Johnson & Johnson (JNJ, Financial) is making waves in the M&A market with its $14.6 billion acquisition of Intra-Cellular Therapies (ITCI, Financial). JNJ is offering $132 per share, a 39% premium over ITCI's last closing price. This follows ITCI's 15% stock gain after resolving patent litigation with Sandoz over its CAPLYTA product.

The settlement allows Sandoz to potentially market a generic version of CAPLYTA, ITCI's FDA-approved schizophrenia treatment, by July 1, 2040. This favorable outcome for ITCI contributed to the recent surge in its stock price.

• CAPLYTA, the highlight of JNJ's acquisition, is a once-daily oral therapy approved for treating schizophrenia and depressive episodes in bipolar I or II disorder. In Q3, CAPLYTA sales rose 39% year-over-year to $175.2 million. ITCI revised its FY25 sales forecast to $665-$685 million, up from $650-$680 million.
• For JNJ, which reported nearly $22.5 billion in Q3 sales, CAPLYTA's potential is significant. ITCI has submitted a supplemental new drug application (sNDA) for CAPLYTA as an adjunctive treatment for major depressive disorder (MDD). Recent Phase 3 trial results showed statistically significant improvements in depressive symptoms.
• ITCI is gearing up for a potential CAPLYTA commercial launch for MDD this year. If approved, it could become the standard treatment for depressive disorders, with peak sales projected at $4-$5 billion annually.

If successful, CAPLYTA could significantly impact JNJ's Innovative Medicines segment, which saw modest 4.9% revenue growth in Q3 to $14.6 billion. Additionally, JNJ gains ITI-1284, a compound under testing for generalized anxiety disorder and Alzheimer's disease, enhancing its pipeline. The acquisition is a strategic fit for JNJ, especially with reduced risk following the patent litigation resolution.