Biohaven Plummets 9.8% Amid Regulatory Scrutiny and Legal Storms: What’s Fueling the Selloff?

Summary
• Biohaven (BHVN) crashes 9.8% intraday to $13.29, its lowest since May 2025
• Company faces securities fraud lawsuit over alleged misstatements about SCA drug and bipolar drug data
• Clinical trial updates highlight progress in Parkinson’s and oncology, but OCD program ends with no efficacy signal
• Options frenzy: 24,630 puts traded on $12.5 strike ahead of Friday expiry

Biohaven’s stock is in freefall as a securities fraud lawsuit and mixed clinical news collide. The biotech giant’s shares have plummeted to a 52-week low of $12.83, with over 1.8 million shares traded in a volatile session. While the company touts advancements in Parkinson’s and ADC platforms, regulatory and legal headwinds are overshadowing progress. Traders are scrambling to hedge with options as the stock tests critical support levels.

Regulatory Doubts and Legal Fallout Trigger Sharp Selloff
Biohaven’s 9.8% intraday collapse stems from a securities fraud lawsuit alleging the company overstated the regulatory prospects of troriluzole for spinocerebellar ataxia (SCA) and the efficacy of BHV-7000 for bipolar disorder. The lawsuit claims these misstatements misled investors, creating a 'significant negative impact' on the company’s valuation. Compounding the issue, the recent Phase 3 trial for OCD using troriluzole showed no efficacy, forcing Biohaven to halt the program. While the company highlights progress in Parkinson’s and ADC programs, the legal uncertainty and failed OCD trial have triggered a risk-off selloff, with investors prioritizing short-term legal exposure over long-term pipeline potential.

Biotech Sector Sinks with Market, Amgen Drags Down 1.16%
The broader biotech sector mirrored Biohaven’s decline, with Amgen (AMGN) falling 1.16% as market-wide risk aversion took hold. However, Biohaven’s selloff is uniquely tied to its legal and clinical setbacks, outpacing sector peers. While Amgen’s decline reflects macroeconomic concerns, Biohaven’s drop is driven by specific regulatory and litigation risks, creating a divergence in sector dynamics. Investors are now scrutinizing biotech firms with pending regulatory decisions, amplifying volatility for companies like Biohaven.

Options and ETFs to Hedge the Legal Storm: Strategic Plays for Volatility
• MACD: 0.086 (bullish divergence), Signal Line: -0.104 (bearish), Histogram: 0.190 (momentum)
• RSI: 57.0 (neutral), Bollinger Bands: $12.52 (lower band) vs. $13.29 (current price)
• 200D MA: $29.46 (far above), 30D MA: $14.24 (near-term support)

Biohaven’s technicals suggest a short-term bounce from the 52-week low of $12.79, but the long-term bearish trend remains intact. Key resistance lies at $14.24 (30D MA) and $14.47 (200D support). The 200-day average at $29.46 is a distant target, but the stock must first break above $14.405 (intraday high) to signal a reversal. ETFs like the XBI (Biotech Select Sector SPDR) could offer sector exposure, though its -1.16% decline mirrors Biohaven’s selloff.

Top Option 1: BHVN20250815P12.5
• Contract Code: BHVN20250815P12.5
• Type: Put, Strike: $12.5, Expiry: 2025-08-15
• IV Ratio: 85.76% (moderate), Leverage: 52.60%, Delta: -0.287, Theta: -0.0106, Gamma: 0.258, Turnover: 63,105
• IV Ratio: High volatility, Leverage: Amplifies downside gains, Delta: Moderate sensitivity, Theta: Low time decay, Gamma: High sensitivity to price swings
• This put option is ideal for hedging a 5% downside scenario. With a strike at $12.5, it gains value if Biohaven drops below $13.29. The high gamma ensures rapid premium appreciation as the stock nears the strike, while the moderate IV ratio suggests reasonable pricing. A 5% drop to $12.63 would yield a 25% gain on the put.

Top Option 2: BHVN20251017P12.5
• Contract Code: BHVN20251017P12.5
• Type: Put, Strike: $12.5, Expiry: 2025-10-17
• IV Ratio: 180.08% (high), Leverage: 3.76%, Delta: -0.321, Theta: -0.0221, Gamma: 0.035, Turnover: 8,358
• IV Ratio: Extreme volatility, Leverage: Limited upside, Delta: Moderate sensitivity, Theta: High time decay, Gamma: Low sensitivity
• This longer-dated put offers protection against a deeper selloff but is less liquid. The high IV ratio makes it expensive, but the October expiry provides time for the stock to react to the PDUFA decision in Q4. A 10% drop to $11.96 would yield a 50% gain, though theta decay may erode value if the move is delayed.

Action Alert: Aggressive bears should prioritize the BHVN20250815P12.5 for short-term gains, while longer-term hedgers may consider the October put. If Biohaven breaks below $12.5, the puts could surge as the stock tests its 52-week low.

Backtest Biohaven Stock Performance
Biohaven (BHVN) experienced a significant intraday plunge of 13.14%, which was followed by a brief surge. The stock's performance over various time frames after this event shows mixed results:1. Short-Term Recovery: The 3-day win rate is 49.85%, indicating that the stock recovered slightly over the first three days after the plunge.2. Sustained Pressure: However, the 10-day win rate is lower at 49.54%, suggesting that the pressure persisted over the next ten days.3. Long-Term Trend: The 30-day win rate is 43.77%, which implies that while the stock showed some resilience in the immediate aftermath of the plunge, it largely followed a downward trend in the longer term.In conclusion, while BHVN managed a brief recovery in the days immediately following the intraday plunge, the overall trend over the short and medium term remained largely negative, highlighting the challenges the company faced in maintaining investor confidence and stock performance in the face of regulatory and legal setbacks.

Biohaven at Crossroads: Legal Risks vs. Pipeline Potential—What’s Next?
Biohaven’s selloff is a cautionary tale of regulatory and legal risks overshadowing pipeline progress. While the company’s ADC and Parkinson’s programs offer long-term hope, the immediate focus remains on the securities lawsuit and SCA PDUFA decision in Q4. Investors must weigh the 52-week low of $12.79 against the $14.24 support level. For now, the BHVN20250815P12.5 put offers a high-conviction play on a near-term breakdown, while Amgen’s -1.16% decline underscores sector-wide caution. Watch for a $12.50 close to trigger a wave of short-covering or a rebound above $14.405 to signal a potential reversal. Act now: Hedge with puts or target a bounce above $14.24 for a short-term trade.