Why Biohaven Stock Plummeted by More Than 15% Today

On Friday's news that Biohaven (NYSE: BHVN) withdrew its application for a top investigational drug from an important regulator, investors aggressively traded out of the stock. The clinical-stage biotech was one of the biggest decliners in its industry, exiting Friday with a share price decline of over 15%. This was during a session that was essentially bullish; the S&P 500 index closed 0.6% higher.

Strategic withdrawal

That news came not from Biohaven itself, but from the European Medicines Agency (EMA, the pharmaceutical regulator for the 27-country European Union). In a statement, the EMA revealed that a subsidiary of the company withdrew its application for marketing authorization for troriluzole, branded as Dazluma. It made that move on March 24, the agency added.

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Biohaven originally applied for such authorization for Dazluma toward the end of 2023. The investigational drug targets a rare genetic affliction of nerve cells called spinocerebellar ataxia type 3.

According to the EMA, it evaluated Biohaven's provided information about Dazluma and prepared a series of questions for the company. The agency noted that it had several issues that mitigated against approval.

If at first you don't succeed...

Although Biohaven hasn't yet made a formal statement about its Dazluma withdrawal, it did send a letter to the EMA stating its reasons for doing so. The agency wrote that in the letter Biohaven "stated that they plan to generate additional data to support a new active substance status" for the drug.

Additionally, according to the EMA, the company intends to "submit a new application once these data are generated."

Regardless, any retreat from a regulatory submission is a significant blow to investor morale. The European Union is huge and sprawling, and therefore has one of the largest patient pools in any jurisdiction throughout the world.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.