Yahoo Finance Karuna Therapeutics, Inc. (NASDAQ:KRTX) Q3 2023 Earnings Call Transcript
Karuna Therapeutics, Inc. (NASDAQ:KRTX) Q3 2023 Earnings Call Transcript November 5, 2023
Operator: Welcome to the Karuna Therapeutics Third Quarter 2023 Financial Results Conference Call. All participants are in a listen-only mode. Please note, this call is being recorded. I will now turn the call over to Alexis Smith, Head of Corporate Affairs and Investor Relations.
Alexis Smith : Good morning, everyone, and thank you for joining the third quarter 2023 Financial Results Conference Call. I'm joined today by Bill Meury, President and Chief Executive Officer; and Jason Brown, Chief Financial Officer, who will begin our call prepared remarks. Andrew Miller, Founder and Chief Operating Officer; and Will Kane, Chief Commercial Officer, will join Bill and Jason for the Q&A portion of our call. Before we begin, I encourage everyone to visit the Investors page of our website at investors.karunatx.com to find our press release and presentation related to today's call. Forward-looking statements related to our product development, regulatory and commercialization plans, our research activities and financial outlook may be presented during this call.
Please refer to today's press release and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. And with that, I'll hand it over to Bill.
Bill Meury : Thanks, Alexis. Good morning, everyone. I want to begin by thanking our R&D team and our external partners on a high-quality and timely NDA submission for KarXT for the treatment of schizophrenia. The team worked many long days and weekends over the past several months to write and submit our NDA. It was a major achievement for Karuna and represents the culmination of years of preclinical, clinical, CMC and regulatory work on KarXT detailed across several hundred thousand pages of information. Now the submission of course is just the first step in the NDA review process. There are several other important milestones and activities ahead including top line-data from the Phase 1b ABPM trial this month. We expect to hear back from the FDA on their filing decision later this month as well and we're already preparing information for our day 120 safety update and site inspections among other things.
As we've talked about, we expect the standard review and therefore, a potential approval and launch in the second half of next year. As you know, the treatment of schizophrenia has been served by one class of medication for over 30 years and the potential approval of KarXT would change that for patients and their physicians. And I continue to believe this could be one of the most important product launches in biopharma in 2024-25. In terms of the prelaunch activities, they remain on track. We have the capabilities and the funding needed to optimize this program. We've built out our managed care access and MSL teams, we're focused primarily on pre-approval scientific exchange meetings with payers, which started several weeks ago and on responding to medical information requests from psychiatrists and nurse practitioners.
Interest and anticipation for KarXT is very high in the community right now and we'll continue to build over the next several quarters. Additionally, we have and will continue to present and publish new data from our emerging program this year and next year. Last month, we presented data from EMERGENT-3 at the European College of Neuropsychopharmacology meeting that highlighted KarXT's differentiated tolerability profile demonstrated in the trial and potential to provide clinically meaningful symptom relief. The data includes new analysis on PANSS responders, which was the final prespecified secondary endpoint in the trial, and EMERGENT-3, nearly 60% of patients receiving KarXT achieved a 20% reduction of pain symptoms by week five at the end of the trial.
We also shared data on the PANSS motor symptom domain, including the PANSS Marder positive, disorganized thoughts, uncontrolled hostility, excitement and anxiety depression factors, where KarXT demonstrated statistically significant improvements from baseline to week five compared to placebo. On safety, we provided additional data to characterize the adverse events associated with KarXT and EMERGENT-3 were consistent with EMERGENT-1 and 2, the most common treatment-emergent adverse events were GI in nature, primarily occurred within the first two weeks of treatment, mild in severity and transient over time. Looking ahead, we'll be sharing pooled efficacy and safety analysis from the EMERGENT-1, 2 and 3 trials as well as additional analysis on negative symptoms and adverse events at NEI in Colorado Springs and CNS Summit in Boston this month.
On the commercial front, preparations for the anticipated launch are on track too, including market research, sales force sizing and deployment and our peer-to-peer and consumer outreach programs. We have a team of people with a great deal of new product launch experience in neuroscience. They know what works and what doesn't and are carefully evaluating all strategic and operational decisions to support the launch. Equally important to our regulatory achievements and pre-commercialization work for KarXT is the continued execution of our ongoing Phase 3 program, ARISE and ADEPT, which we believe reinforce the value proposition of KarXT as a potential treatment for psychosis-related conditions. For ARISE, site activation and improvement is ongoing with about 50 sites currently active across the United States and Europe.
As we maintain our target of sharing top line data in the second half of 2024, we continue to monitor site activation and enrollment rates very closely and manage factors that may impact enrollment on a day-to-day basis. Although there is no approved therapy for the adjunctive treatment of schizophrenia, the use of antipsychotics as combination treatment is seen in around 30% of patients despite the lack of clear pharmacological rationale and clinical evidence to support adjunctive use. Through ARISE, we hope to reinforce the unique weakness of KarXT's differentiating clinical profile, and demonstrate that KarXT can be safely and effectively added on top of standard of care. I'm also pleased to share our ADEPT program evaluating KarXT for the treatment of psychosis and Alzheimer's is fully underway following the initiation of ADEPT-2 and 3 in the third quarter.
We remain on track to share data from ADEPT-1 and 2, our relapse prevention and acute efficacy trials in 2025. As a reminder, the fundamental concept of KarXT originates from an Alzheimer's trial, where xanomeline demonstrated promising therapeutic benefit in treating psychosis and related behavioral symptoms as well as cognition. Our ADEPT program is designed based on the insights from that initial strategy and our Phase 1b trial in healthy volunteers. And while our primary objective with ADEPT is to evaluate the efficacy and safety of KarXT in treating hallucinations and delusions associated with Alzheimer's. We will also be collecting data, providing additional insights into the potential of KarXT in treating other prominent and clinically relevant symptoms of Alzheimer's, including agitation, aggression and cognition.
The data from ADEPT may not only reinforce KarXT's promise as the potential treatment for Alzheimer's psychosis, but also help inform future developments with KarXT. Outside of KarXT, we're also making headway in our early stage and discovery program, most notably with KAR-2618, a TRPC4/5 inhibitor that we have acquired from Goldfinch Bio at the start of this year. We plan to evaluate KAR-2618 for the treatment of major depressive disorder and anticipate initiating the Phase 1b clinical trial in 2024 with additional details such as trial design and refined timing to be shared early next year. Now on our earnings call earlier this year, I had highlighted three strategic and operational priorities that we set out to achieve in 2023. Those priorities were maximize the value of KarXT from a development perspective; two, expand our pipeline; and three, scale the operational capabilities of our company as we transition to a fully integrated R&D commercial organizations.
We've made excellent progress on these three fronts, which reflects the hard work and scale of our organization. With just a couple of months left in 2023, we look forward to finishing the year strong. With that, I'll hand it over to Jason.
Jason Brown : Thank you, Bill. I'm pleased to be with you all today to share our third quarter financial results and to discuss our full year 2023 guidance. Q3 was another strong quarter for the company driven by continued progress across our ongoing KarXT Phase 3 programs, the submission of our NDA for KarXT, pre-commercialization efforts as well as significant growth across the organization. Total operating expenses for the third quarter were $136.2 million compared to $81.1 million for the same period in 2022. Operating expenses were slightly offset by $17 million in interest income, resulting in a net loss of $119.1 million. Research and development expenses for the third quarter were $104 million compared to $62 million for the prior year period.
The increase to $42 million was primarily driven by expenses related to our ongoing RXT clinical programs, increased employee head count and higher stock-based compensation. General and administrative expenses for the third quarter were $32.3 million compared to $19.1 million for the prior year period. The increase of $13.1 million was primarily driven by expenses related to our pre-commercialization efforts, increased employee head count and higher stock-based compensation. Cash, cash equivalents and investment securities totaled $1.3 billion as of September 30, 2023, compared to $1.1 billion at the end of 2022, providing us with a cash runway comfortably through 2026. The increase was due to our follow-on public offering in March of this year that resulted in a net proceeds of approximately $437 million.
Looking ahead at the rest of the year, we anticipate R&D to decrease in the fourth quarter relative to the third quarter and reiterate our guidance for the full year 2023, with total operating expense is expected to come in towards the top end of the range at around $470 million. Of that, we expect R&D and G&A expenses to be in the range of $355 million and $115 million, respectively. With the increase in R&D guidance being primarily driven by continued enrollment in our long-term safety trials by activation costs associated with the ADEPT program and costs related to our ambulatory blood pressure monitoring trial. I'll now hand it back over to Bill.
Bill Meury : Thank you, Jason. With that, we can open the call to questions.
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