A potential game changer. “The first new mechanism for treating schizophrenia in more than 50 years.” As the hype continues to build ahead of the expected launch of Karuna Therapeutics’ KarXT next year, it’s no surprise that Royalty Pharma wants a piece of the pie.
The royalty hawk has swooped in with a $100 million upfront payment to PureTech Health to acquire an interest in the biotech’s own stake in royalty payments from the therapy should it reach the market. KarXT’s story dates back to 2012, when PureTech took over a shelved Eli Lilly drug called xanomeline and adapted the therapy with trospium before launching Karuna as a vehicle to take the schizophrenia therapy further.
PureTech has passed to Royalty the right to 3% of the first $2 billion sales of KarXT. Beyond that point, Royalty will receive 33% and PureTech will retain 67% of the royalty payments. Besides the upfront payment to PureTech, Royalty is also due to hand over up to $400 million in regulatory and commercial milestone payments.
Royalty CEO Pablo Legorreta pointed to the drug’s “impressive clinical profile in phase 3” in the press release this morning announcing the deal. That profile includes a second late-phase readout earlier this week, which saw KarXT hit the study’s primary endpoint but miss a secondary endpoint of reducing the so-called “negative” symptoms of the condition.
“We believe this important therapy will have a significant impact on patients with schizophrenia if approved by the FDA,” Legorreta said. “This medicine is a notable addition to our royalty portfolio and is well aligned with our strategy of investing in breakthrough therapies that address areas of high unmet medical need.”
While PureTech might have signed away some lucrative royalty payments, it retains a 3.1% equity stake in its Karuna spinout. It is also still in line to receive milestone payments tied to regulatory approvals, as well as 20% of any sublicense income.
“This agreement will provide PureTech with additional nondilutive capital to advance our wholly owned pipeline including our rapidly maturing clinical programs, towards potential commercialization,” CEO Daphne Zohar said. “Such nondilutive sources of capital have allowed us to fund our pipeline and operations without having to raise capital from the public markets in over five years, and we are pleased to be able to benefit from the success of our invented programs.”
Following Karuna’s phase 3 win on Monday, the biotech reaffirmed its plan to meet with the FDA early in the second quarter ahead of a planned midyear approval application to the regulator. If all goes to plan, those royalty payments could start trickling in after a 2024 approval.