With Karuna Therapeutics $14B Deal, Bristol Myers Is Serious For Re-Establishing Its Neurology Portfolio: Analyst

Earlier Friday, Bristol Myers Squibb & Co BMY agreed to acquire Karuna Therapeutics Inc KRTX for $330.00 per share in cash, for a total equity value of $14.0 billion, or $12.7 billion net of estimated cash acquired. 

William Blair highlights Bristol Myers' commitment to reestablishing its neuroscience pipeline as a primary focus during the 2023 R&D event. Management is actively pursuing strategies to counter the forthcoming loss of exclusivities by seeking de-risked assets and demonstrating a willingness to pay significant premiums for such assets.

The analyst says there is a debate on whether the acquisition is paying too much for Karuna's lead asset, KarXT. 

The drug has displayed robust effectiveness throughout its trials thus far and is anticipated to secure regulatory approval in the latter part of 2024. 

William Blair notes that KarXT, other than schizophrenia indication, has additional upside in indications, including a combination with standard of care (SOC) in schizophrenia and Alzheimer's disease psychosis, both of which have registrational trials underway. 

Bristol believes KarXT has potential in additional neuroscience indications, such as bipolar I disorder and Alzheimer's disease agitation.

Management did note multibillion-dollar revenue potential for KarXT but did not provide a sense of how this may be split among potential indications. 

The analyst previously published peak sales estimates of roughly $7 billion, approximately half of which comes from sales in psychosis associated with Alzheimer's disease.

William Blair keeps the Market Perform ahead of additional clarity with the company's commercial portfolio.

Price Action: BMY shares are up 3.01% at $52.81 on the last check Friday.