Bristol Myers Squibb Acquires Karuna Therapeutics for $14 Billion to Bolster Antipsychotic Drug Portfolio

Karuna's experimental schizophrenia drug, KarXT, is expected to contribute significantly to Bristol Myers' revenue well into the late 2020s and beyond.

Bristol Myers Squibb (BMY.N) has recently announced its acquisition of Karuna Therapeutics (KRTX.O) for a staggering $14 billion.

This strategic move is aimed at securing a promising new class of antipsychotic medication, KarXT, to drive growth as patents on their older drugs approach expiration in the coming years.

Karuna’s experimental schizophrenia drug, KarXT, is expected to contribute significantly to Bristol Myers’ revenue well into the late 2020s and beyond.

This becomes crucial as two of their top-selling drugs, Revlimid (a blood cancer treatment) and Eliquis (a blood thinner), face increasing competition from generic alternatives.

Furthermore, the company anticipates revenue losses from other key products like Opdivo (a cancer immunotherapy) and Eliquis due to upcoming patent expirations, with the added challenge of Eliquis potentially being subject to drug price negotiations by the U.S. Medicare health program in 2026.

Bristol Myers CEO Chris Boerner stated that the company still possesses substantial financial resources for business development and innovation while avoiding large transformative deals.

Boerner emphasized their commitment to enhancing therapeutic areas such as oncology and cardiovascular disease and exploring emerging fields like neuroscience.

KarXT holds the promise of becoming a multi-billion dollar drug across various indications, potentially benefiting patients with Bipolar I disorder and those suffering from psychosis and agitation due to Alzheimer’s disease.

The acquisition terms include Bristol Myers paying $330 per share in cash for Karuna, representing a 53.4% premium over its last closing price.

This deal prompted a surge in Karuna’s shares, reaching $316.80 in early trading, and also boosted Bristol Myers’ shares by 2.5%.

Boerner highlighted that KarXT offers a novel approach to treating schizophrenia by activating muscarinic receptors in the central nervous system, a departure from existing antipsychotic drugs that block dopamine receptors.

Clinical trials have demonstrated its efficacy in symptom reduction with fewer adverse effects like sleepiness, weight gain, and involuntary movements.

Importantly, Karuna’s drug is expected to remain patent-protected in the United States until the mid-2030s.

Although the acquisition will temporarily impact Bristol Myers’ earnings per share by approximately 30 cents in 2024 due to financing costs, it is deemed “fairly valued” by analysts.

The deal underscores the company’s dedication to securing innovative therapies, following its recent acquisition of cancer drugmaker Mirati Therapeutics for up to $5.8 billion.

This move solidifies Bristol Myers’ commitment to remaining at the forefront of pharmaceutical innovation and ensuring a robust product portfolio.