Karuna shares soar on schizophrenia drug results


Karuna Therapeutics will ask regulators to approve its most advanced drug, an experimental treatment for schizophrenia, now that a large clinical trial has produced results that impressed investors and Wall Street analysts.

The results, announced Monday, showed patients given Karuna’s “KarXT” drug improved significantly more than those who received placebo, as measured by a medical scorecard used to gauge the severity of schizophrenia symptoms. After five weeks of treatment, the KarXT group experienced an average 9.6-point reduction in their scores compared to the placebo group, hitting the main goal of the study. Karuna said its drug also succeeded on secondary goals and was generally well tolerated.

In a statement, Karuna’s CEO Steve Paul said the data appear to confirm positive results seen in earlier testing and “underscore the potential for KarXT.” The company now expects to submit an approval application to the Food and Drug Administration sometime in mid-2023.

Karuna’s share price rose by more than 60%, to just above $230, Monday morning, in a stock swing that lifted the company’s market value by trillions of dollars.

Paul Matteis, an analyst at the investment firm Stifel, wrote in a note to clients that investors were hoping to see the KarXT arm achieve at least a 7-point reduction compared to its placebo counterpart. What Karuna disclosed “easily clears that bar” and is “as good as one could hope for” in a late-stage study of schizophrenia patients, Matteis wrote.

In his own note, RBC Capital Markets analyst Brian Abrahams wrote that the results “lived up to, and likely exceeded” high expectations on Wall Street.

Like many diseases that affect the brain, schizophrenia has proven difficult to tackle for even the world’s most powerful drug developers. Its causes aren’t fully understood, and it can carry a wide range of symptoms — from “positive” ones, like hallucinations, to “negative” ones, like social withdrawal or decreased motivation. In the last few years, experimental schizophrenia medicines from Acadia Pharmaceuticals, Concert Pharmaceuticals and Neurocrine Biosciences have failed key clinical trials.

Evaluating how well a potential medicine is working can be tricky, too, as trials for mood and cognitive disorders often rely on direct reports from patients. As such, researchers and drugmakers are sometimes surprised when patients in placebo groups report better-than-expected outcomes.

Currently, schizophrenia is treated with antipsychotic drugs that affect two mood-regulating chemicals: dopamine and serotonin. Those drugs include older ones like Abilify, Latuda and Zyprexa, as well as newer ones like Caplyta and Lybalvi, which the FDA approved in 2019 and 2021, respectively.

But KarXT works differently. It’s meant to stimulate two members of a protein family called muscarinic receptors, which control whether another neurotransmitter, acetylcholine, gets released in the brain. Last year, Matteis wrote that his team forecasts a roughly $4 billion market opportunity for drugs that treat schizophrenia by targeting muscarinic receptors.

In addition to the efficacy data, Karuna reported that the most common adverse events seen in the KarXT arm as patients received treatment were all mild to moderate in severity. They included constipation, nausea, vomiting, diarrhoea, acid reflux and increases in blood pressure. The company noted that average blood pressure measures were similar between KarXT and placebo throughout the trial, and that researchers hadn’t observed any instances in which a patient fainted after a sudden drop in blood pressure.

Those results are important, according to Mizuho Securities analyst Uy Ear, as KarXT’s relationship to blood pressure had become a “key investor concern.”

Karuna also reported that the rates of patients discontinuing the study were similar between KarXT and placebo groups, as were the rates of serious adverse events seen as patients were getting treated. Karuna said none of these serious adverse events were judged to be related to KarXT. Overall rates of treatment-emergent adverse events were 75% for the KarXT group and 58% for the placebo group.

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