Bristol Myers Squibb Completes Acquisition of Karuna Therapeutics, Strengthening Neuroscience Portfolio
- Successful completion of the acquisition enhances BMY's neuroscience portfolio.
- KarXT offers a differentiated efficacy and safety profile for the treatment of schizophrenia.
- KarXT has a PDUFA date of September 26, 2024, for adult schizophrenia treatment.
- The acquisition includes Karuna's early-stage and pre-clinical pipeline.
- BMY expects the transaction to be dilutive to non-GAAP EPS by $0.30 in 2024.
- An Acquired In-Process Research and Development charge of approximately $12 billion will impact 2024 EPS.
- BMY plans to maintain strong investment-grade credit ratings and investment for growth despite the transaction.
- Financial outlook updates will be provided when BMY reports first quarter 2024 results.
- The acquisition is expected to be dilutive to BMY's non-GAAP diluted earnings per share by approximately $0.30 in 2024.
- A one-time, non-deductible Acquired In-Process Research and Development charge of approximately $12 billion will impact 2024 EPS.
Insights
Bristol Myers Squibb's acquisition of Karuna Therapeutics signifies a strategic move to enhance its neuroscience portfolio, particularly with KarXT, which is poised to address schizophrenia and potentially other indications. The financial implications of this acquisition are multifaceted. Firstly, the expected dilution of non-GAAP diluted earnings per share by $0.30 in 2024 due to financing costs is a critical figure for investors. This dilution reflects the immediate financial burden of the acquisition, balanced against the future revenue potential of KarXT.
Another key financial aspect is the $12 billion Acquired In-Process Research and Development charge, which will impact GAAP and non-GAAP EPS significantly. This charge is a substantial one-time expense, reflecting the value assigned to Karuna's pipeline, particularly KarXT's potential market. It's essential to note that such charges can affect the attractiveness of BMS's financial statements in the short term but may be justified if KarXT achieves commercial success.
BMS's strategy to offset operational expenses through cost efficiencies and prioritization suggests a focus on maintaining financial stability while integrating Karuna's assets. The commitment to maintaining investment-grade credit ratings and the ability to invest in growth signifies a robust financial position, which could reassure investors about the company's capacity to absorb the costs of this acquisition.
The acquisition's impact extends beyond immediate financials, delving into the market potential of KarXT. With a PDUFA date set for September 26, 2024, the anticipation for this novel antipsychotic drug is high, given the unmet needs in schizophrenia treatment. The ability to expand to other indications, such as Alzheimer’s disease psychosis and Bipolar I disorder, indicates a broad market opportunity that could be transformative for BMS.
The neuroscience sector has been notoriously challenging, with high risks and rewards. BMS's move to acquire Karuna and its pipeline suggests confidence in KarXT's clinical data and market potential. The multi-billion dollar sales potential across multiple indications could significantly impact BMS's growth profile in the latter half of the decade. Investors should monitor the progress of registrational trials and the response from the medical community to gauge the market's reception of KarXT.
It's important for stakeholders to consider the competitive landscape and regulatory hurdles that BMS will navigate. Success in the market will depend not only on the efficacy and safety profile of KarXT but also on strategic marketing and the ability to secure favorable reimbursement rates.
The acquisition of Karuna by BMS represents a calculated risk in the high-stakes pharmaceutical industry. The emphasis on KarXT's novel mechanism of action and differentiated efficacy and safety profile highlights the potential for a significant competitive advantage in the antipsychotic drug market. The neuroscience field, particularly schizophrenia treatment, has seen limited innovation in recent years, making KarXT's progress particularly noteworthy.
Investors must consider the long-term R&D implications of this acquisition. The early-stage and pre-clinical pipeline acquired from Karuna could yield additional assets that contribute to BMS's growth. However, the inherent risk of drug development, especially in neuroscience, must be accounted for, as many compounds fail to make it through clinical trials to commercialization.
As BMS integrates Karuna's pipeline, the strategic focus will likely be on streamlining operations and ensuring the successful development and potential launch of KarXT. The ability of BMS to manage this integration while pursuing cost efficiencies will be critical to realizing the full value of the acquisition without compromising other areas of their business.
KarXT, Karuna’s Lead Asset, Is a Potential First-in-Class Treatment for Schizophrenia with Multi-Billion Dollar Sales Potential Across Multiple Indications
“We are excited to expand our neuroscience portfolio as we welcome Karuna to Bristol Myers Squibb,” said Chris Boerner, Ph.D., Chief Executive Officer, Bristol Myers Squibb. “Importantly, this transaction aligns with our commitment to strengthening BMS’s growth profile in the latter half of the decade and beyond. We look forward to working with Karuna’s talented team to bring KarXT to patients with schizophrenia later this year.”
Through this transaction, BMS has added KarXT (xanomeline-trospium), an antipsychotic with a novel mechanism of action and a differentiated efficacy and safety profile, and Karuna’s early-stage and pre-clinical pipeline. KarXT has a Prescription Drug User Fee Act (PDUFA) date of September 26, 2024 for the treatment of schizophrenia in adults. KarXT is also in registrational trials both for adjunctive therapy to existing standard of care agents in schizophrenia and for the treatment of psychosis in patients with Alzheimer’s disease, with potential to expand to additional indications, including Bipolar I disorder and Alzheimer’s disease agitation.
As previously disclosed, the transaction is expected to be dilutive to Bristol Myers Squibb’s non-GAAP diluted earnings per share by approximately
The transaction will be accounted for as an asset acquisition resulting in an approximately
Consistent with past practice, Bristol Myers Squibb generally provides updates to its financial outlook once each quarter. When considering Bristol Myers Squibb’s financial outlook issued on February 2, 2024, investors and analysts should take into account the impacts outlined above. Bristol Myers Squibb will provide an update to its financial outlook when it reports first quarter 2024 results on April 25, 2024.
Advisors
Gordon Dyal & Co. and Citi are serving as financial advisors to Bristol Myers Squibb, and Covington & Burling LLP is serving as legal counsel. Goldman Sachs & Co. LLC is serving as exclusive financial advisor to Karuna, and Simpson Thacher & Bartlett LLP is serving as legal counsel.
About Bristol Myers Squibb
Bristol Myers Squibb is a global biopharmaceutical company whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. For more information about Bristol Myers Squibb, visit us at BMS.com or follow us on LinkedIn, Twitter, YouTube, Facebook and Instagram.
Cautionary Statement Regarding Forward-Looking Statements
This communication contains “forward-looking statements” regarding, among other things, the acquisition of Karuna by Bristol Myers Squibb and Bristol Myers Squibb’s anticipated Acquired IPR&D charges for the quarter ending March 31, 2024, and the related impact to its GAAP and non-GAAP earnings per share. These statements may be identified by the fact they use words such as “should,” “could,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance, although not all forward-looking statements contain such terms. All statements that are not statements of historical facts are, or may be deemed to be, forward-looking statements. These statements are only predictions, and such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. No forward-looking statement can be guaranteed. Actual results may differ materially from current expectations because of numerous risks and uncertainties including with respect to (i) the risk that the expected benefits or synergies of the acquisition will not be realized, including with respect to the potential commercialization of KarXT, (ii) risks associated with legal proceedings instituted related to the merger agreement (iii) unanticipated difficulties or expenditures relating to the transaction, the response of business partners and competitors to the consummation of the transaction and/or potential difficulties in employee retention as a result of the consummation of the transaction and (iv) completion of Bristol Myers Squibb’s quarter-end closing process, including review by management and the audit committee of the Bristol Myers Squibb’s board of directors, which could result in changes to the preliminary estimates described herein. Forward-looking statements in this communication should be evaluated together with the many uncertainties that affect Bristol Myers Squibb’s business, particularly those identified in the cautionary factors discussion in Bristol Myers Squibb’s Annual Report on Form 10-K for the year ended December 31, 2023 and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other documents that may be filed by Bristol Myers Squibb from time to time with the
Use of Non-GAAP Financial Information and Financial Guidance
In discussing financial guidance, Bristol Myers Squibb refers to financial measures that are not in accordance with
Non-GAAP earnings and related EPS information are adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of past or future operating results. These items are excluded from non-GAAP earnings and related EPS information because Bristol Myers Squibb believes they neither relate to the ordinary course of Bristol Myers Squibb’s business nor reflect Bristol Myers Squibb’s underlying business performance. Similar charges or gains were recognized in prior periods and will likely recur in future periods.
Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to or as a substitute for the related financial measures that are prepared in accordance with GAAP and are not intended to be considered in isolation and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
A reconciliation of forward-looking non-GAAP measures, including non-GAAP EPS, to the most directly comparable GAAP measures is not provided because comparable GAAP measures for such measures are not reasonably accessible or reliable due to the inherent difficulty in forecasting and quantifying measures that would be necessary for such reconciliation. Namely, we are not without unreasonable effort, able to reliably predict the impact of accelerated depreciation, and impairment charges, legal and other settlements, gains and losses from equity investments and other adjustments. In addition, the company believes such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. These items are uncertain, depend on various factors and may have a material impact on our future GAAP results. In addition, the non-GAAP financial guidance in this press release excludes the impact of any potential additional future strategic acquisitions and divestitures and any specified items that have not yet been identified and quantified. The financial guidance is subject to risks and uncertainties applicable to all forward-looking statements as described elsewhere in this communication.
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Source: Bristol Myers Squibb
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