Why Biohaven Stock Dove by Nearly 20% on Thursday

Volatile biotech stock Biohaven (NYSE: BHVN) is prone to sharp movements both up and down. On Thursday, it had one of its down days, with its share price eroding by almost 20% on a development with a top regulator. That was on a day when stocks generally did well, as indicated by the S&P 500 (SNPINDEX: ^GSPC) landing in positive territory with a 0.4% rise.

A regulatory extension

After market close on Wednesday, Biohaven divulged that the U.S. Food and Drug Administration's (FDA) Division of Neurology 1 is extending the due date for its decision on a very promising pipeline drug developed by the company.

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Specifically, the FDA unit is extending the Prescription Drug User Fee Act (PDUFA) date for Biohaven's troriluzole, a treatment that targets brain disorder spinocerebellar ataxia (SCA), by three months. The biotech has formally submitted troriluzole under the FDA's New Drug Application (NDA) regime, and now expects a decision from the regulator to come in the fourth calendar quarter of this year.

According to the company, the FDA said it required the extra time to conduct a full review of recent Biohaven submissions to the regulator's information requests. The FDA division also told the company that it aims to hold an advisory committee meeting to discuss the troriluzole application, but no date has yet been set for this.

The next moves belong to the FDA

Many investors consider Biohaven to boast excellent potential with troriluzole, as it targets a rare brain disorder that currently has no treatment. It has been granted fast-track, priority review, and orphan drug designation (ODD) by the FDA, so initially it seemed as if a decision on approval would come soon.

It's always disappointing when there's a delay, but until we know more about the regulator's concerns, it's hard to gauge the ultimate future of troriluzole. Much will depend on the FDA's moves in the coming months.

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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.