(Bloomberg Gadfly) -- It's easier to promise a quick biotech buck than deliver one.
Biohaven Pharmaceutical Holding Co. Ltd., which raised nearly $200 million in an IPO last year, announced Monday that its lead migraine pill had met its main goals in a late-stage trial. But the drug didn't have the impact investors had hoped, and the firm's shares retreated to their IPO price.
Succeeding with a late-to-market drug in a crowded area -- and it doesn't get much more crowded than the migraine drug market -- is a tough task. Biohaven is now an object lesson in exactly how tough.
Patients would rather swallow a pill than get jabbed with a needle. Unfortunately, pills are often less effective than injected biologic (meaning made with living cells) alternatives. Oral competitors in a crowded market generally must meet a high efficacy bar in order to carve out a niche and must compete aggressively on price in order to get covered by insurers.
In theory, this can be a profitable strategy. But it's not an easy one, particularly if there are generic options to your drug. Esperion Therapeutics Inc., for example, is following such a path with its cholesterol medicine. It announced comparatively better-received data on March 7, but its shares have since fallen 8 percent on questions about its commercial viability.
Biohaven staged a lucrative IPO in spite of these risks, thanks to an experienced leadership team and the fact that its lead drug would have final-stage data and a path to market in relatively short order.
But the company's lead program should have raised extra red flags. Biohaven acquired its migraine drug from Bristol-Myers Squibb Co., which had given up on trying to take the drug to market after a mid-stage trial found it didn't compare well to a generic option.
Meanwhile, four different injectable biologic drugs, including medicines from Amgen Inc. and Eli Lilly & Co., may beat Biohaven's drug to market. The fight for market share among those medicines will likely result in price cuts that will make it harder for an oral alternative to gain profitable traction. Allergan Inc. has an oral competitor that looks at least as good as Biohaven's so far, if not better.
Any price-war victory in pharma tends to be Pyrrhic. That could be especially true for migraine drugs. In fact, there could be a three-front price war in this market, with more-effective drugs on the high end, cheap generic alternatives at the low end and Biohaven's drug stuck in the middle with Allergan's.
Biohaven hopes another Phase 3 trial, testing a version of its pill that dissolves in the mouth, will produce better results. It will probably have to do better, if this drug is to make much headway in this market.
Biohaven's pitch to investors is still attractive. The potential for rapid return is always nice, and a good oral migraine-drug option priced at a discount to biologics could do well in the migraine market.
But it's one of many biotech stories that sound better during an IPO roadshow than in the real world.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
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