Bristol Myers Drops $14 Billion to Acquire Karuna Therapeutics, Gaining Schizophrenia Drug

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Pharmaceutical giant Bristol Myers Squibb made a bold move into neuroscience today, announcing the $14 billion acquisition of clinical-stage biotech Karuna Therapeutics. The massive deal provides Bristol Myers with Karuna’s lead drug candidate, KarXT, a potential new treatment for schizophrenia and other psychiatric disorders.

KarXT could be the first drug in its class approved for schizophrenia in decades. The market for schizophrenia drugs is estimated at over $7 billion globally. If approved, KarXT is projected to achieve multi-billion dollar peak sales. Bristol Myers is betting the experimental medicine could transform treatment for millions struggling with serious mental illness.

This acquisition is the latest in a wave of big pharma interest in the emerging neuroscience space. Companies are eager to find new approaches to historically hard-to-treat psychiatric conditions like schizophrenia, depression and Alzheimer’s disease.

Smaller biotechs like Karuna have led the charge, developing novel therapies targeting neurological mechanisms of psychiatric disorders. But larger players like Bristol Myers have taken notice of the promise of these new technologies.

Karuna’s KarXT combines xanomeline, a novel muscarinic receptor agonist, with trospium chloride, an FDA-approved muscarinic receptor antagonist. Early clinical results show this approach reduces side effects and improves efficacy compared to current schizophrenia drugs.

Take a look at other emerging growth biotechnology companies by taking a look at Noble Capital Markets’ Senior Research Analyst Robert Leboyer’s coverage list.

In late-stage clinical trials, KarXT demonstrated statistically significant and clinically meaningful improvements in schizophrenia symptoms. Patients experienced rapid reductions in hallucinations and delusions with far fewer problematic side effects like sedation.

Based on positive Phase 3 data, Karuna submitted a New Drug Application for KarXT in schizophrenia in mid-2022. The FDA accepted the application and set a PDUFA goal date of September 2023 for a potential approval.

Clearly Bristol Myers feels confident about KarXT’s chances, agreeing to pay $28.5 billion upfront in cash to finalize the acquisition. Karuna shareholders will also be eligible for up to $3.5 billion in milestone payments if KarXT reaches certain commercial goals.

For Bristol Myers, the move signals a push into neuroscience and psychiatric disease, an area it has not traditionally emphasized. But the company likely sees major growth potential, given the prevalence of mental illness and the need for better treatments.

Almost 3% of the U.S. population suffers from schizophrenia. Another 17% experience some other mental illness like depression, bipolar disorder or PTSD. Existing drugs fail to adequately manage symptoms for many patients and carry tolerability issues that lead to poor compliance.

Doctors and patients are eagerly awaiting novel therapies like KarXT that balance safety and efficacy. Karuna is also exploring KarXT’s potential in dementia-related psychosis and other indications beyond schizophrenia.

The lucrative deal builds on other recent big-ticket acquisitions for Bristol Myers as the company looks to expand its portfolio. Earlier this year, Bristol Myers acquired cancer biotech Turning Point Therapeutics for $3.2 billion and the oncology company MyoKardia for $13 billion.

But the Karuna purchase represents Bristol Myers’ biggest bet yet on the emerging neuroscience space. It’s the second largest biopharma acquisition announced in 2022 after Pfizer’s $43 billion buyout of cancer drugmaker Seagen.

Other large pharmaceutical companies have also signed deals to access neuropsychiatric drug candidates. AbbVie recently acquired an option to purchase Alector’s experimental Alzheimer’s therapy for up to $2.2 billion. And Eli Lilly collaborated with NextCure on novel immuno-oncology approaches for treating mental illness.

As more novel mechanisms like KarXT arrive, expect growing competition among pharma giants to capture market share. Bristol Myers struck first with today’s monumental acquisition, but likely won’t be the last looking to neuroscience for future growth.


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