Karuna Therapeutics Shares Soar 47% Following Offer

Last Updated: 27. Dezember 2023By

Despite the holidays, the takeover carousel is still turning. On the last trading day before Christmas, there was the next billion-dollar deal in the biotech sector. Pharmaceutical giant Bristol-Myers wants to expand its portfolio in neuroscience and grabs rival Karuna Therapeutics for $14 billion. Karuna’s share price responded promptly and shot up 47% on Friday after the announcement. Unusually, even the share price of buyer Bristol-Myers Squibb rose 2% after the takeover announcement.

Bristol-Myers Squibb: World Leader in Pharmacy… Bristol-Myers Squibb is an absolute traditional company. The company was founded in August 1933 and has its headquarters in Princeton, NJ. Bristol Myers specializes in the development, production and sale of pharmaceutical products and is a world leader.

The company offers chemically synthesized drugs or small molecules and products produced by biological processes, so-called biologics. The drugs are used in the following areas: cardiovascular, metabolic, nervous system, HIV and hepatitis, cancer, rheumatism and pain.

In the last financial year, the company achieved a net profit of 6.32 billion dollars on a turnover of 46.15 billion dollars.

… puts $14 billion on the table for Karuna Therapeutics Now Bristol Myers Squibb is offering $330 per share in cash for Karuna Therapeutics. This corresponds to a total value of $14 billion, i.e. $12.7 billion minus the estimated acquired cash. The takeover offer also corresponds to a premium of 53% on the closing price of the day before the announcement of the deal. The transaction was approved unanimously by the boards of Bristol Myers Squibb and Karuna.

Deal to expand portfolio in neuroscience Karuna is a biopharmaceutical company that was founded with the goal of developing innovative medicines for people with psychiatric and neurological diseases. Karuna’s hope is KarXT – an antipsychotic for which a license to treat schizophrenia has just been applied for.

In addition, research is being conducted into further indications around Alzheimer’s disease and bipolar disorder. According to analysts, the drug could reach an annual turnover of more than $6 billion if it is approved in several therapy fields, according to a report in the Wall Street Journal.

Analysts see great market potential KarXT is expected to be launched in the US for the treatment of schizophrenia in adults by the end of 2024. The potential is great: alone in the USA about 1.6 million people are treated for schizophrenia, of which a considerable part does not respond to the currently available therapies and has unacceptable side effects.

And there is also considerable need for the further research fields: Currently, among other things, a clinical approval study is being conducted in the field of Alzheimer psychosis, in which KarXT is being investigated for treatment. In the USA more than 6 million people live with Alzheimer’s disease. Currently there are no approved treatments for Alzheimer psychosis.

Under bipolar disorders with Alzheimer’s disease (another indication for KarXT) 1.4 million people in the USA suffer.

New growth sources urgently needed The foray into the field of neuroscience has another tangible reason. The company is looking for new sources of growth. It is expected that Bristol-Myers will have to accept sales losses with two of its other top drugs, the cancer immunotherapy Opdivo and the blood thinner Eliquis. These will lose their patent protection over the course of this decade.

William Blair analyst Myles Minter does not rule out that another bidder will come forward. Although he believes the deal is fairly valued, it is a first-in-class drug in an area where no new mechanism has been approved for decades.