Royalty Pharma hands off $100M upfront for PureTech royalty on Karuna's schizophrenia hopeful
The company that spun out Karuna is cashing in on a $500 million deal with Royalty Pharma, just days after the biotech rolled out positive late-stage data and a nine-figure raise.
PureTech Health announced Thursday that Royalty Pharma, the company helmed by Pablo Legorreta that buys royalty streams, got its hands on part of PureTech’s royalty in Karuna Therapeutics’ schizophrenia candidate KarXT, which combines former Eli Lilly candidate xanomeline with trospium.
Royalty Pharma is paying $100 million in cash upfront, leaving room for up to another $400 million in milestones. In exchange, Royalty gets Puretech’s 3% royalty on potential KarXT sales of up to $2 billion a year. After that threshold, Royalty only gets 1% royalty on those sales — and PureTech gets 2% royalty on sales above $2 billion.
Outside the agreement, PureTech is holding onto its 3.1% equity ownership in Karuna and will keep its license agreement open for certain milestone payments.
PureTech Health originally spun out Karuna into its own company, with PureTech’s chief innovation officer, Eric Elenko, becoming Karuna’s founding CEO. Karuna then in-licensed xanomeline in May 2012 from Eli Lilly.
PureTech CEO Daphne Zohar tells Endpoints News that discussions with Royalty started after the first Phase III for KarXT read out positively last summer. After receiving several “inbounds” from different royalty-buying groups, the company ended up getting multiple offers for PureTech’s royalty.
“[T]he Royalty Pharma deal we felt had the right balance, because there was sort of upfront and near term proponents. But if KarXT is enormously successful, our economics sort of capture that upside, we don’t just give it away,” Zohar said.
As for that $100 million, Zohar said it will be used to push forward late-stage clinical readouts and potential commercialization efforts.
Karuna reported a positive Phase III readout in EMERGENT-3 on Monday, which showed a statistically significant and clinically meaningful reduction in schizophrenia symptoms compared to placebo. Karuna also announced plans to raise $400 million later that day via public offering.
Shares of $PRTC went up 7% Thursday morning.
