Another big pharma competed for Karuna, submitting all-cash offer day before BMS deal announcement

Another big pharma competed for Karuna, submitting all-cash offer day before BMS deal announcement

Karuna Therapeutics was almost bought out by another large pharma that competed up until the last moment before Bristol Myers Squibb’s $14 billion proposal won out.

The other multinational pharmaceutical company was identified only as “Party A,” according to a proxy statement filed today by Karuna with the Securities and Exchange Commission.

Neuro-focused Karuna said that representatives for Party A reached out on October 3, 2023—mere days after the biotech had submitted its investigational schizophrenia treatment KarXT to the FDA for potential approval. Then, on October 11, Party A offered to buy Karuna’s shares at a significant premium to its October 10 closing price of $175.94 per share.

On December 18, Party A received word that Karuna was aware of interest from another party—namely, BMS—and was evaluating that option as well.

The biotech remained in talks with the unnamed first bidder until December 21, when Party A submitted a final, all-cash proposal that was higher than its initial offer. BMS also submitted its final proposal, ultimately offering $330 cash per share, a price that represented a 53% premium over Karuna’s share price at close December 21.

BMS’ bid exceeded Party A’s bid and Karuna’s management approved the deal right before it was announced December 22. The deal is expected to close in the first half of this year.

Once the acquisition is complete, BMS will wait for the FDA’s decision on KarXT, which is expected to arrive by or on September 24. The investigational treatment is a combo of xanomeline-trospium and holds the potential of becoming the first new schizophrenia treatment approved in years. Karuna has also been testing the asset in psychosis related to Alzheimer’s disease.

The deal marks BMS’ return to neuropsychiatry and complements existing anti-tau assets in Alzheimer’s, CEO Chris Boerner, Ph.D., told investors on a December 22 call.

William Blair previously predicted KarXT’s peak sales potential to be $7 billion—half of which is expected to come from the Alzheimer’s psychosis indication, where there are currently no other approved treatments.

“While we can debate whether the acquisition is overpaying for KarXT, the drug has shown strong efficacy across trials to date and should receive regulatory approval in the second half of 2024, adding another drug to the important new product portfolio,” William Blair’s Matt Phipps, Ph.D., wrote December 22.

The BMS-Karuna deal came directly on the heels of AbbVie’s $8.7 billion acquisition of the neuroscience-focused Cerevel Therapeutics earlier in December.

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