Karuna Soars 47% After $14B Bristol Myers Buyout

On Friday, Bristol Myers Squibb said that it has reached a deal to purchase Karuna Therapeutics, a biopharmaceutical business, for $14 billion in cash, or $330 per share.

Following the news on Friday, Karuna's stock surged almost 47%, closing at $317.85 per share. Shares of Bristol Myers Squibb finished 2% higher.

The transaction will aid in expanding Bristol Myers' therapeutic pipeline following a decline in demand for the company's blood cancer treatment, Revlimid, during the third quarter due to competition from a generic product.

The transaction was unanimously authorized by the boards of directors of Bristol Myers and Karuna, and a release states that it is anticipated to close in the first half of 2024.

Karuna creates pharmaceuticals for people with mental and neurological illnesses. According to the press announcement, the company's main product is an antipsychotic called KarXT, which is anticipated to be used as a therapy for individuals with schizophrenia starting in late 2024.

According to the announcement, KarXT is also being considered as a potential therapy for a kind of bipolar disorder and psychosis associated with Alzheimer's disease. The portfolio of Karuna, according to CEO Bill Meury, "offers advancements in treatment not seen in many years."

Bristol Myers received advice on the transaction from Citi and Gordon Dyal & Co., while Goldman Sachs functioned as Karuna's only advisor.

A few days after Bristol decreased its near-term estimates for its new pipeline portfolio, Boerner assumed the company's CEO position in November.

Experts have projected billions dollar sales during KarXT's height, and by September of next year, a decision about its clearance for the treatment of schizophrenia is expected.

Innovative Antipsychotic Medication

While there are a number of established antipsychotic medications for treating schizophrenia, KarXT is a novel antipsychotic medication that works by activating muscarinic receptors in the central nervous system in contrast to current antipsychotic medications that inhibit dopamine receptors.

The medication reduced symptoms in clinical studies without causing several of the side effects that are commonly connected to antipsychotic medications today, including drowsiness, weight gain, and uncontrollable movement.

It is anticipated that Karuna's medication would be patent-protected in the US until the middle of the 1930s.

The financing expenses associated with the purchase are projected to reduce Bristol Myers' earnings per share by approximately thirty cents in 2024.

Myles Minter, an analyst at William Blair, stated that the sale is "fairly valued in our view and can't rule out another potential bidder, given this is first-in-class in an area that has not seen a new mechanism approval in decades."

The purchase was made around two months after Bristol agreed to pay up to $5.8 billion to acquire cancer pharmaceutical Mirati Therapeutics.