Claiming that Karuna Therapeutics’ board of directors withheld crucial information, a shareholder has filed a lawsuit seeking to block the $14 billion merger with Bristol Myers Squibb.
Pictured: Signage above a U.S. courthouse/iStock, Mariakray
Karuna Therapeutics shareholder Shannon Jenkins this week filed a lawsuit against the company and its leadership—including CEO Bill Meury—for agreeing to and endorsing the $14 billion merger with Bristol Myers Squibb.
Jenkins is seeking to prevent the transaction and is alleging that Karuna’s directors had failed to disclose crucial material information regarding the company’s financial projections and sales processes, according to a case summary from Law.com. The plaintiff also claims that the defendants have conflicts of interests.
The lawsuit, which was filed Tuesday with the U.S. District Court for Delaware, names eight other defendants in addition to Meury: Christopher Coughlin, James Healy, Jeffrey Jonas, Laurie Olson, Atul Pande, Steven Paul, Denice Torres and David Wheadon. All sit on Karuna’s board of directors.
BMS first moved to buy Karuna in December 2023, paying $330 apiece for all of the biotech’s outstanding shares for a total deal value of approximately $14 billion. In exchange, BMS gains ownership of Karuna’s highly anticipated muscarinic antipsychotic candidate KarXT, which is being developed for schizophrenia and psychosis in Alzheimer’s disease patients.
KarXT has a target action date in September 2024 and is expected to launch in the U.S. this year, with a potential market of approximately 1.6 million patients with schizophrenia, many of whom suffer from harsh side effects of existing treatments or respond poorly.
At the time of the merger’s announcement, Karuna’s board of directors unanimously approved the merger with the companies anticipating the deal closing in the first half of 2024, pending anti-trust clearance and other customary conditions—including shareholder approval.
Earlier this month, Karuna filed a proxy statement to the SEC inviting stockholders to an online special meeting on March 12 in order to discuss and vote on the merger with BMS. In the filing, Karuna’s board of directors unanimously recommended that shareholders vote in favor of the transaction, writing that the acquisition is “in the best interests of Karuna and its stockholders.”
In her lawsuit, Jenkins claimed that the proxy statement leaves out or misrepresents information important to the vote, including other proposed buyers, according to Fierce Biotech.
In the proxy statement, the board directors revealed that in October 2023, a “large multinational pharmaceutical company” approached Karuna with an acquisition offer at a “significant premium” to its closing price at the time. The filing does not disclose the identity of the company or the value of its initial offer.
Jenkins is looking to prevent the merger from pushing through until Karuna discloses all pertinent information to its stockholders. The lawsuit is requesting a jury trial.
Tristan Manalac is an independent science writer based in Metro Manila, Philippines. Reach out to him on LinkedIn or email him at tristan@tristanmanalac.com or tristan.manalac@biospace.com.
