On Friday, Bristol Myers Squibb agreed to purchase Karuna Therapeutics for $14 billion in cash, according to a report. This move is aimed at helping Bristol grow as the patents on its older treatments run out. As part of the agreement, Bristol will pay $330 per share in cash for Karuna, which is a 53.4% premium compared to its recent closing price.
This acquisition follows Bristol’s agreement about two months ago to buy Mirati Therapeutics, a cancer drugmaker, for a potential sum of up to $5.8 billion. Moreover, AbbVie announced on Dec 6 that it plans to buy Cerevel Therapeutics, a company that makes drugs for the brain.
Bristol’s Plans and Hurdles in the Drug Industry
Bristol, located in New York, is facing challenges as demand decreases for two of its main drugs: Revlimid for blood cancer treatment and Eliquis, a blood thinner. Both are now facing competition from generic alternatives.
Bristol Myers CEO Christopher Boerner stated, “We anticipate that KarXT will contribute to our growth throughout the late 2020s and into the next decade.”
Analysts predict that the drug, KarXT, could generate sales in the multi-billion-dollar range. A decision regarding its use in adults is expected by September next year, and the company is also conducting tests to explore its potential in treating patients with psychosis linked to Alzheimer’s disease.
Although there are various medications for schizophrenia, KarXT belongs to a new category of drugs that are likely to have fewer side effects, such as weight gain.
Karuna’s shares were trading at $314.01, while Bristol Myers shares dropped by 3% before the market opened, as the company plans to finance the deal mainly through new debt.
The deal is expected to impact Bristol’s earnings per share by approximately 30 cents in 2024 due to financing costs.
Other acquisitions by the drug company this year include a drug development agreement with Sichuan Biokin Pharmaceutical for one of the Chinese drugmaker’s cancer treatments outside China, and a $180 million deal for the private drugmaker Orum.
Bristol Myers Squibb is buying Karuna Therapeutics for $14 billion in cash, a move to help Bristol grow as its older treatments face patent expiration. This acquisition, with a 53.4% premium, follows Bristol’s recent $5.8 billion deal for Mirati Therapeutics. Facing challenges in declining drug demand, Bristol plans future growth with KarXT, a potential multi-billion-dollar seller.