PureTech Health plc announces the acquisition of Karuna Therapeutics, Inc. by Bristol Myers Squibb for $14 billion, emphasizing KarXT’s potential in schizophrenia treatment. PureTech’s ownership yields $293 million in gross proceeds. Bristol Myers Squibb anticipates financial dilution in 2024 due to transaction costs but underscores commitment to neuroscience and future growth. Financial outlook updates are expected post-first quarter 2024 results.
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC), a leading clinical-stage biotherapeutics company, has announced the successful completion of the acquisition of its Founded Entity, Karuna Therapeutics, Inc. (“Karuna”), by Bristol Myers Squibb (NYSE: BMY). Bristol Myers Squibb (BMS) has acquired all outstanding common stock of Karuna for $330.00 per share, totaling an equity value of approximately $14 billion.
Eric Elenko, Ph.D., Chief Innovation Officer at PureTech, and a co-inventor of KarXT, expressed the significance of this acquisition, stating, “This acquisition recognizes the enormous potential of KarXT to help millions of people with schizophrenia in need of a new therapeutic option, and BMS will provide the global leadership to maximize the reach of KarXT.” He further highlighted the milestone for PureTech, where KarXT was invented, and for Karuna, one of their Founded Entities advancing innovative therapeutic approaches. Elenko extended congratulations to the Karuna and BMS teams and wished them success in their joint endeavor to make a difference for people with psychiatric and neurological conditions.
KarXT, if approved, will represent the first new mechanism of action for patients with schizophrenia in over 50 years. This breakthrough holds promise for revolutionizing treatment in this critical area of mental health.
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As of February 15, 2024, PureTech’s ownership in Karuna stood at approximately 2.3% on an outstanding voting share basis, resulting in an estimated $293 million in gross proceeds to PureTech upon the transaction’s closure. PureTech had initially directed around $18.5 million towards the founding and development of Karuna. Following the completion of the BMS acquisition, PureTech will have generated approximately $1.1 billion in direct cash proceeds. Moreover, under its license agreement with Karuna, PureTech retains rights to receive milestone payments upon certain regulatory approvals and is entitled to royalties on net sales, along with the potential for additional milestone payments under its agreement with Royalty Pharma.
Bristol Myers Squibb issued a statement upon completing the acquisition, emphasizing its commitment to strengthening neuroscience through this strategic move. Chris Boerner, Ph.D., Chief Executive Officer of Bristol Myers Squibb, expressed excitement about expanding their neuroscience portfolio and welcoming Karuna to the company. He highlighted the alignment of this transaction with BMS’s growth objectives, particularly in the latter half of the decade and beyond. Boerner emphasized the collaborative effort to bring KarXT to patients with schizophrenia, underscoring the potential impact on improving patient outcomes.
With the acquisition, BMS has gained access to KarXT, an antipsychotic with a novel mechanism of action and a differentiated efficacy and safety profile. Additionally, BMS has acquired Karuna’s early-stage and pre-clinical pipeline. KarXT is currently under review with a Prescription Drug User Fee Act (PDUFA) date of September 26, 2024, for the treatment of schizophrenia in adults. Clinical trials are also underway for adjunctive therapy in schizophrenia and for the treatment of psychosis in patients with Alzheimer’s disease, with potential expansion to additional indications such as Bipolar I disorder and Alzheimer’s disease agitation.
Regarding financial implications, the transaction is expected to be dilutive to Bristol Myers Squibb’s non-GAAP diluted earnings per share by approximately $0.30 in 2024 due to financing costs. Bristol Myers Squibb anticipates offsetting operational expenses through disciplined resource allocation, cost efficiencies, and portfolio prioritization. The company’s strong financial profile enables continued commitment to investment-grade credit ratings and growth initiatives through business development opportunities, dividends, and share repurchases.
The transaction will be accounted for as an asset acquisition, resulting in an approximately $12 billion one-time, non-deductible Acquired In-Process Research and Development (Acquired IPR&D) charge impacting both 2024 first quarter and full-year GAAP and non-GAAP EPS.
As part of its transparency, Bristol Myers Squibb usually updates its financial outlook each quarter. Considering the financial impacts outlined above, investors and analysts should take these into account when referring to Bristol Myers Squibb’s financial outlook issued on February 2, 2024. An update to the financial outlook will be provided when first-quarter 2024 results are reported on April 25, 2024.