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Highlights:
- FDA approval for KarXT (Cobenfy): Schizophrenia treatment approval results in milestone payments and opens potential revenue streams.
- Strategic royalty agreements: PureTech to receive approximately 2% royalties on sales above €2 billion and future milestone payments.
- Validates business model: Approval reinforces PureTech’s model of developing and monetizing clinical-stage therapies.
PureTech Health (LSE:PRTC) announced a significant milestone as its formerly developed schizophrenia treatment, KarXT, secured approval from the U.S. Food and Drug Administration (FDA). The drug, now rebranded as "Cobenfy," was sold to Bristol Myers Squibb (NYSE:BMY) earlier this year, triggering milestone payments and opening the door for future royalties.
The approval has resulted in two separate milestone payments amounting to €29 million, a reflection of PureTech’s strategic approach to advancing drug development through its subsidiaries. The treatment, originally progressed through PureTech’s spinout entity Karuna Therapeutics (NASDAQ:KRTX), was later acquired by Bristol Myers Squibb as part of its efforts to expand its neurological treatment portfolio.
In addition to the upfront payments, PureTech is entitled to receive royalties of approximately 2% on net annual sales exceeding €2 billion, alongside potential future milestone payments. The royalty agreement with Royalty Pharma, established in March 2023, secured PureTech an additional €500 million in interest, showcasing the biotherapeutic company’s ability to leverage its innovations into recurring financial gains.
PureTech described the approval as a validation of its business model, which focuses on building, advancing, and eventually monetizing its pipeline of therapeutic candidates. The firm has been able to self-fund its continued research and development efforts through its strategic monetization of assets, with the success of Cobenfy providing a significant boost to its cash position.
This achievement is expected to enhance PureTech's capability to support the development of new therapies across its pipeline. The company's model revolves around creating subsidiaries or collaborating with larger pharmaceutical entities to advance its clinical-stage assets, thereby mitigating financial risk while maximizing the potential for future revenue.
PureTech has stated that the success of Cobenfy not only underscores the clinical value of its innovations but also positions it as a key player in the biopharmaceutical sector with a sustainable strategy for long-term growth. With this latest approval, PureTech is well-positioned to replicate similar outcomes for other assets within its diversified therapeutic pipeline.
