Biohaven Shares Plunge After FDA Rejects Key Neurological Drug
The U.S. regulator issued a Complete Response Letter for Vyglxia, citing issues with clinical trial data and prompting a major R&D spending cut.
Biohaven Pharmaceutical Holding Co. (NYSE: BHVN) shares fell sharply on Tuesday after the U.S. Food and Drug Administration rejected its New Drug Application (NDA) for Vyglxia, a closely watched treatment for the rare neurological disorder spinocerebellar ataxia (SCA).
The stock plunged more than 20% in pre-market trading before settling to a loss of approximately 6.1% to $13.95 in morning trading, pushing the company’s market capitalization to around $1.57 billion. The decision marks a significant setback for the New Haven-based biopharmaceutical firm, which was betting on the drug, also known as troriluzole, to become a cornerstone of its pipeline.
In a statement, Biohaven confirmed it had received a Complete Response Letter (CRL) from the FDA. The regulator’s rejection was not based on safety concerns but instead on the clinical trial design itself. According to the company's announcement, the FDA cited “inherent limitations of external controls and real-world evidence,” pointing to potential biases and design flaws in how the company used data from outside its primary study to support its application.
Spinocerebellar ataxia is a progressive and debilitating genetic disease that affects motor skills, causing issues with coordination, balance, and speech, for which there are currently no approved treatments. Vyglxia was seen by many analysts as a potential first-to-market therapy, making the FDA's decision a painful blow to both the company and the patient community.
In response to the regulatory setback, Biohaven announced a swift and significant strategic overhaul. The company plans to slash its direct research and development spending by approximately 60% and reprioritize its pipeline to focus on three of its most promising late-stage programs. This move signals a dramatic narrowing of focus for a company that has been pursuing a broad range of treatments for neurological and rare disorders.
Tuesday's decision casts a shadow on a pipeline that investors had previously viewed with optimism. The average 12-month price target from analysts covering Biohaven stood at $45.83 before the announcement, reflecting high hopes for Vyglxia and other pipeline assets. The current share price, now hovering near its 52-week low of $12.79, indicates a sharp recalibration of those expectations.
This is not the first time the drug has faced regulatory hurdles. In 2022, a Phase 3 trial of troriluzole for generalized anxiety disorder also failed to meet its primary endpoint, raising earlier questions about its clinical efficacy across different indications. The company had hoped the SCA trial, which relied on a study design incorporating real-world data, would pave a new path to approval.
The FDA’s stance on the use of “real-world evidence” in this case will be closely watched across the biotechnology industry. While regulators have shown increasing openness to incorporating data from outside of traditional, rigidly controlled clinical trials, Biohaven’s experience with Vyglxia serves as a cautionary tale about the high bar for its acceptance in primary evidence of a drug's effectiveness.
For Biohaven, the path forward now depends on the successful execution of its remaining late-stage programs and its ability to regain investor confidence. The company's management is expected to provide further details on its restructured R&D focus and financial outlook in the coming weeks as it navigates the fallout from the FDA's pivotal decision.