Pfizer has agreed to acquire Biohaven Pharmaceuticals for $11.6 billion in a deal that turns an existing alliance on a fast-selling migraine drug into a big bet on its future growth.
Pfizer will pay $148.50 per share in cash for each Biohaven share it doesn’t already own, representing a roughly 79% premium to the company’s Monday closing price and a 33% premium to its average share price of $111.70 over the last three months. The deal, which is expected to close early next year, is by far the biggest biotech buyout of 2022, according to data compiled by Biopharma Dive.
Announced Tuesday, the acquisition hands Pfizer full rights to Nurtec ODT, a pill that’s approved in the U.S. and other countries for the treatment and prevention of migraines. Biohaven's pipeline also includes an experimental nasal spray for migraines, zavepegant, that’s been submitted to U.S. regulators, as well as five additional, preclinical treatments that block the same protein target.
Pfizer won't hold onto the rest of Biohaven, however. The biotech’s other assets, which include medicines in advanced testing for amyotrophic lateral sclerosis and obsessive compulsive disorder, will be spun out into a new company. Existing stockholders, including Pfizer, will get half of a share in that new business for each Biohaven share they already own. Vlad Coric, Biohaven's CEO, will run the new company, which will retain the biotech's name.
After the deal closes, Pfizer said it will cover all of Biohaven’s debt, which totaled about $627 million in February, and pay to redeem outstanding redeemable preferred stock.
At the center of Pfizer's deal for Biohaven is Nurtec ODT, one of a group of migraine drugs that have come to market over the past few years offering a new way to treat and, in some cases, prevent migraines. Like approved drugs from Amgen, Eli Lilly, AbbVie, Teva and Lundbeck, Nurtec ODT inhibits CGRP, a protein released during migraine attacks.
Nurtec ODT and AbbVie’s two drugs Ubrelvy and Qulipta are pills, while the other medicines are injected. Biohaven estimates that Nurtec ODT holds just under half of the oral CGRP market, and that 2 million prescriptions of the drug have been written to date.
Despite that performance, Pfizer and Biohaven noted how oral CGRP drugs account for only 10% of all migraine treatment prescriptions. Pfizer, envisioning a multibillion-dollar opportunity, told investors Tuesday it plans to double the number of sales representatives carrying Nurtec to potentially reach 70,000 additional healthcare providers.
"It is good for patients to have multiple different options, but ultimately we think this is going to be a space primarily driven by the oral CGRP antagonists," said Coric on a conference call Tuesday.
Sales of Nurtec ODT totaled $463 million last year, due in part to an aggressive digital marketing strategy that’s involved celebrity endorsements and TikTok ads. First quarter numbers released by Biohaven Tuesday came in lower than anticipated, however, showing a quarterly sales decline which the company attributed to seasonal factors.
On the conference call, Coric said he expects those factors, such as patient deductibles resetting with the new year, to reverse and anticipates "substantial increases" in second quarter net revenue.
Shares in Biohaven climbed to nearly $150 apiece last year as Nurtec ODT outperformed expectations, though they’ve since slid considerably amid a biotech downturn that has caused the stock prices of many drugmakers to tumble.
Pfizer's deal was therefore a brightspot to at least some biotech investors. The XBI, a closely watched biotech stock index, hit its lowest point since 2015 on Monday, but rose by as much as 7% Tuesday morning. Whether the Biohaven buyout is a sign of more M&A to come isn't clear, though analysts have expected dealmaking to increase this year due, in part, to the huge cash reserves at large pharmaceutical firms that successfully developed COVID-19 vaccines and treatments.
Pfizer, for one, ended last year with $82 billion in revenue, nearly $2 billion in cash and almost $30 billion in short-term investments, and investors have said they want the company "to be more aggressive on the M&A front," according to Cantor Fitzgerald analyst Louise Chen. In December, Pfizer bought Arena Pharmaceuticals, a developer of inflammatory disease drugs, for nearly $7 billion.
Provided the Biohaven deal closes, Pfizer would be tasked with weaving in a business somewhat outside its core research areas of cancer, inflammation and vaccines. Yet, Pfizer does already have some experience selling Nurtec ODT through a licensing agreement inked last year that handed it marketing rights outside the U.S.
That deal gave Pfizer a 2.6% stake in Biohaven at a price of $173 per share, nearly $25 higher than the price in Tuesday's acquisition agreement. "It is pretty clear to us that Pfizer saved several billions of dollars by proceeding with this deal in a methodical way," Vamil Divan, an analyst at Mizuho Securities, wrote in a May 10 note to clients.
Pfizer doesn't appear to be mounting a return to neuroscience, however, given its plan to spin off Biohaven's non-migraine assets. The move has similarities to one made several years ago, when Pfizer chose to spin out experimental drugs for brain and nervous system disorders into a new company called Cerevel Therapeutics. Other drugmakers have pursued similar strategies following an acquisition, such as with Johnson & Johnson's buyout of Actelion Pharmaceuticals and subsequent spinout of Idorsia Pharmaceuticals.
"When we looked at this opportunity, the place where we feel like we can have the most value is on the CGRP franchise — through the deployment of our commercial capabilities globally," Amir Malik, Pfizer's chief business innovation officer, told investors.
"We think that the Biohaven team is very well positioned to advance their other therapies," he added.
Editor's note: This story has been updated with additional detail on the acquisition, Biohaven sales and executive commentary.