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Bristol Myers (BMY) to Buy Karuna Therapeutics for $14B
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Bristol Myers Squibb (BMY - Free Report) announced that it will acquire the biopharmaceutical company Karuna Therapeutics, Inc. for $330.00 per share in cash for a total equity value of $14 billion in a move to strengthen its neuroscience portfolio.
Financial Terms of the Acquisition
The acquisition price of $330.00 per share in cash represents an approximately 53% premium to Karuna Therapeutics' closing stock price on Dec 21, 2023. The total equity value comes to approximately $14 billion or $12.7 billion net of estimated cash acquired.
The acquisition is expected to close in the first half of 2024, subject to customary closing conditions.
The transaction is expected to dilute BMY’s bottom line by approximately 30 cents in 2024.
Strategic Value of the Acquisition
Karuna is focused on developing drugs for psychiatric and neurological conditions. Its lead asset, KarXT (xanomeline-trospium), is an antipsychotic with a novel mechanism of action and differentiated efficacy and safety. The new drug application for KarXT for the treatment of schizophrenia in adults is under review in the United States. The FDA has set a target action date of Sep 26, 2024. The candidate is expected to be launched in late 2024 upon tentative approval.
A registrational clinical trial is currently underway, evaluating KarXT as adjunctive treatment, with the current standard of care agents for the treatment of schizophrenia, with data expected in 2025.
The candidate is also in a registrational trial for the treatment of psychosis in patients with Alzheimer’s disease. Data for the same is expected in 2026.
Our Take
Bristol Myers is currently in transition mode as it shifts its mature product portfolio, which is facing generic competition due to new drugs. The company is looking to offset its declining revenues with the help of its blockbuster multiple myeloma drug Revlimid and blood thinner medicine Eliquis due to generic competition.
Shares of the company have lost 28.7% year to date compared with the industry's decline of 18%.
Image Source: Zacks Investment Research
The acquisition will diversify its broad portfolio and enable it to establish a presence in the schizophrenia space, which is challenging but has enormous potential given the lack of treatments.
This is BMY’s second acquisition announcement in the last three months.
In October, Bristol Myers announced that it will acquire the oncology-focused company Mirati Therapeutics for a total equity value of $5.8 billion. In addition to cash, each Mirati stockholder will also receive one non-tradeable contingent value right for each share held. This, in turn, will entitle its holders to receive a one-time potential payment of $12 in cash, for a total value of approximately $1 billion.
The acquisition will add Mirati’s lung cancer drug Krazati (adagrasib) to BMY’s strong oncology portfolio. The FDA approved the drug in December 2022 for the treatment of adult patients with KRAS-mutated locally advanced or metastatic non-small cell lung cancer who have received at least one prior systemic therapy.
Merger and acquisition (“M&A”) activity has picked up in the pharma and biotech space after a lull of two years. Pharma and biotech bigwigs are constantly looking to bolster product portfolios and pipelines through collaborations and buyouts. Hence, M&A is back in the spotlight.
Pharma giant AbbVie (ABBV - Free Report) recently announced two back-to-back acquisitions, Cerevel Therapeutics for $8.7 billion and ImmunoGen for $10.1 billion. The acquisition will add ImmunoGen’s flagship cancer therapy, Elahere, a first-in-class antibody-drug conjugate approved for platinum-resistant ovarian cancer, to ABBV’s portfolio.
Earlier, Novartis acquired Chinook Therapeutics. Biogen acquired Reata Pharmaceuticals, Inc.
Image: Shutterstock
Bristol Myers (BMY) to Buy Karuna Therapeutics for $14B
Bristol Myers Squibb (BMY - Free Report) announced that it will acquire the biopharmaceutical company Karuna Therapeutics, Inc. for $330.00 per share in cash for a total equity value of $14 billion in a move to strengthen its neuroscience portfolio.
Financial Terms of the Acquisition
The acquisition price of $330.00 per share in cash represents an approximately 53% premium to Karuna Therapeutics' closing stock price on Dec 21, 2023. The total equity value comes to approximately $14 billion or $12.7 billion net of estimated cash acquired.
The acquisition is expected to close in the first half of 2024, subject to customary closing conditions.
The transaction is expected to dilute BMY’s bottom line by approximately 30 cents in 2024.
Strategic Value of the Acquisition
Karuna is focused on developing drugs for psychiatric and neurological conditions. Its lead asset, KarXT (xanomeline-trospium), is an antipsychotic with a novel mechanism of action and differentiated efficacy and safety. The new drug application for KarXT for the treatment of schizophrenia in adults is under review in the United States. The FDA has set a target action date of Sep 26, 2024. The candidate is expected to be launched in late 2024 upon tentative approval.
A registrational clinical trial is currently underway, evaluating KarXT as adjunctive treatment, with the current standard of care agents for the treatment of schizophrenia, with data expected in 2025.
The candidate is also in a registrational trial for the treatment of psychosis in patients with Alzheimer’s disease. Data for the same is expected in 2026.
Our Take
Bristol Myers is currently in transition mode as it shifts its mature product portfolio, which is facing generic competition due to new drugs. The company is looking to offset its declining revenues with the help of its blockbuster multiple myeloma drug Revlimid and blood thinner medicine Eliquis due to generic competition.
Shares of the company have lost 28.7% year to date compared with the industry's decline of 18%.
Image Source: Zacks Investment Research
The acquisition will diversify its broad portfolio and enable it to establish a presence in the schizophrenia space, which is challenging but has enormous potential given the lack of treatments.
This is BMY’s second acquisition announcement in the last three months.
In October, Bristol Myers announced that it will acquire the oncology-focused company Mirati Therapeutics for a total equity value of $5.8 billion. In addition to cash, each Mirati stockholder will also receive one non-tradeable contingent value right for each share held. This, in turn, will entitle its holders to receive a one-time potential payment of $12 in cash, for a total value of approximately $1 billion.
The acquisition will add Mirati’s lung cancer drug Krazati (adagrasib) to BMY’s strong oncology portfolio. The FDA approved the drug in December 2022 for the treatment of adult patients with KRAS-mutated locally advanced or metastatic non-small cell lung cancer who have received at least one prior systemic therapy.
Merger and acquisition (“M&A”) activity has picked up in the pharma and biotech space after a lull of two years. Pharma and biotech bigwigs are constantly looking to bolster product portfolios and pipelines through collaborations and buyouts. Hence, M&A is back in the spotlight.
Pharma giant AbbVie (ABBV - Free Report) recently announced two back-to-back acquisitions, Cerevel Therapeutics for $8.7 billion and ImmunoGen for $10.1 billion. The acquisition will add ImmunoGen’s flagship cancer therapy, Elahere, a first-in-class antibody-drug conjugate approved for platinum-resistant ovarian cancer, to ABBV’s portfolio.
Earlier, Novartis acquired Chinook Therapeutics. Biogen acquired Reata Pharmaceuticals, Inc.
BMY currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.