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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-38080
bhvn-20220630_g1.jpg
Biohaven Pharmaceutical Holding Company Ltd.
(Exact Name of Registrant as Specified in its Charter)
British Virgin Islands Not applicable
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
c/o Biohaven Pharmaceuticals, Inc.
215 Church Street, New Haven, Connecticut
 06510
(Address of principal executive offices) (Zip Code)
(203) 404-0410
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Shares, no par valueBHVNNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
1


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Small reporting company☐
 Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 4, 2022, the registrant had 71,494,798 common shares, without par value per share, outstanding.
2









Part I.     Financial Information

Item 1.    Condensed Consolidated Financial Statements (Unaudited)

Index to Condensed Consolidated Financial Statements (Unaudited)
Page
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021
Notes to Condensed Consolidated Financial Statements

1
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
June 30, 2022December 31, 2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$235,807 $171,945 
Marketable securities317,679 192,648 
Trade receivable, net352,449 308,269 
Inventory106,561 80,608 
Prepaid expenses100,360 88,838 
Other current assets61,485 33,946 
Total current assets1,174,341 876,254 
Property and equipment, net15,727 14,690 
Intangible assets, net75,112 56,438 
Other assets121,069 129,830 
Total assets$1,386,249 $1,077,212 
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable$64,149 $51,683 
Accrued expenses and other current liabilities545,307 420,019 
Current portion of mandatorily redeemable preferred shares62,500 62,500 
Total current liabilities671,956 534,202 
Long-term debt764,983 626,720 
Liability related to sale of future royalties, net388,027 367,645 
Mandatorily redeemable preferred shares, net180,213 155,737 
Derivative liabilities110,129 13,110 
Obligation to perform R&D services29,972 50,571 
Other long-term liabilities46,527 12,236 
Total liabilities2,191,807 1,760,221 
Commitments and contingencies (Note 15)
Contingently redeemable non-controlling interests— 60,000 
Shareholders’ deficit:
Common shares, no par value; 200,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 71,111,071 and 66,933,531 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
2,181,398 1,676,792 
Additional paid-in capital167,021 169,656 
Accumulated other comprehensive loss(5,811)(73)
Accumulated deficit(3,143,541)(2,585,755)
Total shareholders’ deficit attributable to Biohaven Pharmaceutical Holding Company Ltd.(800,933)(739,380)
Non-controlling interests in consolidated subsidiaries(4,625)(3,629)
Total shareholders' deficit(805,558)(743,009)
Total liabilities and shareholders’ deficit$1,386,249 $1,077,212 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenues:
Product revenue, net$193,954 $92,933 $317,544 $136,756 
Collaboration and other revenue
21,125 — 216,387 — 
Total revenues215,079 92,933 533,931 136,756 
Operating expenses:
Cost of sales
35,741 17,339 62,083 30,201 
Research and development218,480 77,428 337,579 184,539 
Selling, general and administrative250,455 170,057 477,698 329,580 
Total operating expenses504,676 264,824 877,360 544,320 
Loss from operations(289,597)(171,891)(343,429)(407,564)
Other income (expense):
Interest expense(17,114)(7,836)(34,330)(15,567)
Interest expense on mandatorily redeemable preferred shares(8,077)(8,042)(15,994)(15,985)
Interest expense on liability related to sale of future royalties(18,045)(14,499)(35,359)(28,007)
Change in fair value of derivatives(111,197)(1,490)(107,593)(1,700)
Gain from equity method investment
— — — 5,261 
Other income (expense), net
2,229 (3,051)2,310 (4,751)
Total other expense, net
(152,204)(34,918)(190,966)(60,749)
Loss before provision for income taxes
(441,801)(206,809)(534,395)(468,313)
Provision for income taxes
84 4,350 24,387 8,174 
Net loss(441,885)(211,159)(558,782)(476,487)
Net loss attributable to non-controlling interests
498 540 996 900 
Deemed dividend upon repurchase of preferred shares in consolidated subsidiary
— — (92,673)— 
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.
$(441,387)$(210,619)$(650,459)$(475,587)
Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. — basic and diluted
$(6.21)$(3.23)$(9.20)$(7.48)
Weighted average common shares outstanding—basic and diluted71,043,693 65,112,179 70,689,949 63,584,932 
Comprehensive loss:
Net loss$(441,885)$(211,159)$(558,782)$(476,487)
Other comprehensive loss, net of tax
(3,413)(129)(5,738)(34)
Comprehensive loss(445,298)(211,288)(564,520)(476,521)
Less: comprehensive loss attributable to non-controlling interests498 540 996 900 
Comprehensive loss attributable to Biohaven Pharmaceutical Holding Company Ltd.
$(444,800)$(210,748)$(563,524)$(475,621)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 Six Months Ended June 30,
 20222021
Cash flows from operating activities:
Net loss$(558,782)$(476,487)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash share-based compensation expense122,094 74,312 
Interest expense on mandatorily redeemable preferred shares— 15,985 
Interest expense on liability related to sale of future royalties35,359 28,007 
Deferred interest paid-in-kind on long-term debt13,037 5,649 
Acquisition of IPR&D asset93,747 — 
Issuance of common shares as payment for license agreement
1,779 4,243 
Change in fair value of derivatives107,593 1,700 
Gain from equity method investment
— (5,261)
Depreciation and amortization9,783 11,278 
Change in obligation to perform R&D services(12,326)(10,205)
Other non-cash items373 2,993 
Changes in operating assets and liabilities:
Trade receivable, net
(44,180)(48,526)
Inventory
(29,088)(19,046)
Prepaid expenses, other current assets, and other assets(35,273)(58,173)
Accounts payable12,466 5,085 
Accrued expenses, other current liabilities, and other liabilities125,738 35,730 
Net cash used in operating activities$(157,680)$(432,716)
Cash flows from investing activities:
Purchases of marketable securities(246,816)— 
Sales of marketable securities54,015 113,441 
Maturities of marketable securities62,893 48,852 
Purchases of property and equipment(2,393)(1,657)
Payment for intangible asset
(20,000)— 
Payment for IPR&D asset acquisition
(35,000)— 
Net cash (used in) provided by investing activities
$(187,301)$160,636 
Cash flows from financing activities:
Proceeds from issuance of long-term debt125,000 — 
Proceeds from issuance of common shares252,000 308,743 
Proceeds from obligation to perform R&D services— 100,000 
Proceeds from the issuance of series B preferred shares29,158 35,170 
Proceeds from exercise of share options
9,983 8,643 
Payments for term loan, finance leases, and other(6,224)(6,369)
Net cash provided by financing activities$409,917 $446,187 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,722)(189)
Net increase in cash, cash equivalents and restricted cash
62,214 173,918 
Cash, cash equivalents and restricted cash at beginning of period174,343 134,231 
Cash, cash equivalents and restricted cash at end of period$236,557 $308,149 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)

1.   Nature of the Business and Basis of Presentation
Biohaven Pharmaceutical Holding Company Ltd. (“we,” “us," "our," "Biohaven" or the “Company”) was incorporated in Tortola, British Virgin Islands in September 2013. We are a biopharmaceutical company with a portfolio of innovative product candidates targeting neurological diseases, including rare disorders. The Company's lead product, NURTEC® ODT (rimegepant), was approved by the U.S. Food and Drug Administration ("FDA") in February 2020, for the acute treatment of migraine and was approved for the preventive treatment of migraine in May 2021. NURTEC ODT is the first and only calcitonin gene-related peptide ("CGRP") receptor antagonist available in a quick-dissolve orally dissolving tablet ("ODT") formulation that is approved by the FDA for both the acute and preventive treatment of migraine in adults. In April 2022, the European Commission approved rimegepant 75 mg (available as an ODT), for the prophylaxis and acute treatment of migraine. VYDURA™ (rimegepant) will be the commercial name for rimegepant in the EU. Our Neuroinnovation portfolio includes product candidates based on multiple mechanisms — CGRP receptor antagonists, glutamate modulators, myeloperoxidase inhibition, Kv7 ion channel activators ("Kv7"), and Myostatin inhibition — which we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large and orphan indications.
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, but not limited to, the risks associated with developing product candidates at each stage of non-clinical and clinical development; the challenges associated with gaining regulatory approval of such product candidates; the risks associated with commercializing pharmaceutical products for marketing and sale; the potential for development by third parties of new technological innovations that may compete with the Company’s products; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high costs of drug development; and the uncertainty of being able to secure additional capital when needed to fund operations.
The Company has incurred recurring losses since its inception, had an accumulated deficit as of June 30, 2022, and expects to continue to generate operating
losses during the continued global commercial launch of rimegepant. Prior to the commercial launch of rimegepant the Company has primarily raised funds through sales of equity in private placements and public offerings, sale of revenue participation rights related to potential future royalties, and debt financings.
As of August 5, 2022, the issuance date of our condensed consolidated financial statements, the Company expects that its cash, cash equivalents and marketable securities as of June 30, 2022, its future operating cash flows from sales of NURTEC ODT, Series B Preferred Shares receipts, and product sales and other proceeds from its Pfizer Collaboration will be sufficient to fund its current forecast for operating expenses, including commercial operations, financial commitments and other cash requirements for more than one year. The Company may need to raise additional capital to execute its business plans and growth strategy until it is profitable. If no additional capital is raised through either public or private equity financings, debt financings, strategic relationships, alliances and licensing agreements, or a combination thereof, the Company may delay, limit or reduce discretionary spending in areas related to research and development activities and other general and administrative expenses in order to fund its operating costs and working capital needs.
Pfizer Merger and Distribution Agreement
On May 9, 2022, the Company, Pfizer and a wholly owned subsidiary of Pfizer (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Pfizer will acquire all outstanding shares of Biohaven for $148.50 per share in cash and Merger Sub will merge with and into the Company (the “Pfizer Merger”), with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Pfizer.
In connection with the Merger Agreement, Biohaven and Biohaven Research Ltd. entered into a Separation and Distribution Agreement, dated as of May 9, 2022 (the “Distribution Agreement”). In connection with the Distribution Agreement, the Board of Directors of the Company approved and directed management to effect the spin-off of the Kv7 ion channel activator, glutamate modulation, MPO inhibition and myostatin inhibition platforms, preclinical product candidates, and certain corporate infrastructure currently owned by
5

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
1.   Nature of the Business and Basis of Presentation (Continued)
Biohaven, or collectively the “Biohaven Research Business”.
To implement the spin-off, the Company expects to transfer the related license agreements, intellectual property and certain corporate infrastructure to Biohaven Research Ltd, through a series of internal restructuring transactions, referred to as the pre-closing reorganization.
To effect the spin-off, each of the Company's shareholders will receive one common share of Biohaven Research Ltd. for every two common shares of Biohaven held of record at the close of business on the record date for the distribution. Upon completion of the spin-off, Biohaven Research Ltd. will be a stand-alone, publicly traded company focused on the development of the Biohaven Research Business.
Pfizer Collaboration
On November 9, 2021, the Company entered into a strategic commercialization arrangement with Pfizer Inc. ("Pfizer"), including a collaboration and license agreement and a related sublicense agreement (the "Pfizer Collaboration"), pursuant to which Pfizer would commercialize product candidates containing the Company's proprietary compounds rimegepant (BHV-3000) and gains rights to zavegepant (BHV-3500) (the "Licensed Products") in all countries worldwide outside of the United States (the "Territory"). The Pfizer Collaboration became effective on January 4, 2022. Refer to Note 13, "Collaboration, License and Other Agreements" for further details.
2.   Summary of Significant Accounting Policies
Our significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). Updates to our accounting policies, including impacts from the adoption of new accounting standards, are discussed below in this Note 2.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its controlled subsidiaries after elimination of all significant intercompany accounts and transactions. Investments in companies in which the Company owns less than a 50% equity interest and where it exercises significant influence over the
operating and financial policies of the investee are accounted for using the equity method of accounting.
The financial statements of our subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for shareholders' equity (deficit) and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income, net of tax, in shareholders' deficit. Foreign currency transaction gains and losses are included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Reclassifications
Certain items in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current period presentation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, interest expense on liability related to sale of future royalties, valuation of derivative liabilities, and income taxes. In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2022 and the results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021. The results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods or any future year or period.  The financial information included herein should be read in conjunction with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Revenue Recognition - Collaboration and Other Revenue
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of ASC 606, Revenue from Contracts with Customers ("ASC 606"). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. The accounting treatment pursuant to ASC 606 is outlined below.
The terms of licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front
license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply and research and development services and royalties on net sales of licensed products. Each of these payments results in collaboration and other revenue, except for revenues related to manufacturing supply services, which are classified as product revenue. The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.
In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Amounts received prior to recognizing revenue are recorded as contract liabilities in the Company’s condensed consolidated balance sheets.
At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the promised good or service does not provide the customer with a material right.
The Company considers the terms of the contract to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


the amount of cumulative revenue recognized will not occur.
If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices ("SSP"). The relative SSP for each deliverable is estimated using external sourced evidence if it is available. If external sourced evidence is not available, the Company uses its best estimate of the SSP for the deliverable.
Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer.
After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception, or to a single performance obligation as applicable.
Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, which may include forecasted revenue, development timelines, estimated future costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.
Acquired In-Process Research and Development
IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the asset is classified as a definite-lived intangible and the Company will make a determination as to the then-useful life of the intangible
asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization.
The Company evaluates IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.
If we acquire an asset or group of assets that do not meet the definition of a business under applicable accounting standards, the acquired IPR&D is expensed on its acquisition date, unless it has an alternative future use. Future costs to develop these assets are recorded to research and development expense as they are incurred.
Recently Adopted Accounting Pronouncements
Effective January 1, 2022 the Company adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The adoption of ASU 2020-06 did not have a material effect on the Company's consolidated financial statements.
Effective January 1, 2022 the Company adopted ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-
8

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The guidance has been applied prospectively and did not have a material effect on the consolidated financial statements of the Company.
Future Adoption of New Accounting Pronouncements
In January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, providing temporary guidance to ease the burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR, which is currently expected to occur in mid-2023 for legacy contracts. The amendments in ASU 2021-01 are elective immediately and apply to all entities that have contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued. The Company does not expect that the adoption of ASU 2021-01 will have a material effect on its consolidated financial statements.
In June 2022 the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The ASU also introduced new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in ASU 2022-03 are effective for fiscal years beginning after December 15, 2023. The Company does not expect the adoption ASU 2022-03 to have a material effect on its consolidated financial statements.
3. Marketable Securities
The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of debt securities available-for-sale by type of security at June 30, 2022 and December 31, 2021 was as follows:
Amortized CostAllowance for Credit LossesNet Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 30, 2022
Corporate bonds
U.S.$220,913 $— $220,913 $— $(2,589)$218,324 
Foreign30,276 — 30,276 — (411)29,865 
Government related obligations
U.S.69,830 — 69,830 — (340)69,490 
Total $321,019 $— $321,019 $— $(3,340)$317,679 
December 31, 2021
Corporate bonds
U.S.$130,388 $— $130,388 $1 $(234)$130,155 
Foreign20,643 — 20,643 — (82)20,561 
Government related obligations
U.S.41,939 — 41,939 — (8)41,931 
Total$192,971 $— $192,971 $1 $(324)$192,648 
The Company had 68 and 53 available-for-sale debt securities in an unrealized loss position, with an aggregate fair value of $317,679 and $185,296, as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis. We did not have any investments in a continuous unrealized loss position for more than twelve months as of June 30, 2022 and December 31, 2021.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
3.  Marketable Securities (Continued)

The net amortized cost and fair value of debt securities available-for-sale at June 30, 2022 and December 31, 2021 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity. The fair values of available for sale debt securities are classified as marketable securities in the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021.
June 30, 2022December 31, 2021
Net Amortized CostFair ValueNet Amortized CostFair Value
Due to mature:
Less than one year$294,150 $291,394 $155,359 $155,226 
One year through five years26,869 26,285 37,612 37,422 
Total$321,019 $317,679 $192,971 $192,648 
Net Investment Income
Sources of net investment income included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021 were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Gross investment income from debt securities available-for-sale$1,084 $89 $1,224 $161 
Investment expenses(57)(24)(75)(76)
Net investment income (excluding net realized capital gains or losses)1,027 65 1,149 85 
Net realized capital (losses) gains
(157)— (160)19 
Net investment income$870 $65 $989 $104 
We utilize the specific identification method in computing realized gains and losses. The proceeds from the sale of available-for-sale debt securities and the related gross realized capital gains and losses for the three and six months ended June 30, 2022 and 2021 were the following:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Proceeds from sales$54,015 $— $54,015 $113,441 
Gross realized capital gains9 — 9 19 
Gross realized capital losses$166 — $166 — 
4.   Fair Value of Financial Assets and Liabilities
The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values.
Financial Instruments Measured at Fair Value on the Condensed Consolidated Balance Sheets
Certain assets of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three
10

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 “Fair Value of Financial Assets and Liabilities” in the 2021 Form 10-K. Financial assets and liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021 were as follows:
11

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
Fair Value Measurement Using:
Balance Sheet ClassificationType of InstrumentLevel 1Level 2Level 3Total
June 30, 2022
Assets:
Cash equivalentsMoney market funds$3,142 $— $— $3,142 
Marketable securitiesU.S. treasury bills— 69,489 — 69,489 
Marketable securitiesU.S. corporate bonds— 218,326 — 218,326 
Marketable securitiesForeign corporate bonds— 29,865 — 29,865 
Total assets$3,142 $317,680 $— $320,822 
Liabilities:
Derivative liabilitiesSeries B preferred shares forward contracts$— $— $71,110 $71,110 
Derivative liabilitiesSeries B preferred shares derivative liability— — 33,760 33,760 
Derivative liabilitiesSeries A preferred shares derivative liability— — 5,259 5,259 
Total liabilities$— $— $110,129 $110,129 
December 31, 2021
Assets:
Cash equivalentsMoney market funds$32,420 $— $— $32,420 
Marketable securitiesU.S. treasury bills5,994 35,937 — 41,931 
Marketable securitiesU.S. corporate bonds— 130,155 — 130,155 
Marketable securitiesForeign corporate bonds— 20,561 — 20,561 
Total assets$38,414 $186,653 $— $225,067 
Liabilities:
Derivative liabilitySeries B preferred shares forward contracts$— $— $13,110 $13,110 
Total liabilities$— $— $13,110 $13,110 
There were no securities transferred between Level 1, 2 and 3 during the six months ended June 30, 2022 or 2021.
12

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)

Series B Preferred Shares Forward Contract
In August 2020, the Company entered into Series B preferred share agreement, whereby RPI will invest in the Company through the purchase of up to 3,992 Series B preferred shares (the "Series B Preferred Shares") at a price of $50,100 per share (the "RPI Series B Preferred Share Agreement"). Upon issuance of the Series B Preferred Shares, they qualify as mandatorily redeemable instruments and are initially classified at their fair value as preferred shares liabilities. The Company will then accrete the carrying value to the redemption value through interest expense using the effective interest rate method.
The Company is required to redeem the Series B Preferred Shares for 1.77 times the original purchase price, payable beginning March 31, 2025 in equal quarterly installments through December 31, 2030 (the "Normal Series B Redemption Provision").
The holders of the Company's outstanding Series B Preferred Shares will have the right to require redemption of the shares in certain circumstances, including in the event of a Change of Control, as defined in the Company's memorandum and article of association. If a Change of Control occurs, the Company will be required to sell and RPI will be required to buy the remaining unissued Series B Preferred Shares. The holders of a majority of outstanding Series B Preferred Shares will then have an option to redeem all outstanding Series B Preferred Shares in a single payment at a price equal to 1.77 times the original issuance price of the Series B Preferred Shares (the "Change of Control Series B Redemption Provision").
Accordingly, the Company has concluded that the agreement to issue Series B Preferred Shares at a future date represents a forward contract, and classified as a derivative.
The fair value of the forward contract recognized in connection with the RPI Series B Preferred Share Agreement was determined based on significant inputs not observable in the market, and therefore represents a Level 3 measurement within the fair value hierarchy. The fair value of the forward contract is made up of the probability weighted fair value of the Normal Series B Redemption Provision and the Change of Control Series B Redemption Provision for the 2,004 unissued Series B Preferred Shares at June 30, 2022. The fair value of the Normal Series B Preferred Shares Redemption Provision for the forward contract is calculated as the difference between the present value of proceeds to the
Company for the quarterly issuances of the remaining unissued Series B Preferred Shares and the present value of the required quarterly redemption payments to the holders. The fair value of the Change of Control Series B Redemption Provision for the forward contract is calculated as the difference between the present value of the proceeds to the Company on the estimated change of control date for the issuance of the remaining unissued Series B Preferred Shares and the present value of the lump sum redemption payment to the holders.
As inputs into the valuation, the Company assessed the Change of Control Series B Redemption Provision as highly likely due to Pfizer's pending acquisition of Biohaven, see Note 1 for additional details. In addition, the Company considered the amount of the payments and a risk-adjusted discount rate ranging from low single digits to low-twenty percent. Due to the uncertainty around the close date of Pfizer's pending acquisition of Biohaven, the Company's expectation of the timing of a change of control event at the reporting date could reasonably be different than the timing of an actual change of control event, and if so, would mean the estimated fair value could be significantly higher or lower than the fair value determined.
In accordance with ASC 815, Derivatives and Hedging, the fair value of the forward contract was recorded on the balance sheet as a derivative liability with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
The following table provides a roll forward of the aggregate fair value of the Company's series B preferred shares forward contract for which fair value is determined by Level 3 inputs for the six months ended June 30, 2022 and 2021:
Carrying Value
Balance at December 31, 2021$13,110 
Change in fair value of derivative liability68,574 
Partial settlement of derivative liability(10,574)
Balance at June 30, 2022$71,110 
Balance at December 31, 2020$14,190 
Change in fair value of derivative liability3,295 
Partial settlement of derivative liability(1,595)
Balance at June 30, 2021$15,890 
13

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
Series B Preferred Shares Derivative Liability
As of June 30, 2022, the Company has 1,988 Series B Preferred Shares outstanding, see Note 8 for details. As discussed in the Series B Preferred Shares Forward Contracts section above, the holders of the Company's outstanding Series B Preferred Shares will have the right to require redemption of the shares in certain circumstances, including in the event of a Change of Control, as defined in the Company's memorandum and article of association.
If a Change of Control occurs the holders of the outstanding Series B Preferred Shares will have the option to exercise the Change of Control Series B Redemption Provision. The Company would then be required to redeem the outstanding Series B Preferred Shares in a lump sum payment of 1.77 times the original issue price instead of in equal quarterly installments.
The series B preferred shares derivative liability recognized in connection with the RPI Series B Preferred Share Agreement was determined based on significant inputs not observable in the market, and therefore represents a Level 3 measurement within the fair value hierarchy. The fair value of the series B preferred shares derivative liability is calculated as the difference between the fair value of the outstanding Series B Preferred Shares with and without the derivative. The fair value of the outstanding Series B Preferred Shares both with and without the derivative is calculated as the probability weighted present value of the required quarterly redemption payments considering the likelihood of a Change of Control.
As inputs into the valuation, the Company assessed the likelihood of a Change of Control, and the risk-adjusted discount rate similarly to these same inputs for the Series B Preferred Shares Forward Contract.
In accordance with ASC 815, Derivatives and Hedging, the fair value of the series B preferred shares derivative liability was recorded on the balance sheet as a derivative liability with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
The following table provides a roll forward of the aggregate fair value of the Company's series B preferred shares derivative liability for which fair value
is determined by Level 3 inputs for the six months ended June 30, 2022:
Carrying Value
Balance at December 31, 2021$— 
Change in fair value of derivative liability33,760 
Balance at June 30, 2022$33,760 
The series B preferred shares derivative liability had no material value at December 31, 2021.
Series A Preferred Shares Derivative Liability
In April 2019, the Company sold 2,495 series A preferred shares (the "Series A Preferred Shares") to RPI at a price of $50,100 per preferred share pursuant to a Series A preferred share purchase agreement (the "RPI Series A Preferred Share Agreement"). The Company is required to redeem the Series A Preferred Shares for two times (2x) the original purchase price, payable beginning March 31, 2021 in equal quarterly installments through December 31, 2024 (the "Normal Series A Preferred Share Redemption Provision"). As of June 30, 2022, the Company had 1,559 outstanding Series A Preferred Shares, see Note 8 for additional details.
The holders of the Company's outstanding Series A Preferred Shares will have the right to require a lump sum redemption of the shares in the event of a Change of Control, as defined in the Company's memorandum and article of association. Upon exercise of the put option by the holders, the Company will be required to redeem the outstanding Series A Preferred Shares that have not previously been redeemed for two times (2x) the original purchase price of the Series A Preferred Shares payable in a lump sum at the closing of the Change of Control (the "Change of Control Series A Preferred Share Redemption Provision").
The series A preferred shares derivative liability recognized in connection with the RPI Series A Preferred Share Agreement was determined based on significant inputs not observable in the market, and therefore represents a Level 3 measurement within the fair value hierarchy. The fair value of the series A preferred shares derivative liability is calculated as the difference between the fair value of the outstanding Series A Preferred Shares with and without the derivative. The fair value of the outstanding Series A Preferred Shares both with and without the derivative is calculated as the probability weighted present value of the required redemption payments considering the likelihood of a Change of Control.
14

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
As inputs into the valuation, the Company assessed the likelihood of a Change of Control, and the risk-adjusted discount rate similarly to these same inputs for the Series B Preferred Shares Forward Contract.
In accordance with ASC 815, Derivatives and Hedging, the fair value of the series A preferred shares derivative liability was recorded on the balance sheet as a derivative liability with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
The following table provides a roll forward of the aggregate fair value of the Company's series A preferred
shares derivative liability for which fair value is determined by Level 3 inputs for the six months ended June 30, 2022:
Carrying Value
Balance at December 31, 2021$— 
Change in fair value of derivative liability5,259 
Balance at June 30, 2022$5,259 
The series A preferred shares derivative liability had no material value as of December 31, 2021.
Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets
The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the condensed consolidated balance sheets at adjusted cost or contract value at June 30, 2022 and December 31, 2021 were as follows:
CarryingFair Value Measurement Using:
ValueLevel 1Level 2Level 3Total
June 30, 2022
Liabilities:
Long-term debt(1)
$764,983 $— $861,877 $— $861,877 
December 31, 2021
Liabilities:
Long-term debt(1)
$626,720 $— $646,159 $— $646,159 
(1) Due to the $125,000 draw of the remaining delayed draw term loan commitment in June 2022, see Note 14 for details, and the announcement of the acquisition of Biohaven by Pfizer in May 2022, see Note 1 for details, the Company remeasured the fair value of its long-term debt as of June 30, 2022.
5. Balance Sheet Components
Restricted Cash
Restricted cash included in other current assets in the condensed consolidated balance sheets is primarily employee contributions to the Company's employee share purchase plan held for future purchases of the Company's outstanding shares.
Restricted cash included in other assets in the condensed consolidated balance sheets represents collateral held by a bank for a letter of credit ("LOC") issued in connection with the leased office space in Yardley, Pennsylvania. The following represents a reconciliation of cash and cash equivalents in the condensed consolidated balance sheets to total cash, cash equivalents and restricted cash as of June 30, 2022
and December 31, 2021, respectively, in the condensed consolidated statements of cash flows:
As of June 30, 2022As of December 31, 2021
Cash and cash equivalents$235,807 $171,945 
Restricted cash (included in other current assets)— 1,648 
Restricted cash (included in other assets)750 750 
Cash, cash equivalents and restricted cash in the statements of cash flows$236,557 $174,343 
Trade Receivable, Net
The Company’s trade accounts receivable consists of amounts due primarily from pharmacy wholesalers in
15

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
5. Balance Sheet Components (Continued)
the U.S. (collectively, its "Customers") related to sales of NURTEC ODT and have standard payment terms. For certain Customers, the trade accounts receivable for the Customer is net of distribution service fees, prompt pay discounts and other adjustments. The Company monitors the financial performance and creditworthiness of its Customers so that it can properly assess and respond to changes in their credit profile. The Company reserves against trade accounts receivable for estimated losses that may arise from a Customer’s inability to pay and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The allowance for doubtful accounts, including reserve amounts for estimated credit losses, was immaterial as of June 30, 2022 and December 31, 2021.
Inventory
Inventory consisted of the following:
As of June 30, 2022As of December 31, 2021
Work-in-process$168,091 $159,075 
Finished goods12,576 9,269 
Total inventories180,667 168,344 
Less noncurrent inventories(1)
74,106 87,736 
Total inventories classified as current$106,561 $80,608 
(1) Included in other assets on the condensed consolidated balance sheets. There are no recoverability issues for these amounts.
Prepaid Expenses
Prepaid expenses consisted of the following:
As of June 30, 2022As of December 31, 2021
Prepaid clinical trial costs$59,996 $42,578 
Prepaid manufacturing1,152 17,448 
Prepaid commercial costs26,940 15,732 
Other prepaid expenses12,272 13,080 
 Prepaid expenses$100,360 $88,838 
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of June 30, 2022As of December 31, 2021
Accrued development milestones$25,000 $5,000 
Accrued employee compensation and benefits35,917 40,109 
Accrued clinical trial costs34,822 37,477 
Accrued commercialization and other professional fees31,793 19,994 
Accrued sales discounts and allowances292,292 203,760 
Current obligation to perform R&D services30,303 22,030 
Other accrued expenses and other current liabilities95,180 91,649 
 Accrued expenses and other current liabilities$545,307 $420,019 
6.   Acquisitions
Acquisition of Kleo Pharmaceuticals, Inc.
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. (“Kleo”). Kleo is a development-stage biopharmaceutical company focused on advancing the field of immunotherapy by developing small molecules that emulate biologics. The transaction was accounted for as the acquisition of a business using the acquisition method of accounting.
The total fair value of the consideration transferred was $20,043 which primarily consisted of the issuance of a total of 115,836 common shares of the Company to Kleo stockholders and contingent consideration in the form of a contingent value right to receive one dollar in cash for each Kleo share if certain specified Kleo biopharmaceutical products or product candidates receive the approval of the FDA prior to the expiration of 30 months following the effective time of the transaction. The maximum amount payable pursuant to the contingent value right was approximately $17,300. At December 31, 2021, the Company determined the value of the contingent value right to be immaterial and recognized a gain of $1,457 related to the contingent value right in other income (expense) during the fourth quarter of 2021. The value of the contingent value right continues to be immaterial with no value included on the condensed consolidated balance sheet as of June 30, 2022.
16

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
6.   Acquisitions (Continued)


Prior to the consummation of the transaction, the Company owned approximately 41.9% of the outstanding shares of Kleo and accounted for it as an equity method investment. As part of the transaction, the Company acquired the remainder of the shares of Kleo, and post-transaction the Company owns 100% of the outstanding shares of Kleo. The carrying value of the Company’s investment in Kleo was $1,176 immediately prior to the acquisition date. The Company determined the fair value of the existing interest was $6,437, and recognized a gain from our equity method investment during the first quarter of 2021 of $5,261 on the condensed consolidated statements of operations and comprehensive loss as a result of remeasuring to fair value the existing equity interest in Kleo.
In connection with the transaction, we recorded: net working capital of $573; property, plant and equipment of $1,257; intangible assets consisting of in progress research and development assets of $18,400 which include an oncology therapeutic candidate entering Phase I clinical trials and a COVID-19 therapeutic candidate in the planning stage for clinical development; debt assumed of $1,577; and goodwill of $1,390.
Kleo’s employees, other than its President and Chief Financial Officer, were retained as part of the transaction. In connection with the transaction agreement, the Company filed a registration statement permitting Kleo stockholders to offer and sell the common shares of the Company issued in the transaction.
Kv7 Platform Acquisition
In April 2022, the Company closed the acquisition from Knopp Biosciences LLC (“Knopp”) of Channel Biosciences, LLC (“Channel”), a wholly owned subsidiary of Knopp owning the assets of Knopp’s Kv7 channel targeting platform (the “Kv7 Platform Acquisition”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated February 24, 2022.
In consideration for the Kv7 Platform Acquisition, on April 4, 2022, the Company made an upfront payment comprised of $35,000 in cash and 493,254 common shares, valued at approximately $58,747, issued through a private placement. The Company has also agreed to pay additional success-based payments comprised of (i) up to $325,000 based on developmental and regulatory milestones through approvals in the United States, EMEA and Japan for the lead asset, BHV-7000 (formerly known as KB-3061), (ii) up to an additional $250,000 based on developmental and regulatory milestones for the Kv7 pipeline development in other indications and
additional country approvals, and (iii) up to $562,500 for commercial sales-based milestones of BHV-7000. Additionally, the Company has agreed to make scaled royalty payments in cash for BHV-7000 and the pipeline programs, starting at high single digits and peaking at low teens for BHV-7000 and starting at mid-single digits and peaking at low tens digits for the pipeline programs.
The Company accounted for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, in-process research and development (“IPR&D”). The IPR&D asset has no alternative future use and relates to intellectual property rights related to the Kv7 platform lead, now BHV-7000. There was no material value assigned to any other assets or liabilities acquired in the acquisition. As such, during the second quarter of 2022, the Company recorded a charge to R&D expense in the accompanying condensed consolidated statements of operations and comprehensive loss of $93,747.
In June 2022, the Company recorded a liability for a $25,000 regulatory milestone payment which became due to Knopp during the second quarter. The milestone payment was recorded as R&D expense in the accompanying condensed consolidated statements of operations and comprehensive loss during the three months ended June 30, 2022.
Excluding the milestone payment noted above, the Company has not recorded any of the possible contingent consideration payments to Knopp as a liability in the accompanying condensed consolidated balance sheet as none of the future events which would trigger a milestone payment were considered probable of occurring at June 30, 2022.
7.   Liability Related to Sale of Future Royalties, net
2018 RPI Funding Agreement
In June 2018, the Company entered into a funding agreement (the "2018 RPI Funding Agreement") to sell tiered, sales-based royalty rights on global net sales of pharmaceutical products containing the compounds rimegepant or zavegepant (previously known as BHV-3500 and vazegepant) and certain derivative compounds thereof ("Products") to RPI, a Delaware statutory trust. The Company issued to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products for each calendar quarter during the royalty term contemplated by the 2018 RPI Funding Agreement, in exchange for $100,000 in cash. Specifically, the participation rate commences at 2.1%
17

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
7.   Liability Related to Sale of Future Royalties, net (Continued)
on annual global net sales of up to and equal to $1,500,000, declining to 1.5% on annual global net sales exceeding $1,500,000. Pursuant to the Pfizer Collaboration, Pfizer will compensate Biohaven for the related royalties on net sales outside of the U.S. owed to RPI under the 2018 RPI Funding Agreement
Concurrent with the 2018 RPI Funding Agreement, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with RPI. Pursuant to the Purchase Agreement, the Company sold 1,111,111 common shares of the Company to RPI at a price of $45.00 per share, for gross proceeds of $50,000.
The Company concluded that there were two units of account for the consideration received comprised of the liability related to sale of future royalties and the common shares. The Company allocated the $100,000 from the 2018 RPI Funding Agreement and $50,000 from the Purchase Agreement among the two units of account on a relative fair value basis at the time of the transaction. The Company allocated $106,047 in transaction consideration to the liability, and $43,953 to the common shares. The Company determined the fair value of the common shares based on the closing share price on the transaction date, adjusted for the trading restrictions. The transaction costs of $377 were allocated in proportion to the allocation of total consideration to the two units of account. The effective interest rate under the 2018 RPI Funding Agreement, including transaction costs, is approximately 27% as of June 30, 2022.
2020 RPI Funding Agreement
In August 2020, the Company entered into a funding agreement with RPI 2019 Intermediate Finance Trust (“RPI 2019 IFT”) providing for up to $250,000 of funding in exchange for rights to participation payments based on global net sales of products containing zavegepant and rimegepant and certain payments based on success-based milestones relating to zavegepant (the "2020 RPI Funding Agreement"). Under the 2020 RPI Funding Agreement, RPI 2019 IFT will be entitled to receive tiered, sales based participation rights up to 3.0% of future global net sales of products containing zavegepant, 0.4% of future global net sales of products containing rimegepant, and payments tied to success-based milestones as described below. Pursuant to the Pfizer Collaboration, Pfizer will compensate Biohaven for the related royalties on net sales outside of the U.S. owed to RPI under the 2020 RPI Funding Agreement. The Company received $150,000 in cash at closing in 2020 and $100,000 in cash upon achievement of the
commencement of the oral zavegepant Phase 3 program in March 2021.
The success-based milestone payments range from 0.6x to 2.95x of the funded amount depending on the number of regulatory approvals achieved for zavegepant (including 1.9x for the first zavegepant migraine regulatory approval) and would be paid over a 10-year period. If the Company consummates a Change of Control, RPI 2019 IFT has the option to accelerate each unpaid milestone payment which has or thereafter occurs.
The Company concluded that there were two units of account for the $150,000 in initial consideration received, which comprised of a liability related to sale of future royalties for products containing rimegepant and a research and development arrangement with RPI 2019 IFT for zavegepant. The Company allocated the $150,000 from the 2020 RPI Funding Agreement among the two units of account based on the present value of probability adjusted net sales at the time of the transaction. The Company allocated $147,876 in transaction consideration to the liability related to sale of future royalties and $2,124 to the obligation to perform R&D services liability in the condensed consolidated balance sheets. The transaction costs of $400 were allocated to the liability related to sale of future royalties. The effective interest rate under the 2020 RPI Funding Agreement, including transaction costs, is approximately 8% as of June 30, 2022.
In March 2021, the Company received $100,000 from RPI 2019 IFT, pursuant to the 2020 RPI Funding Agreement, for the commencement of the oral zavegepant Phase 3 clinical program. The Company allocated the proceeds to obligation to perform R&D services liability in the condensed consolidated balance sheets.
Since there is a substantive and genuine transfer of risk to RPI 2019 IFT for the development of zavegepant, the $102,124 of consideration allocated to the development of zavegepant is being recognized by the Company as an obligation to perform contractual services and therefore is a reduction of research and development expenses as incurred.
The following table shows the activity within the obligation to perform R&D services account for the
18

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
7.   Liability Related to Sale of Future Royalties, net (Continued)
three and six months ended June 30, 2022 and 2021, related to the 2020 RPI Funding Agreement.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Reduction to research and development expenses$5,383 $10,016 $12,326 $10,205 
The following table shows the activity within the liability related to sales of future royalties account for the six months ended June 30, 2022 and 2021, related to the 2018 and 2020 RPI Funding Agreements.
Six Months Ended June 30,
20222021
Liability related to sale of future royalties - beginning balance
$384,283 $335,282 
Royalty revenues paid and payable to RPI(7,924)(3,419)
Interest expense on liability related to sale of future royalties35,359 28,007 
Liability related to sale of future royalties - ending balance
$411,718 $359,870 
8.   Mandatorily Redeemable Preferred Shares, net
RPI Series A Preferred Shares
In April 2019, the Company sold 2,495 Series A Preferred Shares to RPI at a price of $50,100 per preferred share pursuant to the RPI Series A Preferred Share Agreement. The gross proceeds from the transaction with RPI were $125,000, with $105,000 of the proceeds used to purchase a priority review voucher ("PRV") issued by the United States Secretary of Health and Human Services to potentially expedite the regulatory review of the new drug application ("NDA") for the ODT formulation of rimegepant and the remainder of the proceeds to be used for other general corporate purposes.
The holders of the Company's outstanding Series A Preferred Shares will have the right to require a lump sum redemption of the shares in certain circumstances, such as in the event of a Change of Control, as defined in the Company's memorandum and article of association. Upon exercise of the put option by the holders, the Company must redeem the Series A Preferred Shares for two times (2x) the original purchase price of the
Series A Preferred Shares payable in a lump sum at the closing of the Change of Control.
The Company may redeem the Series A Preferred Shares at its option at any time for two times (2x) the original purchase price, which redemption price may be paid in a lump sum or in equal quarterly installments through December 31, 2024.
In the event that the Company defaults on any obligation to redeem Series A Preferred Shares when required, the redemption amount shall accrue interest at the rate of eighteen percent (18%) per annum. If any such default continues for at least one year, the holders of such shares shall be entitled to convert, subject to certain limitations, such Series A Preferred Shares into common shares, with no waiver of their redemption rights.
The Company is required to redeem the Series A Preferred Shares for two times (2x) the original purchase price, payable beginning March 31, 2021 in equal quarterly installments through December 31, 2024. Accordingly, the Company has concluded the Series A Preferred Shares are mandatorily redeemable instruments and classified as a liability. The Company initially measured the liability at fair value, and will subsequently accrete the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the RPI Series A Preferred Share Agreement, including transaction costs, was determined to be approximately 20% as of June 30, 2022. The Company recognized $6,112 and $7,677 in interest expense for the three months ended June 30, 2022 and 2021, respectively. The company recognized $12,575 and $15,620 in interest expense for the six months ended June 30, 2022 and 2021, respectively. The Company had 1,559 and 1,871 Series A preferred shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.
19

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
8.   Mandatorily Redeemable Preferred Shares, net (Continued)
The following table shows the activity within the Series A preferred share liability for the six months ended June 30, 2022 and 2021, respectively:
Carrying Value
Gross balance at December 31, 2021$141,740 
Interest expense recognized, excluding transaction cost amortization12,553 
Redemption of Series A preferred shares(31,250)
Gross balance at June 30, 2022$123,043 
Less: unamortized transaction costs(109)
Net balance at June 30, 2022$122,934 
Gross balance at December 31, 2020$174,264 
Interest expense recognized, including transaction cost amortization15,599 
Redemption of Series A preferred shares(31,250)
Gross balance at June 30, 2021$158,613 
Less: unamortized transaction costs(152)
Net balance at June 30, 2021$158,461 
RPI Series B Preferred Shares
On August 7, 2020, the Company entered into the RPI Series B Preferred Share Agreement, pursuant to which RPI agreed to invest in the Company through the purchase of up to 3,992 Series B Preferred Shares at a price of $50,100 per share. The shares will be issued in quarterly increments from March 31, 2021 to December 31, 2024. Upon issuance of the Series B Preferred Shares, they qualify as mandatorily redeemable instruments and are classified as a mandatorily redeemable preferred shares liability on the condensed consolidated balance sheet. The Company initially measures the liability at fair value, and subsequently accretes the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the RPI Series B Preferred Share Agreement was determined to be approximately 7% as of June 30, 2022. The Company recognized $1,965 and $3,419 in interest expense for the three and six months ended June 30, 2022, respectively,
and $365 interest expense for the three and six months ended June 30, 2021. The Company had 1,988 and 1,406 Series B preferred shares issued and outstanding, as of June 30, 2022 and December 31, 2021, respectively.
The following table shows the activity within the Series B preferred share liability for the six months ended June 30, 2022 and 2021, respectively:
Carrying Value
Balance at December 31, 2021$76,627 
Interest expense recognized3,419 
Issuance of Series B preferred shares at fair value39,733 
Balance at June 30, 2022$119,779 
Balance at December 31, 2020$— 
Interest expense recognized365 
Issuance of Series B preferred shares at fair value36,765 
Balance at June 30, 2021
$37,130 
Pfizer Merger Agreement
On May 9, 2022, the Company, Pfizer and Merger Sub, entered into the Merger Agreement, see Note 1 for details. Pursuant to the terms set forth in the Merger Agreement, the Company shall (i) issue the remaining unissued Series B Preferred Shares pursuant to the Put Closing (as defined in the RPI Series B Preferred Share Agreement) and (ii) cause each Series A Preferred Shares and Series B Preferred Shares that are issued and outstanding to be redeemed by the Company. At the Closing (as defined in the Merger Agreement), Pfizer shall pay to the holders of Company's Series A Preferred Shares and Series B Preferred Shares, the redemption amount in immediately available funds. In connection with the early redemption of the Series A Preferred Shares and Series B Preferred Shares pursuant to the Merger Agreement, the Company recorded a derivative liability, see Note 4 for details.                                                                    
20

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)

9.   Shareholders' Deficit
Changes in shareholders’ deficit for the three and six months ended June 30, 2022 were as follows:
Common Shares
SharesAmountAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeBiohaven Shareholders' Equity (Deficit)Non-controlling InterestsTotal Shareholders' Equity (Deficit)
Balances as of December 31, 202166,933,531 $1,676,792 $169,656 $(2,585,755)$(73)$(739,380)$(3,629)$(743,009)
Repurchase of preferred shares in consolidated subsidiary1,232,629 152,673 (92,673)60,000 60,000 
Issuance of common shares as payment for agreements2,037,921 253,779 253,779 253,779 
Issuance of common shares under equity incentive plan336,721 29,442 (30,193)(751)(751)
Non-cash share-based compensation expense82,790 82,790 82,790 
Net loss(116,399)(116,399)(498)(116,897)
Other comprehensive loss(2,325)(2,325)(2,325)
Balances as of March 31, 202270,540,802 $2,112,686 $129,580 $(2,702,154)$(2,398)$(462,286)$(4,127)$(466,413)
Issuance of common shares as payment for acquisition493,254 58,747 — — — 58,747 — 58,747 
Issuance of common shares under equity incentive plan and employee share purchase plan77,015 9,965 (2,826)— — 7,139 — 7,139 
Non-cash share-based compensation expense— — 40,267 — — 40,267 — 40,267 
Net loss— — — (441,387)— (441,387)(498)(441,885)
Other comprehensive loss— — — — (3,413)(3,413)— (3,413)
Balances as of June 30, 202271,111,071 $2,181,398 $167,021 $(3,143,541)$(5,811)$(800,933)$(4,625)$(805,558)
21

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9.   Shareholders' Deficit (Continued)
Changes in shareholders’ equity (deficit) for the three and six months ended June 30, 2021 were as follows:
Common Shares
SharesAmountAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeBiohaven Shareholders' Equity (Deficit)Non-controlling InterestsTotal Shareholders' Equity (Deficit)
Balance as of December 31, 202060,436,876 $1,249,547 $98,938 $(1,739,169)$314 $(390,370)$(1,819)$(392,189)
Issuance of common shares, net of offering costs4,037,204 308,243 — — — 308,243 — 308,243 
Issuance of common shares as part of acquisition115,836 10,673 — — — 10,673 — 10,673 
Issuance of common shares as payment for license agreements110,998 10,243 — — — 10,243 — 10,243 
Issuance of common shares under equity incentive plan365,554 25,315 (23,933)— — 1,382 — 1,382 
Non-cash share-based compensation expense— — 48,726 — — 48,726 — 48,726 
Net loss— — — (264,968)— (264,968)(360)(265,328)
Other comprehensive income— — — — 95 95 — 95 
Balance as of March 31, 202165,066,468 $1,604,021 $123,731 $(2,004,137)$409 $(275,976)$(2,179)$(278,155)
Issuance of common shares under equity incentive plan173,990 14,173 (6,912)— — 7,261 — 7,261 
Non-cash share-based compensation expense— — 25,586 — — 25,586 — 25,586 
Net loss— — — (210,619)— (210,619)(540)(211,159)
Other comprehensive loss— — — — (129)(129)— (129)
Balance as of June 30, 202165,240,458 $1,618,194 $142,405 $(2,214,756)$280 $(453,877)$(2,719)$(456,596)
Issuance of Common Shares for Kv7 Platform Acquisition
On April 1, 2022, the Company closed the previously announced acquisition from Knopp Biosciences LLC (“Knopp”) of Channel Biosciences, LLC (“Channel”), a wholly owned subsidiary of Knopp owning the assets of Knopp’s Kv7 channel targeting platform (the “Transaction”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated February 24, 2022.
In consideration for the Transaction, on April 4, 2022, Biohaven made an upfront payment comprised of $35,000 in cash and 493,254 common shares of the Company, valued at approximately $58,747, (“Biohaven Shares”) issued through a private placement.
Issuance of Common Shares for Pfizer Collaboration Agreement
In November 2021, the Company and Pfizer Inc. entered into a Subscription Agreement (the “Subscription Agreement”). In January 2022, upon expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company closed the sale of 2,022,581 of its common shares to Pfizer Inc. for $350,000 (the “Share Purchase”), pursuant to the terms of the Subscription Agreement. The estimated fair market value of the shares issued to Pfizer was approximately $252,000, adjusted by a discount for lack of marketability due to certain holding period restrictions, which was valued using an option pricing model (see Note 13).
Issuance of Common Shares for KU Leuven Agreement
In January 2022, Biohaven and Katholieke Universiteit Leuven ("KU Leuven") entered into an Exclusive License and Research Collaboration Agreement (the "KU Leuven Agreement") to develop and commercialize TRPM3 antagonists to address the growing proportion of people worldwide living with chronic pain disorders. As consideration, KU Leuven received an upfront cash payment of $3,000 and 15,340 shares valued at $1,779 which were both recorded as research and development expense on the Company’s condensed consolidated statements of operations.
22

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9.   Shareholders' Deficit (Continued)
Issuance of Common Shares for the March 2021 Offering
In March 2021, the Company issued and sold 2,686,409 common shares at a public offering price of $76.00 per share for net proceeds of approximately $199,500 after deducting underwriting discounts and commissions of approximately $4,167 and other offering expenses of approximately $500. In addition, in March 2021, the underwriter of the March follow-on offering exercised its option to purchase additional shares, and the Company issued and sold 402,961 common shares for net proceeds of approximately $30,000 after deducting underwriting discounts and commissions of approximately $625. Thus, the aggregate net proceeds to the Company from the follow-on offering, after deducting underwriting discounts and commissions and other offering costs, were approximately $229,500.
Issuance of Common Shares for Acquisition of Kleo Pharmaceuticals, Inc.
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. In the merger, each share of Kleo common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive approximately 0.007 of a common share of the Company, rounded up to the nearest whole share. Prior to the consummation of the merger, the Company owned approximately 41.9% of the outstanding shares of Kleo through its subsidiary Therapeutics, resulting in 115,836 common shares of the Company being issued to Kleo stockholders in the merger.
Issuance of Common Shares for Yale MoDE Agreement
On January 1, 2021, the Company entered into a worldwide, exclusive license agreement for the development and commercialization of a novel Molecular Degrader of Extracellular Protein (MoDEs) platform based on ground-breaking research conducted in the laboratory of Professor David Spiegel at Yale University. Under the agreement, the Company paid Yale University an upfront cash payment of $1,000 and 11,668 shares valued at $1,000, both of which were included in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
Issuance of Common Shares for Consulting Agreement with Moda Pharmaceuticals LLC
On January 1, 2021, the Company entered into a consulting services agreement with Moda
Pharmaceuticals LLC to further the scientific and commercial advancement of technology, drug discovery platforms, product candidates and related intellectual property owned or controlled by the Company (Note 13). Under the agreement, the Company paid Moda Pharmaceuticals LLC an upfront cash payment of $2,700 and 37,836 shares valued at $3,243, both of which were included in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
Issuance of Common Shares for Equity Distribution Agreement
In December 2020, the Company entered into the Equity Distribution Agreement. In accordance with the terms of the Equity Distribution Agreement, we may offer and sell common shares having an aggregate offering price of up to $400,000 from time to time through or to the sales agents, acting as our agents or principals. Sales of our common shares, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act, in ordinary brokers’ transactions, to or through a market maker, on or through the New York Stock Exchange or any other market venue where the securities may be traded, in the over-the-counter market, in privately negotiated transactions, or through a combination of any such methods of sale. The sales agents may also sell our common shares by any other method permitted by law. The sales agents are not required to sell any specific amount of securities but will act as our sales agents using commercially reasonable efforts consistent with their normal trading and sales practices, on mutually agreed terms between the sales agents and us. The Company issued and sold no shares in the three and six months ended June 30, 2022. The Company issued and sold no shares in the three months ended June 30, 2021, and 939,328 common shares for net proceeds of approximately $78,743 during the six months ended June 30, 2021.
Issuance of Series A Preferred Shares and Employee Share Options by Consolidated Subsidiary
In September 2020, the Company's Asia-Pacific Subsidiary, BioShin Limited, authorized, issued and sold 15,384,613 BioShin Series A Preferred Shares at a price of $3.90 per share for a total of $60,000 to a group of investors led by OrbiMed, with participation from Cormorant Asset Management LLC, HBM Healthcare Investments Ltd, Surveyor Capital (a Citadel Company), and Suvretta Capital Management, LLC (the "BioShin Investors"). The BioShin Series A Preferred Shares
23

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9.   Shareholders' Deficit (Continued)
contained both a call option by the Company and a put option held by the BioShin Investors. Due to the contingently redeemable features, the Company had classified the BioShin Series A Preferred Shares in mezzanine equity since the redemption was out of the Company's control.
In connection with the BioShin Series A Preferred Shares issuance, BioShin Limited executed the 2020 Equity Incentive Plan ("BioShin 2020 Equity Incentive Plan") and granted options under the BioShin 2020 Equity Incentive Plan to certain employees. The compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award (generally three years) using the straight-line method. The Company is accounting for the expense being recognized over the requisite service period as non-controlling interest in shareholder's equity. The Company recognized $498 and $996 in non-controlling interest relating to the options for the three and six months ended June 30, 2022, respectively. The Company recognized $540 and $900 in non-controlling interest relating to the options for the three and six months ended June 30, 2021, respectively.
In November 2021, the Company, Biohaven Therapeutics Ltd. Atlas Merger Sub ("Merger Sub") and BioShin entered into an Agreement and Plan of Merger (the "Bioshin Merger Agreement"). The Bioshin Merger Agreement provided for the merger of the Merger Sub with and into BioShin, with BioShin surviving the merger as a wholly owned indirect subsidiary of the Company, in accordance with Section 233 of the Cayman Islands Companies Act. As a result of the satisfaction of the closing conditions described in the Biohsin Merger Agreement, on January 6, 2022, each Series A convertible preferred share of BioShin, no par value, other than Excluded Shares (as defined in the Bioshin Merger Agreement) was converted into the right to receive 0.080121 of a common share of the Company and was removed from mezzanine equity. The convertible Series A preferred shares of BioShin converted into 1,232,629 shares of the Company.
10. Accumulated Other Comprehensive Income (Loss)
Shareholders’ deficit included the following activity in accumulated other comprehensive income for the three and six months ended June 30, 2022:
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Net unrealized investment gains (losses):
Beginning of period balance$(2,602)$(323)
Other comprehensive loss before reclassifications(1)
(580)(2,856)
Amounts reclassified from accumulated other comprehensive loss(1)
(157)(160)
Other comprehensive loss(737)(3,016)
End of period balance(3,339)(3,339)
Foreign currency translation adjustments:
Beginning of period balance204 250 
Other comprehensive loss(1)
(2,676)(2,722)
End of period balance(2,472)(2,472)
Total beginning of period accumulated other comprehensive loss(2,398)(73)
Total other comprehensive loss(3,413)(5,738)
Total end of period accumulated other comprehensive loss$(5,811)$(5,811)
(1) There was no tax on other comprehensive loss or amounts reclassified from accumulated other comprehensive income during the period.
24

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
10. Accumulated Other Comprehensive Income (Loss) (Continued)
Shareholders’ deficit included the following activity in accumulated other comprehensive income for the three and six months ended June 30, 2021:
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Net unrealized investment gains (losses):
Beginning of period balance$(43)$(125)
Other comprehensive income(1)
73 136 
Amounts reclassified from accumulated other comprehensive income(1)
— 19 
Other comprehensive income73 155 
End of period balance30 30 
Foreign currency translation adjustments:
Beginning of period balance452 439 
Other comprehensive loss(1)
(202)(189)
End of period balance250 250 
Total beginning of period accumulated other comprehensive income409 314 
Total other comprehensive loss(129)(34)
Total end of period accumulated other comprehensive income $280 $280 
(1) There was no tax on other comprehensive income during the period or amounts reclassified from accumulated other comprehensive income during the period.
11. Share-Based Compensation
Non-Cash Share-Based Compensation Expense
Non-cash share-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award (generally three to four years) using the straight-line method. Non-cash share-based compensation expense, consisting of expense for stock options, Restricted Share Units ("RSUs"), Performance Share Units ("PSU"), and Employee Share Purchase Plan ("ESPP"), was classified in the condensed
consolidated statements of operations and comprehensive loss as follows:
Three months ended June 30,Six Months Ended June 30,
2022202120222021
Research and development expenses$16,624 $9,273 $50,577 $29,331 
Selling, general and administrative expenses23,643 16,313 71,518 44,981 
Total non-cash share-based compensation expense$40,267 $25,586 $122,094 $74,312 
Less: Share-based compensation expense attributable to non-controlling interests498 540 996 900 
Share-based compensation expense attributable to Biohaven Pharmaceutical Holding Company Ltd.$39,769 $25,046 $121,098 $73,412 
Share-based compensation expense capitalized to inventory was $962 for the six months ended June 30, 2022. The Company did not capitalize material share-based compensation expense to inventory during the three months ended June 30, 2022 or the three and six months ended June 30, 2021.
Stock Options
All stock option grants are awarded at fair value on the date of grant. The fair value of stock options is estimated using the Black-Scholes option pricing model and stock-based compensation is recognized on a straight-line basis over the requisite service period. Stock options granted generally become exercisable over a three-year or four-year period from the grant date. Stock options generally expire 10 years after the grant date.
Under the terms of the Merger Agreement and the Distribution Agreement, upon the Pfizer merger, each post-spin Company stock option that is outstanding immediately prior to the effective time of the change in control, whether or not then vested, will be cancelled in exchange for the right to receive an amount in cash equal to the product of (i) the excess of the change in
25

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
11. Share-Based Compensation (Continued)
control consideration over the exercise price per Company share for such Company stock option; and (ii) the total number of Company shares subject to such Company stock option, less any withholding taxes.
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common shares for those stock options that had exercise prices lower than the fair value of the Company's common shares at June 30, 2022.
As of June 30, 2022, the Company's unrecognized compensation expense related to unvested stock options totaled $95,791, which the Company expects to be recognized over a weighted-average period of 2.07 years, which does not consider the impact of a change in control. The Company expects approximately 2,486,094 of the unvested stock options to vest over the requisite service period.
The following table is a summary of the Company's stock option activity for the six months ended June 30, 2022:
Number of SharesWeighted Average Exercise Price Weighted Average Remaining Contractual Term (in years)Aggregate Intrinsic Value
Outstanding as of December 31, 20217,089,727 $40.15
Granted1,364,434 $126.36
Exercised(76,161)$57.92
Forfeited(19,375)$80.24
Outstanding as of June 30, 20228,358,625 $53.966.80$766,875 
Options exercisable as of June 30, 20225,872,531 $39.756.12$622,280 
Vested and expected to vest as of June 30, 20228,358,625 $53.936.80$766,875 
Restricted Share Units and Performance Share Units
The Company’s RSUs are considered nonvested share awards and require no payment from the employee. For each RSU, employees receive one common share at the end of the vesting period. The employee can elect to receive the one common share net of taxes or pay for taxes separately and receive the entire share. Compensation cost is recorded based on the market price of the Company’s common shares on the grant date and is recognized on a straight-line basis over the requisite service period.
The Company’s PSUs contain performance vesting conditions in addition to a service vesting condition. Vesting of the Company’s PSUs is dependent upon the degree to which the Company achieves its performance goals, which are generally set for a three-year performance period and are approved at the time of grant by the Compensation Committee. The fair value of PSUs granted with service and performance vesting conditions is based on the market price of the Company's common stock on the grant date. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment. A cumulative catch-up
adjustment is recorded when it becomes probable that the performance conditions will be achieved. The remaining compensation expense is recognized on a straight-line basis over the remaining vesting period, beginning when the accomplishment of the performance vesting conditions become probable. Certain of the PSUs also contain a market vesting condition based on the performance of the Company's common shares relative to a comparator group. The fair value of these PSUs is determined using a Monte Carlo simulation as of the grant date and is recognized over the vesting period.
Under the terms of the Merger Agreement and the Distribution Agreement, upon the Pfizer merger, each post-spin Company RSU outstanding immediately prior to the effective time of the change in control, whether or not then vested, will be cancelled in exchange for the right to receive an amount in cash equal to the product of (i) the number of Company shares subject to such Company RSU, with any performance conditions applicable to the Company RSU deemed achieved at 100%; and (ii) the change in control consideration, provided, however, that each Company RSU granted after the date of the Merger Agreement but prior to the effective time of the Pfizer Merger (other than certain Company RSUs that may be granted in exchange for or
26

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
11. Share-Based Compensation (Continued)
in lieu of options to acquire common shares of BioShin) will convert into a cash-based award if held by a continuing Company employee and otherwise will convert into a New Biohaven award.
As of June 30, 2022, there was $150,261 of total unrecognized compensation cost related to Company RSUs and PSUs that are expected to vest. These costs are expected to be recognized over a weighted-average period of 2.25 years, which does not consider the impact of a change in control. The total fair value of RSUs vested during the six months ended June 30, 2022 was $60,161.
The following table is a summary of the RSU and PSU activity for the six months ended June 30, 2022:
Number of SharesWeighted Average Grant Date Fair Value
Unvested as of December 31, 20211,218,070 $78.98
Granted1,184,787 $127.32
Forfeited(30,530)$99.69
Vested(637,728)$94.32
Unvested as of June 30, 20221,734,599 $106.00
12.   Net Loss Per Share
Basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. was calculated as follows:
 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Numerator:  
Net loss$(441,885)$(211,159)$(558,782)$(476,487)
Net loss attributable to non-controlling interests498 540 996 900 
Deemed dividend upon repurchase of preferred shares in consolidated subsidiary (1)
— — (92,673)— 
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.$(441,387)$(210,619)$(650,459)$(475,587)
Denominator:
Weighted average common shares outstanding—basic and diluted71,043,693 65,112,179 70,689,949 63,584,932 
Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.—basic and diluted$(6.21)$(3.23)$(9.20)$(7.48)
(1) As part of the BioShin Merger Agreement, the Company repurchased the 15,384,613 BioShin Series A Preferred Shares previously classified as mezzanine equity on the condensed consolidated balance sheet in exchange for 1,232,629 shares of the Company with a fair value of $152,673 (see Note 9 for further detail).
The Company’s potential dilutive securities, which include stock options, restricted share units, performance share units, and warrants to purchase common shares, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares
27

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
12. Net Loss Per Share (Continued)
outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders of the Company is the same.
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:
 As of June 30,
 20222021
Options to purchase common shares8,358,625 8,573,800 
Warrants to purchase common shares100,000 106,751 
Restricted share units and performance share units1,734,599 1,179,471 
 Total10,193,224 9,860,022 
13.  Collaboration, License and Other Agreements
Commercial and Late-stage Agreements
Pfizer Collaboration
In November 2021, the Company and Pfizer entered into a collaboration and license agreement and a related sublicense agreement (the "Pfizer Collaboration"), pursuant to which Pfizer was granted the exclusive right to commercialize product candidates containing Biohaven's proprietary compound rimegepant (BHV-3000) and may elect to commercialize zavegepant (BHV-3500) (the "Zavegepant Option"), in each case, in all countries worldwide outside of the United States. In January 2022, following the expiration or termination of applicable waiting periods under all applicable antitrust laws and the completion of the Share Purchase (as defined below), the Pfizer Collaboration became effective. In consideration therefor, Pfizer made an upfront cash payment to the Company of $150,000 and a $350,000 equity investment in the Company (as further discussed below).
In November 2021, in connection with the Pfizer Collaboration, the Company and Pfizer Inc. entered into the Subscription Agreement. In January 2022, upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company closed the sale of 2,022,581 of its common shares to Pfizer Inc. for $350,000 (the “Share Purchase”), pursuant to the terms of the Subscription Agreement. The estimated fair market value of the shares issued to Pfizer was approximately
$252,000, adjusted by a discount for lack of marketability due to certain holding period restrictions, which was valued using an option pricing model. The issuance resulted in a $98,000 premium paid to the Company above the estimated fair value of the Company's common stock (the "Share Purchase Premium"), which forms part of the transaction price for the Collaboration Agreement as discussed below.
Under the terms of the arrangement, the Company will be eligible to receive an aggregate additional $740,000 in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
The Company is also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate Biohaven for a pro-rata share of certain of its sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory.
Upon closing, the Company identified the following as material distinct performance obligations associated with the Pfizer Collaboration under ASC 606: (i) delivery of the license and sublicense to commercialize Rimegepant outside the U.S.; (ii) a material right for the delivery of the license and sublicense for Zavegepant in conjunction with the Zavegepant Option; (iii) certain future development activities to be performed by the Company, which include clinical development activities, regulatory affairs and the transfer of information required for manufacturing (the "initial development plan"); and (iv) a material right for the Company's obligation to provide product to Pfizer under the Supply Agreement.
The Company believes that the Pfizer Collaboration is a collaboration arrangement as defined in ASC 808, Collaborative Agreements. The Company also believes that Pfizer meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for all of the performance obligations identified at inception except for the initial
28

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13.  Collaboration, License and Other Agreements (Continued)
development plan. As ASC 808 does not address recognition and measurement, the Company has accounted for the initial development plan performance obligation by analogy to ASC 606.
The transaction price at inception included fixed consideration consisting of the upfront cash payment of $150,000 and the $98,000 Share Purchase Premium. Potential development, regulatory, and sales-based milestones, and royalties, will be accounted for as variable transaction price related to the Licensed Products under ASC 606. Given the uncertain nature of these payments, we determined they were fully constrained at inception and not included in the initial transaction price for the collaboration arrangement. At June 30, 2022, the Company reevaluated the transaction price and determined that $20,000 of variable consideration should no longer be constrained. We will re-evaluate the transaction price at each reporting period as uncertain events are resolved or other changes in circumstances occur.
The respective standalone value for each of the performance obligations was determined by applying the SSP method and the transaction price was allocated based on the relative SSP method with revenue recognition timing to be determined either by the provision of services or execution or expiration of an option.
The Company used an income approach to estimate the SSP for the Rimegepant license and sublicense, Zavegepant Option, and the Supply Agreement, and a cost approach for estimating the SSP of the initial development plan. The Rimegepant license and sublicense was delivered on the closing date of the collaboration arrangement and revenue allocated to this performance obligation of $194,389 was recorded as collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2022. Revenue allocated to the Zavegepant Option is deferred as a contract liability until execution or expiration of the option occurs. The initial development plan activities are expected to be delivered over time as the services are performed, with the allocated revenue being recognized over time based on costs incurred to perform the services, since the level of costs incurred over time is thought to best reflect the transfer of services to Pfizer. Revenue allocated to the Supply Agreement is deferred, and will be recognized as product revenue on the condensed consolidated statement of operations and comprehensive loss over the estimated period of the services.
In January 2022, upon the effectiveness of the agreements, a total contract liability of $53,611 was recorded relating to the remaining performance obligations under the Pfizer Collaboration. Approximately $1,729 and $2,602 of the initial contract liability was recognized as revenue during the three and six months ended June 30, 2022, respectively. Approximately $1,125 and $1,998 was recognized as collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2022, respectively, and $604 was recorded as product revenue for both the three and six months ended June 30, 2022. As of June 30, 2022, the total contract liability relating to the Pfizer Collaboration, which is primarily related to our obligations under the initial development plan was $51,009, of which $18,990 was classified as current and recorded to accrued expenses and other current liabilities on the condensed consolidated balance sheet. The remaining $32,019 was recorded to other long-term liabilities on the condensed consolidated balance sheet as of June 30, 2022, and expected to be recognized over several years.
In assessing the Pfizer Collaboration, management exercised considerable judgment in estimating revenue to be recognized, specifically related to estimating the discount for lack of marketability associated with the stock issuance, determining the separate performance obligations under the Collaboration Agreement, and estimating the standalone selling price of those performance obligations.
In the second quarter of 2022, the Company recorded $20,000 to collaboration and other revenue for variable consideration recognized as part of our collaboration arrangement with Pfizer. The associated receivable was included in other current assets on the condensed consolidated balance sheet as of June 30, 2022. Excluding the aforementioned variable consideration, as of June 30, 2022 the Company had not achieved any milestones or recorded any royalty revenue under the Pfizer Collaboration.
Yale University Agreement
In September 2013, the Company entered into an exclusive license agreement (the "Yale Agreement") with Yale University to obtain a license to certain patent rights for the commercial development, manufacture, distribution, use and sale of products and processes resulting from the development of those patent rights, related to the use of riluzole in treating various neurological conditions, such as general anxiety
29

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13.  Collaboration, License and Other Agreements (Continued)
disorder, post-traumatic stress disorder and depression. As part of the consideration for this license, the Company issued Yale 250,000 common shares and granted Yale the right to purchase up to 10% of the securities issued in specified future equity offerings by the Company, in addition to the obligation to issue shares to prevent anti-dilution. The obligation to contingently issue equity to Yale was no longer outstanding as of December 31, 2019.
The Yale Agreement was amended and restated in May 2019. As amended, the Company agreed to pay Yale up to $2,000 upon the achievement of specified regulatory milestones and annual royalty payments of a low single-digit percentage based on net sales of riluzole-based products from the licensed patents or from products based on troriluzole. Under the amended and restated agreement, the royalty rates are reduced as compared to the original agreement. In addition, under the amended and restated agreement, the Company may develop products based on riluzole or troriluzole. The amended and restated agreement retains a minimum annual royalty of up to $1,000 per year, beginning after the first sale of product under the agreement. If the Company grants any sublicense rights under the Yale Agreement, it must pay Yale a low single-digit percentage of sublicense income that it receives.
For the three and six months ended June 30, 2022 and 2021, the Company did not record any material expense, or make any royalty or milestone payments under the Yale Agreement.
BMS Agreement
In July 2016, the Company entered into an exclusive, worldwide license agreement with BMS (the "BMS Agreement") for the development and commercialization rights to rimegepant and zavegepant, as well as other CGRP-related intellectual property. In exchange for these rights, the Company agreed to pay BMS initial payments, milestone payments and royalties on net sales of licensed products under the agreement.
The Company is obligated to make milestone payments to BMS upon the achievement of specified development and commercialization milestones. The development milestone payments due under the BMS Agreement depend on the licensed product being developed. With respect to rimegepant, the Company is obligated to pay up to $127,500 in the aggregate upon the achievement of the development milestones. For any product other than rimegepant, the Company is obligated to pay up to $74,500 in the aggregate upon the achievement of the development milestones. In addition, the Company is obligated to pay up to $150,000 for each
licensed product upon the achievement of commercial milestones. If the Company receives revenue from sublicensing any of its rights under the BMS Agreement, it is also obligated to pay a portion of that revenue to BMS. The Company is also obligated to make tiered royalty payments to BMS based on annual worldwide net sales, with percentages in the low to mid-teens.
Under the BMS Agreement, the Company is obligated to use commercially reasonable efforts to develop licensed products and to commercialize at least one licensed product using the patent rights licensed from BMS and is solely responsible for all development, regulatory and commercial activities and costs. The Company is also required to reimburse BMS for any fees that BMS incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the BMS Agreement. Under the BMS Agreement, BMS transferred to the Company manufactured licensed products, including certain materials that will be used by the Company to conduct clinical trials. The Company's right to sublicense its rights under the BMS agreement, other than to an affiliate or to certain third-party manufacturers, is subject to BMS's prior written consent, which cannot be unreasonably withheld or delayed.
The BMS Agreement will terminate on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to each licensed product in each country and can also be terminated if certain events occur, e.g., material breach or insolvency.
In March 2018, the Company entered into an amendment to the BMS Agreement (the “2018 BMS Amendment”). Under the 2018 BMS Amendment, the Company paid BMS an upfront payment of $50,000 in return for a low single-digit reduction in the royalties payable on net sales of rimegepant and a mid single-digit reduction in the royalties payable on net sales of zavegepant, which was recorded in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
The 2018 BMS Amendment also removes BMS’s right of first negotiation to regain its intellectual property rights or enter into a license agreement with the Company following the Company’s receipt of topline data from its Phase 3 clinical trials with rimegepant, and clarifies that antibodies targeting CGRP are not prohibited as competitive compounds under the non-competition clause of the Original License Agreement.
In August 2020, the Company entered into a further amendment of the BMS Agreement (the “August
30

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13.  Collaboration, License and Other Agreements (Continued)
2020 BMS Amendment”). Under the August 2020 BMS Amendment, the Company paid BMS an upfront payment of $5,000 in return for a reduction in the royalties payable on net sales of rimegepant and zavegepant in China, with percentages in the low to mid-single digits. In addition, the Company is obligated to pay up to $22,500 for each licensed product upon the achievement of commercial milestones in China. The August 2020 BMS Amendment also amended the BMS Agreement to remove sales in China from the commercial milestone payment obligations.
In November 2020, the Company entered into a further amendment of the BMS Agreement (the “November 2020 BMS Amendment”). Under the November 2020 BMS Amendment, certain exclusivity provisions under the BMS Agreement are waived which permits the Company to develop certain CGRP compounds licensed by the Company from Heptares Therapeutics Limited (“Heptares”). Under the November 2020 Amendment, if the Company initiates clinical development of a Heptares compound prior to July 8, 2023, the Company is obligated to pay BMS certain fees based on net sales of the Heptares compounds from low single percentage to 10% and pay up to $17,500 for each Heptares compound upon the achievement of certain development milestones and up to $150,000 for each Heptares compound upon the achievement of certain commercial milestones. As of June 30, 2022 the Company has not achieved any of the development or commercial milestones for the Heptares compounds. No fees or milestones are due by the Company to BMS for Heptares compounds that begin clinical trials after July 8, 2023.
The BMS Agreement continues to provide the Company with exclusive global development and commercialization rights to rimegepant, zavegepant and related CGRP molecules, as well as related know-how and intellectual property. The Company’s obligations to make development milestone payments to BMS under the BMS Agreement remain unchanged.
In connection with the BMS Agreement, upon FDA approval of NURTEC ODT on February 27, 2020, the Company became obligated to pay BMS $40,000 in milestone payments. The Company recorded the $40,000 in milestone payments as an intangible asset on its condensed consolidated balance sheet in the first quarter of 2020, and is amortizing the expense to cost of sales on its condensed consolidated statements of operations and comprehensive loss over the patent life. The Company paid the $40,000 in milestone payments to BMS during the year ended December 31, 2020.
Prior to 2021, in connection with the BMS Agreement, the Company paid $12,000 for certain development milestones for zavegepant. In the first quarter of 2021, the Company accrued a $5,000 development milestone expense following the regulatory filing for rimegepant in Europe, which was paid in the second quarter of 2021. In the fourth quarter of 2021, the Company accrued a $5,000 development milestone expense for the planned submission of a New Drug Application to the FDA for intranasal zavegepant in the first half of 2022, which was paid in the second quarter of 2022.
In the second quarter of 2022, the Company paid a $20,000 regulatory milestone to BMS which was recorded as an intangible asset on the condensed consolidated balance sheet in the second quarter of 2022. The Company is amortizing the expense to cost of sales on its condensed consolidated statements of operations and comprehensive loss over the patent life.
For the three and six months ended June 30, 2022 and 2021, excluding the milestone payments above, the Company did not record research and development expense related to the BMS Agreement. For the three and six months ended June 30, 2022, the Company recorded $19,354 and $31,709, respectively, in royalty expense in cost of sales on the condensed consolidated statements of operations and comprehensive loss under the BMS agreement. For the three and six months ended June 30, 2021, the Company recorded $9,293 and $13,678, respectively, in royalty expense in cost of sales on the condensed consolidated statements of operations and comprehensive loss under the BMS agreement.
RPI Agreements
In June 2018, pursuant to the 2018 RPI Funding Agreement entered into by the Company and RPI (Note 7), the Company granted to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products, for each calendar quarter during the royalty term contemplated by the 2018 RPI Funding Agreement, in exchange for $100,000 in cash. Specifically, the participation rate commences at 2.1 percent on annual global net sales of up to and equal to $1,500,000, declining to 1.5 percent on annual global net sales exceeding $1,500,000.
In connection with the 2018 RPI Funding Agreement, the Company recorded, $14,686 and $28,782 in interest expense on its liability related to sale of future royalties for the three and six months ended June 30, 2022, respectively, and $12,049 and $23,468 in interest expense on its liability related to sale of future
31

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13.  Collaboration, License and Other Agreements (Continued)
royalties for the three and six months ended June 30, 2021, respectively. The Company paid $2,595 and $6,620 under the 2018 RPI Funding Agreement during the three and six months ended June 30, 2022, respectively, and $920 and $1,656 for the three and six months ended June 30, 2021, respectively.
In August 2020, pursuant to the 2020 RPI Funding Agreement, the Company sold sales-based participation rights on global net sales of products containing zavegepant and rimegepant to RPI 2019 IFT for aggregate funding of $250,000, payable in two tranches. For further details on the transaction see Note 7 “Liability Related to Sale of Future Royalties, net.”
In connection with the 2020 RPI Funding Agreement, the Company recorded $3,359 and $6,577 in interest expense for the three and six months ended June 30, 2022, respectively, and $2,450 and $4,539 for the three and six months ended June 30, 2021, respectively. The Company recorded payments of $494 and $1,261 during the three and six months ended June 30, 2022, respectively, and payments of $175 and $315 under the 2020 RPI Funding Agreement during the three and six months ended June 30, 2021, respectively.
AstraZeneca License Agreement
In September 2018, the Company entered into an exclusive license agreement (the "2018 AstraZeneca Agreement") with AstraZeneca, pursuant to which AstraZeneca granted the Company a license to certain patent rights for the commercial development, manufacture, distribution and use of any products or processes resulting from development of those patent rights, including BHV-3241 (verdiperstat). Under the 2018 AstraZeneca Agreement, the Company paid AstraZeneca an upfront cash payment of $3,000 and 109,523 shares valued at $4,080 on the date of settlement, both of which were included in research and development expense, and is obligated to pay milestone payments to AstraZeneca totaling up to $55,000 upon the achievement of specified regulatory and commercial milestones and up to $50,000 upon the achievement of specified sales-based milestones. In addition, we will pay AstraZeneca tiered royalties ranging from high single-digit to low double-digits based on net sales of specified approved products, subject to specified reductions.
The Company is solely responsible, and has agreed to use commercially reasonable efforts, for all development, regulatory and commercial activities related to verdiperstat. The Company may sublicense its rights under the agreement and, if it does so, will be obligated to pay a portion of any milestone payments
received from the sublicense to AstraZeneca in addition to any milestone payments it would otherwise be obligated to pay.
The 2018 AstraZeneca Agreement terminates on a country-by-country basis and product-by-product basis upon the expiration of the royalty term for such product in such country and can also be terminated if certain events occur, e.g., material breach or insolvency.
For the three and six months ended June 30, 2022 and 2021, the Company did not record any material expense or make any milestone or royalty payments under the 2018 AstraZeneca Agreement.
Taldefgrobep Alfa License Agreement
In February 2022, following the transfer of intellectual property, the Company announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa (also known as BMS-986089), a novel, Phase 3-ready anti-myostatin adnectin (the "Taldefgrobep Alfa License Agreement"). Under the terms of the Taldefgrobep Alfa License Agreement, the Company will receive worldwide rights to taldefgrobep alfa and BMS will be eligible for regulatory approval milestone payments of up to $200,000, as well as tiered, sales-based royalty percentages from the high teens to the low twenties. There were no upfront or contingent payments to BMS related to the Taldefgrobep Alfa License Agreement.
For the three and six months ended June 30, 2022 and 2021, the Company did not record any material expense or make any milestone or royalty payments under the Taldefgrobep Alfa License Agreement.
Other Agreements
In addition to the agreements discussed above, the Company has entered into various other collaborations, including licensing and development programs, for assets which the Company considers to be early-stage (have not yet entered phase 3 clinical trials). The agreements generally include upfront fees, milestone payments which become payable upon achievement of certain clinical, development, regulatory and sales milestones, as well as royalties calculated as a percentage of product revenue, with rates that vary by agreement.
The Company records milestones and other payments, including funding for research arrangements, which become due under its early-stage agreements to research and development expense in the condensed consolidated statements of operations and
32

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13.  Collaboration, License and Other Agreements (Continued)
comprehensive loss. Amounts recorded for the period were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Milestone payments$— $500 $— $650 
Other payments 761 3,527 5,206 4,956 
For the three and six months ended June 30, 2022 and 2021, the Company made the following upfront payments in connection with new agreements:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Upfront Payments:
Cash $— $— $3,000 $3,700 
Issuance of Common Stock — — 1,779 4,243 
As of June 30, 2022, under these agreements the Company has potential future developmental, regulatory, and commercial milestone payments of up to approximately $224,812, $299,325 and $723,121, respectively. Payments under these agreements generally become due and payable upon achievement of a specified milestone. Because the achievement of these milestones have not been considered probable as of June 30, 2022, such contingencies have not been recorded in our financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.
14.   Debt
In August 2020, the Company and Biohaven Pharmaceuticals, Inc., the Company's wholly-owned subsidiary (together with the Company, the "Borrowers"), entered into a financing agreement, as amended, with Sixth Street Specialty Lending, Inc., as administrative agent, and the lenders party thereto (the "Lenders") pursuant to which the Lenders agreed to extend a senior secured credit facility to the Company providing for term loans in an aggregate principal amount up to $500,000, plus any capitalized interest paid in kind. The Borrowers drew an initial term loan of $275,000 at closing in August 2020 (the "Initial Term
Loan") and had $100,000 of immediately available delayed draw term loan commitments and $125,000 of delayed draw term loan commitments available upon achievement of the Delay Draw Sales Milestone (as defined in the Sixth Street Financing Agreement).
In March 2021, the Borrowers and certain other of the Company’s subsidiaries entered into Amendment No. 1 (the “First Amendment”) to the financing agreement pursuant to which the parties agreed to, among other things, remove the Delayed Draw Sales Milestone tied to the availability of the $125,000 tranche of delayed draw term loans. In August 2021, the Borrowers drew the $125,000 tranche of delayed draw term loans (the "DDTL-2).
In September 2021, the Borrowers, and certain other of the Company’s subsidiaries entered into Amendment No. 2 (the “Second Amendment”) to the financing agreement. Pursuant to the Second Amendment, the parties agreed to, among other things, increase the size of the credit facility by providing for additional term loans in an aggregate principal amount of $250,000 for a total facility size of $750,000 plus any capitalized interest paid in kind. At the closing of the Second Amendment, the Borrowers drew an initial term loan of $125,000 (the "2021 Term Loan") and $100,000 (the "DDTL-1"). The remaining $125,000 in delayed draw term loan commitments (the "2021 DDTL Commitment") was available to be drawn by the Borrowers until December 31, 2021 (the "Delayed Draw Term Loan Commitment Termination Date").
In November 2021, the Company entered into Amendment No. 3 and Limited Consent to Financing Agreement (“the Third Amendment and Limited Consent”) to our Sixth Street Financing Agreement. Pursuant to the Third Amendment and Limited Consent, the Lenders consented to the Company’s entry into the Collaboration Agreement with Pfizer.
In December 2021, the Company entered into Amendment No. 4 (the "Fourth Amendment") to the financing agreement (as previously amended and as amended by the Fourth Amendment, the “Sixth Street Financing Agreement”), pursuant to which the parties agreed to, among other things, extend the Delayed Draw Term Loan Commitment Termination Date to June 30, 2022. In June 2022, the Company drew the remaining $125,000 term loan available under the 2021 DDTL Commitment (the "DDTL-3").
The Company has the right to elect to pay up to 4.00% per annum of the interest on the term loans comprising such borrowing in the form of payment in kind for the first eight fiscal quarters after the date of
33

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
14.  Debt (Continued)
such borrowing. For the loans drawn under the 2021 DDTL Commitment, the payment-in-kind election cannot exceed seven fiscal quarters after the Delayed Draw Term Loan Commitment Termination Date. Interest on amounts borrowed under the facility will be payable quarterly.
The Company will have the right to prepay borrowings under the facility in whole or in part at any time, subject to a customary prepayment fee on the principal amount prepaid, which declines over time. The Company paid customary fees with respect to amounts drawn on each credit date. The Company also agreed to pay customary fees on the funding of any delayed draw term loans.
The Sixth Street Financing Agreement contains mandatory prepayments, restrictions and covenants applicable to the Company and its subsidiaries that are customary for financings of this type. Among other requirements, the Borrowers are required to maintain a minimum unrestricted cash balance of $80,000. At the Borrowers' request, the minimum unrestricted cash balance will be waived for any fiscal quarter in which the Borrowers achieve $400,000 of net sales of the Company’s products in the four consecutive quarterly periods prior to such fiscal quarter. The Sixth Street Financing Agreement also includes representations, warranties, indemnities and events of default that are customary for financings of this type, including an event of default relating to a change of control of the Company. Upon or after an event of default, the administrative agent and the lenders may declare all or a portion of our obligations under the Sixth Street Financing Agreement to be immediately due and payable and exercise other rights and remedies provided for under the Sixth Street Financing Agreement.
The obligations under the Sixth Street Financing Agreement are and will be guaranteed by each of the Company's existing and future direct and indirect subsidiaries, subject to certain exceptions. The obligations of the Company and its subsidiaries under the Sixth Street Financing Agreement are secured, subject to customary permitted liens and other agreed upon exceptions, by a security interest in certain existing and after-acquired assets of the Company and its subsidiaries.
2020 Loans
In August 2020, the Company borrowed the Initial Term Loan for total proceeds of $262,200, net of discounts and issuance costs. In August 2021, the Company borrowed the DDTL-2 for total proceeds of $123,750, net of discounts and issuance costs. The
DDTL-2 contained the same financing terms as the Initial Term Loan. The Initial Term Loan and the DDTL-2 (collectively, the "August 2020 Loans") become due and payable in August 2025. The August 2020 Loans bear floating interest on the unpaid principal amount at a rate per annum equal to the three-month LIBOR rate, adjusted for applicable reserve requirements, and subject to a floor of 1.00%, plus 9.00%. The contractual interest rate as of June 30, 2022 for the August 2020 Loans was 11.25%, and the effective interest rate is approximately 13.04% and 12.25% for Initial Term Loan and DDTL-2, respectively. The interest expense on the August 2020 Loans, including amortization of loan discounts and issuance costs, for the three and six months ended June 30, 2022 was $11,261 and $22,262, respectively. For the August 2020 Loans, the Company elected to pay in kind the maximum amount for its interest payments made through June 30, 2022.
2021 Loans
In September 2021, the Company borrowed the 2021 Term Loan and DDTL-1, and in June 2022, the Company borrowed the DDTL-3 (collectively, the "September 2021 Loans") and received proceeds of $119,722, $97,778, and $123,307, respectively, net of discounts and issuance costs. The September 2021 Loans are due and payable in September 2026. The September 2021 Loans will bear floating interest on the unpaid principal amount at a rate per annum equal to the three-month LIBOR rate, adjusted for applicable reserve requirements, and subject to a floor of 1.00%, plus 8.25%. The contractual interest rate as of June 30, 2022 for the September 2021 Loans was 10.50% and the effective interest rate is approximately 12.19%, 11.63%, and 11.51% for 2021 Term Loan, DDTL-1, and DDTL-3, respectively.
The interest expense on the September 2021 Loans, including amortization of loan discounts and issuance costs, was $5,648 and $11,168 for the three and six months ended June 30, 2022, respectively. For the September 2021 Loans, the Company elected to pay in kind the maximum amount for its interest payments made through June 30, 2022.
34

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
14. Debt (Continued)
The following table is a summary of the Company’s borrowing as of June 30, 2022:
June 30, 2022December 31, 2021
Long-term debt
Floating rate loans due August 2025 (11.25% at June 30, 2022)(1)
$426,127 $417,685 
Floating rate loans due September 2026 (10.50% at June 30, 2022)(2)
356,894 227,300 
Total debt principal783,021 644,985 
Unamortized debt discount and issuance costs(18,038)(18,265)
Long-term debt$764,983 $626,720 
(1) As of June 30, 2022 and December 31, 2021, paid in kind interest of $26,127 and $17,685, respectively, are included in the principal balance.
(2) As of June 30, 2022 and December 31, 2021, paid in kind interest of $6,894 and $2,300, respectively, are included in the principal balance.
The following is a summary of the Company's required repayments of debt principal due during each of the next five years, as of June 30, 2022:
2022$— 
202310,587 
202439,958 
2025411,272 
2026321,204 
$783,021 
Pfizer Merger Agreement
On May 9, 2022, the Company, Pfizer and Merger Sub, entered into the Merger Agreement, see Note 1 for
details. Pursuant to the terms set forth in the Merger Agreement, the Company will terminate the Sixth Street Financing Agreement at the Closing (as defined in the Merger Agreement), and will obtain at the Closing customary payoff letters from the lenders under the Sixth Street Financing Agreement, including, subject to the payment of any applicable payoff amount, the release of all Liens granted in connection with the Sixth Street Financing Agreement. Pfizer shall irrevocably pay off or cause to be paid off at Closing the applicable payoff amount on behalf of the Company.
15.   Commitments and Contingencies
Leases
The Company has operating leases for corporate offices and operating and finance leases for vehicles. The Company determines if an arrangement is a lease at inception. The lease term includes options to extend or terminate the lease when it is reasonably certain that Biohaven will exercise that option. Real estate leases for facilities have an average remaining lease term of 3.82 years for which none include the optional extension. Vehicle leases are generally in effect for three years. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet.
35

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
15.  Commitments and Contingencies (Continued)


The following table is a summary of the components of total lease cost:
Three Months Ended June 30,Six Months Ended
June 30,
Statement of Operations Loss Location2022202120222021
Lease cost
Finance lease cost:
Amortization of right-of-use assetsSelling, general and administrative expense$1,274 $1,374 $2,618 $2,670 
Interest on lease liabilitiesInterest expense84 158 189 301 
Operating lease costSelling, general and administrative expense681 267 948 534 
Total lease cost$2,039 $1,799 $3,755 $3,505 
The Company recognized no material short-term or variable lease costs for the three and six months ended June 30, 2022 and 2021.
The following table summarizes supplemental cash flow information:
Six Months Ended
June 30,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases$657 $334 
Operating cash flows paid for interest portion of finance leases$200 $335 
Financing cash flows paid for principal portion of finance leases$2,576 $2,514 
Right-of-use assets obtained in exchange for new operating lease liabilities$7,863 $478 
Right-of-use assets obtained in exchange for new finance lease liabilities$54 $186 

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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
15.  Commitments and Contingencies (Continued)


Supplemental balance sheet information related to leases is as follows:
In thousands, except remaining lease term and discount rateBalance Sheets LocationJune 30, 2022December 31, 2021
Operating leases:
Operating lease right-of-use assetsOther assets$12,293 $5,222 
Current portion of operating lease liabilitiesAccrued expenses and other current liabilities$2,685 $439 
Noncurrent operating lease liabilitiesOther long-term liabilities7,833 2,797 
Total operating lease liabilities$10,518 $3,236 
Finance leases:
Finance lease right-of-use assets$16,418 $16,363 
Accumulated amortization(10,250)(7,632)
Modifications affecting finance lease right-of-use assets(1,446)$— 
Total finance lease right-of-use assetsOther assets$4,722 $8,731 
Current portion of finance lease liabilitiesAccrued expenses and other current liabilities$4,207 $5,410 
Noncurrent finance lease liabilitiesOther long-term liabilities794 3,728 
Total finance lease liabilities$5,001 $9,138 
Weighted average remaining lease term (in years)
Operating leases3.825.75
Finance leases1.161.63
Weighted average discount rate
Operating leases8.86%9.07%
Finance lease5.08%5.15%
The following table summarize maturities of lease liabilities as of June 30, 2022:
Finance leasesOperating leasesTotal
2022 (remaining six months)$2,216 $1,755 $3,971 
20232,902 3,408 6,310 
202477 3,358 3,435 
20256 2,039 2,045 
2026— 1,147 1,147 
Thereafter— 669 669 
Total lease payments5,201 12,376 17,577 
Less: imputed interest(200)(1,858)(2,058)
Total lease liabilities$5,001 $10,518 $15,519 
Vehicle Exchange
37

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
15.  Commitments and Contingencies (Continued)


During the second quarter of 2022, the Company exchanged approximately half of its commercial car fleet leases for new leases. The gains on termination of the old fleet leases were treated as lease incentives that reduced the lease payments for the new fleet leases. The Company has determined that the new fleet leases are operating leases and has recorded a modification to the finance lease right-of-use assets of $1,446 for the early termination of the old fleet leases. The Company expects to exchange the remaining vehicles in the second half of 2022.
Commercial Commitments
The Company's commercial commitments primarily relate to manufacturing preparation services that are enforceable and legally binding on us and that specify all significant terms, including applicable milestone payments and target completion dates, and its commercial car fleet.
Research Commitments
The Company has entered into agreements with several contract research organizations to provide services in connection with its preclinical studies and clinical trials. The Company commits to minimum payments under these arrangements.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with certain executive officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company’s amended and restated memorandum and articles of association also provide for indemnification of directors and officers in specified circumstances. To date, the Company has not incurred any material costs as a result of such indemnification provisions. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of June 30, 2022 or December 31, 2021.
Legal Proceedings
From time to time, in the ordinary course of business, the Company is subject to litigation and regulatory examinations as well as information gathering requests, inquiries and investigations. As of June 30, 2022, there were no matters which would have a material impact on the Company’s financial results.
16. Income Taxes
The following table provides a comparative summary of the Company's income tax provision and effective income tax rate for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Income tax provision$84 $4,350 $24,387 $8,174 
Effective income tax rate— %2.1 %4.6 %1.7 %
The Company recorded an income tax provision of $84 and $24,387 for the three and six months ended
June 30, 2022, respectively, compared to a provision for income taxes of $4,350 and $8,174 for the three and six months ended June 30, 2021, respectively. The increase in income tax expense for the six months ended June 30, 2022 as compared to 2021 was primarily attributable to the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax Cuts and Jobs Act, offset by an increased benefit to the Company's foreign derived intangible income deduction. The decrease in income tax expense for the three months ended June 30, 2022 as compared to 2021 was primarily attributable to the timing of income subject to taxation for the Company's profitable operations in the United States.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”). Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC.
Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, the development of the industry in which we operate, the potential achievement of milestones and receipt of payments under our collaboration with Pfizer (“Pfizer”) entered into in November 2021 (the “Pfizer Collaboration”) and the proposed Pfizer Merger and spin-off, among other things, may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, the development of the industry in which we operate, the potential achievement of milestones and receipt of payments under the Pfizer Collaboration are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.
Overview
We are a commercial-stage biopharmaceutical company with a portfolio of innovative therapies to improve the lives of patients with debilitating neurological and neuropsychiatric diseases, including rare disorders. Our Neuroinnovation portfolio includes FDA-approved NURTEC ODT (rimegepant) for the acute and preventive treatment of migraine and a broad pipeline of drug candidates modulating distinct central nervous system targets, including calcitonin gene-related peptide ("CGRP") receptors, Kv7 ion channels, glutamate receptors, MPO, myostatin, and TRP channels. In April 2022, the European Commission approved rimegepant 75 mg (available as an ODT), for the prophylaxis and acute treatment of migraine. VYDURA™ (rimegepant) will be the commercial name for rimegepant in the EU.
Pfizer Merger and Distribution Agreement
On May 9, 2022, the Company, Pfizer and a wholly owned subsidiary of Pfizer (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Pfizer will acquire all outstanding shares of Biohaven for $148.50 per share in cash and Merger Sub will merge with and into the Company (the “Pfizer Merger”), with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Pfizer.
In connection with the Merger Agreement, Biohaven and Biohaven Research Ltd. ("New Biohaven") entered into a Separation and Distribution Agreement, dated as of May 9, 2022 (the “Distribution Agreement”). In connection with the Distribution Agreement, the Board of Directors of the Company approved and directed management to effect the spin-off of the Kv7 ion channel activator, glutamate modulation, MPO inhibition and myostatin inhibition platforms, preclinical product candidates, and certain corporate infrastructure currently owned by Biohaven (the "spin-off").
To implement the spin-off, the Company expects to transfer the related license agreements, intellectual property and corporate infrastructure, including certain non-commercial employee agreements, share based awards and other corporate agreements to New Biohaven, through a series of internal restructuring transactions, referred to as the pre-closing reorganization
To effect the spin-off, each of the Company's shareholders will receive one common share of New Biohaven for every two common shares of Biohaven held of record at the close of business on the record date for the distribution.. Upon completion of the spin-off, New Biohaven will be a stand-alone, publicly traded company focused on the development of its Kv7 ion channel activator, glutamate modulation, MPO inhibition and myostatin inhibition platforms.
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Following the closing of the Pfizer Merger, New Biohaven will continue to operate under the Biohaven name and will be led by Vlad Coric, MD, as Chairman and CEO, and include other members of the current management team of Biohaven. Immediately prior to the effective time of the spin-off, Pfizer or an affiliate of Pfizer will pay to the Company an amount equal to $275 million minus the marketable securities, cash and cash equivalents held by New Biohaven as of the close of business on the day prior to the date of the spin-off, subject to certain reductions agreed to by the Company and Pfizer, and the Company will contribute such
funding to New Biohaven. New Biohaven will also have the right to receive tiered royalties from Pfizer at percentage rates in the low-tens to mid-teens on any annual net sales of rimegepant and zavegepant in the United States in excess of $5.25 billion for all years ended on or prior to December 31, 2040. Pfizer expects to finance the transaction with existing cash on hand. Pfizer’s acquisition of Biohaven is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions and approval by Biohaven’s shareholders. The companies expect the transaction to close by early 2023.
Clinical-Stage Milestones
Our clinical-stage milestones include the following:
Drug NameIndication1H20212H20211H20222H20221H20232H2023
bhvn-20220630_g2.jpg
Migraine preventionApproval
Migraine acute/preventionEurope Filing 1QEU Approval
Migraine acute (China/Korea)ToplineChina Filing
Zavegepant
Small molecule/NCE
Migraine (intranasal)ToplineUS Filing
Migraine (oral)Start Phase 3
BHV-7000
Kv7 channel modulator
Focal epilepsyStart Phase 1
Troriluzole
NCE prodrug of riluzole
Spinocerebellar ataxiaTopline
Obsessive-Compulsive Disorder (“OCD”)Complete Enrollment
Verdiperstat
NCE oral MPO inhibitor
Amyotrophic Lateral Sclerosis ("ALS")Complete EnrollmentTopline
Taldefgrobep Alfa
Anti-myostatin adnectin
Spinal Muscular Atrophy ("SMA")Start Phase 3
BHV-1100
ARM combo
Multiple MyelomaStart Phase 1
Milestone Achieved
CGRP Platform
In July 2016, we acquired exclusive, worldwide rights to our CGRP receptor antagonist platform, including rimegepant and zavegepant (previously known as BHV-3500 and vazegepant), through a license agreement, as amended, with Bristol-Myers Squibb Company (“BMS”). In December 2020, Heptares Therapeutics Ltd. ("Sosei Heptares") and Biohaven entered a global collaboration and license agreement (the "Heptares Agreement") under which Biohaven received exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
Rimegepant
The most advanced product candidate from our CGRP receptor antagonist platform is rimegepant, an orally available, potent and selective small molecule human CGRP receptor antagonist that we have developed for the acute and preventive treatment of migraine. During the second quarter of 2019, we submitted NDAs for the acute treatment of migraine to the FDA for the Zydis ODT and tablet formulations of rimegepant. The NDA submission for the Zydis ODT formulation of rimegepant was submitted using an FDA priority review voucher, purchased in March 2019, providing for an expedited 6-month review. The Zydis ODT formulation of rimegepant (NURTEC ODT) was approved by the FDA for the acute treatment of migraine
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on February 27, 2020 and was available by prescription in U.S. pharmacies on March 12, 2020. During the fourth quarter of 2020, we submitted an sNDA for the preventive treatment of migraine to the FDA for NURTEC ODT. The FDA approved NURTEC ODT for the preventive treatment of episodic migraine on May 27, 2021.
We remain focused on investing in long-term success by driving new-to-brand prescriptions, and ultimately market share, in this rapidly growing oral CGRP market and are continuing to observe a positive return on investment with increasing physician advocacy and attracting a greater pool of patients. We believe that the rapid adoption of NURTEC ODT is evidence of significant unmet need among people with migraine and an associated large acute and preventive therapy market opportunity. We continue to expand commercial payer coverage, with NURTEC ODT now covered by insurance providers reflecting 96% of commercial lives.
A summary of key rimegepant studies is described below.
Study 301/Study 302
In March 2018, we announced positive topline data from our first two pivotal Phase 3 trials (“Study 301 and Study 302”) for the acute treatment of migraine. In each trial, treatment with a single 75 mg dose of rimegepant met the co-primary efficacy endpoints of the trial, which were superior to placebo, at two hours post-dose, on measures of pain freedom and freedom from the patient’s most bothersome symptom ("MBS"). In addition to achieving both co-primary endpoints in each of the trials, rimegepant also was observed to be generally safe and well-tolerated in the trials, with a safety profile similar to placebo. The co-primary endpoints achieved in the Phase 3 trials were consistent with regulatory guidance from the FDA and provided the basis for the submission of an NDA to the FDA.
Study 303
A third Phase 3 clinical trial for the acute treatment of migraine with a bioequivalent ODT formulation of rimegepant was commenced in February 2018. On December 3, 2018, we announced positive topline data from this randomized, controlled Phase 3 clinical trial (“BHV3000-303” or “Study 303”) evaluating the efficacy and safety of our Zydis ODT formulation of rimegepant for the acute treatment of migraine. Rimegepant differentiated from placebo on the two co-primary endpoints using a single dose, pain freedom and freedom from the MBS at two hours. In total, rimegepant was significantly differentiated from the placebo in the first 21 consecutive primary and secondary outcome measures that were pre-specified. Patients treated with the rimegepant Zydis ODT formulation began to numerically separate from placebo on pain relief as early as 15 minutes, and this difference was statistically significant at 60 minutes. Additionally, a significantly greater percentage of patients treated with rimegepant Zydis ODT returned to normal functioning by
60 minutes and lasting clinical benefit compared to placebo was observed through 48 hours after a single dose of rimegepant on freedom from pain, pain relief, freedom from the MBS, and freedom from functional disability. The safety and tolerability observations of rimegepant in Study 303 were consistent with our previous observations. The overall rates of adverse events were similar to placebo (13.2% with respect to rimegepant compared to 10.5% with placebo). The co-primary endpoints achieved in the Phase 3 trials were consistent with regulatory guidance from the FDA and formed the basis of efficacy data required by the FDA for approval.
Study 305
In November 2018, we initiated a double-blind, placebo-controlled Phase 3 clinical trial examining regularly scheduled dosing of rimegepant 75 mg to evaluate its efficacy and safety as a preventive therapy for migraine (“BHV3000-305” or “Study 305”). In March 2020, we announced positive topline results from this study. Rimegepant 75 mg, dosed every other day, demonstrated statistically significant superiority, compared to placebo, on the primary endpoint of reduction in the mean number of migraine days per month in both episodic and chronic migraine patients. The safety profile seen in the 370 patients who received rimegepant 75 mg every other day was consistent with prior clinical trial experience. With this trial, rimegepant has become the only CGRP targeted therapy to demonstrate efficacy in both the acute and preventive treatment of migraine. An sNDA for rimegepant for prevention of migraine was filed with the FDA and accepted for review in the fourth quarter of 2020. The FDA approved NURTEC ODT for the preventive treatment of migraine on May 27, 2021.
Pediatric Study Plan
In June 2019, the FDA agreed to our Pediatric Study Plan for the acute treatment of migraine. The pediatric program for the acute treatment of migraine was initiated in the fourth quarter of 2020.
Trigeminal Neuralgia
In the second quarter of 2019, we initiated a Phase 2 proof of concept trial to evaluate the safety and efficacy of rimegepant in patients with treatment refractory trigeminal neuralgia. Trigeminal neuralgia is a chronic facial pain syndrome characterized by paroxysmal, severe, and lancinating episodes of pain in the distribution of one or more branches of the trigeminal nerve. The trigeminal nerve, or fifth cranial nerve, is the largest of the 12 cranial nerves and provides sensory innervation to the head and neck, as well as motor innervation to the muscles of mastication. These episodic bouts of severe facial pain can last seconds to minutes, occur several times per day, and often result in significant disability. Over the long-term course of the disease, symptoms often become
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refractory to medical therapy and current treatment options remain suboptimal.
Plaque Psoriasis
In the fourth quarter of 2020, we announced a collaboration with Weill Cornell Medicine's Dr. Richard Granstein, Chairman of Dermatology, to initiate an investigator-led clinical trial, which will explore whether treatment with one of our CGRP receptor antagonists will reduce the severity of disease and percentage of area affected as measured by patients' Psoriasis Activity Severity Index (PASI) score after 16 weeks of treatment as compared to placebo. In addition, the study will assess the potential impact on itch and patient quality-of-life measures. Psoriasis is a chronic and painful autoimmune disease characterized by red patches of dry, cracked skin that may bleed, itch, and burn that affects approximately 7- 8 million people in the U.S.
Rhinosinusitis
In February 2022, we announced that we have begun enrollment in a Phase 2/3 clinical trial assessing the safety and efficacy of NURTEC ODT 75mg in patients with chronic rhinosinusitis ("CRS") with or without nasal polyps. CRS is a symptomatic inflammation of the paranasal sinuses and nasal cavity lasting more than 12 weeks. CRS typically manifests as facial pain/pressure/fullness, nasal obstruction (congestion), nasal discharge, and/or a decreased sense of smell. Both preclinical and human studies have indicated that increased CGRP levels are associated with CRS, and suggest that blocking CGRP receptors with NURTEC ODT may have beneficial effects for those suffering from CRS. We expect to enroll approximately 200 patients in a randomized, double-blind, placebo-controlled trial across approximately 25 sites in the U.S. Researchers will evaluate acute symptomatic treatment with rimegepant in patients with chronic rhinosinusitis with and without nasal polyps. The primary outcome measure is the change in a patient’s facial pain/pressure/fullness score on a Numerical Rating Scale (0-10). The trial will also assess the safety and tolerability of rimegepant.
Temporomandibular Disorder
Temporomandibular disorder ("TMD") is a disorder of the jaw muscles, temporomandibular joints, and the nerves associated with chronic facial pain. In April 2022 the Company commenced enrollment in a Phase 2/3 clinical trial assessing the safety and efficacy of NURTEC ODT (rimegepant) 75 mg in patients with TMD. The Company expects to enroll approximately 200 patients across approximately 25 sites in the United States. The primary outcome measure will be the change from baseline of pain on a Numerical Rating Scale (0-10).
International Health Authority Interactions
Scientific advice for rimegepant for acute and preventive migraine treatment was received from the CHMP, a committee of the European Medicines Agency,
in June and December 2018, respectively. In the first quarter of 2021, we submitted the MAA for rimegepant dual indication, inclusive of acute treatment and prevention of migraine. In April 2022, the European Commission ("EC") approved rimegepant 75 mg (available as an orally dissolving tablet), intended for the prophylaxis and acute treatment of migraine. VYDURA™ (rimegepant) will be the commercial name for rimegepant in the EU. The full indication for VYDURA is the acute treatment of migraine with or without aura in adults and preventive treatment of episodic migraine in adults who have at least four migraine attacks per month. The Marketing Authorization follows the recommendation for approval by CHMP in February 2022. The EC approval will be valid for all 27 EU member states as well as Iceland, Liechtenstein and Norway and local reimbursement approval will follow. Assessment of the MAA by the Medicines & Healthcare products Regulatory Agency ("MHRA") is complete and approval was granted in Great Britain in June 2022.
Filings in Israel and the Middle East began in 2020. In March 2021, we received approval for rimegepant in Israel and the UAE for the acute treatment of migraine. In the fourth quarter of 2021, we received approval for rimegepant in Israel for the preventive treatment of episodic migraine in adults and in Kuwait for the acute treatment of migraine in adults. In April 2022 we received approval for prevention of episodic migraine in adults in UAE. We expect further approvals in 2022.
With respect to Japan, we have engaged the Pharmaceuticals and Medical Devices Agency ("PMDA") on a path forward, and initiation of Phase 2/3 bridging studies are anticipated to begin mid-2022.
In January 2019, we and our subsidiary, BioShin (Shanghai) Consulting Services Company Ltd. (“BioShin Shanghai”), a Shanghai based limited liability company, jointly announced that the National Medical Products Administration (“NMPA,” formerly, the China FDA) had accepted the IND application for rimegepant for the treatment of migraine. As previously announced, BioShin Shanghai was established to develop and potentially commercialize our late-stage migraine and neurology portfolio in China and other Asia-Pacific markets. Following the results of Study 303, we submitted a second IND application to the NMPA for the Zydis ODT formulation of rimegepant for the acute treatment of migraine. The IND application for the Zydis ODT formulation of rimegepant was accepted by the NMPA in the fourth quarter of 2019. In September 2020, BioShin Limited ("BioShin"), our subsidiary and the parent organization of BioShin Shanghai, raised $60.0 million in series A funding (the "BioShin Funding") which was used to build out BioShin in China and advance our clinical portfolio in the Asia-Pacific region.
In November 2020, BioShin initiated a double-blind, randomized Phase 3 clinical trial evaluating the safety and efficacy of NURTEC ODT (rimegepant) for the acute treatment of migraine in China and South Korea. In February 2022, we announced positive topline results
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from the study. The study met its co-primary endpoints of freedom from pain (p<0.0001) and freedom from MBS including either nausea, phonophobia or photophobia (p<0.0001) at 2-hours following a single oral dose of rimegepant. The early onset and durable 48 hour efficacy observed in China and South Korea is consistent with previous clinical trial results. In addition to the positive results on the co-primary endpoints, NURTEC ODT demonstrated rapid onset efficacy that was superior to placebo on multiple clinically important outcomes, including: pain relief at 2 hours (p < 0.0001); normal functioning at 2 hours post-dose (p<0.0001); no need for rescue medication within 24 hrs of dosing (p < 0.0001), and showed lasting efficacy with sustained pain freedom from 2 through 24 hours (p < 0.0001) and sustained pain freedom from 2 through 48 hours (p < 0.0001). Initial analysis of topline data indicates NURTEC ODT was numerically advantaged compared to placebo on multiple early-onset measures, including: pain relief within 45 minutes and freedom from MBS within 45 minutes; return to normal function within 60 min; and pain freedom within 90 min. Rimegepant also showed a favorable safety and tolerability profile among study participants that was consistent with prior clinical trial results in the United States. Detailed data from the study will be presented at future medical meetings to help inform ongoing and future research. We expect to submit an NDA during the second half of 2022.
Pursuant to the terms of our Pfizer Collaboration, we will continue to perform development activities required for the regulatory approval of rimegepant and zavegepant in all countries outside of the U.S. ("the Territory"). The development activities are to be performed under a mutually agreed-upon development plan. In addition, Pfizer has the right to conduct certain development activities in the Territory and will be the marketing authorization holder in all countries in the Territory where permitted under applicable law.
Zavegepant
BHV-3500, formerly "vazegepant", is now referred to as "zavegepant" (za ve’ je pant). The World Health Organization (WHO) International Nonproprietary Names (INN) Expert Committee revised the name to "zavegepant" which was accepted by the United States Adopted Names Council for use in the U.S. and is pending formal adoption by the INN for international use.
Acute Treatment of Migraine
Administration of intranasal zavegepant in a Phase 1 clinical trial was initiated in October 2018 and achieved targeted therapeutic exposures. We advanced zavegepant into a Phase 2/3 trial to evaluate its efficacy for the acute treatment of migraine in the first quarter of 2019. We believed that intranasal zavegepant could provide an ultra-rapid onset of action that could be used in a complementary fashion with other migraine treatments when the speed of onset is critical to a patient and/or for patients experiencing severe nausea
and/or vomiting symptoms. In December 2019, we announced positive topline results from the Phase 2/3 trial. Zavegepant 10 and 20 mg was statistically superior to placebo on the co-primary endpoints of pain freedom and freedom from the MBS at two hours using a single dose.
In January 2021, we announced the initiation of the Phase 3 clinical trial for the use of intranasal zavegepant for the acute treatment of migraine and in December 2021, we announced top-line results. The results of the study showed that zavegepant was statistically superior to placebo on the co-primary endpoints of pain freedom (24% vs 15%, p <.0001) and freedom from most bothersome symptom (40% vs 31%, p = 0.0012) at 2 hours. Zavegepant was superior to placebo demonstrating pain relief as early as 15 minutes, with patients achieving return to normal function as early as 30 minutes after dosing (p < 0.006). The efficacy benefits of zavegepant were durable, including superiority versus placebo (p < 0.05) on: sustained pain freedom 2 to 24 hours; sustained pain freedom 2 to 48 hours; sustained pain relief 2 to 24 hours; and sustained pain relief 2 to 48 hours.
In May 2022, we announced that the FDA has filed and accepted for review an NDA for intranasal zavegepant for the acute treatment of migraine in adults. The Prescription Drug User Fee Act ("PDUFA") goal date for completion of the FDA review of the NDA is set for the first quarter of 2023.
Preventative Treatment of Migraine
In September 2020, we announced that the FDA authorized the initiation of clinical trials for oral zavegepant and that we had achieved first in human dosing in a Phase 1 trial designed to assess the safety and pharmacokinetics of oral formulations of zavegepant. In March 2021, we announced that our Phase 2/3 clinical program to assess the efficacy of oral zavegepant in the preventive treatment of migraine began enrollment. The Phase 2/3 trial is ongoing with enrollment expected to complete in the first half of 2023.
COVID-19
In April 2020, we announced our plan to study intranasal zavegepant in pulmonary complications of COVID-19 disease. The IND was approved by the Division of Pulmonary, Allergy, and Critical Care at FDA in April 2020, and a Phase 2 trial began in April 2020 in collaboration with Thomas Jefferson University and other academic medical institutions. The clinical trial will assess the potential benefits of CGRP receptor-blockade in mitigating an excessive immune response which in some cases can be fatal in COVID-19 patients.
Asthma
In October 2021, we began enrollment in a Phase 1b, double-blind, placebo-controlled, parallel-group study to evaluate the safety and efficacy of oral
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zavegepant for the treatment of subjects with mild allergic asthma. Enrollment in the trial is ongoing.
Next Generation CGRP Receptor Antagonists
Several clinical candidates are being developed through a global collaboration and license agreement between Biohaven and Sosei Heptares. Under the agreement, Biohaven received exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
BHV-3100, previously known as HTL0022562, was developed successfully through preclinical trials by Sosei Heptares and demonstrated promising and differentiated properties in target CGRP-mediated disorders. During the fourth quarter of 2021, we decided to stop development of BHV-3100 based upon its emerging preclinical profile and will instead advance one of the portfolio's backup compounds in its place.
Kv7 Platform
BHV-7000
In April 2022, we closed the acquisition from Knopp Biosciences LLC (“Knopp”) of Channel Biosciences, LLC, a wholly owned subsidiary of Knopp owning the assets of Knopp’s Kv7 channel targeting platform, pursuant to a Membership Interest Purchase Agreement, dated February 24, 2022. The acquisition of the Kv7 channel targeting platform adds the latest advances in ion-channel modulation to our growing neuroscience portfolio. BHV-7000 (formerly known as KB-3061), the lead asset from the Kv7 platform is an activator of Kv7.2/Kv7.3, a key ion channel involved in neuronal signaling and in regulating the hyperexcitable state in epilepsy. In June 2022, our Clinical Trial Application for BHV-7000 was approved by Health Canada, and in July we began clinical development.
Epilepsy
Epilepsy is the initial disease we are targeting with activators from our Kv7 platform. Epilepsy affects approximately 3.5 million Americans, or more than 1.2% of adults and 0.6% of children in the U.S., and more than 50 million patients worldwide, according to the World Health Organization (“WHO”). It is the fourth most common neurological disorder, and many patients struggle to achieve freedom from seizures, with more than one third of patients requiring two or more medications to manage their epilepsy. While the use of anti-seizure medications is often accompanied by dose-limiting side effects, our clinical candidate BHV-7000 is specifically designed to target subtypes of Kv7 potassium channels without engagement of GABAA receptors. The lack of GABAA-R activity potentially gives BHV-7000 a wide therapeutic window which we expect to result in an improved side effect profile, limiting the somnolence and fatigue often seen in patients receiving anti-seizure medications. By adding BHV-7000 to our
pipeline, we aim to bring this potassium channel modulator as a potential solution to patients with epilepsy who remain uncontrolled on their current regimens.
KCNQ2 Epileptic Encephalopathy
We are currently exploring BHV-7000 as a potential treatment for KCNQ2 epileptic encephalopathy ("KCNQ2-EE"), a rare pediatric epileptic encephalopathy first described in 2012 resulting from dominant-negative mutations in the KCNQ2 gene. BHV-7000 has been granted Rare Pediatric Disease Designation by the FDA for the treatment of KCNQ2-EE.
Neuropathic Pain
Neuropathic pain, as defined by the International Association for the Study of Pain, is pain caused by a lesion or disease of the somatosensory nervous system and includes a collection of heterogeneous conditions that are often chronic and debilitating and for which long term therapy is difficult. In the United States, over 30 million adults are estimated to be living with neuropathic pain.
Previous studies have demonstrated the efficacy of Kv7 targeting drugs in clinical trials for pain indications and in animal models. Selective Kv7 potassium channel activators represent a promising new approach in the development of non-opioid therapeutic options for neuropathic pain. In addition to leveraging reduced abuse and addiction risk potential of potassium channel activators, our Kv7 potassium channel platform addresses the complexities of channel subtype physiology through targeted pharmacology to overcome the limitations inherent in unbiased Kv7 activators and is intended to deliver a well-tolerated, highly effective, non-opioid treatment for neuropathic pain.
We are currently evaluating the activity of BHV-7010 and other compounds from our proprietary series of selective Kv7.2/7.3 activators in multiple preclinical models of neuropathic pain.
Mood disorders
Approximately 1 in 5 adults in the US are living with neuropsychiatric illnesses that are, in turn, associated with inadequate treatment, poor quality of life, disability, and considerable direct and indirect costs. There is significant unmet need for novel and effective therapeutic options that are not limited by long latency periods to clinical effects, low response rates, and significant risks and side effects. Increasing evidence from animal models and clinical trials now suggests that Kv7.2/7.3 targeting drugs offer the potential to treat a spectrum of these neuropsychiatric diseases including, but not limited to, mood disorders such as major depressive disorder, bipolar disorder and anxiety.
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Glutamate Platform
The most advanced product candidate from our glutamate receptor antagonist platform is troriluzole (previously referred to as trigriluzole and BHV-4157), which is in multiple Phase 3 trials. Other product candidates include BHV-5500, which is an antagonist of the glutamate N-methyl-D-aspartate (“NMDA”) receptor.
Troriluzole
Ataxias
In May 2022, the Company announced top-line results from the Phase 3 clinical trial evaluating the efficacy and safety of its investigational therapy, troriluzole, in patients with SCA. The primary endpoint, change from baseline to Week 48 on the modified functional Scale for the Assessment and Rating of Ataxia (f-SARA), did not reach statistical significance in the overall SCA population as there was less than expected disease progression over the course of the study. In the overall study population (N=213), the troriluzole and placebo groups each had mean baseline scores of 4.9 on the f-SARA and the two groups showed minimal change at the 48-week endpoint with f-SARA scores of 5.1 and 5.2, respectively (p=0.76).
Post hoc analysis of efficacy measures by genotype suggests a treatment effect in patients with the SCA Type 3 (“SCA3”) genotype, which represents the most common form of SCA and accounted for 41% of the study population. In the SCA3 subgroup, troriluzole showed a numerical treatment benefit on the change in f-SARA score from baseline to Week 48 compared to placebo (least squares (“LS”) mean change difference -0.55, nominal p-value = 0.053, 95% CI: -1.12, 0.01). SCA patients treated with troriluzole showed minimal disease progression over the study period. Further, in patients in the SCA3 subgroup who were able to walk without assistance at baseline (i.e., f-SARA Gait Item score = 1), troriluzole demonstrated a greater numerical treatment benefit on the change in f-SARA score from baseline to Week 48 compared to placebo (LS mean change difference -0.71, nominal p-value = 0.031, 95% CI: -1.36, -0.07). Notably, the f-SARA is a novel, 16-point scale developed in collaboration with FDA as the primary outcome measure for this trial; the scale was designed to limit subjectivity of the scale and focus on functional aspects of the disease so that significant changes would be considered clinically meaningful.
Across all genotypes, patients who were able to ambulate at baseline (i.e., f-SARA Gait Item score = 1) showed a reduction in the relative risk of falls in troriluzole-treated patients versus placebo. Patient reported falls, as measured by adverse events reveal an approximately 58% reduction of fall risk in the troriluzole group (10% versus 23% AE incidence of falls in the troriluzole and placebo groups, respectively; nominal p=0.043).
The reduction of falls in the troriluzole group combined with the progression of f-SARA scores in the untreated SCA3 group compared to SCA3 patients on troriluzole demonstrates that SCA3 patients are experiencing a clinically meaningful improvement in ataxia symptoms on troriluzole treatment. Given these findings and the debilitating nature of SCA, we intend to share the SCA3 genotype data with regulators and work with the FDA to address the high unmet need in this patient population.
Obsessive Compulsive Disorder
A Phase 2/3 double-blind, randomized, controlled trial to assess the efficacy of troriluzole in OCD commenced in December 2017. The Phase 2/3 study results were announced in June 2020. Troriluzole 200 mg administered once daily as adjunctive therapy in OCD patients with inadequate response to standard of care treatment showed consistent numerical improvement over placebo on the Yale-Brown Obsessive Compulsive Scale (Y-BOCS) at all study timepoints (weeks 4 to 12) but did not meet the primary outcome measure at week 12 (p = 0.22 at week 12), including significant improvement at week 8 (p < 0.05). Troriluzole was well tolerated with a safety profile consistent with past clinical trial experience. Given the strong signal in the Phase 2/3 proof of concept study and after receiving feedback from the FDA in an End of Phase 2 meeting, in December 2020 we initiated enrollment in the Phase 3 program. Two Phase 3 studies are currently ongoing with enrollment expected to be completed in 2023.
Glioblastoma
In December 2021, the Global Coalition for Adaptive Research ("GCAR") selected troriluzole for evaluation in Glioblastoma Adaptive Global Innovative Learning Environment - NCT03970447 ("GBM AGILE"). GBM AGILE is a revolutionary patient-centered, adaptive platform trial for registration that tests multiple therapies for patients with newly-diagnosed and recurrent glioblastoma ("GBM"), the most fatal form of brain cancer. Troriluzole will be evaluated in all patient subgroups of the trial which include newly-diagnosed methylated O6-Methylguanine-DNA methyltransferase ("MGMT"), newly-diagnosed unmethylated MGMT, and recurrent GBM. Troriluzole was selected for inclusion in GBM AGILE based on compelling evidence showing deregulation of glutamate in GBM. The therapeutic potential of troriluzole in GBM and other oncology indications is supported by several recent clinical and translational research studies conducted with troriluzole and its active moiety.
In July 2022, the Company and GCAR announced that enrollment has commenced in GBM AGILE for the evaluation of troriluzole.
BHV-5500
We are developing BHV-5500 (lanicemine), a low-trapping NMDA receptor antagonist. One potential target indication includes Complex Regional Pain Syndrome
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(“CRPS”). CRPS is a rare, chronic pain condition typically affecting limbs and triggered by traumatic injury. Accompanying symptoms also include chronic inflammation and reduced mobility in the affected areas. Other disorders of interest include post-herpetic neuralgia and diabetic peripheral neuralgia. We acquired worldwide rights to BHV-5500 under an exclusive license agreement with AstraZeneca AB in October 2016. Current work is focused on formulation development.
MPO Platform
Verdiperstat
We are developing verdiperstat (previously BHV-3241), an oral myeloperoxidase inhibitor for the treatment of neurodegenerative diseases. One potential target indication is Amyotrophic Lateral Sclerosis ("ALS"). In September 2019, we announced that verdiperstat was selected to be studied in the Phase 3 HEALEY ALS Platform Trial, which is being conducted by the Sean M. Healey & AMG Center for ALS at Massachusetts General Hospital in collaboration with the Northeast ALS Consortium (“NEALS”) clinical trial network. Promising investigational drugs were chosen for the HEALEY ALS Platform Trial through a competitive process, with the Healey Center providing partial financial support to successful applicants. The Phase 3 HEALEY ALS Platform Trial of verdiperstat began enrollment in July 2020. Enrollment in the trial was completed in November 2021, with results expected in the second half of 2022.
Verdiperstat was progressed through Phase 2 clinical trials by AstraZeneca. Seven clinical studies have been completed by AstraZeneca, including four Phase 1 studies in healthy subjects, two Phase 2a studies in subjects with Parkinson’s disease, and one Phase 2b study in subjects with MSA. We have entered into an exclusive license agreement with AstraZeneca for the product candidate.
Myostatin Platform
Taldefgrobep Alfa (BHV-2000)
In February 2022, we announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa (also known as BMS-986089 and now referred to as BHV-2000), a novel, Phase 3-ready anti-myostatin adnectin. Myostatin is a natural protein that limits skeletal muscle growth, an important process in healthy muscular development. However, in patients with neuromuscular diseases, active myostatin can critically limit the growth needed to achieve developmental and functional milestones. Myostatin inhibition is a promising therapeutic strategy for enhancing muscle mass and strength in a range of pediatric and adult neuromuscular conditions. Taldefgrobep is a muscle-targeted treatment for neuromuscular disease and offers the opportunity for combination therapy.
In July 2022, we commenced enrollment in a Phase 3 clinical trial of BHV-2000 assessing the efficacy and safety of taldefgrobep alfa in Spinal Muscle Atrophy ("SMA"). SMA is a rare, progressively debilitating motor neuron disease in which development and growth of muscle mass are compromised, resulting in progressive weakness and muscle atrophy, reduced motor function, impaired quality of life and often death. The Phase 3 placebo-controlled, double-blind trial is designed to evaluate the efficacy and safety of taldefgrobep as an adjunctive therapy for participants who are already taking a stable dose of nusinersen or risdiplam or have a history of treatment with onasemnogene abeparvovec-xioi, compared to placebo. The study is not restricted nor limited to patients based on ambulatory status or classification of SMA. We expect to enroll approximately 180 patients in this randomized, double-blind, placebo-controlled global trial.
Biohaven Labs
Kleo Pharmaceuticals, Inc. and Biohaven Labs
In January 2021, we acquired the remaining approximately 58% of Kleo that we did not previously own. We have assumed Kleo's laboratory facilities located in Science Park in New Haven, Connecticut and formed Biohaven Labs to serve as the integrated chemistry and discovery research arm of Biohaven. Biohaven Labs will continue several existing Kleo discovery partnerships, including one with the Bill and Melinda Gates Foundation for the development of a Hyperimmune Globulin Mimic for COVID-19 and one with PeptiDream for the development of immuno-oncology therapeutics (See Note 6).
Biohaven's proprietary Multimodal Antibody Therapy Enhancer ("MATE") conjugation technology uses a new class of synthetic peptide binders to target the spike protein of SARS-CoV-2 that are then selectively conjugated to commercially available intravenous immunoglobulin. The Biohaven synthetic binders for SARS-CoV2 were designed to establish a much wider area and number of contacts with the spike protein that other agents like monoclonal antibodies. In February 2021, we announced that BHV-1200, developed with Biohaven's proprietary MATE platform, has demonstrated functional binding and neutralization of the SARS-CoV-2 virus, including the strains known as the "English" and "South African" variants (also known as B.1.1.7 and B.1.351, respectively). The preliminary experiments conducted by Biohaven Labs and an academic collaborator demonstrated that BHV-1200 substantially reduced viral entry into cells. Accelerated development of the COVID-19 MATE program has been supported by the Bill and Melinda Gates Foundation. In addition, the in vitro data indicated that BHV-1200 may activate important immune system components including antibody-dependent cellular phagocytosis and antibody dependent cellular cytotoxicity. We believe our proprietary MATE-conjugation technology could also be used against other infectious diseases by changing the targeting moiety of its antibody binders.
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Option and License Agreement with the University of Connecticut
In October 2018, we entered into an exclusive, worldwide option and license agreement (the "UConn Agreement") with the University of Connecticut ("UConn") for the development and commercialization rights to UC1MT, a therapeutic antibody targeting extracellular metallothionein. Under this agreement, we have the option to acquire an exclusive, worldwide license to UC1MT and its underlying patents to develop and commercialize throughout the world in all human indications. If we choose to exercise the option, we would be obligated to pay UConn milestone payments upon the achievement of specified regulatory and commercial milestones, and royalties of a low single-digit percentage of net sales of licensed products.
Fox Chase Chemical Diversity Center, Inc.
In May 2019, we entered into an agreement with Fox Chase Chemical Diversity Center Inc. (“FCCDC”) for FCCDC’s TDP-43 assets (the “FCCDC Agreement”). The FCCDC Agreement provides us with a plan and goal to identify one or more new chemical entity candidates for preclinical development for eventual clinical evaluation for the treatment of one or more TDP-43 proteinopathies. In connection with the FCCDC Agreement, Biohaven and FCCDC have established a TDP-43 Research Plan that provides for certain milestones to be achieved by FCCDC, and milestone payments to be made by us.
Sosei Heptares
In November 2020, we entered into a global collaboration and license agreement with Sosei Heptares, an international biopharmaceutical group focused on the discovery and early development of new medicines originating from their proprietary GPCR-targeted StaR technology and structure-based drug design platform capabilities. Under the agreement, Sosei Heptares will be eligible to receive development, regulatory and commercialization milestone payments, as well as tiered royalties on net sales of products resulting from the collaboration. In return, we will receive exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
Artizan Biosciences, Inc. License Option
In December 2020, we entered into an Option and License Agreement with Artizan Biosciences Inc. ("Artizan"), a biotechnology company focused on addressing inflammatory diseases involving the human intestinal microbiota. Pursuant to the agreement, we acquired an option to obtain a royalty-based license from Artizan to manufacture, use and commercialize certain products. Artizan will use the proceeds to continue advancing the preclinical research and
development of its lead program for inflammatory bowel disease, which is anticipated to enter the clinic in early 2023, as well as to explore additional disease targets. In November 2021, we announced a collaborative therapeutic discovery and development program in Parkinson’s disease ("PD"), to exploit recent scientific advances in the understanding of pathogenic roles played by the gut microbiome in PD.
BHV-1100
In the fourth quarter of 2021, Biohaven initiated a Phase 1a/1b trial in multiple myeloma patients using its antibody recruiting molecule ("ARM") BHV-1100 in combination with autologous cytokine induced memory-like ("CIML") natural killer ("NK") cells and immune globulin ("IG") to target and kill multiple myeloma cells expressing the cell surface protein CD38. BHV-1100 is the lead clinical asset from Biohaven’s Antibody Recruiting Molecule ("ARM™") Platform developed from a strategic alliance with PeptiDream Inc. (TYO: 4587). This clinical trial will assess the safety and tolerability as well as exploratory efficacy endpoints in newly diagnosed multiple myeloma patients who have tested positive for minimal residual disease ("MRD+") in first remission prior to autologous stem cell transplant ("ASCT").
Reliant Glycosciences, LLC
In July 2021, Biohaven entered into a development and license agreement with Reliant Glycosciences, LLC ("Reliant") for collaboration on a program with Biohaven Labs’ multifunctional molecules to develop and commercialize conjugated antibodies for therapeutic uses relating to IgA nephropathy and treatment of other diseases and conditions. Under the Agreement, Reliant was entitled to an upfront share payment and will be eligible to receive development milestone payments and royalties of net sales of licensed products.
TRPM3 Antagonists
In January 2022, we entered into the KU Leuven Agreement to develop and commercialize TRPM3 antagonists to address the growing proportion of people worldwide living with chronic pain disorders. The TRPM3 antagonist platform was discovered at the Centre for Drug Design and Discovery and the Laboratory of Ion Channel Research at KU Leuven. Under the KU Leuven Agreement, we receive exclusive global rights to develop, manufacture and commercialize KU Leuven's portfolio of small-molecule TRPM3 antagonists. The portfolio includes the lead candidate, BHV-2100, which is being evaluated in several preclinical pain models and which we are advancing towards the clinic in 2023. We will support further basic and translational research at KU Leuven on the role of TRPM3 in pain and other disorders.
Recent Developments
The following is a summary of key developments affecting our business in 2022.
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Pfizer Merger and Distribution Agreement
On May 9, 2022, the Company, Pfizer and a wholly owned subsidiary of Pfizer (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Pfizer will acquire all outstanding shares of Biohaven for $148.50 per share in cash and Merger Sub will merge with and into the Company (the “Pfizer Merger”), with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Pfizer.
In connection with the Merger Agreement, Biohaven and Biohaven Research Ltd. ("New Biohaven") entered into a Separation and Distribution Agreement, dated as of May 9, 2022 (the “Distribution Agreement”). In connection with the Distribution Agreement, the Board of Directors of the Company approved and directed management to effect the spin-off of the Kv7 ion channel activator, glutamate modulation, MPO inhibition and myostatin inhibition platforms, preclinical product candidates, and certain corporate infrastructure currently owned by Biohaven, or collectively the “Biohaven Research Business”.
To implement the spin-off, the Company expects to transfer the related license agreements, intellectual property and corporate infrastructure, including certain non-commercial employee agreements, share based awards and other corporate agreements to New Biohaven, through a series of internal restructuring transactions, referred to as the pre-closing reorganization.
To effect the spin-off, each of the Company's shareholders will receive one common share of New Biohaven for every two common shares of Biohaven held of record at the close of business on the record date for the distribution. Upon completion of the spin-off, New Biohaven will be a stand-alone, publicly traded company focused on the development of its Biohaven Research Business.
Following the closing of the Pfizer Merger, New Biohaven will continue to operate under the Biohaven name and will be led by Vlad Coric, MD, as Chairman and CEO, and include other members of the current management team of Biohaven. Immediately prior to the effective time of the spin-off, Pfizer or an affiliate of Pfizer will pay to the Company an amount equal to $275 million minus the marketable securities, cash and cash equivalents held by New Biohaven as of the close of business on the day prior to the date of the spin-off, subject to certain adjustments agreed to by the Company and Pfizer, and the Company will contribute such funding to New Biohaven. The Company and Pfizer also entered into a side letter, which provided that the SpinCo Funding Amount will also be reduced by approximately $4 million in connection with the purchase by the Company of shares of capital stock of Artizan Biosciences Inc., and by approximately $7 million of transaction expenses allocated to SpinCo.
New Biohaven will also have the right to receive tiered royalties from Pfizer at percentage rates in the low-tens to mid-teens on any annual net sales of rimegepant and zavegepant in the United States in excess of $5.25 billion. Pfizer expects to finance the transaction with existing cash on hand. Pfizer’s acquisition of Biohaven is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions, including receipt of regulatory approvals and approval by Biohaven’s shareholders. The companies expect the transaction to close by early 2023.
Pfizer Collaboration Agreement
In November 2021, we entered into the Pfizer Collaboration, pursuant to which Pfizer would commercialize the product candidates containing the Company's proprietary compounds rimegepant (BHV-3000) and gains rights to zavegepant (BHV-3500) (the "Licensed Products") in all countries worldwide outside of the United States. In consideration thereof, in January 2022 Pfizer made an upfront payment of $150.0 million to Biohaven upon receipt of the requisite regulatory approvals needed for the effectiveness of the Collaboration Agreement. In addition, in January 2022 Pfizer purchased $350.0 million worth of Biohaven common shares at approximately $173.05 per share, equal to 125% of the volume weighted average price per share for the 20 consecutive trading days prior to the signing. We will be eligible to receive an aggregate additional $740.0 million in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
We are also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate us for a pro-rata share of certain of its sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory.
Merger Agreement with BioShin
On November 9, 2021, we entered into an agreement and plan of merger (the “Bioshin Merger Agreement”) with BioShin. The Bioshin Merger Agreement provides for the merger of a wholly owned indirect subsidiary of the Company with and into BioShin, with BioShin surviving the merger as a wholly owned indirect subsidiary of the Company (the “BioShin Merger”). As a result of the satisfaction of the closing conditions described in the BioShin Merger Agreement,
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on January 6, 2022, each Series A convertible preferred share of BioShin, no par value, other than Excluded Shares (as defined in the BioShin Merger Agreement), was converted into the right to receive 0.080121 of a Biohaven common share.
KU Leuven Agreement
In January 2022, we entered into the KU Leuven Agreement to develop and commercialize TRPM3 antagonists to address the growing proportion of people worldwide living with chronic pain disorders. The TRPM3 antagonist platform was discovered at the Centre for Drug Design and Discovery ("CD3") and the Laboratory of Ion Channel Research ("LICR") at KU Leuven. Under the KU Leuven Agreement, we receive exclusive global rights to develop, manufacture and commercialize KU Leuven's portfolio of small-molecule TRPM3 antagonists. The portfolio includes the lead candidate, henceforth known as BHV-2100, which has demonstrated promising efficacy in preclinical pain models and will be the first to advance towards Phase 1 studies. We will support further basic and translational research at KU Leuven on the role of TRPM3 in pain and other disorders. As consideration, KU Leuven received an an upfront cash payment of $3.0 million and 15,340 shares valued at $1.8 million, and is eligible to receive additional development, regulatory, and commercialization milestones payments of up to $327.8 million. In addition, KU Leuven will be eligible to receive mid-single digit royalties on net sales of products resulting from the collaboration.
Kv7 Platform Acquisition
In April 2022, the Company closed the acquisition from Knopp Biosciences LLC (“Knopp”) of Channel Biosciences, LLC (“Channel”), a wholly owned subsidiary of Knopp owning the assets of Knopp’s Kv7 channel targeting platform (the “Kv7 Platform Acquisition”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated February 24, 2022.
In consideration for the Transaction, on April 4, 2022, we made an upfront payment comprised of $35 million in cash and 493,254 Biohaven common shares, valued at approximately $58.7 million, (“Biohaven Shares”) issued through a private placement. We also agreed to pay additional success-based payments comprised of (i) up to $325 million based on developmental and regulatory milestones through approvals in the United States, EMEA and Japan for the lead asset, BHV-7000 (formerly known as KB-3061), (ii) up to an additional $250 million based on developmental and regulatory milestones for the Kv7 pipeline development in other indications and additional country approvals, and (iii) up to $562.5 million for commercial sales-based milestones of BHV-7000. These contingent milestone payments may be paid in cash or Biohaven Shares at our election, but if we elect to pay in Biohaven Shares, such amounts are subject to increases of a mid-single-digit percentage increase (or in one case, a ten-percent increase). Additionally, we agreed to make
scaled royalty payments in cash for BHV-7000 and the pipeline programs, starting at high single digits and peaking at low teens for BHV-7000 and starting at mid-single digits and peaking at low tens for the pipeline programs.
We have also given Knopp the option to request a one-time cash true-up payment from us in December 2022 in the event that Knopp continues to hold Biohaven Shares issued as a component of the upfront payment and the value of such shares has declined, subject to certain conditions.
See Note 6, "Acquisitions" for discussion of the accounting for the Kv7 Platform Acquisition.
Taldefgrobep Alfa Platform License
In February 2022, following the transfer of intellectual property we announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa, a novel, Phase 3-ready anti-myostatin adnectin. The in-licensing of taldefgrobep expands our portfolio of innovative, late-stage product candidates for the treatment of neurologic, neuroinflammatory, and psychiatric indications. Under the terms of the agreement, we will receive worldwide rights to taldefgrobep alfa and BMS will be eligible for regulatory approval milestone payments, as well as tiered, sales-based royalty percentages from the high teens to the low twenties (see Note 13). We initiated a Phase 3 clinical trial of taldefgrobep alfa in SMA in July 2022.
Artizan Series A-2 Preferred Stock Purchase
In June 2022, we entered into an Amendment to our Series A-2 Preferred Stock Purchase Agreement with Artizan. Under the Amendment, we made a cash payment of $4.0 million in exchange for 22,975,301 shares of series A-2 preferred stock of Artizan out of a total of 45,950,601 shares of series A-2 preferred stock of Artizan for a total raise of $8.0 million (the “A2 Extension Raise”). Along with the Amendment, we and Artizan executed a non-binding indication of interest (“Artizan Side Letter”) which describes terms under which we and Artizan would amend the 2020 Artizan Agreement to eliminate certain milestone payments required by us in exchange for limiting our option to the selection of the first (ARZC-001) licensed product. The Artizan Side Letter requires Artizan to commit at least 80% of the funds raised in the A-2 Extension Raise to a certain program and to raise $35.0 million of additional capital within a certain time.
Components of Our Results of Operations
Product Revenue, Net
We began to recognize revenue from product sales, net of rebates, chargebacks, discounts and other adjustments, in March 2020 in conjunction with the launch of our first product, NURTEC ODT. We will continue to evaluate trends related to revenue
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momentum for NURTEC ODT, including any discernible impacts of the COVID-19 pandemic. If our development efforts for our other product candidates are successful and result in regulatory approval, or additional license agreements with third parties, we may generate additional revenue in the future from product sales.
Collaboration and other revenue
We enter into licensing and collaboration agreements in which we are entitled to receive up-front payments, certain milestone payments and royalties. In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Pfizer, pursuant to which Pfizer would commercialize the Licensed Products in all countries worldwide outside of the United States (see Note 13).
Pursuant to ASC 606, during the six months ended June 30, 2022 we recorded a portion of the transaction price received in connection with the Collaboration Agreement to collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss for the amount representing performance obligations which had been satisfied during the period, including the transfer of intellectual property to Pfizer.
Operating Expenses
Cost of Sales
Cost of sales includes direct and indirect costs related to the manufacturing and distribution of NURTEC, including third-party manufacturing costs, packaging services, freight-in, third-party royalties payable on our net product revenues and amortization of intangible assets associated with NURTEC ODT.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. These expenses include:
•expenses incurred under agreements with contract research organizations (“CROs”) or contract manufacturing organizations (“CMOs”), as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;
•employee-related expenses, including salaries, benefits, travel and non-cash share-based compensation expense for
employees engaged in research and development functions;
•costs related to compliance with regulatory requirements;
•development milestone payments incurred prior to regulatory approval of the product candidate; and
•payments made in cash, equity securities or other forms of consideration under third-party licensing or other agreements prior to regulatory approval of the product candidate.
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using estimates of our clinical personnel or information provided to us by our service providers.
Our external direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs, and central laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees and certain development milestones incurred under license agreements. We do not allocate employee costs, or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee the research and development as well as for managing our preclinical development, process development, manufacturing and clinical development activities. Many employees work across multiple programs, and we do not track personnel costs by program.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will remain significant over the next several years as we increase personnel costs, conduct late-stage clinical trials, and prepare regulatory filings for our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the
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numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
•the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;
•establishment of an appropriate safety profile with IND-enabling studies;
•successful patient enrollment in, and the initiation and completion of, clinical trials;
•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
•establishment of commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;
•acquisition, maintenance, defense and enforcement of patent claims and other intellectual property rights;
•significant and changing government regulation;
•initiation of commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and
•maintenance of a continued acceptable safety profile of the product candidates following approval.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel costs, including salaries, benefits and travel expenses for our executive, commercial, finance, business, corporate development and other administrative functions; and non-cash share-based compensation expense. Selling, general and administrative expenses also include facilities and other related expenses, including rent, depreciation, maintenance of facilities, insurance and supplies; professional fees for expenses incurred under agreements with third parties relating to the commercialization of NURTEC ODT; and for public relations, audit, tax and legal services, including legal expenses to pursue patent protection of our intellectual property.
We anticipate that our selling, general and administrative expenses, including payroll and related expenses, will remain significant in the future as we
continue to expand our operations and organizational capabilities, continue to support our commercial activities associated with NURTEC ODT, and prepare for potential commercialization of our product candidates, if successfully developed and approved. We also anticipate increased expenses associated with general operations, including costs related to accounting and legal services, director and officer insurance premiums, facilities and other corporate infrastructure and office-related costs, such as information technology costs.
Other Income (Expense)
Interest Expense
Interest expense primarily consists of interest on our outstanding term loan with Sixth Street Specialty Lending, Inc., which includes interest expense on the outstanding loan balance, accretion of the debt discount and amortization of issuance costs. Our interest expense also includes implied interest on our finance leases associated with our commercial car fleet. We utilize the effective interest method to determine our interest expense on the term loan and finance leases and the straight-line method for the amortization of the debt issuance costs.
Interest Expense on Mandatorily Redeemable Preferred Shares
Interest expense on mandatorily redeemable preferred shares is being recognized in connection with the issuance of series A preferred shares and series B preferred shares pursuant to the Series A preferred share purchase agreement and Series B preferred shares forward contracts we entered into with RPI. Since we are required to redeem the series A preferred shares for 2x the original purchase price in equal quarterly installments by December 31, 2024 and the series B preferred shares for 1.77x the original purchase price in equal installments beginning on March 31, 2025 and ending December 31, 2030, we concluded that the Series A preferred shares and Series B preferred shares are mandatorily redeemable instruments and initially classified the preferred shares at their fair value as a liability. Interest expense on the mandatorily redeemable preferred shares represents the accretion of the carrying value of the preferred shares liability to its redemption value using the effective interest rate method.
Change in Fair Value of Derivatives
The fair value of our derivative liabilities are determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. We utilized the with-and-without valuation method to determine the fair value of our derivative liabilities. As inputs into the valuations, we assessed a change of control as highly probable by early 2023, and considered the amount and timing of the payments with and without a change of control and risk-adjusted discount rates ranging from low single-digits to mid-twenties. In accordance with ASC 815, Derivatives
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and Hedging, the fair value of the derivatives are recorded on the condensed consolidated balance sheets as derivative liabilities with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. If factors change and different assumptions are used, the fair value of the derivative liabilities and related gains or losses could be materially different in the future.
Interest Expense on Liability Related to Sale of Future Royalties
We have accounted for the 2018 RPI Funding Agreement and a unit of accounting of the 2020 RPI Funding Agreement with RPI Trust both as liability financings, primarily because they have significant continuing involvement in generating the future revenue on which the royalties are based. The liabilities related to sale of future royalties and the related interest expense are measured based on our current estimate of the timing and amount of future royalties expected to be paid over the estimated terms of the 2018 RPI Funding Agreement and 2020 RPI Funding Agreement. The liabilities are amortized using the effective interest rate method, resulting in recognition of interest expense over the estimated term of the agreement. Each reporting period, we assess the estimated timing and amount of future expected royalty payments over the estimated terms. If there is a change to one of the estimates, we recognize the impact to the liability’s amortization schedule and the related interest expense prospectively. Our estimate of the amount of expected future royalties to be paid considers the probability of success of compounds not yet approved for sale, and market penetration rates, compliance rate, and net pricing of both NURTEC ODT and compound not yet approved for sale. Additionally, the transaction costs associated with the liabilities will be amortized to interest expense over the estimated term of the 2018 RPI Funding Agreement and 2020 RPI Funding Agreement, respectively.
Gain from Equity Method Investment
Prior to our acquisition of Kleo in January 2021, we owned approximately 41.9% of the outstanding shares as of December 31, 2020, and accounted for our investment in Kleo under the equity method of accounting. As a result, our proportionate share of Kleo’s net income or loss each reporting period was included in other income (expense), net, in our condensed consolidated statements of operations and comprehensive loss and results in a corresponding adjustment to the carrying value of the equity method investment on our condensed consolidated balance sheet.
On January 4, 2021, we acquired the rest of the shares of Kleo, and post-transaction we own 100% of the outstanding shares of Kleo.
Provision for Income Taxes
As a company incorporated in the British Virgin Islands (“BVI”), we are principally subject to taxation in the BVI. Under the current laws of the BVI, tax on a company’s income is assessed at a zero percent tax rate. As a result, we have not recorded any income tax benefits from losses incurred in the BVI during each reporting period, and no net operating loss carryforwards will be available to us for those losses. We have historically outsourced all of the research and clinical development for our programs under a master services agreements with our wholly owned subsidiary, Biohaven Pharmaceuticals, Inc., a Delaware corporation (“BPI”). As a result of providing services under this agreement and profit from US commercial sales of NURTEC ODT, BPI was profitable during the six months ended June 30, 2022 and 2021, and BPI is subject to taxation in the United States.
In August 2020, we completed an intra-entity asset transfer of certain of our intellectual property to our Irish subsidiary. As a result of the transfer, we recorded a deferred tax asset of $875.0 million for the step up in tax basis received pursuant to Irish tax law. Based on our analysis of all available objective evidence, we concluded that it was more likely than not that the deferred tax asset from the intra-entity transfer will not be realized due to the lack of net operating income history of our subsidiary. Therefore, we established a full valuation allowance against our net deferred tax asset in Ireland.
We continue to maintain a valuation allowance against our US deferred tax assets. We periodically review our position and have determined that a full valuation allowance on these assets was appropriate due to future stock based compensation deductions as of June 30, 2022. We will continue to evaluate the need for a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances. We anticipate the commercialization of NURTEC ODT will result in future earnings and believe sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion, or all, of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release is subject to change on the basis of the level of profitability that we are able to actually achieve.
In January 2021, we completed the acquisition of Kleo. The acquisition and inclusion of Kleo did not result in a material impact on the provision for income taxes or the effective tax rate for the three and six months ended June 30, 2022 or 2021. We recorded a full valuation allowance against our Kleo US deferred tax assets and will periodically review our position and have determined that a full valuation allowance on these
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assets was appropriate due to Kleo’s cumulative loss history. We will continue to evaluate the need for a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.
We recorded income tax provisions during the three and six months ended June 30, 2022 of $0.1 million and $24.4 million, respectively and
$4.4 million and $8.2 million during the three and six months ended June 30, 2021, respectively. The income tax provisions recorded primarily represent US federal and state taxes resulting from general business credit limitations in 2021 and the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax Cuts and Jobs Act.
Results of Operations
Comparison of the Three Months Ended June 30, 2022 and 2021
The following tables summarize our results of operations for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
 20222021Change
 In thousands
Revenues:
Product revenue, net$193,954 $92,933 $101,021 
Collaboration and other revenue21,125 — 21,125 
Total revenues215,079 92,933 122,146 
Operating expenses: 
Cost of sales 35,741 17,339 18,402 
Research and development218,480 77,428 141,052 
Selling, general and administrative250,455 170,057 80,398 
Total operating expenses504,676 264,824 239,852 
Loss from operations(289,597)(171,891)(117,706)
Other income (expense): 
Interest expense(17,114)(7,836)(9,278)
Interest expense on mandatorily redeemable preferred shares(8,077)(8,042)(35)
Interest expense on liability related to sale of future royalties(18,045)(14,499)(3,546)
Change in fair value of derivatives(111,197)(1,490)(109,707)
Other income (expense), net2,229 (3,051)5,280 
Total other expense, net(152,204)(34,918)(117,286)
Loss before provision for income taxes(441,801)(206,809)(234,992)
Provision for income taxes84 4,350 (4,266)
Net loss(441,885)(211,159)(230,726)
Net loss attributable to non-controlling interests498 540 (42)
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.$(441,387)$(210,619)$(230,768)
Product revenue, net
Net product revenue was $194.0 million for the three months ended June 30, 2022, compared to $92.9 million for the three months ended June 30, 2021. The increase of $101.0 million in net product revenues is primarily due to increased NURTEC ODT sales volume as well as an increase in average pills per prescription during the during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The increase was partially offset by additional rebate contracts and improved allowances from patient affordability support.
Collaboration and other revenue
Collaboration and other revenue was $21.1 million for the three months ended June 30, 2022. No  collaboration and other revenue was recognized for the three months ended June 30, 2021. The collaboration and other revenue recognized during the three months ended June 30, 2022 was primarily due variable consideration of $20.0 million recognized as part of our Collaboration Agreement with Pfizer (see Note 13).
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Cost of Sales
Cost of sales was $35.7 million for the three months ended June 30, 2022, compared to $17.3 million for the three months ended June 30, 2021. Our cost of sales is related to royalties on net sales payable to BMS under a license agreement, manufacturing costs for NURTEC ODT, certain distribution costs and amortization of intangible assets related to milestone
payments to BMS and Catalent, Inc. ("Catalent"). See Note 13 "Collaboration, License and Other Agreements" to our condensed consolidated financial statements for more information on the BMS agreements. The increase of $18.4 million in costs of goods sold was primarily due to increased NURTEC ODT sales during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.
Research and Development Expenses
Three Months Ended June 30,
 20222021Change
In thousands
Direct research and development expenses by program:   
BHV-7000$119,515 $— $119,515 
Rimegepant24,309 13,976 10,333 
Troriluzole13,125 13,068 57 
Zavegepant6,690 11,470 (4,780)
Verdiperstat4,014 8,613 (4,599)
BHV-20004,126 — 4,126 
TRPM3277 — 277 
Other programs2,933 38 2,895 
Unallocated research and development costs:
Personnel related (including non-cash share-based compensation)32,091 19,919 12,172 
Preclinical research programs5,254 4,706 548 
Other6,146 5,638 508 
Total research and development expenses$218,480 $77,428 $141,052 
R&D expenses, including non-cash share-based compensation costs, were $218.5 million for the three months ended June 30, 2022, compared to $77.4 million for the three months ended June 30, 2021. The increase of $141.1 million was primarily due to an increase of $119.5 million in expense for BHV-7000, an increase of $10.3 million in program expenses for rimegepant, and an increase of $12.2 million in personnel costs related to increases in headcount. The $119.5 million increase in expense for BHV-7000 was primarily due to the Kv7 Platform Acquisition, which resulted in $93.7 million of expense recorded to R&D during the three months ended June 30, 2022, and a $25.0 million milestone payment accrued during the second quarter of 2022 which became payable in June 2022. These increases were partially offset by a decrease in program expense for zavegepant of $4.8 million, primarily due to the conclusion of a Phase 3 clinical trial for the acute treatment of migraines in December 2021 with positive topline results, and a decrease in program expense for Verdiperstat of $4.6 million. Non-cash share-based compensation expense was $16.6 million for the three months ended June 30, 2022, an increase of $7.4 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount and the amortization of our annual equity incentive awards granted in the first quarter of 2022 which had an
increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Selling, General and Administrative Expenses
SG&A expenses, including non-cash share-based compensation costs, were $250.5 million for the three months ended June 30, 2022, compared to $170.1 million for the three months ended June 30, 2021. The increase of $80.4 million was primarily due to increases in spending to support the increased commercial sales of NURTEC ODT, including the launch of NURTEC ODT for the preventative treatment of migraine which was approved by the FDA in May of 2021. The increased spending included increases in marketing and advertising expenses, professional fees and non-cash share based compensation. Additionally, approximately $9.6 million of the increased SG&A expense related to fees incurred in connection with the Pfizer Merger, including increased legal and accounting costs. Less than half of the SG&A expense was for commercial organization personnel costs, excluding non-cash share-based compensation expense. Non-cash share-based compensation expense was $23.6 million for the three months ended June 30, 2022, an increase of $7.3 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount
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and the amortization of our annual equity incentive awards granted in the first quarter of 2022 which had an increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Other Expense, Net
Other expense, net was $152.2 million for the three months ended June 30, 2022, compared to net expense of $34.9 million for the three months ended June 30, 2021. The increase of $117.3 million in net expense was primarily due to the change in fair value of derivative liabilities, as well as increased interest expense as a result of additional borrowings under our
debt facility (see Note 4 "Fair Value of Financial Assets and Liabilities" and Note 14 "Debt.")
Provision for Income Taxes
We recorded an income tax provision of $0.1 million for the three months ended June 30, 2022, compared to a provision for income taxes of $4.4 million for the three months ended June 30, 2021. The decrease in income tax expense of $4.3 million was primarily attributable to the timing of income subject to taxation for the Company's profitable operations in the United States.
Comparison of the Six Months Ended June 30, 2022 and 2021
The following tables summarize our results of operations for the six months ended June 30, 2022 and 2021:
Six Months Ended June 30,
20222021Change
In thousands
Product revenue, net$317,544 $136,756 $180,788 
Collaboration and other revenue216,387 — 216,387 
Total revenues533,931 136,756 397,175 
Operating expenses:
Cost of sales62,083 30,201 31,882 
Research and development337,579 184,539 153,040 
Selling, general and administrative477,698 329,580 148,118 
Total operating expenses877,360 544,320 333,040 
Loss from operations(343,429)(407,564)64,135 
Other income (expense):
Interest expense(34,330)(15,567)(18,763)
Interest expense on mandatorily redeemable preferred shares(15,994)(15,985)(9)
Interest expense on liability related to sale of future royalties(35,359)(28,007)(7,352)
Change in fair value of derivatives(107,593)(1,700)(105,893)
Gain (loss) from equity method investment— 5,261 (5,261)
Other2,310 (4,751)7,061 
Total other expense, net(190,966)(60,749)(130,217)
Loss before provision for income taxes(534,395)(468,313)(66,082)
Provision for income taxes24,387 8,174 16,213 
Net loss(558,782)(476,487)(82,295)
Net loss attributable to non-controlling interests996 900 96 
Deemed dividend upon repurchase of preferred shares in consolidated subsidiary(92,673)— (92,673)
Net loss attributable to Biohaven Pharmaceutical Holding Company Ltd.$(650,459)$(475,587)$(174,872)
Product revenue, net
We began recording product revenues in the first quarter of 2020 following the approval of NURTEC ODT by the FDA on February 27, 2020 and its subsequent commercial launch in the U.S. in March 2020. Net product revenue was $317.5 million for the six months ended June 30, 2022, compared to $136.8 million for the six months ended June 30, 2021. The increase of $180.8 million in net product revenues is primarily due to
increased NURTEC ODT sales volume as well as an increase in average pills per prescription during the six months ended June 30, 2022 compared the six months ended June 30, 2021. The increase partially offset by additional rebate contracts and improved allowances from patient affordability support.
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Collaboration and other revenue
Collaboration and other revenue was $216.4 million for the six months ended June 30, 2022. No collaboration and other revenue was recognized for the six months ended June 30, 2021. The collaboration and other revenue recognized during the six months ended June 30, 2022 was primarily due to $194.4 million recognized upon the satisfaction of our performance obligation for the delivery of the license and sublicense to commercialize Rimegepant outside of the U.S. as part of our Collaboration Agreement with Pfizer (see Note 13). In addition, in the second quarter of 2022 we recognized $20.0 million of variable consideration relating to our Collaboration Agreement with Pfizer.
Cost of Sales
Cost of sales was $62.1 million for the six months ended June 30, 2022, compared to $30.2 million for the six months ended June 30, 2021. Our cost of sales is related to royalties on net sales payable to BMS under a license agreement, manufacturing costs for NURTEC ODT, certain distribution costs and amortization of intangible assets related to milestone payments to BMS and Catalent. The increase of $31.9 million in cost of sales was primarily due to increased NURTEC ODT sales during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.
Research and Development Expenses
Six Months Ended June 30,
20222021Change
In thousands
Direct research and development expenses by program:
BHV-7000$119,515 $— $119,515 
Rimegepant43,425 30,968 12,457 
Troriluzole26,642 29,682 (3,040)
Zavegepant14,164 34,218 (20,054)
Verdiperstat9,093 15,401 (6,308)
BHV-20007,006 — 7,006 
TRPM36,154 — 6,154 
   Other programs5,721 42 5,679 
Unallocated research and development costs:
Personnel related (including non-cash share-based compensation)83,252 50,596 32,656 
Preclinical research programs11,325 15,188 (3,863)
Other11,282 8,444 2,838 
Total research and development expenses$337,579 $184,539 $153,040 
R&D expenses, including non-cash share-based compensation costs, were $337.6 million for the six months ended June 30, 2022, compared to $184.5 million for the six months ended June 30, 2021. The increase of $153.0 million was primarily due to an increase of $119.5 million in expense for BHV-7000, an increase of $12.5 million in program expenses for rimegepant, and an increase of $32.7 million in personnel costs related to increases in headcount. The $119.5 million increase in expense for BHV-7000 was primarily due to the Kv7 Platform Acquisition, which resulted in $93.7 million of expense recorded to R&D during the three months ended June 30, 2022, and a $25.0 million milestone payment accrued during the second quarter of 2022 which became payable in June 2022. These increases were partially offset by a decrease in program expense for zavegepant of $20.1 million, primarily due to the conclusion of a Phase 3 clinical trial for the acute treatment of migraines in December 2021 with positive topline results, and a decrease in program expense for Verdiperstat of $6.3 million. Non-cash share-based compensation expense
was $50.6 million for the six months ended June 30, 2022, an increase of $21.2 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount and our annual equity incentive awards granted in the first quarter of 2022 which had an increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Selling, General and Administrative Expenses
SG&A expenses, including non-cash share-based compensation costs, were $477.7 million for the six months ended June 30, 2022, compared to $329.6 million for the six months ended June 30, 2021. The increase of $148.1 million was primarily due to increases in spending to support the increased commercial sales of NURTEC ODT, including the launch of NURTEC ODT for the preventative treatment of migraine which was approved by the FDA in May of 2021. The increased spending included increases in marketing and advertising expenses, professional fees and non-cash share based compensation. Less than half of the
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SG&A expense was for commercial organization personnel costs, excluding non-cash share-based compensation expense. Additionally, approximately $9.6 million of the increased SG&A expense related to fees incurred in connection with the Pfizer Merger, including increased legal and accounting costs. Less than half of the SG&A expense was for commercial organization personnel costs, excluding non-cash share-based compensation expense. Non-cash share-based compensation expense was $71.5 million for the six months ended June 30, 2022, an increase of $26.5 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount and our annual equity incentive awards granted in the first quarter of 2022 which had an increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Other Expense, Net
Other expense, net was a net expense of $191.0 million for the six months ended June 30, 2022, compared to net expense of $60.7 million for the six months ended June 30, 2021. The increase of 130.2 million in net expense was primarily due to the change in fair value of our derivative liabilities, as well as increased interest expense as a result of additional borrowings under our debt facility (see Note 4 "Fair Value of Financial Assets and Liabilities" and Note 14 "Debt.").
Provision for Income Taxes
We recorded a provision for income taxes of $24.4 million for the six months ended June 30, 2022,
compared to a provision for income taxes of $8.2 million for the six months ended June 30, 2021. The increase in income tax expense of was primarily attributable the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax Cuts and Jobs Act, offset by an increased benefit to the Company's foreign derived intangible income deduction.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We have funded our operations primarily with proceeds from sales of our common and preferred equity, sales of revenue participation rights related to future royalties, proceeds from a senior secured credit facility and the Collaboration Agreement with Pfizer. In addition, we began to generate net product revenue in the first quarter of 2020 in conjunction with the launch of our first product, NURTEC ODT.
As of June 30, 2022, we had cash and cash equivalents of $235.8 million, excluding restricted cash of $0.8 million. Cash in excess of immediate requirements is invested in marketable securities with a view to liquidity and capital preservation. As of June 30, 2022, we had marketable securities of $317.7 million. We continuously assess our working capital needs, capital expenditure requirements, and future investments or acquisitions.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Six Months Ended June 30,
 20222021Change
In thousands
Net cash used in operating activities$(157,680)$(432,716)$275,036 
Net cash (used in) provided by investing activities(187,301)160,636 (347,937)
Net cash provided by financing activities409,917 446,187 (36,270)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(2,722)(189)(2,533)
Net increase in cash, cash equivalents and restricted cash$62,214 $173,918 $(111,704)
Operating Activities
During the six months ended June 30, 2022, net cash used in operating activities was $157.7 million, a decrease of $275.0 million as compared to the six months ended June 30, 2021. The decrease in net cash used in operations was primarily due to $248.0 million in upfront consideration received from Pfizer at the closing of the Collaboration Agreement in January 2022 and an increase in cash receipts from an increase in net product revenue from sales of NURTEC ODT, partially offset by an increase in SG&A expenses due to increased costs to support the commercial growth of NURTEC ODT
and an increase in R&D expenses to support our portfolio of late stage product candidates and preclinical assets.
Investing Activities
During the six months ended June 30, 2022, net cash used in investing activities was $187.3 million, an increase of $347.9 million as compared to the six months ended June 30, 2021. The increase in net cash used in investing activities was primarily due the $93.7 million acquisition of the Kv7 platform of which $35.0 million was paid in cash and the remainder in
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Biohaven common shares, an increase of $246.8 million in purchases of marketable securities, a decrease of $45.4 million in sales and maturities of marketable securities, and an increase of $20.0 million due to a payment for an intangible asset during the six months ended June 30, 2022. The $20.0 million payment for an intangible asset is a milestone payment to BMS related to the approval of Vydura (rimegepant) in the European Union.
Financing Activities
During the six months ended June 30, 2022, net cash provided by financing activities was $409.9 million, a decrease of $36.3 million compared to the six months ended June 30, 2021.  The decrease in net cash provided by financing activities was primarily due to a decrease in proceeds from the issuance of common shares of $56.7 million and non-recurring cash proceeds of $100.0 million from RPI related to the 2020 RPI Funding Agreement during the six months ended June 30, 2022, partially offset by a $125.0 million increase in proceeds from issuance of long-term debt.
Pfizer Collaboration Agreement
In November 2021, we entered into the Collaboration Agreement with Pfizer, pursuant to which Pfizer would commercialize the Licensed Products in all countries worldwide outside of the United States. In consideration thereof, in January 2022 Pfizer made an upfront payment of $150.0 million to Biohaven upon receipt of the requisite regulatory approvals needed for the effectiveness of the Collaboration Agreement. In addition, in January 2022 Pfizer purchased $350.0 million worth of Biohaven common shares at approximately $173.05 per share. We will be eligible to receive an aggregate additional $740.0 million in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
We are also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate us for a pro-rata share of certain of our sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory. As of June 30, 2022, we have recognized $20.0 million of variable consideration related to the collaboration agreement with Pfizer. See Note 13, "Collaboration, License and Other Agreements" to the Condensed Consolidated Financial Statements included in this report for
additional information regarding our Collaboration Agreement with Pfizer.
Credit Facility
In August 2020, we entered into a financing agreement, as amended, with the Lenders pursuant to which the Lenders agreed to extend a senior secured credit facility to the Company providing for term loans in an aggregate principal amount up to $500.0 million, plus any capitalized interest paid in kind. We drew an Initial Term Loan of $275.0 million at closing in August 2020 (the "Initial Term Loan" and had $100.0 million of immediately available delayed draw term loan commitments and $125.0 million of delayed draw term loans available upon achievement of the Delay Draw Sales Milestone (as defined in the Sixth Street Financing Agreement).
In March 2021, we entered into Amendment No. 1 (the "First Amendment") to the financing agreement pursuant to which the parties agreed to, among other things, remove the Delayed Draw Sales Milestone tied to the availability of the $125.0 million tranche of delayed draw term loans. In August 2021, we drew the $125.0 million tranche of delayed draw term loans (the "DDTL-2").
In September 2021, we entered into Amendment No. 2 (the “Second Amendment”) to the financing agreement. Pursuant to the Second Amendment, the parties agreed to, among other things, increase the size of the credit facility by providing for additional term loans in an aggregate principal amount of $250.0 million for a total facility size of $750.0 million plus any capitalized interest paid in kind. At the closing of the Second Amendment, we drew an initial term loan of $125.0 million (the "2021 Term Loan") and $100.0 million of delayed draw term loan commitments (the "DDTL-1"). The remaining $125.0 million in delayed draw term loan commitments (the "2021 DDTL Commitment") was available to be drawn by the Borrowers until December 31, 2021 (the "Delayed Draw Term Loan Commitment Termination Date").
In November 2021, we entered into Amendment No. 3 and Limited Consent to Financing Agreement (“the Third Amendment and Limited Consent”) to our Sixth Street Financing Agreement. Pursuant to the Third Amendment and Limited Consent, the Lenders consented to our entry into the Collaboration Agreement with Pfizer.
In December 2021, we entered into Amendment No. 4 (the "Fourth Amendment") to the financing agreement (as previously amended and as amended by the Fourth Amendment, the “Sixth Street Financing Agreement”), pursuant to which the parties agreed to, among other things, extend the Delayed Draw Term Loan Commitment Termination Date to June 30, 2022. In June 2022, we drew the remaining $125.0 million term loan available under the 2021 DDTL Commitment (the "DDTL-3").
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2020 Loans
In August 2020, we borrowed the Initial Term Loan for total proceeds of $262.2 million, net of discounts and issuance costs. In August 2021, we borrowed the DDTL-2 for total proceeds of $123.8 million, net of discounts and issuance costs. The DDTL-2 was borrowed under the same financing terms as the Initial Term Loan. The Initial Term Loan and the DDTL-2 (collectively, the "August 2020 Loans") become due and payable in August 2025. The August 2020 Loans accrue interest at a variable rate, with interest paid on a quarterly basis. The interest rate on the August 2020 Loans as of June 30, 2022 was 11.25%. We have the option to pay-in-kind up to 4.0% interest per annum for the first two years and have elected to pay-in-kind the maximum amount for all interest payments as of June 30, 2022. The proceeds from the August 2020 Loans are being used for general corporate purposes.
2021 Loans
In September 2021, we borrowed the 2021 Term Loan for total proceeds of $119.7 million, the DDTL-1 for total proceeds of $97.8 million, and in June 2022, the DDTL-3 for total proceeds of $123.3 million (collectively, the September 2021 Loans"), net of discounts and issuance costs. The September 2021 Loans become due and payable in September 2026. The September 2021 Loans accrue interest at a variable rate, with interest paid on a quarterly basis. The interest rate on the September 2021 Loans as of June 30, 2022 was 10.50%. We have the option to pay-in-kind up to 4.0% interest per annum for the first two years that the loans are outstanding. The proceeds from the September 2021 Loans are being used for general corporate purposes.
Equity Distribution Agreement
In December 2020, we entered into an equity distribution agreement in which we may offer and sell common shares having an aggregate offering price of up to $400.0 million from time to time through or to the sales agents, acting as our agents or principals (the "Equity Distribution Agreement"). Sales of our common shares, if any, will be made in sales deemed to be “at the market offerings”. The sales agents are not required to sell any specific amount of securities but will act as our sales agents using commercially reasonable efforts consistent with their normal trading and sales practices, on mutually agreed terms between the sales agents and us. We currently plan to use the net proceeds from the offering for general corporate purposes.
As of June 30, 2022, we have issued and sold 939,328 common shares for net proceeds of approximately $78.7 million all in the first quarter of 2021 under the Equity Distribution Agreement.
Series B Preferred Shares Forward Contracts
In August 2020, we entered into the Series B preferred share agreement, whereby RPI will invest in the Company through the purchase of up to 3,992 Series
B preferred shares at a price of $50,100 per share for aggregate proceeds of approximately $200.0 million (the "RPI Series B Preferred Share Agreement"). The shares will be issued in quarterly increments from March 31, 2021 to December 31, 2024. We are required to redeem the Series B Preferred Shares for 1.77 times the original purchase price, payable beginning March 31, 2025 in equal quarterly installments through December 31, 2030. The gross proceeds from the transaction with RPI will be used for the clinical development of zavegepant and other general corporate purposes
As of June 30, 2022, we have issued 1,988 Series B preferred shares to RPI for proceeds of $99.6 million.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we:
•continue and expand our commercial activities related to NURTEC ODT for the acute and preventive treatment of migraine;
•advance and expand the clinical development in our CGRP receptor antagonism, glutamate modulation, MPO inhibition, Kv7, and Myostatin inhibition programs;
•continue to initiate and progress other supporting studies required for regulatory approval of our product candidates, including long-term safety studies, drug-drug interaction studies, preclinical toxicology and carcinogenicity studies;
•make required milestone and royalty payments under the license agreements by which we acquired some of the rights to our product candidates;
•initiate preclinical studies and clinical trials for any additional indications for our current product candidates and any future product candidates that we may pursue;
•continue to build our portfolio of product candidates through the acquisition or in-license of additional product candidates or technologies;
•continue to develop, maintain, expand and protect our intellectual property portfolio;
•pursue regulatory approvals for our current and future product candidates that successfully complete clinical trials;
•support our sales, marketing and distribution infrastructure to commercialize any future product candidates for which we may obtain marketing approval;
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•hire additional clinical, medical, commercial, and development personnel;
•incur additional legal, accounting and other expenses in operating as a public company; and
•incur expenses related to the proposed spin-off and Pfizer Merger.
As of August 5, 2022, the issuance date of our condensed consolidated financial statements, we expect that our cash, cash equivalents, and marketable securities as of June 30, 2022, our future operating cash flows from sales of NURTEC ODT, Series B Preferred Shares receipts, and product sales and other proceeds from our Pfizer Collaboration will be sufficient to fund our current forecast for operating expenses, including commercialization of NURTEC ODT, financial commitments and other cash requirements for more than one year. We may need to raise additional capital until we are profitable. If no additional capital is raised through either public or private equity financings, debt financings, strategic relationships, alliances and licensing agreements, or a combination thereof, we may delay, limit or reduce discretionary spending in areas related to research and development activities and other general and administrative expenses in order to fund our operating costs and working capital needs.
We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for troriluzole, or our other product candidates, we expect to incur additional commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on whether we commercialize jointly or on our own.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
•the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
•the costs, timing and outcome of regulatory review of our product candidates;
•the effect of COVID-19 pandemic on our business operations and funding needs;
•the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for
NURTEC ODT, in addition to any of our product candidates for which we receive marketing approval;
•the revenue from NURTEC ODT, and revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
•the costs and timing of hiring new employees to support our continued growth;
•the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•the extent to which we acquire or in-license other product candidates and technologies;
•the costs of manufacturing commercial-grade product and necessary inventory to support product sales;
•the costs associated with payment of milestones and royalties under existing contractual arrangements and/or in-licensing additional products candidates to augment our current pipeline; and
•the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we will be required to delay, limit, reduce or terminate our
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product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
The disclosure of our contractual obligations and commitments is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2021. See Note 15, "Commitments and Contingencies" to our Condensed Consolidated Financial Statements included in Item 1, “Unaudited Condensed Consolidated Financial Statements,” of this Quarterly Report on Form 10-Q for further discussion of commitments and contingencies.
Critical Accounting Policies and Significant Judgments and Estimates
We have prepared our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States ("GAAP"). Our preparation of our condensed consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures at the date of the condensed consolidated financial statements, as well as revenue and expenses recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.
Excluding the discussion below, there have been no material changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed by us with the SEC on February 25, 2022.
Revenue Recognition - Collaboration and other revenue
We recognize revenue associated with our collaboration arrangement, which may require us to exercise considerable judgment in estimating revenue to be recognized, including judgments made on initial accounting and judgments associated with the amount of revenue to be recognized over time as performance obligations are satisfied.
Significant judgment is required to apply the authoritative accounting guidance at the outset of a collaboration arrangement, and over time, as detailed below:
•Measurement of the transaction price - determining the transaction price includes varying levels of judgment. Where amounts are fixed and paid, such as upfront payments, estimation is not required. However, other elements of the transaction price do require estimation or assumptions by management. The calculation of a share issuance premium requires the use of a valuation model for purposes of determining the fair value of the shares for financial reporting purposes, with any resulting premium impacting the transaction price, which ultimately impacts the measurement of revenue.
•Allocation of the transaction price to the performance obligations - there is significant judgment required to allocate the transaction price to performance obligations. Generally, this is done by estimating the standalone selling price of identified performance obligations, and allocating on a relative value basis. The estimate of standalone selling price includes several assumptions that cannot be observed, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The standalone selling price of performance obligations can be very sensitive to many of these underlying assumptions, which are based on management estimates since they cannot be observed. This is a point-in-time assessment performed at the outset of a collaboration arrangement.
•Recognition of revenue when (or as) we satisfy each performance obligation - determining the timing of revenue recognition includes varying levels of judgment. For revenue recognized over time, this is often based on an underlying measure deemed to approximate the progress towards satisfaction of the performance obligations. These underlying measures, such as costs incurred to date compared with total forecasted costs for a service, may include inherent estimates, which in turn can impact the timing of revenue recognition. The satisfaction of performance obligations assessment is performed at each reporting period.
Valuation of Derivative Liabilities
The fair value of our derivative liabilities are determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. We utilized the with-and-without valuation method to determine the fair value of our derivative liabilities. As inputs into the valuations, we assessed a change of control as highly probable by early 2023, and considered the amount and timing of the payments with and without a change of control and risk-
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adjusted discount rates ranging from low single-digits to mid-twenties. In accordance with ASC 815, Derivatives and Hedging, the fair value of the derivatives are recorded on the condensed consolidated balance sheets as derivative liabilities with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. If factors change and different assumptions are used, the fair value of the derivative liabilities and related gains or losses could be materially different in the future.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations, if applicable, is disclosed in Note 2 to our condensed consolidated financial statements appearing at the beginning of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Foreign Currency Translation
Our operations include activities in countries outside the U.S. As a result, our financial results are impacted by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets where we operate. Our monetary exposures on our balance sheet are currently immaterial to our financial position.
We do not engage in any hedging activities against changes in foreign currency exchange rates.
Interest Rate Risk
As of June 30, 2022, we invest our excess cash balances in marketable securities of highly rated financial institutions and investment-grade debt instruments. We seek to diversify our investments and limit the amount of investment concentrations for individual institutions, maturities and investment types. Most of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate. Based on the type of securities we hold, we do not believe a change in interest rates would have a material impact on our financial statements. If interest rates were to increase or decrease by 1.00%, the fair value of our investment portfolio would (decrease) increase by approximately $(1.8) million and $1.8 million, respectively.
In August 2020, we became subject to market risk in connection with borrowings under the Sixth Street Financing Agreement. The August 2020 Term Loans borrowed under the agreement accrue interest at the LIBOR Rate, subject to a floor of 1.00%, plus 9.00%. The September 2021 Term Loans borrowed under the agreement accrue interest at the LIBOR Rate, subject to a floor of 1.00%, plus 8.25%. Considering the total outstanding principal balance for all the loans drawn
under the Sixth Street Financing Agreement of approximately $783.0 million at June 30, 2022, a 1.00% change in the LIBOR Rate would result in an impact to loss before income taxes of approximately $7.8 million per year.
We do not engage in any hedging activities against changes in interest rates.
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, and marketable securities. Our cash management policy permits investments in U.S. federal government and federal agency securities, corporate bonds or commercial paper, supranational and sovereign obligations, certain qualifying money market mutual funds, certain repurchase agreements, and places restrictions on credit ratings, maturities, and concentration by type and issuer. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales. Our trade accounts receivable primarily consists of amounts due from pharmacy wholesalers in the U.S. (collectively, our "Customers") related to sales of NURTEC ODT and have standard payment terms. For certain Customers, the trade accounts receivable for the Customer is net of distribution service fees, prompt pay discounts and other adjustments. We monitor the financial performance and creditworthiness of our Customers so that we can properly assess and respond to changes in their credit profile. Our reserves against trade accounts receivable for estimated losses that may arise from a Customer’s inability to pay and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The reserve amount for estimated losses was not significant as of June 30, 2022, and we do not expect any such delays in collections to have a material impact on our financial condition or results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal
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executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
Item 1A.  Risk Factors
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Our risk factors have not changed materially from those described in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022. In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors described in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022.
The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and information provided elsewhere in this report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. Except for such additional information and the risk factors set forth below, we believe there have been no other material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The consummation of the Pfizer Merger is subject to a number of conditions, many of which are largely outside of the parties’ control, and, if these conditions are not satisfied or waived on a timely basis, the Merger Agreement may be terminated and the Pfizer Merger may not be completed.
The Pfizer Merger is subject to certain customary closing conditions, including: (i) adoption of the Merger Agreement by holders of a majority of the outstanding common shares and Series A preferred shares entitled to vote on such matters at the Company’s shareholders meeting and who are present at the shareholders meeting, in person or by proxy; (ii) the expiration, termination or receipt of any approval or clearances applicable to the consummation of the Merger under applicable antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the receipt of certain additional clearances or approvals of certain other governmental bodies applicable to the Merger; (iii) the absence of any law or order prohibiting or making illegal the consummation of the Merger; (iv)
effectiveness of the registration statement to be filed with respect to registration of the common shares of New Biohaven; (v) completion of the spin-off; (vi) the absence of certain legal proceedings by governmental authorities imposing certain limitations on Pfizer’s ownership or operation of the Company; (vii) subject to certain qualifications, the accuracy of representations and warranties of the Company, Pfizer and Merger Sub, as applicable, under the Merger Agreement and the performance in all material respects by the Company, Pfizer and Merger Sub, as applicable, of their obligations under the Merger Agreement; and (viii) the absence of any Company Material Adverse Effect (as defined in the Merger Agreement).
The failure to satisfy all of the required conditions could delay the completion of the Pfizer Merger by a significant period of time or prevent it from occurring. Any delay in completing the Pfizer Merger could cause the parties to not realize some or all of the benefits that are expected to be achieved if the Pfizer Merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed within the expected timeframe or at all.
Failure to complete the Pfizer Merger could adversely affect the stock price and future business and financial results of the Company.
There can be no assurance that the conditions to the closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed. If the Pfizer Merger is not completed within the expected timeframe or at all, the ongoing business of the Company could be adversely affected and the Company will be subject to a variety of risks and possible consequences associated with the failure to complete the Merger, including the following: (i) upon termination of the Merger Agreement under specified circumstances, the Company is required to pay Pfizer a termination fee of $450 million; (ii) the Company will incur certain transaction costs, including legal, accounting, financial advisor, filing, printing and mailing fees, regardless of whether the Pfizer Merger closes; (iii) under the Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to the closing of the Pfizer Merger, which may adversely affect its ability to execute certain of its business strategies; and (iv) the proposed Pfizer Merger, whether or not it closes, will divert the attention of certain management and other key employees of the Company from ongoing business activities, including the pursuit of other opportunities that could be beneficial to the Company as an independent company.
If the Pfizer Merger is not completed, these risks could materially affect the business and financial results of the Company and its stock price, including to the extent that the current market price of the Company’s
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common stock is positively affected by a market assumption that the Pfizer Merger will be completed.
While the Pfizer Merger is pending, the Company will be subject to business uncertainties and certain contractual restrictions that could adversely affect the business and operations of the Company.
In connection with the pending Pfizer Merger, some customers, vendors or other third parties of the Company may react unfavorably, including by delaying or deferring decisions concerning their business relationships or transactions with the Company, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company, regardless of whether the Pfizer Merger is completed. In addition, due to certain restrictions in the Merger Agreement on the conduct of business prior to completing the Pfizer Merger, the Company may be unable (without the other party’s prior written consent), during the pendency of the Pfizer Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial and may cause the Company to forego certain opportunities it might otherwise pursue. In addition, the pendency of the Pfizer Merger may make it more difficult for the Company to effectively retain and incentivize key personnel and may cause distractions from the Company’s strategy and day-to-day operations for its current employees and management.
The Company will incur substantial transaction fees and Pfizer Merger-related costs in connection with the Pfizer Merger that could adversely affect the business and operations of the Company if the Pfizer Merger is not completed.
The Company expects to incur non-recurring transaction fees, which include legal and advisory fees and substantial Pfizer Merger-related costs associated with completing the Pfizer Merger, and which could adversely affect the business operations of the Company if the Pfizer Merger is not completed.
The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire the Company.
The Merger Agreement prohibits the Company from initiating, soliciting, knowingly encouraging or knowingly facilitating any competing acquisition proposals, subject to certain limited exceptions. The Merger Agreement also contains certain termination rights for the Company and Pfizer. Upon termination of the Merger Agreement in accordance with its terms, under certain circumstances, the Company will be required to pay Pfizer a termination fee in an amount equal to $450 million, including, if the Merger Agreement is terminated due to (i) the Company accepting a Superior Proposal (as defined in the Merger Agreement) or (ii) the Company Board changing its recommendation that
shareholders vote to approve the Merger Agreement. The termination fee will also be payable by the Company if the Merger Agreement is terminated under certain circumstances and prior to such termination, a proposal to acquire more than 50% of the Company's stock or assets is made or publicly announced and not publicly withdrawn and the Company enters into a definitive agreement for, or completes, any transaction involving the acquisition of more than 50% of its stock or assets within twelve months of such termination. The termination fees and restrictions could discourage other companies from trying to acquire the Company even though those other companies might be willing to offer greater value to the Company’s stockholders than Pfizer has offered in the Pfizer Merger.
Litigation against the Company, Pfizer, or the members of their respective boards, could prevent or delay the completion of the Pfizer Merger or result in the payment of damages following completion of the Pfizer Merger.
It is a condition to the Pfizer Merger that no injunction or other order preventing the consummation of the Pfizer Merger shall have been issued by any court of competent jurisdiction or other governmental authority of competent jurisdiction and remain in effect. It is possible that lawsuits may be filed by the Company’s stockholders challenging the Pfizer Merger. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Pfizer Merger on the agreed-upon terms, such an injunction may delay the consummation of the Pfizer Merger in the expected timeframe, or may prevent the Pfizer Merger from being consummated at all. Whether or not any plaintiff’s claim is successful, this type of litigation can result in significant costs and divert management’s attention and resources from the closing of the Pfizer Merger and ongoing business activities, which could adversely affect the operations of the Company.
Uncertainty about the Pfizer Merger may adversely affect the relationships between the Company and its customers, vendors and employees, whether or not the Pfizer Merger is completed.
In response to the announcement of the Pfizer Merger, existing or prospective customers, vendors and other third party relationships of the Company may delay, defer or cease providing goods or services, delay or defer other decisions concerning the Company, refuse to extend credit to the Company, or otherwise seek to change the terms on which they do business with the Company. Any such delays or changes to terms could materially harm the Company’s business.
In addition, as a result of the Pfizer Merger, current and prospective employees could experience uncertainty about their future with the Company. These
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uncertainties may impair the Company’s ability to retain, recruit or motivate key management and technical, manufacturing, and other personnel.
If the Pfizer Merger is not consummated by May 9, 2023, either the Company or Pfizer may terminate the Merger Agreement, subject to certain exceptions.
Either the Company or Pfizer may terminate the Pfizer Merger Agreement if the Merger has not been by May 9, 2023. However, this termination right will not be available to a party if that party failed to fulfill its obligations under the Merger Agreement and that failure was the proximate cause of the failure to consummate the Pfizer Merger on time. In the event the Merger Agreement is terminated by either party due to the failure of the Pfizer Merger to close by May 9, 2023, the Company will have incurred significant costs and will have diverted significant management focus and resources from other strategic opportunities and ongoing business activities without realizing the anticipated benefits of the Pfizer Merger.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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Item 6. Exhibits
Exhibit No.
 Description
2.1
2.2
2.3
31.1 
31.2 
32.1‡ 
101 The following materials from the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104Cover Page Interactive Data File (formatted in iXBRL in Exhibit 101).
___________________________________________________
‡    These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
Dated: August 5, 2022 
 By:/s/ Vlad Coric, M.D.
  Vlad Coric, M.D.
  Chief Executive Officer
  (On behalf of the Registrant and as the Principal Executive Officer)
   
 By:/s/ Matthew Buten
  Matthew Buten
  Chief Financial Officer
  (Principal Financial Officer)

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