Biohaven Pharmaceuticals Plunges 1.69% as Class-Action Lawsuit Alleges Misleading Drug Claims

Biohaven Pharmaceuticals (BHVN) fell 1.69% on Tuesday, marking its fourth consecutive day of declines and a 6.62% drop over four days, with the stock hitting its lowest level since April 2023. The selloff follows a class-action lawsuit filed by Levi & Korsinsky, LLP, alleging the company misled investors about its drug candidates troriluzole and BHV-7000. The lawsuit claims Biohaven overstated regulatory prospects for troriluzole, a treatment for spinocerebellar ataxia, and exaggerated the efficacy and market readiness of BHV-7000 for bipolar disorder, leading to artificially inflated stock prices between March 2023 and May 2025.

The strategy of buying BHVN shares after they reach a recent low and holding for one week resulted in a 15.04% return over the past five years. However, this performance was significantly under the benchmark return of 61.05%, with an excess return of -46.01%. The strategy had a maximum drawdown of 0.00%, a Sharpe ratio of 0.09, and a volatility of 63.57%.

The litigation highlights material misstatements and omissions by Biohaven, including failure to disclose critical risks such as adverse clinical trial outcomes and regulatory hurdles. By concealing these uncertainties, the company allegedly created a misleading narrative of success, damaging investor trust and triggering a sharp decline in its stock price. The lawsuit also underscores broader implications for the biopharmaceutical sector, where transparency in clinical data and risk communication is crucial for investor confidence.

Legal experts note the case could set a precedent for securities litigation in the industry, potentially influencing corporate disclosure practices and regulatory scrutiny. Investors who purchased Biohaven shares between March 24, 2023, and May 14, 2025, now have until September 12, 2025, to seek appointment as lead plaintiff in the case. The outcome may reshape how biotech firms manage expectations around drug development timelines and commercial potential, particularly for companies with limited revenue streams.