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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-38080
Biohaven Pharmaceutical Holding Company Ltd.
(Exact Name of Registrant as Specified in its Charter)
British Virgin Islands Not applicable
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
c/o Biohaven Pharmaceuticals, Inc.
215 Church Street, New Haven, Connecticut
 06510
(Address of principal executive offices) (Zip Code)
(203) 404-0410
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Shares, no par valueBHVNNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmall reporting company
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of November 5, 2021, the registrant had 65,501,261 common shares, without par value per share, outstanding.
1











Part I.     Financial Information

Item 1.    Condensed Consolidated Financial Statements (Unaudited)

Index to Condensed Consolidated Financial Statements (Unaudited)
Page
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020
Notes to Condensed Consolidated Financial Statements

1

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
September 30, 2021December 31, 2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$501,409 $132,149 
Marketable securities19,031 223,185 
Trade receivable, net252,952 120,111 
Inventory74,864 39,563 
Prepaid expenses61,698 76,682 
Other current assets34,427 11,716 
Total current assets944,381 603,406 
Property and equipment, net10,409 9,340 
Equity method investment 1,176 
Intangible assets, net56,968 39,087 
Other assets119,437 33,966 
Total assets$1,131,195 $686,975 
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable$49,437 $48,476 
Accrued expenses and other current liabilities350,339 166,630 
Current portion of mandatorily redeemable preferred shares62,500 62,500 
Total current liabilities462,276 277,606 
Long-term debt619,267 267,458 
Liability related to sale of future royalties, net357,655 328,350 
Mandatorily redeemable preferred shares, net144,333 111,591 
Derivative liability15,050 14,190 
Obligation to perform R&D services47,155 932 
Other long-term liabilities16,666 19,037 
Total liabilities1,662,402 1,019,164 
Commitments and contingencies (Note 15)
Contingently redeemable non-controlling interests60,000 60,000 
Shareholders’ deficit:
Common shares, no par value; 200,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 65,473,332 and 60,436,876 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
1,633,462 1,249,547 
Additional paid-in capital165,052 98,938 
Accumulated other comprehensive income82 314 
Accumulated deficit(2,386,572)(1,739,169)
Total shareholders’ deficit attributable to Biohaven Pharmaceutical Holding Company Ltd.(587,976)(390,370)
Non-controlling interests in consolidated subsidiaries(3,231)(1,819)
Total shareholders' deficit(591,207)(392,189)
Total liabilities and shareholders’ deficit$1,131,195 $686,975 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Product revenue, net$135,740 $17,664 $272,496 $28,513 
Cost of goods sold25,514 4,244 55,715 7,726 
Gross profit110,226 13,420 216,781 20,787 
Operating expenses:
Research and development85,664 57,044 270,203 155,539 
Selling, general and administrative164,511 119,533 494,091 339,936 
Total operating expenses250,175 176,577 764,294 495,475 
Loss from operations(139,949)(163,157)(547,513)(474,688)
Other income (expense):
Interest expense(9,047)(4,608)(24,614)(4,835)
Interest expense on mandatorily redeemable preferred shares(8,144)(7,310)(24,129)(19,864)
Interest expense on liability related to sale of future royalties(15,488)(11,955)(43,495)(31,950)
Change in fair value of derivatives(1,893)(1,940)(3,593)(7,071)
Gain (loss) from equity method investment (607)5,261 (3,472)
Other expense, net(5)(3,062)(4,756)(3,278)
Total other income (expense), net(34,577)(29,482)(95,326)(70,470)
Loss before (benefit) provision for income taxes(174,526)(192,639)(642,839)(545,158)
(Benefit) provision for income taxes(2,198)3,989 5,976 5,341 
Net loss(172,328)(196,628)(648,815)(550,499)
Less: Net loss attributable to non-controlling interests(512)(1,439)(1,412)(1,439)
Net loss attributable to Biohaven Pharmaceutical Holding Company Ltd.$(171,816)$(195,189)$(647,403)$(549,060)
Net loss per share attributable to Biohaven Pharmaceutical Holding Company Ltd. — basic and diluted$(2.63)$(3.27)$(10.09)$(9.42)
Weighted average common shares outstanding—basic and diluted65,389,574 59,677,989 64,193,090 58,282,697 
Comprehensive loss:
Net loss$(172,328)$(196,628)$(648,815)$(550,499)
Other comprehensive (loss) income, net of tax(198)251 (232)251 
Comprehensive loss(172,526)(196,377)(649,047)(550,248)
Less: comprehensive loss attributable to non-controlling interests(512)(1,439)(1,412)(1,439)
Comprehensive loss attributable to Biohaven Pharmaceutical Holding Company Ltd.$(172,014)$(194,938)$(647,635)$(548,809)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 Nine Months Ended September 30,
 20212020
Cash flows from operating activities:
Net loss$(648,815)$(550,499)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash share-based compensation expense102,278 43,206 
Interest expense on mandatorily redeemable preferred shares24,129 19,864 
Interest expense on liability related to sale of future royalties43,495 31,950 
Interest expense paid-in-kind on long-term debt8,980 1,650 
Issuance of common shares as payment for license and consulting agreements7,929  
Change in fair value of derivatives3,593 7,071 
(Gain) loss from equity method investment(5,261)3,472 
Depreciation and amortization16,985 4,625 
Change in obligation to perform R&D services(19,418)(110)
Other non-cash items761 190 
Changes in operating assets and liabilities:
Trade receivables, net(132,841)(79,522)
Inventories(35,301)(18,124)
Prepaid expenses, other current assets, and other assets(66,391)(46,133)
Accounts payable219 27,898 
Accrued expenses and other liabilities61,950 63,821 
Net cash used in operating activities(637,708)(490,641)
Cash flows from investing activities:
Purchases of marketable securities(11,033)(230,233)
Sales of marketable securities113,441  
Maturities of marketable securities100,124  
Purchases of property and equipment(1,666)(1,501)
Payments for leasehold improvements (1,600)
Payments for intangible assets (41,500)
Net cash provided by (used in) investing activities200,866 (274,834)
Cash flows from financing activities:
Proceeds from issuance of long-term debt350,000 275,000 
Proceeds from issuance of common shares308,743 283,333 
Proceeds from sale of future royalties 147,476 
Proceeds from the sale of contingently redeemable non-controlling interests 60,000 
Proceeds from obligation to perform R&D services100,000 2,124 
Proceeds from the issuance of series B preferred shares52,755  
Proceeds from exercise of share options and employee share purchase plan14,906 17,815 
Payments for term loan, finance leases, and other(18,619)(16,291)
Net cash provided by financing activities807,785 769,457 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(347)324 
Net increase (decrease) in cash, cash equivalents and restricted cash370,596 4,306 
Cash, cash equivalents and restricted cash at beginning of period134,231 317,727 
Cash, cash equivalents and restricted cash at end of period$504,827 $322,033 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)

1.   Nature of the Business
Biohaven Pharmaceutical Holding Company Ltd. (“we,” “us”, "our," "Biohaven" or the “Company”) was incorporated in Tortola, British Virgin Islands in September 2013. We are a biopharmaceutical company with a portfolio of innovative product candidates targeting neurological diseases, including rare disorders. The Company's lead product, NURTEC™ ODT (rimegepant), was approved by the U.S. Food and Drug Administration ("FDA") on February 27, 2020, which became available by prescription in U.S. pharmacies on March 12, 2020, and was approved for the preventive treatment of migraine on May 27, 2021. NURTEC ODT is the first and only calcitonin gene-related peptide ("CGRP") receptor antagonist available in a quick-dissolve orally dissolving tablet ("ODT") formulation that is approved by the FDA for both the acute and preventive treatment of migraine in adults. Our other late-stage product candidates are based on multiple mechanisms — CGRP receptor antagonists, glutamate modulators and myeloperoxidase inhibition—which we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large and orphan indications.
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, but not limited to, the risks associated with developing product candidates at each stage of non-clinical and clinical development; the challenges associated with gaining regulatory approval of such product candidates; the risks associated with commercializing pharmaceutical products for marketing and sale; the potential for development by third parties of new technological innovations that may compete with the Company’s products; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high costs of drug development; and the uncertainty of being able to secure additional capital when needed to fund operations.
Subsequent to its May 2017 initial public offering, the Company has primarily raised funds through sales of equity in private placements and public offerings, sale of revenue participation rights related to future royalties, debt financing and funds received for a research and development obligation. The Company has incurred recurring losses since its inception, had an accumulated deficit as of September 30, 2021, and expects to continue to generate operating losses during the commercial launch of NURTEC ODT for the acute and preventive treatment of migraine. To execute its business plans, the Company will continue to require additional funding to support its continuing operations and pursue its growth strategy.
As of November 9, 2021, the issuance date of our condensed consolidated financial statements, the Company expects that its cash, cash equivalents and marketable securities as of September 30, 2021, and the funds available from the Sixth Street Financing Agreement (see Note 14) and Series B Preferred Shares (see Note 8) will be sufficient to fund its current forecast for operating expenses, including commercialization of NURTEC ODT, financial commitments and other cash requirements for more than one year. The Company may need to raise additional capital until it is profitable. If no additional capital is raised through either public or private equity financings, debt financings, strategic relationships, alliances and licensing agreements, or a combination thereof, the Company may delay, limit or reduce discretionary spending in areas related to research and development activities and other general and administrative expenses in order to fund its operating costs and working capital needs.

2.   Summary of Significant Accounting Policies
Our significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K"). Updates to our accounting policies, including impacts from the adoption of new accounting standards, are discussed below in this Note 2.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its controlled subsidiaries after elimination of all significant intercompany accounts and transactions. Investments in companies in which the Company owns less than a 50% equity interest and where it exercises significant influence over the operating and financial policies of the investee are accounted for using the equity method of accounting.
The financial statements of our subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for shareholders' equity (deficit) and
5


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income, net of tax, in shareholders' deficit. Foreign currency transaction gains and losses are included in other income (expense) in the condensed consolidated statement of operations and comprehensive loss.
Reclassifications
Certain items in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current presentation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, interest expense on liability related to sale of future royalties, valuation of Series B preferred shares forward contracts and income taxes. In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Inventory
The Company values its inventories at the lower-of-cost or net realizable value. The Company determines the cost of its inventories, which includes costs related to products held for sale in the ordinary course of business, products in process of production for such sale and items to be currently consumed in the production of goods to be available for sale, on a first-in, first-out (FIFO) basis. Due to the nature of the Company’s supply chain process, inventory that is owned by the Company is physically stored at third-party warehouses, logistics providers, and contract manufacturers. The Company classifies inventory costs as noncurrent when we expect to utilize the inventory beyond our normal operating cycle and includes these costs in other assets in our condensed consolidated balance sheets. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified. If they occur, such impairment charges are recorded as a component of cost of goods sold in the consolidated statements of operations.
The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. Products which may be used in clinical development programs are excluded from inventory and charged to research and development expense in the consolidated statement of operations as incurred. Prior to the initial date regulatory approval is received, costs related to the production of inventory are recorded as research and development expense on the Company’s consolidated statements of operations in the period incurred.
Acquisitions
Our condensed consolidated financial statements include the operations of acquired businesses after the completion of the acquisitions. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired In-Process Research and Development ("IPR&D") be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. Contingent consideration in a business acquisition is included as part of the consideration transferred and is recognized at fair value as of the acquisition date. Fair value is generally estimated by using a probability-weighted discounted cash flow approach.
Acquired In-Process Research and Development
IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or
6


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


abandonment of the projects. Upon successful completion of each project, the Company will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.
Obligation to Perform Research and Development Services
The Company accounts for obligations to perform Research and Development ("R&D") services by recording the consideration received as a liability, which then is recognized in the condensed consolidated statement of operations and comprehensive loss as an offset to R&D expense using the percentage completion method. The percentage complete is determined based on incurred R&D costs as a percent of the total forecasted costs of the contractual R&D commitment.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021 and the results of its operations for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods or any future year or period.  The financial information included herein should be read in conjunction with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Recently Adopted Accounting Pronouncements
Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements.
Future Adoption of New Accounting Pronouncements
In August 2020 the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The amendments in ASU 2020-06 are effective for fiscal years beginning after December 15, 2021, with early adoption permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Adoption of the standard requires changes to be made through either a modified retrospective method of transition or a fully retrospective method. In applying the modified retrospective method, the updated guidance is applied to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on its condensed consolidated financial statements.
In January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, providing temporary guidance to ease the burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR, which is currently expected to occur in mid-2023 for legacy contracts. The amendments in ASU 2021-01 are elective immediately and apply to all entities that have contracts, hedging
7


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2.   Summary of Significant Accounting Policies (Continued)


relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The Company is currently evaluating the impact that the adoption of ASU 2021-01 will have on its condensed consolidated financial statements.
In May 2021 the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The guidance is applied prospectively and is effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2021-04 will have on the condensed consolidated financial statements. The effect will largely depend on the terms of written call options or financings issued or modified in the future.

3. Marketable Securities
The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale debt securities by type of security at September 30, 2021 was as follows:
Amortized CostAllowance for Credit LossesNet Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Corporate bonds
U.S.$14,061 $ $14,061 $ $(3)$14,058 
Foreign4,980  4,980  (7)4,973 
Total $19,041 $ $19,041 $ $(10)$19,031 

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale debt securities by type of security at December 31, 2020 was as follows:
Amortized CostAllowance for Credit LossesNet Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Corporate bonds
U.S.$185,989 $ $185,989 $1 $(106)$185,884 
Foreign37,321  37,321 1 (21)37,301 
Total $223,310 $ $223,310 $2 $(127)$223,185 

The Company had 5 and 47 available-for-sale debt securities in an unrealized loss position, with an aggregate fair value of $19,031 and $212,378, as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell
8


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
3.  Marketable Securities (Continued)

these securities prior to the anticipated recovery of their amortized cost basis. We did not have any investments in a continuous unrealized loss position for more than twelve months as of September 30, 2021 and December 31, 2020.
The fair values of debt securities available-for-sale by classification in the condensed consolidated balance sheets were as follows:
September 30, 2021December 31, 2020
Marketable securities$19,031 $223,185 

The net amortized cost and fair value of debt securities available-for-sale at September 30, 2021 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.
Net Amortized CostFair Value
Due to mature:
Less than one year$11,799 $11,798 
One year through five years7,242 7,233 
Total$19,041 $19,031 

Net Investment Income
Sources of net investment income included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 were as follows:
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Gross investment income from debt securities available-for-sale$94 $255 
Investment expenses(17)(93)
Net investment income (excluding net realized capital gains or losses)77 162 
Net realized capital gains (losses) 19 
Net investment income$77 $181 

The Company had $36 in net investment income during the three and nine months ended September 30, 2020.
We utilize the specific identification method in computing realized gains and losses. The proceeds from the sale of available-for-sale debt securities and the related gross realized capital gains and losses for the three and nine months ended September 30, 2021 and 2020 were the following:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Proceeds from sales$ $ $113,441 $ 
Gross realized capital gains  19  
Gross realized capital losses$  $  


9

BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)

4.   Fair Value of Financial Assets and Liabilities
The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values.
Financial Instruments Measured at Fair Value on the Condensed Consolidated Balance Sheets
Certain assets of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see (Note 4) “Fair Value of Financial Assets and Liabilities” in the 2020 Form 10-K. Financial assets and liabilities measured at fair value on a recurring basis on the condensed consolidated
10


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
balance sheet at September 30, 2021 and December 31, 2020 were as follows:
Fair Value Measurement as of September 30, 2021 Using:
Balance Sheet ClassificationType of InstrumentLevel 1Level 2Level 3Total
Assets:
Cash equivalentsMoney market funds$106,308 $ $ $106,308 
Marketable securitiesU.S. corporate bonds 14,058  14,058 
Marketable securitiesForeign corporate bonds 4,973  4,973 
Total assets$106,308 $19,031 $ $125,339 
Liabilities:
Series B preferred shares forward contracts$ $ $15,050 $15,050 
Contingent value right liability  1,457 1,457 
Total liabilities$ $ $16,507 $16,507 

Fair Value Measurement as of December 31, 2020 Using:
Balance Sheet ClassificationType of InstrumentLevel 1Level 2Level 3Total
Assets:
Cash equivalentsMoney market funds$6,858 $ $ $6,858 
Marketable securitiesU.S. corporate bonds 185,884  185,884 
Marketable securitiesForeign corporate bonds 37,301  37,301 
Total assets$6,858 $223,185 $ $230,043 
Liabilities:
Series B preferred shares forward contracts$ $ $14,190 $14,190 
Total liabilities$ $ $14,190 $14,190 

There were no securities transferred between Level 1, 2 and 3 during the nine months ended September 30, 2021 and 2020.
11


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
Series B Preferred Shares Forward Contracts

The following tables provide roll forwards of the aggregate fair value of the Company's Series B Preferred Shares Forward Contracts for which fair value is determined by Level 3 inputs for the nine months ended September 30, 2021 and 2020:
Forward Contracts
Balance at December 31, 2020$14,190 
Change in fair value of derivative liability3,593 
Partial settlement of derivative liability(2,733)
Balance at September 30, 2021$15,050 

Forward Contracts
Balance at December 31, 2019$ 
Change in fair value of derivative liability1,940 
Balance at September 30, 2020$1,940 

Contingent Value Right Liability
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. (“Kleo”) (see Note 6). Included in the purchase consideration transferred was a contingent value right to receive one dollar in cash for each Kleo share if certain specified Kleo biopharmaceutical products or product candidates receive the approval of the FDA prior to the expiration of 30 months following the effective time of the transaction. The maximum amount payable pursuant to the contingent value right is approximately $17,300, and the fair value of the contingent value right was $1,457 as of the acquisition date. The Company recorded the contingent value right in other long-term liabilities on the condensed consolidated balance sheets.

The fair value of the contingent value right was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a discounted cash flow approach to value the contingent value right liability. As inputs into the valuation, the Company considered the probability of FDA approval within the 30 month period, which we estimated at approximately 10%, the amount of the payment, and a discount rate of approximately 7% determined using an implied credit spread adjusted based on companies with similar credit risk.

There was no material change in fair value of the contingent value right liability during the three and nine months ended September 30, 2021.
Series A Preferred Shares Derivative Liability
The Company had no Series A preferred shares derivative liability for the nine months ended September 30, 2021.

12


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4.   Fair Value of Financial Assets and Liabilities (Continued)
The following table provides a roll forward of the aggregate fair value of the Company’s Series A preferred shares derivative liability for which fair value is determined by Level 3 inputs for the nine months ended September 30, 2020:
Series A Derivative
Liability
Balance at December 31, 2019$37,690 
Change in fair value of derivative liability5,131 
Partial settlement of derivative liability(42,821)
Balance at September 30, 2020$ 


5. Balance Sheet Components
Restricted Cash
Restricted cash included in other current assets in the condensed consolidated balance sheets is primarily employee contributions to the Company's employee share purchase plan held for future purchases of the Company's outstanding shares.
Restricted cash included in other assets in the condensed consolidated balance sheets represents collateral held by a bank for a letter of credit ("LOC") issued in connection with the leased office space in Yardley, Pennsylvania. The following represents a reconciliation of cash and cash equivalents in the condensed consolidated balance sheets to total cash, cash equivalents and restricted cash as of September 30, 2021 and December 31, 2020, respectively, in the condensed consolidated statement of cash flows:
September 30, 2021December 31, 2020
Cash and cash equivalents$501,409 $132,149 
Restricted cash (included in other current assets)2,668 1,082 
Restricted cash (included in other assets)750 1,000 
Cash, cash equivalents and restricted cash in the statement of cash flows$504,827 $134,231 
Trade Receivables, Net
The Company’s trade accounts receivable consists of amounts due primarily from pharmacy wholesalers in the U.S. (collectively, its "Customers") related to sales of NURTEC ODT and have standard payment terms. For certain Customers, the trade accounts receivable for the Customer is net of distribution service fees, prompt pay discounts and other adjustments. The Company monitors the financial performance and creditworthiness of its Customers so that it can properly assess and respond to changes in their credit profile. The Company reserves against trade accounts receivable for estimated losses that may arise from a Customer’s inability to pay and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The allowance for doubtful accounts, including reserve amounts for estimated credit losses, was immaterial as of September 30, 2021 and December 31, 2020.
13


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
5. Balance Sheet Components (Continued)
Inventories
Inventories consisted of the following:
As of September 30, 2021As of December 31, 2020
Raw materials$ $931 
Work-in-process153,586 33,266 
Finished goods10,978 5,366 
Total inventories$164,564 $39,563 
Less noncurrent inventories(1)
89,700  
Total inventories classified as current$74,864 $39,563 
(1) Included in other assets on the condensed consolidated balance sheets. There are no recoverability issues for these amounts.
Prepaid Expenses
Prepaid expenses consisted of the following:
As of September 30, 2021As of December 31, 2020
Prepaid clinical trial costs$26,260 $21,173 
Prepaid manufacturing9,115 36,040 
Prepaid commercial costs22,569 16,448 
Other prepaid expenses3,754 3,021 
 Prepaid expenses$61,698 $76,682 
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of September 30, 2021As of December 31, 2020
Accrued development milestones$ $667 
Accrued employee compensation and benefits32,296 29,447 
Accrued clinical trial costs31,205 19,887 
Accrued commercialization and other professional fees23,052 6,336 
Accrued sales discounts and allowances158,896 73,155 
Current obligation to perform R&D services35,879 846 
Other accrued expenses and other current liabilities69,011 36,292 
 Accrued expenses and other current liabilities$350,339 $166,630 

6.   Business Acquisition
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. (“Kleo”). Kleo is a development-stage biopharmaceutical company focused on advancing the field of immunotherapy by developing small molecules that emulate biologics. The transaction was accounted for as the acquisition of a business using the acquisition method of accounting.
The total fair value of the consideration transferred was $20,043 which consisted of the issuance of a total of 115,836 common shares of the Company to Kleo stockholders and contingent consideration in the form of a contingent value right to receive one dollar in cash for each Kleo share if certain specified Kleo biopharmaceutical products or product candidates receive the approval of the FDA prior to the expiration of 30 months following the effective time of the transaction. The maximum amount payable pursuant to the contingent value right is approximately $17,300, and the fair value of the contingent value right is $1,457 as of the acquisition date. The transaction also provides for approximately $950 of cash holdbacks to
14


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
6.   Business Acquisition (Continued)


provide for potential indemnification claims and other reserves. Any holdback amounts remaining after the holdback periods will be released to the Kleo stockholders in the form of cash consideration.
Prior to the consummation of the transaction, the Company owned approximately 41.9% of the outstanding shares of Kleo and accounted for it as an equity method investment. As part of the transaction, the Company acquired the remainder of the shares of Kleo, and post-transaction the Company owns 100% of the outstanding shares of Kleo. The carrying value of the Company’s investment in Kleo was $1,176 immediately prior to the acquisition date. The Company determined the fair value of the existing interest was $6,437, and recognized a gain from our equity method investment of $5,261 for the nine months ended September 30, 2021 on the condensed consolidated statement of operations and comprehensive loss as a result of remeasuring to fair value the existing equity interest in Kleo.
In connection with the transaction, we recorded: net working capital of $573; property, plant and equipment of $1,257; intangible assets consisting of in progress research and development assets of $18,400 which include an oncology therapeutic candidate entering Phase I clinical trials and a COVID-19 therapeutic candidate in the planning stage for clinical development; debt assumed of $1,577; and goodwill of $1,390.
Kleo’s employees, other than its President and Chief Financial Officer, were retained as part of the transaction. In connection with the transaction agreement, the Company filed a registration statement permitting Kleo stockholders to offer and sell the common shares of the Company issued in the transaction.

7.   Liability Related to Sale of Future Royalties, net
2018 RPI Funding Agreement
In June 2018, the Company entered into a funding agreement (the "2018 RPI Funding Agreement") to sell tiered, sales-based royalty rights on global net sales of pharmaceutical products containing the compounds rimegepant or zavegepant (previously known as BHV-3500 and vazegepant) and certain derivative compounds thereof ("Products") to RPI, a Delaware statutory trust. The Company issued to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products for each calendar quarter during the royalty term contemplated by the 2018 RPI Funding Agreement, in exchange for $100,000 in cash.
Concurrent with the 2018 RPI Funding Agreement, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with RPI. Pursuant to the Purchase Agreement, the Company sold 1,111,111 common shares of the Company to RPI at a price of $45.00 per share, for gross proceeds of $50,000.
The Company concluded that there were two units of account for the consideration received comprised of the liability related to sale of future royalties and the common shares. The Company allocated the $100,000 from the 2018 RPI Funding Agreement and $50,000 from the Purchase Agreement among the two units of account on a relative fair value basis at the time of the transaction. The Company allocated $106,047 in transaction consideration to the liability, and $43,953 to the common shares. The Company determined the fair value of the common shares based on the closing share price on the transaction date, adjusted for the trading restrictions. The transaction costs of $377 were allocated in proportion to the allocation of total consideration to the two units of account. The effective interest rate under the 2018 RPI Funding Agreement, including transaction costs, is approximately 27% as of September 30, 2021.
2020 RPI Funding Agreement
In August 2020, the Company entered into a funding agreement with RPI 2019 Intermediate Finance Trust (“RPI 2019 IFT”) providing for up to $250,000 of funding in exchange for rights to participation payments based on global net sales of products containing zavegepant and rimegepant and certain payments based on success-based milestones relating to zavegepant (the "2020 RPI Funding Agreement"). Under the 2020 RPI Funding Agreement, RPI 2019 IFT will be entitled to receive tiered, sales based participation rights up to 3.0% of future global net sales of products containing zavegepant, 0.4% of future global net sales of products containing rimegepant, and payments tied to success-based milestones as described below. Pursuant to the 2020 RPI Funding Agreement, the Company received $150,000 on the transaction date in August 2020 and $100,000 in March 2021 upon the commencement of the oral zavegepant Phase 3 clinical program.
15


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
7.   Liability Related to Sale of Future Royalties, net (Continued)
If at any time during the 180 days following the closing of the 2020 RPI Funding Agreement, the Company enters into a definitive agreement to consummate a Change of Control (as defined in the Company's articles and memorandum of association), the Company will have the option to repurchase the participation rights and milestone payment rights for a purchase price of 2.0x of the amount received under the agreement at that date, contingent upon the closing of a Change of Control (the "Buy-Back Option").
The success-based milestone payments range from 0.6x to 2.95x of the funded amount depending on the number of regulatory approvals achieved for zavegepant (including 1.9x for the first zavegepant migraine regulatory approval) and would be paid over a 10-year period. If the Company consummates a Change of Control, and the Buy-Back Option has not previously been exercised, RPI 2019 IFT has the option to accelerate each unpaid milestone payment which has or thereafter occurs.
The Company concluded that there were two units of account for the $150,000 in initial consideration received, which comprised of a liability related to sale of future royalties for products containing rimegepant and a research and development arrangement with RPI 2019 IFT for zavegepant. The Company allocated the $150,000 from the 2020 RPI Funding Agreement among the two units of account based on the present value of probability adjusted net sales at the time of the transaction. The Company allocated $147,876 in transaction consideration to the liability related to sale of future royalties and $2,124 to the obligation to perform contractual services in the condensed consolidated balance sheets. The transaction costs of $400 were allocated only to the liability related to sale of future royalties. The effective interest rate under the 2020 RPI Funding Agreement, including transaction costs, is approximately 8% as of September 30, 2021.
In March 2021, the Company received $100,000 from RPI 2019 IFT for the commencement of the oral zavegepant Phase 3 clinical program. The Company allocated the proceeds to obligation to perform R&D services liability in the condensed consolidated balance sheets.
Since there is a substantive and genuine transfer of risk to RPI 2019 IFT for the development of zavegepant, the $102,124 of consideration allocated to the development of zavegepant is being recognized by the Company as an obligation to perform contractual services and therefore is a reduction of research and development expenses as incurred.
The following table shows the reduction to research and development expenses for the three and nine months ended September 30, 2021 and 2020, related to the 2020 RPI Funding Agreement.
Three months ended September 30,Nine months ended September 30,
2021202020212020
Reduction to research and development expenses$9,213 $110 $19,418 $110 

The following table shows the activity within the liability related to sales of future royalties account for the nine months ended September 30, 2021 and 2020, related to the 2018 and 2020 RPI Funding Agreements.
Nine Months Ended September 30,
20212020
Liability related to sale of future royalties - beginning balance
$335,282 $144,111 
Additional liability related to the 2020 RPI Funding Agreement, net of issuance costs 147,476 
Royalty revenues paid and payable to RPI(6,813)(667)
Interest expense on liability related to sale of future royalties43,495 31,950 
Liability related to sale of future royalties - ending balance
$371,964 $322,870 

8.   Mandatorily Redeemable Preferred Shares, net
In April 2019, the Company sold 2,495 Series A preferred shares (the "Series A Preferred Shares") to RPI at a price of $50,100 per preferred share pursuant to a Series A preferred share purchase agreement (the "Preferred Share Agreement"). The gross proceeds from the transaction with RPI were $125,000, with $105,000 of the proceeds used to purchase a priority review voucher ("PRV") issued by the United States Secretary of Health and Human Services to potentially expedite the regulatory
16


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
8.   Mandatorily Redeemable Preferred Shares, net (Continued)

review of the new drug application ("NDA") for the ODT formulation of rimegepant and the remainder of the proceeds to be used for other general corporate purposes. Pursuant to the Preferred Share Agreement, the Company had the option to issue additional Series A Preferred Shares to RPI in up to three additional closings for an aggregate amount of $75,000. The Company was not obligated to issue any additional Series A Preferred Shares, subject to a fee up to $3,000 if not all of the Series A Preferred Shares were issued. In the third quarter of 2020, the Company determined it will not exercise the option to issue additional Series A Preferred Shares and accordingly recognized the full $3,000 fee in other expense in the condensed consolidated statements of operations and comprehensive loss.
The holders of the Company's outstanding Series A Preferred Shares will have the right to require redemption of the shares in certain circumstances. If a Change of Control, as defined in the Company's memorandum and article of association, occurs and the Series A Preferred Shares have not previously been redeemed, the Company must redeem the Series A Preferred Shares for two times (2x) the original purchase price of the Series A Preferred Shares payable in a lump sum at the closing of the Change of Control or in equal quarterly installments following the closing of the Change of Control through December 31, 2024.
The Company may redeem the Series A Preferred Shares at its option at any time for two times (2x) the original purchase price, which redemption price may be paid in a lump sum or in equal quarterly installments through December 31, 2024.
In the event that the Company defaults on any obligation to redeem Series A Preferred Shares when required, the redemption amount shall accrue interest at the rate of eighteen percent (18%) per annum. If any such default continues for at least one year, the holders of such shares shall be entitled to convert, subject to certain limitations, such Series A Preferred Shares into common shares, with no waiver of their redemption rights.
The Company is required to redeem the Series A Preferred Shares for two times (2x) the original purchase price, payable beginning March 31, 2021 in equal quarterly installments through December 31, 2024. Accordingly, the Company has concluded the Series A Preferred Shares are mandatorily redeemable instruments and classified as a liability. The Company initially measured the liability at fair value, and will subsequently accrete the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the Preferred Share Agreement, including transaction costs, was determined to be approximately 20% as of September 30, 2021. The Company recognized $7,392 and $7,310 in interest expense for the three months ended September 30, 2021 and September 30, 2020, respectively. The Company recognized $23,012 and $19,864 in interest expense for the nine months ended September 30, 2021 and September 30, 2020, respectively. The Company had 2,027 and 2,495 Series A Preferred Shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.
17


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
8.   Mandatorily Redeemable Preferred Shares, net (Continued)

The following table shows the activity within the Series A preferred share liability for the nine months ended September 30, 2021 and 2020, respectively:
Carrying Value
Gross balance at December 31, 2020$174,264 
Interest expense recognized, excluding transaction cost amortization22,979 
Redemption of Series A preferred shares(46,875)
Gross balance at September 30, 2021$150,368 
Less: unamortized transaction costs(140)
Net balance at September 30, 2021$150,228 
Gross balance at December 31, 2019$103,864 
Partial settlement of derivative liability42,821 
Interest expense recognized, excluding transaction cost amortization19,864 
Gross balance at September 30, 2020$166,549 
Less: unamortized transaction costs(218)
Net balance at September 30, 2020$166,331 

Certain scenarios as described in the Preferred Share Agreement were determined by the Company to result in a derivative liability. The with-and-without valuation method was used to determine the fair value of the embedded derivatives within the agreement. As inputs into the valuation, the Company considered the type and probability of occurrence of certain events, the amount of the payments, the expected timing of certain events, and a risk-adjusted discount rate. In accordance with ASC 815, Derivatives and Hedging, the fair value of the derivative was recorded on the balance sheet as a Series A preferred shares derivative liability with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss (see Note 4 for details on the fair value measurement).
Upon the FDA's approval of NURTEC ODT the Company remeasured the derivative using the inputs noted above. In the first quarter of 2020, the Company partially settled the Series A preferred shares derivative liability associated with this approval of $42,821, which modified the timing of the payment obligation related to the redeemable preferred share liability.
On August 7, 2020, the Company entered into the RPI Series B Preferred Share Agreement, pursuant to which RPI agreed to invest in the Company through the purchase of up to 3,992 Series B Preferred Shares at a price of $50,100 per share. The shares will be issued in quarterly increments from March 31, 2021 to December 31, 2024. Upon issuance of the Series B Preferred Shares, they will qualify as mandatorily redeemable instruments and be classified as a mandatorily redeemable preferred shares liability on the condensed consolidated balance sheets. The Company will then measure the liability at fair value, and subsequently accrete the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the Series B Preferred Share Agreement was determined to be approximately 8%, and the Company recognized $752 and $1,117 in interest expense for the three and nine months ended September 30, 2021. The Company had 1,053 and no Series B preferred shares issued and outstanding, as of September 30, 2021 and December 31, 2020, respectively.
18


BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
8.   Mandatorily Redeemable Preferred Shares, net (Continued)
The following table shows the activity within the Series B preferred share liability for the nine months ended September 30, 2021:
Carrying Value
Balance at December 31, 2020$ 
Interest expense recognized1,117 
Issuance of Series B preferred shares at fair value55,488 
Balance at September 30, 2021$56,605 

9.   Shareholders' Equity (Deficit)
Changes in shareholders’ deficit for the three and nine months ended September 30, 2021 were as follows:
Common Shares
SharesAmountAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeBiohaven Shareholders' Equity (Deficit)Non-controlling InterestsTotal Shareholders' Equity (Deficit)
Balances as of December 31, 202060,436,876 $1,249,547 $98,938