Bristol Myers Squibb Completes Acquisition of PureTech's Founded Entity Karuna Therapeutics for $14 Billion
- PureTech Health plc completes the acquisition of Karuna Therapeutics, Inc. by Bristol Myers Squibb for around $14 billion.
- PureTech to receive $293 million gross proceeds from its equity position in Karuna.
- KarXT, a potential first-in-class treatment for schizophrenia, has a PDUFA date of September 26, 2024.
- Bristol Myers Squibb expects the transaction to be dilutive to its non-GAAP diluted earnings per share by about $0.30 in 2024.
- The transaction is expected to result in an approximately $12 billion one-time, non-deductible Acquired In-Process Research and Development charge impacting both 2024 first quarter and full-year GAAP and non-GAAP EPS by approximately $5.93.
- The financial outlook for Bristol Myers Squibb may be impacted by the transaction.
Insights
The acquisition of Karuna Therapeutics by Bristol Myers Squibb (BMS) is a significant event that underscores the strategic importance of innovative treatments in the pharmaceutical industry. The focus on KarXT, a potential first-in-class treatment for schizophrenia, highlights the ongoing need for novel therapies in the mental health space, particularly for conditions that have seen little innovation over the past decades.
From a market perspective, the multi-billion dollar sales potential of KarXT across multiple indications, including schizophrenia and possibly Alzheimer's disease, presents a substantial opportunity for BMS to strengthen its neuroscience portfolio. This move is indicative of BMS's strategic focus on growth in the latter half of the decade, as it aims to bolster its pipeline with promising late-stage assets.
Investors should note the financial aspects of the deal, such as the expected dilution to BMS's non-GAAP diluted earnings per share by approximately $0.30 in 2024. However, BMS's commitment to offsetting these costs through disciplined resource allocation and cost efficiencies may mitigate investor concerns over the short-term financial impact.
Examining the financial implications of the acquisition, PureTech Health's receipt of approximately $293 million in gross proceeds from its equity position in Karuna is a substantial liquidity event for the company. This windfall is a testament to the value creation from its initial investment of approximately $18.5 million into Karuna. The potential for additional milestone payments and royalties provides an ongoing revenue stream contingent on KarXT's regulatory and commercial success.
For BMS, the transaction involves a considerable upfront cost with the $14 billion equity value of the acquisition and the associated $12 billion non-deductible Acquired In-Process Research and Development (Acquired IPR&D) charge. While this charge will impact GAAP and non-GAAP EPS significantly, the strategic investment is aimed at catalyzing growth and solidifying BMS's market position in the long term. Investors should weigh the upfront costs against the potential for KarXT to capture significant market share in its therapeutic areas.
The significance of KarXT's novel mechanism of action cannot be overstated in an industry where innovation is a key driver of value. If KarXT is approved, it would represent the first new mechanism of action for schizophrenia treatment in over 50 years, potentially addressing unmet needs in the mental health market.
Moreover, the expansion of the treatment's indications to other areas such as Alzheimer's disease could further enhance its market potential. The Prescription Drug User Fee Act (PDUFA) date of September 26, 2024, serves as a critical milestone for BMS and the industry, as it will determine the near-term commercial trajectory of KarXT.
Investors should monitor the progress of KarXT through its registrational trials and the FDA approval process, as positive outcomes could significantly influence BMS's market valuation and competitive stance within the neuroscience sector.
Acquisition centered on KarXT, which was invented at PureTech, as a potential first-in-class treatment for schizophrenia in adults
PureTech to receive approximately
PureTech intends to provide an update in the coming days regarding its capital return plans
"This acquisition recognizes the enormous potential of KarXT to help millions of people with schizophrenia in need of a new therapeutic option, and BMS will provide the global leadership to maximize the reach of KarXT,” said Eric Elenko, Ph.D., Chief Innovation Officer at PureTech, and a co-inventor of KarXT. “This is also an important milestone for PureTech, where KarXT was invented, and for Karuna, one of our Founded Entities advancing innovative therapeutic approaches on the basis of validated mechanisms. We congratulate the Karuna and BMS teams on the completion of their transaction, and we wish them success in their joint pursuit to make a difference for people living with psychiatric and neurological conditions.”
If approved, KarXT will represent the first new mechanism of action for patients with schizophrenia in over 50 years.
As of February 15, 2024, PureTech’s percentage ownership in Karuna was approximately
The full text of the announcement from Bristol Myers Squibb is as follows:
Bristol Myers Squibb Completes Acquisition of Karuna Therapeutics, Strengthening Neuroscience
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.
About PureTech Health
PureTech is a clinical-stage biotherapeutics company dedicated to giving life to new classes of medicine to change the lives of patients with devastating diseases. The Company has created a broad and deep pipeline through its experienced research and development team and its extensive network of scientists, clinicians and industry leaders that is being advanced both internally and through its Founded Entities. PureTech's R&D engine has resulted in the development of 28 therapeutics and therapeutic candidates, including two that have received both US FDA clearance and European marketing authorization and a third (KarXT) that has been filed for FDA approval. A number of these programs are being advanced by PureTech or its Founded Entities in various indications and stages of clinical development, including registration enabling studies. All of the underlying programs and platforms that resulted in this pipeline of therapeutic candidates were initially identified or discovered and then advanced by the PureTech team through key validation points.
For more information, visit www.puretechhealth.com or connect with us on X (formerly Twitter) @puretechh.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation those statements that relate to a forthcoming update with respect to our capital return plans, our expectations around our therapeutic candidates and approach towards addressing major diseases, and our future prospects, developments, and strategies. The forward-looking statements are based on current expectations and are subject to known and unknown risks, uncertainties and other important factors that could cause actual results, performance and achievements to differ materially from current expectations, including, but not limited to, those risks, uncertainties and other important factors described under the caption "Risk Factors" in our Annual Report on Form 20-F for the year ended December 31, 2022 filed with the SEC and in our other regulatory filings. These forward-looking statements are based on assumptions regarding the present and future business strategies of the Company and the environment in which it will operate in the future. Each forward-looking statement speaks only as at the date of this press release. Except as required by law and regulatory requirements, we disclaim any obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
1 As of March 22, 2023, PureTech has sold its right to receive a
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Source: PureTech Health plc
FAQ
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