In a strategic move to fortify its pharmaceutical portfolio, Bristol Myers Squibb (NYSE:BMY) has announced the acquisition of Karuna Therapeutics for $14 billion. This strategic investment aims to bolster Bristol Myers Squibb’s growth trajectory, particularly as patents for its existing therapies, including Revlimid and Eliquis, face expiration later this decade.
Karuna Therapeutics brings a promising experimental schizophrenia drug, KarXT, to Bristol Myers Squibb’s portfolio. This next-generation antipsychotic medicine activates muscarinic receptors in the central nervous system, offering a novel approach compared to existing antipsychotic drugs that primarily block dopamine receptors. The experimental drug, currently in clinical trials, has demonstrated efficacy in reducing symptoms associated with schizophrenia without typical adverse events like sleepiness, weight gain, and involuntary movement.
Bristol Myers Squibb anticipates that KarXT could become a multi-billion dollar drug across various indications, including Bipolar I disorder and psychosis and agitation related to Alzheimer’s disease. The deal, valued at $330 per share in cash for Karuna, represents a 53.4% premium to its last closing price.
CEO Chris Boerner expressed confidence in the potential of KarXT and highlighted Bristol Myers Squibb’s financial strength to engage in strategic business development. While larger transformative deals are not on the immediate horizon, the company aims to deepen its presence in therapeutic areas such as oncology and cardiovascular disease. Boerner believes there is ample opportunity to enhance its position in more nascent areas like neuroscience.
The acquisition aligns with Bristol Myers Squibb’s focus on addressing revenue challenges posed by patent expirations of key drugs and positions the company for continued innovation. Karuna Therapeutics’ drug is expected to enjoy patent protection in the United States through the mid-2030s.
The transaction is anticipated to impact Bristol Myers Squibb’s earnings per share by approximately 30 cents in 2024 due to financing costs. Analysts foresee multibillion-dollar peak sales for KarXT, with a decision on its approval for schizophrenia expected by September next year. The deal follows Bristol Myers Squibb’s recent acquisition of cancer drugmaker Mirati Therapeutics, emphasizing the company’s commitment to expanding its pharmaceutical portfolio and staying at the forefront of medical innovation.
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