not acquire a headache in the process.
If you are wondering what a milestone payment is, and why it should have any effect on a Biohaven Pharmaceuticals IPO then consider that such a payment is simply a percentage of the fee that a borrower agrees to pay at a certain stage in the project in question. Biohaven is facing up to milestone payments of this kind. First, we should understand that Biohaven specialises in developing therapies based on two biological technologies; calcitonin gene-related peptides, known as CGRP and glutamate modulation. It is not, fortunately, necessary to know what these processes involve. It is enough for you to know that Biohaven licensed its CGRP products from Bristol-Myers-Squibb and its glutamate modulation product from Astra-Zeneca. These licensing agreements not only specify the milestone payments mentioned above, but they also stipulate that Biohaven cannot develop competitive treatments of its own until 2023. If the prospects for a Biohaven Pharmaceuticals IPO looked a tad uncertain in light of our earlier information which stated that clinical trials will not have produced their final, vital data until 2018, then the knowledge that this data will not be translated into marketable, saleable treatments until 2023 definitely explains why so many analysts have advised their customers firmly to avoid this IPO. Of course, it could be that Biohaven is in the process of developing a treatment for the migraines which afflict so many people all through the world and that the future for the company is bright and headache free. However, the indication is that Biohaven will have to wait a few years before this best case scenario could come into play.
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