Bristol Myers Squibb (BMS) has agreed to acquire Karuna Therapeutics for $14 billion, the companies said today, in a deal intended to bolster the buyer’s neurological drug portfolio with Karuna’s pipeline, anchored by an adult schizophrenia drug candidate now under FDA review.
That candidate, KarXT (xanomeline-trospium), is an antipsychotic, M1 / M4 muscarinic receptor agonist that would be a first-in-class treatment for adult schizophrenia if the FDA approves the drug. Karuna is hoping to launch KarXT late in the new year, soon after the September 26, 2024, target action date under the Prescription Drug User Fee Act (PDUFA) set by the FDA for the drug’s new drug application (NDA).
Adult schizophrenia is one of three indications for which KarXT is in development. The other two are schizophrenia as adjunctive therapy, in combination with standard of care (for which KarXt would also be first in class), and psychosis in Alzheimer’s disease (potential first in disease).
Karuna said it had a registrational clinical trial underway that is evaluating KarXT as adjunctive treatment with current standard of care agents for the treatment of schizophrenia, with data expected in 2025. In Alzheimer’s, registrational clinical trials are currently underway evaluating KarXT for the treatment of psychosis stemming from the disease, with data expected in 2026.
BMS said KarXT also has potential in additional indications, citing bipolar I disorder and Alzheimer’s disease agitation.
“There are tremendous opportunities in neuroscience, and Karuna strengthens our position and accelerates the expansion and diversification of our portfolio in the space,” Christopher Boerner, PhD, BMS’ CEO, said in a statement. “We expect KarXT to enhance our growth through the late 2020s and into the next decade.”
Addressing analysts on a conference call this morning, Adam Lenkowsky, BMS’ executive vice president and chief commercialization officer, said KarXT “represents a multibillion-dollar peak sales opportunity. That should contribute meaningfully to our growth in the back end of the decade and into the 2030s.”
Analysts see >$6B-$7B in sales
Graig C. Suvannavejh, PhD, a managing director and senior biopharmaceuticals and biotechnology equity research analyst at Mizuho Securities, has projected that KarXT could generate more than $6 billion in peak annual sales for BMS if it were to be approved for all indications for which it is in development.
He reasoned that BMS’ acquisition of Karuna makes sense because it will fill a gap in BMS’ neuro research and development effort which has primarily emphasized addressing neurodegeneration and neuroinflammation instead of treating psychiatric disorders. That gap in the Bristol Myers portfolio also reduces the risk of the acquisition being delayed or opposed by regulators, according to Mizuho.
Mizuho has not broken down which indications would generate how much in sales by its forecast. A William Blair analyst, Myles Minter, has projected peak sales estimates of roughly $7 billion, approximately half of which would come from sales in psychosis associated with Alzheimer’s disease, for which there are currently no approved treatment options.
“There are additional expansion opportunities for KarXT based on Bristol’s plans to develop a long-acting injectable formulation, and further potential upside from Karuna’s early-stage pipeline,” another William Blair biotechnology analyst, Matt Phipps, PhD, wrote in a research note this morning. “While we can debate whether the acquisition is overpaying for KarXT, the drug has shown strong efficacy across trials to date and should receive regulatory approval in the second half of 2024, adding another drug to the important new product portfolio.”
Phipps said BMS’ purchase of Karuna fulfilled the company’s commitment—expressed earlier this year at its R&D Day event for analysts—that it was serious about re-establishing a neuroscience pipeline, adding: “management is aggressively trying to replace upcoming loss of exclusivities, paying meaningful premiums for de-risked assets.”
Investors appeared to agree, responding to news of BMS’ planned acquisition with a buying surge that sent Karuna shares soaring 47% in early trading today, to $316.63 as of 10:30 a.m. ET. Investors of PureTech Health, which co-founded Karuna and co-invented the KarXT program, also signaled support for the deal by sending its shares climbing 33%, to $24.86 as of the same time. Shares of BMS rose 2%, to $52.46.
Slipping down “patent cliff”
In its Form 10-K annual report for 2022, BMS estimated the earliest basic loss of patent rights or data exclusivity—the proverbial “patent cliff”—for 18 marketed drugs in the U.S., Europe, and/or Japan.
These include four of BMS’ six blockbusters with greater than $1 billion in annual sales, such as Pomalyst®/Imnovid® (pomalidomide), a treatment for multiple myeloma and AIDS-related Kaposi sarcoma set to lose European patent protection in 2024; followed by three drugs on track to lose U.S. patent protection: Cancer drug Yervoy® (ipilimumab) in 2025; blood thinner Eliquis® (apixaban) in 2026; and cancer drug Opdivo® (nivolumab) in 2027.
During the first nine months of 2023, Eliquis generated BMS’ highest sales with $9.332 billion, up 2.5% year-over-year from $9.101 billion. Opdivo finished second with $6.622 billion, up about 10% from $6.033 billion. Pomalyst/Imnovid was third with $2.551 billion, down about 3% from $2.62 billion; and Yervoy, $1.415 billion, down 9.5% from $1.563 billion. The company has blamed the declines on factors ranging from competition from generic versions of other drugs, to increases in patients receiving donated versions of BMS drugs from its foundation.
Also in Karuna’s pipeline are KAR-2618, a TRPC4/5 inhibitor being developed for mood and anxiety disorders and inlicensed from the assignment estate of Goldfinch Bio in January 2023; and four preclinical candidates for undisclosed indications. Three of the four are muscarinic-targeted drug candidates: KAR-201, KAR-301, and KAR-401—while the fourth, KAR-501, is a target-agnostic drug candidate being developed in collaboration with PsychoGenics.
At $14 billion (of which $12.7 billion is net of estimated cash acquired), BMS’ planned buyout of Karuna would be the second largest merger-and-acquisition (M&A) deal of 2023. The year’s top M&A deal remains Pfizer’s planned $43 billion purchase of Seagen, which investors didn’t embrace due to concerns about regulatory review; while Merck & Co.’s $10.8 acquisition of Prometheus Biosciences slips to third-largest transaction.
“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,” Boerner added.
The acquisition of Karuna marks the second multi-billion-dollar buyout of a biotech by BMS. Two months ago on October 8, BMS announced it agreed to buy Mirati Therapeutics for $5.8 billion, a deal intended to expand the buyer’s cancer portfolio with Mirati’s marketed drug Krazati® (adagrasib) and several pipeline candidates that have shown positive albeit early clinical data.
At $330 a share cash, BMS’ acquisition of Karuna represents an approximately 53.4% premium to yesterday’s closing price for Karuna shares of $215.19. 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.
“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,” stated Bill Meury, Karuna’s president and CEO. “This announcement is a testament to the Karuna team’s talent, hard work, and innovation.”
Alex Philippidis is Senior Business Editor of GEN.