REG - PureTech Health PLC - $14B Acquisition of PRTC’s Karuna by BMS Completed

Puretech HealthAnnouncement

18/03/2024 13:45

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RNS Number : 2774H  PureTech Health PLC  18 March 2024

18 March 2024

PureTech Health plc

 

Bristol Myers Squibb Completes Acquisition of PureTech's Founded Entity Karuna
Therapeutics for $14 Billion

 

Acquisition centered on KarXT, which was invented at PureTech, as a potential
first-in-class treatment for schizophrenia in adults

 

PureTech to receive approximately $293 million gross proceeds from Karuna
equity position in addition to being eligible for further milestones and
royalty payments based on KarXT regulatory & commercial successes

 

PureTech intends to provide an update in the coming days regarding its capital
return plans

 

PureTech Health plc (https://puretechhealth.com/) (Nasdaq: PRTC, LSE: PRTC)
("PureTech" or the "Company"), a clinical-stage biotherapeutics company, today
announced the completed acquisition of its Founded Entity, Karuna
Therapeutics, Inc. ("Karuna"), by Bristol Myers Squibb (NYSE: BMY) ("BMS"),
which has acquired all outstanding common stock of Karuna for $330.00 per
share, for a total equity value of approximately $14 billion.

 

"This acquisition recognizes the enormous potential of KarXT to help millions
of people with schizophrenia in need of a new therapeutic option, and BMS will
provide the global leadership to maximize the reach of KarXT," said Eric
Elenko, Ph.D., Chief Innovation Officer at PureTech, and a co-inventor of
KarXT. "This is also an important milestone for PureTech, where KarXT was
invented, and for Karuna, one of our Founded Entities advancing innovative
therapeutic approaches on the basis of validated mechanisms. We congratulate
the Karuna and BMS teams on the completion of their transaction, and we wish
them success in their joint pursuit to make a difference for people living
with psychiatric and neurological conditions."

 

If approved, KarXT will represent the first new mechanism of action for
patients with schizophrenia in over 50 years.

 

As of February 15, 2024, PureTech's percentage ownership in Karuna was
approximately 2.3% on an outstanding voting share basis, resulting in an
estimated $293 million in gross proceeds to PureTech upon the close of the
transaction. PureTech directed approximately $18.5 million towards the
founding and development of Karuna, and following the close of the BMS
acquisition will have generated approximately $1.1 billion in direct cash
proceeds to PureTech. Under its license agreement with Karuna, PureTech
retains the right to receive milestone payments upon the achievement of
certain regulatory approvals. PureTech is also owed certain royalties on net
sales and is eligible to receive up to $400 million in milestone payments
under its agreement with Royalty Pharma 1  (#_ftn1) .

 

The full text of the announcement from Bristol Myers Squibb is as follows:

 

Bristol Myers Squibb Completes Acquisition of Karuna Therapeutics,
Strengthening Neuroscience

KarXT, Karuna's Lead Asset, Is a Potential First-in-Class Treatment for
Schizophrenia with Multi-Billion Dollar Sales Potential Across Multiple
Indications

 

PRINCETON, N.J.-- Bristol Myers Squibb (NYSE: BMY) today announced that it has
successfully completed its acquisition of Karuna Therapeutics, Inc.
("Karuna"). With the acquisition's completion, Karuna shares have ceased
trading on the Nasdaq Global Select Market and Karuna is now a wholly owned
subsidiary of Bristol Myers Squibb ("BMS").

 

"We are excited to expand our neuroscience portfolio as we welcome Karuna to
Bristol Myers Squibb," said Chris Boerner, Ph.D., Chief Executive Officer,
Bristol Myers Squibb. "Importantly, this transaction aligns with our
commitment to strengthening BMS's growth profile in the latter half of the
decade and beyond. We look forward to working with Karuna's talented team to
bring KarXT to patients with schizophrenia later this year."

 

Through this transaction, BMS has added KarXT (xanomeline-trospium), an
antipsychotic with a novel mechanism of action and a differentiated efficacy
and safety profile, and Karuna's early-stage and pre-clinical pipeline. KarXT
has a Prescription Drug User Fee Act (PDUFA) date of September 26, 2024 for
the treatment of schizophrenia in adults. KarXT is also in registrational
trials both for adjunctive therapy to existing standard of care agents in
schizophrenia and for the treatment of psychosis in patients with Alzheimer's
disease, with potential to expand to additional indications, including Bipolar
I disorder and Alzheimer's disease agitation.

 

As previously disclosed, the transaction is expected to be dilutive to Bristol
Myers Squibb's non-GAAP diluted earnings per share by approximately $0.30 in
2024 from the financing cost of the transaction, which is primarily from a
recently completed new debt issuance. Bristol Myers Squibb expects to offset
the operational expenses of the transaction through continued disciplined
resource allocation, cost efficiencies and portfolio prioritization. Bristol
Myers Squibb's cash flows and strong financial profile enable continued
commitment to strong investment-grade credit ratings and investment for growth
through business development opportunities and distributions to shareholders
through ongoing dividends and share repurchases.

 

The transaction will be accounted for as an asset acquisition resulting in an
approximately $12 billion one-time, non-deductible Acquired In-Process
Research and Development (Acquired IPR&D) charge impacting both 2024 first
quarter and full-year GAAP and non-GAAP EPS by approximately $5.93.

 

Consistent with past practice, Bristol Myers Squibb generally provides updates
to its financial outlook once each quarter. When considering Bristol Myers
Squibb's financial outlook issued on February 2, 2024, investors and analysts
should take into account the impacts outlined above. Bristol Myers Squibb will
provide an update to its financial outlook when it reports first quarter 2024
results on April 25, 2024.

 

Advisors

Gordon Dyal & Co. and Citi are serving as financial advisors to Bristol
Myers Squibb, and Covington & Burling LLP is serving as legal counsel.
Goldman Sachs & Co. LLC is serving as exclusive financial advisor to
Karuna, and Simpson Thacher & Bartlett LLP is serving as legal counsel.

 

About Bristol Myers Squibb

Bristol Myers Squibb is a global biopharmaceutical company whose mission is to
discover, develop and deliver innovative medicines that help patients prevail
over serious diseases. For more information about Bristol Myers Squibb, visit
us at BMS.com or follow us on LinkedIn, Twitter, YouTube, Facebook and
Instagram.

 

Cautionary Statement Regarding Forward-Looking Statements

This communication contains "forward-looking statements" regarding, among
other things, the acquisition of Karuna by Bristol Myers Squibb and Bristol
Myers Squibb's anticipated Acquired IPR&D charges for the quarter ending
March 31, 2024, and the related impact to its GAAP and non-GAAP earnings per
share. These statements may be identified by the fact they use words such as
"should," "could," "expect," "anticipate," "estimate," "target," "may,"
"project," "guidance," "intend," "plan," "believe," "will" and other words and
terms of similar meaning and expression in connection with any discussion of
future operating or financial performance, although not all forward-looking
statements contain such terms. All statements that are not statements of
historical facts are, or may be deemed to be, forward-looking statements.
These statements are only predictions, and such forward-looking statements are
based on current expectations and involve inherent risks and uncertainties,
including factors that could delay, divert or change any of them, and could
cause actual outcomes and results to differ materially from current
expectations. No forward-looking statement can be guaranteed. Actual results
may differ materially from current expectations because of numerous risks and
uncertainties including with respect to (i) the risk that the expected
benefits or synergies of the acquisition will not be realized, including with
respect to the potential commercialization of KarXT, (ii) risks associated
with legal proceedings instituted related to the merger agreement (iii)
unanticipated difficulties or expenditures relating to the transaction, the
response of business partners and competitors to the consummation of the
transaction and/or potential difficulties in employee retention as a result of
the consummation of the transaction and (iv) completion of Bristol Myers
Squibb's quarter-end closing process, including review by management and the
audit committee of the Bristol Myers Squibb's board of directors, which could
result in changes to the preliminary estimates described herein.
Forward-looking statements in this communication should be evaluated together
with the many uncertainties that affect Bristol Myers Squibb's business,
particularly those identified in the cautionary factors discussion in Bristol
Myers Squibb's Annual Report on Form 10-K for the year ended December 31, 2023
and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form
8-K and other documents that may be filed by Bristol Myers Squibb from time to
time with the U.S. Securities and Exchange Commission. Bristol Myers Squibb
does not undertake any obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise,
except as required by law. The forward-looking statements made in this
communication relate only to events as of the date on which the statements are
made.

 

Use of Non-GAAP Financial Information and Financial Guidance

In discussing financial guidance, Bristol Myers Squibb refers to financial
measures that are not in accordance with U.S. Generally Accepted Accounting
Principles (GAAP). The non-GAAP financial measures are provided as
supplemental information to the financial measures presented in this press
release that are calculated and presented in accordance with GAAP and are
presented because management has evaluated the company's financial results
both including and excluding the adjusted items or the effects of foreign
currency translation, as applicable, and believes that the non-GAAP financial
measures presented portray the results of the company's baseline performance,
supplement or enhance management, analysts and investors overall understanding
of the company's underlying financial performance and trends and facilitate
comparisons among current, past and future periods.

 

Non-GAAP earnings and related EPS information are adjusted to exclude certain
costs, expenses, gains and losses and other specified items that are evaluated
on an individual basis after considering their quantitative and qualitative
aspects and typically have one or more of the following characteristics, such
as being highly variable, difficult to project, unusual in nature, significant
to the results of a particular period or not indicative of past or future
operating results. These items are excluded from non-GAAP earnings and related
EPS information because Bristol Myers Squibb believes they neither relate to
the ordinary course of Bristol Myers Squibb's business nor reflect Bristol
Myers Squibb's underlying business performance. Similar charges or gains were
recognized in prior periods and will likely recur in future periods.

 

Because the non-GAAP financial measures are not calculated in accordance with
GAAP, they should not be considered superior to or as a substitute for the
related financial measures that are prepared in accordance with GAAP and are
not intended to be considered in isolation and may not be the same as or
comparable to similarly titled measures presented by other companies due to
possible differences in method and in the items being adjusted. We encourage
investors to review our financial statements and publicly-filed reports in
their entirety and not to rely on any single financial measure.

 

A reconciliation of forward-looking non-GAAP measures, including non-GAAP EPS,
to the most directly comparable GAAP measures is not provided because
comparable GAAP measures for such measures are not reasonably accessible or
reliable due to the inherent difficulty in forecasting and quantifying
measures that would be necessary for such reconciliation. Namely, we are not
without unreasonable effort, able to reliably predict the impact of
accelerated depreciation, and impairment charges, legal and other settlements,
gains and losses from equity investments and other adjustments. In addition,
the company believes such a reconciliation would imply a degree of precision
and certainty that could be confusing to investors. These items are uncertain,
depend on various factors and may have a material impact on our future GAAP
results. In addition, the non-GAAP financial guidance in this press release
excludes the impact of any potential additional future strategic acquisitions
and divestitures and any specified items that have not yet been identified and
quantified. The financial guidance is subject to risks and uncertainties
applicable to all forward-looking statements as described elsewhere in this
communication.

 

About PureTech Health

PureTech is a clinical-stage biotherapeutics company dedicated to giving life
to new classes of medicine to change the lives of patients with devastating
diseases. The Company has created a broad and deep pipeline through its
experienced research and development team and its extensive network of
scientists, clinicians and industry leaders that is being advanced both
internally and through its Founded Entities. PureTech's R&D engine has
resulted in the development of 28 therapeutics and therapeutic candidates,
including two that have received both US FDA clearance and European
marketing authorization and a third (KarXT) that has been filed for FDA
approval. A number of these programs are being advanced by PureTech or its
Founded Entities in various indications and stages of clinical development,
including registration enabling studies. All of the underlying programs and
platforms that resulted in this pipeline of therapeutic candidates were
initially identified or discovered and then advanced by the PureTech team
through key validation points.

 

For more information, visit www.puretechhealth.com
(http://www.puretechhealth.com/)  or connect with us on X (formerly Twitter)
@puretechh.

 

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements contained
in this press release that do not relate to matters of historical fact should
be considered forward-looking statements, including without limitation those
statements that relate to a forthcoming update with respect to our capital
return plans, our expectations around our therapeutic candidates and approach
towards addressing major diseases, and our future prospects, developments, and
strategies. The forward-looking statements are based on current expectations
and are subject to known and unknown risks, uncertainties and other important
factors that could cause actual results, performance and achievements to
differ materially from current expectations, including, but not limited to,
those risks, uncertainties and other important factors described under the
caption "Risk Factors" in our Annual Report on Form 20-F for the year ended
December 31, 2022 filed with the SEC and in our other regulatory filings.
These forward-looking statements are based on assumptions regarding the
present and future business strategies of the Company and the environment in
which it will operate in the future. Each forward-looking statement speaks
only as at the date of this press release. Except as required by law and
regulatory requirements, we disclaim any obligation to update or revise these
forward-looking statements, whether as a result of new information, future
events or otherwise.

 

Contact:

PureTech

Public Relations

publicrelations@puretechhealth.com (mailto:publicrelations@puretechhealth.com)

Investor Relations

IR@puretechhealth.com (mailto:IR@puretechhealth.com)

 

EU Media

Ben Atwell, Rob Winder

+44 (0) 20 3727 1000

ben.atwell@FTIconsulting.com (mailto:ben.atwell@FTIconsulting.com)

 

U.S. Media

Nichole Bobbyn

+1 774 278 8273

nichole@tenbridgecommunications.com
(mailto:nichole@tenbridgecommunications.com)

 

 1  (#_ftnref1) As of March 22, 2023, PureTech has sold its right to receive a
3% royalty from Karuna to Royalty Pharma on net sales up to $2 billion
annually, after which threshold PureTech will receive 67% of the royalty
payments and Royalty Pharma will receive 33%.

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