Hey, I think we're live. Thank you. Good afternoon, everyone. My name is Yatin Suneja. I'm one of the biotech analysts here at Guggenheim. Welcome to our fifth annual I&N Conference, day two. Our next presenting company is Karuna Therapeutics, and from the company, we have two executives. We have President and COO Andrew Miller. We also have Will Kane, who is the Chief Commercial Officer. Andrew, why don't I pass it on to you? Why don't you give us five minutes overview of the company? What are some of the key milestones that we should be looking out for over the next, let's say, a few months or so, and then we'll go into the Q&A session. Andrew? Yeah, absolutely. Thanks so much for having us. Always good to be here speaking about what we're working on at Karuna. We're very excited about, a lot of things, but importantly, our lead program, KarXT, which we hope to be launching, in the second half of next year as a completely new class of medicine. A new, class of medicine based on targeting muscarinic receptors for the treatment of schizophrenia. That will be on the basis of our recently completed, pivotal registration program, the EMERGENT program. We submitted our NDA, in towards the end of September. We anticipate, obviously, hearing back from the agency about a potential acceptance for filing here towards the end of this month. As well as we have ongoing clinical programs for adjunctive treatment on top of background, antipsychotic treatment for, first in schizophrenia. We also have a phase III program, the ADEPT Program, ongoing for Alzheimer's disease psychosis, an area where there are currently no approved medicines. And in general, we believe that KarXT, again, represents a significant innovation. Our data at the clinical trial to date suggests robust efficacy towards symptoms of psychosis and schizophrenia, also potential benefits towards negative and cognitive symptoms of schizophrenia, where there are, again, no currently approved treatments. And a side effect and tolerability profile that we believe is differentiated meaningfully from current standard of care, based on that unique pharmacology. In addition to our ongoing programs around KarXT, key activities around the company, we've been building a pipeline of additional innovative assets focused on neuropsychiatry and serious mental illness. We have a TRPC4/5 antagonist program that we're putting into a phase Ib study in patients with major depressive disorder next year. And are obviously putting a lot of resources and time, as represented nicely here, by Will Kane next to me, towards our anticipated launch in the US of KarXT next year. The preparations for that have been ongoing for quite some period of time. We'll obviously continue to intensify with the coming months, as well as all of our CMC and supporting activities to support the launch as well. We are committed to commercializing KarXT in the US on our own. Outside of the US, we have currently a partnership with Zai Lab for development and commercialization of KarXT in Greater China, and also be seeking to work with other companies outside of the US. Andrew, thank you for that. So let's maybe just focus on some of the regulatory and upcoming milestone first, and then, I want to spend some time with Will as well on the commercial dynamic. So you have submitted the NDA, in September. You've said 10 months review or standard review. What else is left? What is the gating factor? And what was submitted as part of the NDA? Yeah. So in terms of the NDA itself, obviously the fundamental basis of the NDA is our pivotal EMERGENT program in schizophrenia. That consists of three acute psychosis, placebo-controlled studies, EMERGENT 1, 2, and 3, which were all successful on the primary endpoint, as well as a number of secondary endpoints. And then EMERGENT 4 and 5, which were a rollover and a de novo, respectively, 52-week safety studies in order to collect the long-term safety data- Mm-hmm. to support, hopefully the NDA submission, but also hopefully the filing and review. In addition to those activities, we completed a number of standard, what we would kind of consider NDA-enabling or phase I studies, typical of small molecule therapeutic development programs, studies in special populations like renal and hepatic impairment, thorough QT study and other studies such as that. That's all a part of the NDA submission as well. In terms of what's left, you know, we have a day 120 safety update. We anticipate in the late January timeframe, consistent with the late September filing. That will contain another update and refresh of our long-term safety data that's being collected in EMERGENT-4 and EMERGENT-5. It will also include an ambulatory blood pressure monitoring study. We expect to have top-line data from that study here in the next few weeks, guidance being fourth quarter. That's a study just to better characterize and I think hopefully statistically reject any hypothesis of chronic blood pressure increases being associated with KarXT. That's all been part of our conversation around our submission strategy, the pre-NDA meeting we had with FDA here in the second quarter. All of what I said is very much in line with that, and we do obviously expect to hear back about the acceptance and review here towards the end of this month. Got it. With regard to the ambulatory study, could you remind to us, what have you seen in the EMERGENT program as it relates to blood pressure? And I think in the past, you've made a point that even at Cmax, you don't hit the threshold that is required to disapprove in this ambulatory study. So explain to us what you need to show, what are the endpoints, the time point, and how confident you are that you're going to get the clean signal? Yeah. So maybe I'll start by just sort of giving a brief overview of the ABPM study and the endpoint, and then talk about how that relates to the previous data we have from the EMERGENT program. So the ambulatory blood pressure monitoring study, it's an eight week study in patients with schizophrenia, uses the same dosing scheme, exact same dosing scheme as the EMERGENT program did. And the primary outcome measure is a change from baseline in systolic blood pressure over the course of the eight week study, so baseline to endpoint. That assessment in an ambulatory study, it's based on an assessment of every 30 minutes over the 24-hour period at baseline, compared to the 24-hour period at endpoint of the study. All consistent with sort of the established regulatory guidance around conducting ABPM studies. Specifically, the primary endpoint is rejecting the statistical hypothesis that there's a greater than 3 mm of mercury increase in systolic blood pressure. So said another way, the 95% confidence interval of any change in blood pressure needs to be below 3 mm of mercury. The rationale for that being, that's the threshold that's been set for where increases of 3 mm or greater have a tangible increase in long-term cardiovascular risk. And so if you're below that threshold, the data suggests that there's no meaningful change in that. That's why that threshold is set. So when you think about that endpoint in comparison to what we've observed historically, of course, we have a standard clinical vital sign assessment in every study we've conducted with KarXT, at every study visit. But specifically in the EMERGENT Program in patients with schizophrenia, we assess vital signs two hours post-dose, which corresponds to Cmax of KarXT, xanomeline and trospium. And so it's meant to assess at peak plasma concentrations of drug, is there any impact? And what we've seen in those five week studies is a less than 1 mm Hg increase in systolic blood pressure, change from baseline versus placebo. Again, something that if we took that data and put it in the ABPM study, we would be successful on the primary. That's certainly part of the basis of our confidence that the ABPM study will read out positively. So that's kind of the, I guess, overarching view of the study and sort of the comparison to our currently existing clinical vital signs. So for the ABPM, you're taking it every 30 minutes, so it's an average of 30 minutes over 24 hours? Correct. 48 measurements averaged into one to get rid of any of the natural variability associated with blood pressure assessment, as well as the variation of blood pressure over the course of the day based on their circadian rhythm. Yeah. So 30 minutes, obviously, before the two hours. So even at—if 2 hours, you're not seeing it, hopefully at that early time frame, you should not. Yeah, I mean, I think our belief is that the assessment we've done our clinical studies at two hours represent if there's any effect. That's going to be the peak effect. Okay. And so when we think about taking that data and averaging over 24 hours, again, we feel quite confident in our ability to be successful in the ABPM study. Got it. Okay. One more question on KarXT, specifically as it relates to the adjunctive study. I think on this recent earnings call, you sort of articulated that the patient population is a little bit different, so the delta that you are looking to show is about four or five point. How important is that study, and any safety considerations, especially given that this is an adjunctive study that we should be paying attention to? We should be paying close attention to? Yes. In terms of the ARISE study, just to give a little more context to that, that's the name for our adjunctive program. It is quite similar to the EMERGENT program. The differences being, it's conducted on top of background care, it's in an outpatient setting, it's one week longer, in terms of the duration of the double-blind treatment phase. I'd say the other difference is because patients are on background care, we're not specifically recruiting for acute psychosis. So what you're referring to, Yatin, was that the baseline severity, symptom severity, we expect to be lower. Rather than a total PANSS score of between 95 and 100, like we saw across the EMERGENT program, we expect it to be probably 15 points below that, so somewhere 80-85 range for ARISE. And so the minimum PANSS score is 30. It's 30 items, minimum score being one in each item. So you just have a little bit less dynamic range to show an improvement over placebo. So that means we should be a little more conservative in terms of our statistical assumptions, and so we're powered in that study to see down to a difference about four to five points. That's in comparison to the 8.5 and 11... 8.5-11.5-point improvement over placebo that we saw in the EMERGENT program. So we could see, said another way, half of the benefit we saw in the EMERGENT program, that would still allow us to be statistically significant and ARISE, and clear a threshold for clinically meaningful improvement that we think would enable, you know, the registration and potential expansion of the, the treatment label for, specifically adjunctive use of schizophrenia. Although I would point out that we anticipate, based on precedent, that at launch, we would be labeled for treatment of schizophrenia in adults without any restrictions other than having a diagnosis of schizophrenia. For EMERGENT-4 and 5, when will those data be shared, and what specifically we should be looking out in those data? I mean, these are more longer-term studies. Yeah, so EMERGENT-4 and -5, again, being our 52-week safety studies, we do anticipate being able to share data from those studies in 2024. We haven't said a lot more specifically about what exactly to expect and when, but I think those studies are a great opportunity for us to do a couple of things. One is to further and continue to characterize the overall safety and tolerability of KarXT, which we see at this point is very consistent with its known pharmacology at the M1 and M4 muscarinic receptors. So from an AE perspective, we largely expect to see the same types of things at similar rates as to what we saw in EMERGENT-1, -2, and -3, the short-term placebo-controlled studies. We do also know from EMERGENT-1, -2, and -3, that the adverse effects we do see tend to be GI in nature. They're mild to moderate and generally transient. Most of them actually self-resolve with continued dosing inside of those short-term studies. So we think the long-term studies are an opportunity to further demonstrate that. We think the long-term studies are also a further opportunity for us to differentiate from current standard of care, where, in our short-term studies, we don't see the weight gain, metabolic changes, glucose intolerance, dyslipidemia, motor or extrapyramidal symptoms, or sedative and somnolence-based effects of current atypical antipsychotics, and so we believe that the long-term studies offer us just another opportunity to further demonstrate that, particularly longer term, with things like weight gain and metabolic changes, where those continue to build up over time with existing treatments. More on safety, is what we should be looking at? Yeah, I mean, I think obviously there is a efficacy data collection as part of those studies. I think it's more a focus in EMERGENT-4, which is the rollover study, because patients have some meaningful degree of symptom severity at baseline. As opposed to EMERGENT-5, which is generally recruiting a pretty stable outpatient setting, and so baseline PANSS scores are going to be pretty low. Mm-hmm. So there's not necessarily an expectation of substantial improvement. Whereas EMERGENT-4, you're looking for continued benefit in patients who started on either placebo or drug as part of EMERGENT-2 or 3. Got it. Very good. Will, for you, just talk to us, the commercial preparation, the team, you and the team is doing. How should we think about the... How are you thinking about the market? What about the sales force? And I do have, like, specific questions. I would love to hear from you, the prep that you are doing. Sure. Thank you, Yatin. So I would characterize our current preparation for launch as ahead of schedule. You know, as Andrew pointed out, our base case is a standard review assumption, which would likely get us approval at the end of September of next year, and then the ability to launch the product towards the end of 2024. So we have been very focused on building our own commercial organization in order to support that. Initially, we're actually out in the field now, our account director, and our market access and our medical science liaison team, and they are interfacing with payers, as is allowable under the Pre-Approval Information Exchange Act, to actually talk about Karuna, to talk about the disease state, which is schizophrenia, and to share clinical data from the KarXT program, EMERGENT-1, EMERGENT-2, and EMERGENT-3. That gives us a great opportunity to begin to educate them about the need in the marketplace, the differentiation that we believe KarXT will offer, to their clinicians and their patients, if you will. And then to continue this dialogue between now and the time of launch in order to foster not only an appreciation, but potentially, you know, a more efficient, if you will, review and formulary placement process for these patients. When it comes specifically to the sales organization that we envision and we're planning for, as we've said, you know, a total sales organization between 300 and 400 professionals that will call on more than 30,000 targets based on our analysis, that will drive performance. And so that plan is to be ready to go at launch. So we will continue to design and finalize the size and structure, bring on sales leadership in the first half of 2024, and then bring on the sales representatives, beginning in the second half of 2024 for their training and ultimate deployment. Got it. How should we think about the pricing dynamics here? Obviously, you have a few branded drugs that are out there in the $17,000-$18,000 range. Is that the ballpark where we could be, or are there more levers there for you to play? Sure. So there is an established pricing corridor in this marketplace. As Yatin noted, there are several right now branded products on the market with a WAC price range in that area up to $20,000. And, you know, generally, you know, a net price between $1,000 and $1,500 a month. So we use that as a benchmark to advance and continue our work to ultimately get to a price. I think one of the things that's important here is the profile of KarXT is fundamentally different than what's on the market. And payers have acknowledged the need for new treatment options, and they've also acknowledged the fact that there's been limited, if any, innovation in decades, certainly not mechanistically. So we think we have a platform to have a solid discussion with them about access in the context of price. But we do use that corridor as a benchmark. We'll continue the work that we've begun as more data become available over the coming months. You know, additional data presentations at medical meetings that will inform the total profile of KarXT. And then payers, not unexpectedly, are interested in learning about data from EMERGENT-4 and EMERGENT-5 on long-term results, if you will, to kind of inform how they will think about value, not just price, but value of this product to their formularies and to their patient populations. Got it. And how you are thinking about positioning in the market, right? Because when you are launch, obviously there are some generics that are branded, but you would not have the adjunctive label on the label. So where is the positioning will be and what and how that might change when adjunctive comes onto the label? Sure. So first, there's, I think, a broad-based opportunity for a product such as KarXT, and we see opportunity across the patient spectrum. So particularly in first-episode psychosis patients, you know, this would be a great product to start with, when you're younger, because, you know, each subsequent trial doesn't necessarily carry the same efficacy, if you will, as the prior one. There's a large population of unmet need, if you will, in terms of inadequate efficacy that might prompt a switch, et cetera. And then there's the population that may be experiencing adequate efficacy, particularly in the positive symptoms, but is not tolerating their medication. So that's why we believe this is a broad-based opportunity, and that's how we intend to go to market, as we continue to build, you know, a positioning and a messaging plan structure around the brand based on the label. Yeah. To address your question on adjunctive, obviously, we would await an approved indication for adjunctive before we actually promote to that data. As Andrew pointed out, you know, the anticipated indication would be treatment of schizophrenia in adults. And while we would not promote to adjunctive use, the marketplace, the clinicians will, you know, evaluate how they want to use KarXT in their patient population. We know today, for example, that clinicians in 20%-30% of their patients are actually using two D2 receptor antagonists. So obviously in patients that are not getting adequate efficacy, they're adding, doubling up. And so, you know, in certain populations, they may see the opportunity to add KarXT, but that would be their clinical decision. Okay. So when you look at the profile of the drug, I think the one thing that we hear from some of your competitor is that you do have a BID profile, and in future, maybe we'll see a QD profile. So how is the profile in general viewed by physician and also patients? Like, what work you've done to tease out that BID acceptability of a BID profile? Sure. So in my experience in the industry with lots of products and also in the market research we've done to date, there's very little difference between QD and BID. We've heard that reinforced by patients. Patients, or people living with schizophrenia actually take multiple medications, not just their antipsychotic. And, you know, they have a variety of dosing regimens, once a day, twice a day, sometimes three times a day, depending on the drug they're taking. So from a patient perspective, they did not indicate any hesitation, with a BID dose. And in reality, there's very little difference in terms of patient adherence, if you will, or compliance with that dosing regimen. So we will continue to reinforce that. We'll also obviously be constructing a patient support services program to, to enable, you know, interaction and communication with patients to support them as they begin on KarXT, and as they continue on it, because we think the profile of the drug also enables potentially better adherence compared to their current meds. And so we want to be there to support them through that. And I think in balance, at the end of the day, you know, whether it's the clinician or the patient, they're looking for a better outcome. Yeah. And there's a significant unmet need in this particular disease state, and so the totality of the profile of the drug, I think, really serves them well in order to try to achieve that. What about the safety. Actually, not safety, tolerability. How is the tolerability viewed in the research that you have done? Because there are definitely some early, you know, GI-related tolerability that we see with KarXT, which obviously becomes better with time. How is that and how you will message around it? Sure. So first, what I would reflect from the market research is that when clinicians see the profile of KarXT, they look at the totality of the safety tolerability profile, and they tend to focus on those areas that are most problematic now for their patients. So weight gain, movement disorders, somnolence, or the sleepiness that patients complain a lot about, et cetera. And that's where they see significant opportunity for a new treatment option. As Andrew mentioned, you know, in our clinical studies, the GI tolerability, which is associated with the mechanism, is mild, moderate, and transient, and they appreciate that. They understand, you know, there will be a need to support patients through that initial phase, but they're certainly willing to do that because the long-term potential gain here is so significant. And they also put the safety tolerability in the context of the overall efficacy data, which has been quite consistently demonstrated in three trials with a very high statistical significance result and a high effect size. So, you know, they look at it in totality, and they really believe that, you know, the value here is worthwhile pursuing and that they can help patients through the what may be in certain instances. And again, remember, the incidence of these adverse events is, you know, lower, fewer than 15 than more than that. So we will work to support them, but so far, not a big issue. Got it. And then, with regards so obviously, this, you have I think you're the only one who have an M1 and an M4, so it's a dual mechanism. There is a potential of cognitive benefit. How does that get communicated to patients and physicians, and how important and powerful that is in messaging, you know, down the line when you have M4 PAMs going to be available? Maybe, maybe let me interject one thing- Sure. Here before Will respond, just more from a scientific basis perspective. Yeah. I do think the data suggests there's an important role for M1. Yeah. And I think, Gavin, you were referring specifically to the pro-cognitive benefits. Yeah. -that we've seen across studies with KarXT and with xanomeline historically. And I think when you look at the preclinical data, you see M1 associated with that cognitive effect, and that was actually the primary hypothesis for which this class of medicines was originally or development was originally initiated. I think you also see preclinically that that M1 receptor has some benefit towards psychosis as well. So we think that the dual activity at M1, M4 is particularly important in the profile for KarXT. If you were to remove any activity at the M1 receptor, or you were to switch to a positive allosteric modulator, there's you know some evidence that that can still be effective based on Phase Ib studies at this point. But I think the idea that we can remove a substantial piece of the pharmacology but somehow maintain all the benefits, I think is going be a significant challenge. I think the question is really not, you know, it is, do you, do you lose anything? I think it's more, what does that profile look like? And I think all the data suggests that M1 does play an important role. We can't quantitate that at this point based on differential human studies... But really the field at this point is largely relying on the data that we've generated with KarXT and was historically generated with the xanomeline to provide proof of concept for both psychosis and cognition. Sure. I would just add that in conversations with with clinicians, they express significant enthusiasm for KarXT for a couple of reasons, not the least of which is what I've talked about in terms of the total profile and particularly the potential improvements on the tolerability and the safety profile. But they fully appreciate the three domains of schizophrenia, the positive and negative, and the cognitive. Yeah. They see clearly unmet need in all three. And while, you know, the work we've done to date has been exploratory, if you will, and will not be included in promotion, we will obviously promote the drug off the total PANSS score and the data that will be, we believe, a part of the approved label and the indication for the treatment of schizophrenia in adults. And then the real test for any product launch is when it gets to the market and clinicians start to use it, and patients start to give feedback on how they're responding to it. And that ultimately is what will drive, you know, interest and potentially adoption. I mean, I've seen that in multiple launches that I've been part of, and, you know, the best laid labels sometimes, you know, only become real when that patient actually starts to report back the benefits they're seeing from the drug. And so we'll monitor that from a feedback perspective. Okay. And then, so you mentioned like, let's say if it's a standard review, you should be able to launch it ASAP, right? Somewhere in four Qs of next year is when you would be ready to launch. Yeah. So we're fully prepared to launch. Our goal is to, as I said, hire a sales organization and have them trained at the time of PDUFA and then complete training upon, you know, receipt of a label, et cetera. But we have and we'll have sufficient production volume, capsules ready to roll. And we'll have a fully trained sales force. And so by the end of 2024, we plan to initiate stocking and to get out into the field. Yeah. How long it takes to get reimbursement on board? I mean, there is a big chunk of patient population that are, Medicaid, so any consideration around that? Sure. So yes, the product or the payer profile, I should say, for KarXT is predominantly government insured, so a high percentage of Medicaid and Medicare, and within Medicare, a lot of Medicare low-income subsidy patients. So first point to make is that in both the Medicaid and the Medicare programs, coverage is available actually upon approval, right? In Medicare, it's a protected class, so there's coverage. The question is the quality of the coverage and how you can improve that coverage over time. The second point is that, you know, there are established protocols to work through in terms of prior authorizations and steps that we will fully support. But there is this movement that we've noted to reduce the utilization management requirements, particularly for drugs for serious mental illness. So in more than a dozen states, you know, there's no prior authorization required. In half the states, there's zero or one step, and so we will capitalize and move quickly in those areas where we can to start the trial and adoption process. And then we will build back based on the profile of the drug, where we think we could go to enhance formulary coverage. So I think, you know, there's an opportunity here to get out of the gate relatively quickly. And because these are Medicaid and mostly Medicare, low-income subsidy patients, they have very low out-of-pocket, right? It can be zero, or it can be a few dollars, and so that lowers the threshold for them, and we hope will be really supportive of their interest in the drug as well. Got it. Andrew, maybe two questions for you. First one is on Alzheimer's disease psychosis, the ADEPT program. When should we expect to get the first data? What endpoint we should be focused on, what the expectation would be for that? And then also, if you can spend one minute on the TRPC4/5, what is the biology driving you to go into MDD? Sure. So, with respect to the ADEPT program, for the treatment of psychosis in Alzheimer's disease, that consists of 3 studies ADEPT-1, 2, and 3. 3 being a long-term safety extension, so from an efficacy perspective and a placebo-controlled perspective, is really reliant on ADEPT-1 and 2. ADEPT-1 is a randomized withdrawal or relapse prevention design, so the outcome measure is the rate of relapse on drug versus placebo. Following a 12-week open-label treatment period, responders randomized to continue on placebo or drug. That relapse is defined as in two ways, inclusive two ways. An improvement of 40 per... and a worsening of 40% on the NPI-C H+D, that's the Neuropsychiatric Index Clinician Scale, specifically the hallucination and delusions items, the core psychotic or features of psychosis, as well as being associated with a change on the CGI. So by definition, a clinically meaningful change. Similarly, in ADEPT-2, the primary endpoint is change from baseline over placebo on that same NPI-C H+D score. So again, an endpoint that is focused on hallucination, delusions, that core psychosis. Those are studies, ADEPT-1 and 2, that we would expect to read out in 2025. So ADEPT-1 started second half of 2022, and then ADEPT-2 just started recently here in the third quarter of 2023. Got it. Any, like, any bar that you need to hit on this relapse prevention? Yeah, well, I think from a relapse prevention perspective, because clinical meaningfulness is built into the event, that is the primary endpoint, it's really just about seeing a statistical difference between drug and placebo. That's what the study is powered on. And so it's really about collecting enough relapse events to be able to see a difference between drug and placebo. I'd say similarly, though, on ADEPT-2, using the same endpoint, we also do track CGI as a secondary endpoint there as well. But again, if we're associated with the statistical improvement in the hallucinations and delusions, I think we would expect that to be clinically meaningful. All right, thank you. On the biology, biology that you're trying in TRPC? Yeah, for TRPC4/5, so this is a channel receptor. We see that expressed in a number of different areas that we believe are important in regulating mood and emotion, and particularly response to fear and stress. That really forms the basis for why this target receptor, inhibiting this receptor, could be helpful across a spectrum of depression as well as anxiety. Again, given that sort of stress response, there's preclinical data that we have, and it's been out there in the field with other exemplary tool molecules demonstrating anxiolytic and antidepressant effects in those preclinical models. So, I think a very standard sort of build-out of target validation and preclinical sort of behavioral pharmacology that you typically see in serious mental illness. Yeah, I'd say the other point I'd make just quickly about that program is it does have substantial previous human experience as part of a renal development program. Over 100 patients dosed in the clinic with KAR-2618, as well as for a duration of up to 48 weeks. Very good. That's all I had for you guys. Thank you so much, for your time.