Karuna continues to build hype for schizophrenia drug with phase 3 data drop but investors not convinced

Momentum continues to build for Karuna Therapeutics' much-hyped schizophrenia therapy, with the company revealing another late-stage win. Yet, a secondary endpoint fail and a share price wobble were a reminder that the anticipated U.S. approval next year isn't yet in the bag.

Karuna first reported a win from the phase 3 EMERGENT-2 trial for the therapy, dubbed KarXT, back in August 2022. Now, we have a fresh late-stage readout, this time from the EMERGENT-3 trial. The 256-adult study demonstrated a 8.4-point greater reduction on the Positive and Negative Syndrome Scale compared to placebo at week 5.

On the trial’s secondary endpoints, KarXT also triggered a 3.5-point greater reduction in “positive” symptoms of schizophrenia—which encompass changes in behavior or thoughts, such as hallucinations or delusions—compared to placebo. However, when it came to “negative” symptoms—when individuals withdraw from the world, appear emotionless or unengaged with interactions—the drug was unable to show a statistically significant shift.

That secondary endpoint slipup may have been behind Karuna's share price wobble. Despite rising 10% in premarket trading this morning, when the markets opened, the biotech's stock actually dropped almost 7.9% to $176.51 from a Friday closing price of $191.63.

Still, the trial’s primary success means Karuna aims to meet with the FDA early in the second quarter and expects to remain on track for a planned midyear approval application to the regulator, according to a press release.

Besides the EMERGENT-3 findings, the approval submission will include efficacy data from the phase 2 EMERGENT-1 trial and late-stage EMERGENT-2 study, as well as year-long safety data from the ongoing EMERGENT-4 and EMERGENT-5 trials. EMERGENT-1 and EMERGENT-2 demonstrated a 11.6-point and a 9.6-point greater reduction on the PANSS scale compared to placebo, respectively.

The rate of overall treatment-related emergent adverse events was 70% for patients on KarXT and and 50% for those on placebo. Discontinuation rates related to these events were similar between the treatment arms, at 6% and 5%, respectively, which the biotech said was consistent with EMERGENT-2 and EMERGENT-1. The most common adverse events were nausea, dyspepsia, vomiting, constipation, headache, hypertension, diarrhea and insomnia, which were all rated mild or moderate and none of which led to discontinuations.

“KarXT has now demonstrated a robust and consistent reduction of symptoms across all three registrational trials, providing a compelling picture of the potential of KarXT in schizophrenia,” CEO Bill Meury said in the release. “With these data, we are one step closer to a potential treatment option that could provide the first new mechanism of action to treat schizophrenia in several decades.” 

In late December 2022, Mizuho predicted $6.8 billion in global peak risk-unadjusted sales for KarXT across several indications. The firm sees the medicine as having applications in the Alzheimer’s disease psychosis setting as well. Karuna is testing the Alzheimer’s indication in a phase 3 trial and also has two other schizophrenia studies underway to expand KarXT's potential label.

With a string of clinical successes for KarXT and such high stakes to play for, it’s perhaps no surprise that Meury suggested at the J.P. Morgan Healthcare Conference in January that the biotech is well capitalized with both funds and the commercial expertise to conduct a significant drug launch without the aid of a Big Pharma.