Bristol Myers Squibb and Karuna Therapeutics recently announced that they have entered into a definitive merger agreement under which Bristol Myers Squibb has agreed to acquire Karuna for $330 per share in cash, for a total equity value of $14 billion, or $12.7 billion net of estimated cash acquired. The deal was unanimously approved by both the Bristol Myers Squibb and Karuna Boards of Directors.
Karuna is a biopharmaceutical company that was built to discover, develop, and deliver transformative medicines for people living with psychiatric and neurological conditions. And Karuna’s lead asset KarXT (xanomeline-trospium) is an antipsychotic with a novel mechanism of action (MoA) and differentiated efficacy and safety.
Karuna’s New Drug Application (NDA) for KarXT for the treatment of schizophrenia in adults was accepted for review by the U.S. Food and Drug Administration (FDA), with a Prescription Drug User Fee Act (PDUFA) date of 9/26/2024. And KarXT is also in registrational trials both for adjunctive therapy to existing standard of care agents in schizophrenia and for the treatment of psychosis in patients with Alzheimer’s disease. Bristol Myers Squibb believes that KarXT represents a significant revenue contribution opportunity. Bristol Myers Squibb also sees potential from Karuna’s early-stage and pre-clinical pipeline.
KarXT targets the M1 and M4 muscarinic receptors, resulting in a differentiated safety and efficacy profile. And KarXT has demonstrated improvements in cognition and is not associated with common side effects of currently approved treatments, including no meaningful weight gain, extrapyramidal symptoms, increased prolactin levels, akathisia and/or sedation.
Considering this differentiated profile, KarXT has meaningful and expanding revenue potential in schizophrenia and with upside in additional indications and geographies:
- Schizophrenia – KarXT is expected to launch in late 2024 in the U.S. as a treatment for schizophrenia in adults. There are about 1.6 million people treated for schizophrenia in the U.S., a significant portion of whom do not respond to currently available therapies and experience unacceptable side effects.
- Adjunctive schizophrenia – A registrational clinical trial is currently underway evaluating KarXT as adjunctive treatment with current standard-of-care agents for the treatment of schizophrenia, with data expected in 2025.
- Alzheimer’s disease psychosis – Registrational clinical trials are currently underway evaluating KarXT for the treatment of Alzheimer’s disease psychosis, with data expected in 2026. More than 6 million people are living with Alzheimer’s disease in the U.S. There are currently no approved treatments for Alzheimer’s disease psychosis.
- Additional indications – Bristol Myers Squibb believes KarXT also has potential in additional indications, including Bipolar I disorder, which impacts approximately 1.4 million people in the U.S., and Alzheimer’s disease agitation.
The deal is expected to be dilutive to Bristol Myers Squibb’s non-GAAP diluted earnings per share by approximately $0.30 in 2024 from the financing cost of the deal as Bristol Myers Squibb expects to offset the operational expenses of the transaction through continued resource allocation, cost efficiencies, and portfolio prioritization.
The deal is expected to close in the first half of 2024, subject to customary closing conditions, including approval of Karuna stockholders and receipt of required regulatory approvals.
KEY QUOTES:
“There are tremendous opportunities in neuroscience, and Karuna strengthens our position and accelerates the expansion and diversification of our portfolio in the space. We expect KarXT to enhance our growth through the late 2020s and into the next decade. This transaction fits squarely within our business development priorities of pursuing assets that are strategically aligned, scientifically sound, financially attractive, and have the potential to address areas of significant unmet medical need. We look forward to welcoming the talented Karuna team to Bristol Myers Squibb.”
- Christopher Boerner, Ph.D., Chief Executive Officer of Bristol Myers Squibb
“Schizophrenia and Alzheimer’s disease psychosis affect millions of people worldwide, with limited to no treatment options. KarXT’s novel mechanism has resulted in a transformational profile in schizophrenia, with compelling efficacy and a differentiated safety profile. KarXT also has the potential to deliver meaningful benefits to patients as an adjunctive treatment for patients with schizophrenia and as a first treatment for Alzheimer’s disease psychosis.”
- Samit Hirawat, M.D., Executive Vice President, Chief Medical Officer, Drug Development of Bristol Myers Squibb
“Karuna’s portfolio offers advancements in treatment not seen in many years. With Bristol Myers Squibb’s long-standing expertise in developing and commercializing medicines on a global scale and legacy in neuroscience, KarXT and the other assets in our pipeline will be well-positioned to reach those living with schizophrenia and Alzheimer’s disease psychosis. This announcement is a testament to the Karuna team’s talent, hard work, and innovation.”
- Bill Meury, President and Chief Executive Officer of Karuna Therapeutics
