Hi, my name is Mitchell Kapoor. I'm a senior biotech analyst here at H.C. Wainwright. Today, we're having a fireside chat with Karuna Therapeutics, and joining me from Karuna is the President and CEO, Bill Meury. Thanks for joining. Great to be here. Thanks, Mitchell. Great. Maybe we can start off for those in the room who are not up to speed on Karuna or familiar with Karuna. Yeah. If you could just give an overview of the pipeline and the, you know, what you're doing to help serious mental illness today. Sure. We're a Boston-based biopharmaceutical company. We have about 300 employees today. That'll grow to about 500 or 600 by the end of 2024. We have discovery, development, and commercial capabilities. Our flagship product is called KarXT, which is an M1, M4 receptor agonist that we're developing for three indications. The first one is schizophrenia, the second one is the adjunctive treatment for schizophrenia, and the third is Alzheimer's psychosis. We expect the NDA for the first indication to be submitted by the end of the month, so we're about 18 days away from our NDA filing. I always remind people, there are only about 30-40 NDAs approved every year in the industry, and there's about 3,000 or 4,000 companies, so it's a special year for Karuna. All the work for the NDA is basically been completed. All the data collection, analysis, and writing of the modules is done. Right now, we're simply formatting, assembling, and publishing, and QC-ing the document. It's about 450,000 pages. We'll get ready for a launch, assuming an approval, at the end of 2024. We also have a muscarinic receptor discovery program in place, and we could potentially be bringing or declaring a development candidate in 2024 for a whole range of psychosis conditions. It could be perceived as a, or considered a next-generation KarXT. We haven't disclosed all the details yet, but we will. And then we have a TRPC4/5 inhibitor that is potentially gonna enter the clinic in 2024, too, which has antidepressant and anxiolytic properties. And so today, we're a psychosis platform, starting with KarXT, and we could be moving into mood and anxiety disorders. We, of course, will continue to look at ways to build a pipeline over the next several years, just like any company. So that's where we're at today. Great, thank you for the overview. Could we just touch a little bit more on KarXT and the mechanism a little bit you mentioned- Sure. and how it's differentiated from standard of care in this area? Yeah. Listen, I'll start with the standard of care, and it's pretty well documented at this point. There's an awful lot of discussion right now in the area of schizophrenia, given some of the research and development programs in place. You essentially have 12 products on the market today, FDA-approved antipsychotics. They're basically all D2 antagonists or D2 blockers, and they've made a big difference in patients' lives, no question, but there are definitely limitations to those. Mm-hmm. Responses to therapy are fairly low and idiosyncratic, and because of the mechanism of action, because you're blocking D2 receptors throughout the brain, antipsychotics are associated with some side effects, namely weight gain, EPS and akathisia, somnolence and sedation, prolactin level increases, glucose level increases, and lipid level elevations. And so those can be rate-limiting adverse events, for patients on antipsychotics, and there's only one class of drugs for schizophrenia. If you take a look at depression, for example, there are eight different classes of antidepressants, but there's only one class, which is a D2 antagonist or blockers. Second-generation atypicals, they're called. So KarXT is an M1, M4 receptor agonist, so it works presynaptically, not postsynaptically, like the D2 antagonists, and it reduces dopaminergic signaling, but bypasses the D2 receptor to do it. And so it doesn't challenge the dopamine hypothesis. It could complement it, but what's most importantly is because it's bypassing D2 and agonizing M1 and M4, you get a few things. First, you get efficacy at the upper end of the range, and so if you ranked all the atypical antipsychotics from high to low in terms of effect size and looked at what we produce in the EMERGENT-1, EMERGENT-2, and EMERGENT-3 program, KarXT is at the top, above risperidone and olanzapine. Now, we don't have a head-to-head study, but in a cross-study comparison, it's a potent antipsychotic. You have broader efficacy, meaning not only improvements on positive symptoms, but also the drug appears to have a pro-cognitive effect, and cognition is a big problem with patients suffering from schizophrenia. In fact, the atypicals themselves can impair cognition. All right? And then, if you turn to the safety and side effects side of the equation, KarXT, at least in our EMERGENT-1, EMERGENT-2, and EMERGENT-3 program, is not associated with weight gain. And weight gain with a second-generation atypical, you're talking about 10... You're talking about 10%-30% of people having an increase of 10-15 pounds of weight on average, and so it's not an insignificant problem. We don't have EPS and akathisia, no sedation and somnolence, and so it's a fundamentally different benefit-risk profile, and it could, it could represent a real changing of the guard in the treatment of schizophrenia, whether the drug is used alone or in combination with atypicals so- Great, thank you. And then, you know, further on KarXT, if you could talk a little bit about the EMERGENT program. Yeah. and what are some of the notable advantages we've seen come out of this program, and what kind of impact it'll have for patients? Yeah, so the EMERGENT program consisted of basically 3 efficacy and safety studies: EMERGENT-1, EMERGENT-2, and EMERGENT-3. They were all 5-week studies, flexible dose, placebo-controlled. They were carbon copies of each other. And then we had EMERGENT-4 and EMERGENT-5, which were 2 long-term safety studies. The findings from EMERGENT-1, EMERGENT-2, and EMERGENT-3, which serve as the fundamental basis of efficacy and safety, were remarkably consistent. So just a few highlights. The effect on the PANSS scale, placebo-adjusted effect, was between 8 points and 11 points, all right? And if you look at other atypicals, you often see 4, 5, and 6. When you look at the responder rates, you had roughly 50% of people with at least a 30% reduction on the PANSS. Good number. If you look at the CGI-S, on average, 80% of people were markedly, markedly ill on the CGI-S scale. At the end of five weeks across the three studies, you had almost 40% of people who were mild or better on KarXT. So that was a pretty profound sort of effect. If you look at the effect size, another sort of analysis of the efficacy results, it was 0.6, 0.61, and 0.75, all right, for an average of 0.65. Most of the atypicals are in that 0.3-0.5 range. Then on safety and side effects, like I said, it was very, very clean. There are GI side effects given the pharmacology of the drug, that means nausea and vomiting in the mid-teens. Looks very much like an SSRI in that regard. I think the other thing I would comment on is only less than a handful of patients out of 340 discontinued due to GI side effects. They're characterized by the investigators as mild to moderate severity, transient, and generally a single episode. It's a very, very solid package, and then we'll release data from our long-term safety studies at the end of 2024. I expect those to be largely consistent with what we observed in the five-week studies. Okay. And touching a little bit on that, the long-term safety studies and your dialogue with the FDA- Yeah. Has the FDA communicated anything that they're looking for from these long-term safety studies that they would like included? Yeah in the final submission? Yeah, it's a pretty straightforward package. The design of the studies, the development program, and the regulatory path here is down the middle. All right? And there's nothing, from my viewpoint, that is anything controversial in our data package. And what they'll look at in the long-term safety studies, which include 30 different endpoints. Mm-hmm. Primary, secondary, exploratory, efficacy, and safety. So this is a very complete data package out to 52 weeks. There are over 500 patients in the studies. They'll look at efficacy endpoints, PANSS total, PANSS positive, PANSS negative, the Marder Factor 5, and they'll look at maintenance, in effect. They'll look at CGI-S. We also have a cognitive endpoint in the studies, and then in terms of safety and side effects, they'll look at all the sort of major adverse events, any serious AEs, which we don't expect to have any. And they'll look at things like glucose levels, lipid levels, among other things. They'll look at cardiovascular safety. Nothing inconsistent with what we've seen in EMERGENT-1, EMERGENT-2, and EMERGENT-3. And then importantly, there's 3 PROs, patient-reported outcomes, in the EMERGENT-4 and EMERGENT-5 studies. The SF-36, the EMA, which is the Ecological Momentary Assessment scale, and something called the PSP, Personal and Social Performance score, which are basically three PROs on activities of daily living and quality of life, which will be more relevant for publication purposes and the psychiatry community than the FDA. But it's a rich, it's a rich package. And look, the Clin Dev and Clin Ops team that ran this program did it exceptionally well. It was done on time, and the quality of the data that we produced is a function of KarXT and also a function of the way the studies were conducted. Great, okay. Moving into this idea of an adjunctive treatment, could you talk about, you know, what you think of KarXT in that kind of a setting? Yeah, and so if you listen to a pharmacologist at the Psych Congress, a couple, actually, a week ago, he stood up in front of 250 psychiatrists and talked about the fact that schizophrenia is a presynaptic condition. But psychiatrists have been treating it postsynaptically with D2 antagonists for nearly 50 years because there has never been a presynaptic approach. And so when you look at the way KarXT works, which is M1, M4 agonism presynaptically, and you look at the way a second-generation atypical works, which is mostly D2 antagonism postsynaptically, it would indicate that these compounds could be complementary and potentially additive. We have preclinical data where we took KarXT and added it to risperidone and Abilify in two animal models of schizophrenia. The CAR and the LAR, I think they're called, conditioned avoidance response model and the locomotor activity response model, I think. And you saw a synergistic effect. Now, it's our job to produce clinical data, and so we're running what's called the ARISE program, which is a 400-patient study designed to examine the effects of KarXT when added to a second-generation atypical in patients who are on a stable dose of their antipsychotic but have residual symptoms. It's your typical adjunctive treatment study. If you look at how the atypicals are used on top of SSRIs in depression today, 20% of the time in a non- or partial responder. We're going to take that model and move it over to schizophrenia. It's completely intuitive to psychiatrists to take one drug that works mechanistically, differently, and potentially complementary, and potentially additive, and add it to another. Mm-hmm. It's estimated roughly 30% of patients with schizophrenia are getting two D2 antagonists. Okay. You know, you really have to squint to see the differences between two D2 antagonists. They're there, but to be fair, they're subtle. But there is a need for polypharmacy, like in any category, but there's never been an adjunctive treatment option. In Alzheimer's, as another analog, roughly 35%-40% of the time, a drug called Namenda, which is an NMDA antagonist, is added to Aricept, which is an acetylcholinesterase inhibitor. And so if you think about the adjunctive treatment opportunity for a product like KarXT, it could be based on those two analogs between 20% and 40%. We would have a very large product if that, in fact, is what happens. The ARISE results will be out at the end of 2024. Okay. Yeah. Great. That's helpful. And thinking about the commercial launch and the preparation that's going into that, can you talk a little bit about the sales force that you're building- Yeah ... and kind of the size, the composition of that sales force, and any other details you think would be important to know about that? Yeah. There's two mistakes a company can make, whether it's a large company or a small company, when you're commercializing a product. The first one is overestimate its marketability, and the second is to underestimate the scale and the level of investment required. I say that because we won't make that mistake. Okay. So to cover the United States and all the patients that are of all the physicians that diagnose and treat schizophrenia, we'll need about 300-400 people to cover roughly 30,000-35,000 psychiatrists. No company has cracked the code on sales forces. There are digital techniques that you can use to provide information to healthcare providers and even to patients themselves, but nothing's proven more effective than actually sitting down with, you know, physicians and nurse practitioners and walking through the data. So the sales force will be in place. There'll be a large peer-to-peer educational program, where psychiatrists who studied the drug with us or considered sort of opinion leaders in the field, will share the results from our studies with other psychiatrists. Also a very effective, accurate, balanced, complete way to get your, your data to potential users of KarXT, and then there'll be a consumer component to it. And so the, the launch will be wired in the right way to maximize the value of KarXT. You know, as long as we make the right strategic decisions, and operationally, we, we execute it, it should be successful. And, you know, ultimately, what you try to do in a space like this is generate as much trial as you can. Share the information, and if the drug gets used, and the real-world experience with KarXT matches the research clinical trial experience, then there's a good chance this should be a very large class, even if it's not just KarXT, but a large class for psychiatrists and for, you know, patients and their caregivers. Totally makes sense. Yeah. Okay, and looking at the different prescribers- Yeah ... you know, the ones you're looking at, how many high-volume specialist prescribers are there, and what's kind of the approach of targeting them? Yeah, so that 30,000 number I gave you- Yeah ... are the- Oh, wow. Okay. They account for 80% of all the prescriptions written in the United States- Wow! ... for atypicals, for schizophrenia. And these numbers are public, but it depends on how you define it and, but you're looking at about 15-20 million prescriptions a year for atypicals, specifically for schizophrenia. Now, that number is over 2x if you think about all the prescriptions for atypicals being written for psychosis, and psychosis can include Alzheimer's, psychosis, or behavioral disturbances like agitation, autism, bipolar mania, even Parkinson's. There's a much larger psychosis market. Does not include the atypicals that are being written for bipolar depression and depression, which totals about 30 million. So it's a very large class of medications- Yeah ... but it's one class. Mm-hmm. You know, the anticipation in the psychiatry community right now is high. We have to get the drug approved. They have to have experience with it, and... But like I said, if it looks like what EMERGENT-1, EMERGENT-2, and EMERGENT-3 looks like, it should be a pretty important shift in schizophrenia. Great. Okay, and I did want to move to the Alzheimer's disease psychosis- Mm-hmm ... before we end in a few minutes. But could you just talk about, I guess, an overview first of the ADEPT program, some of the- Sure ... endpoints, the trial, things like that? Yeah, so there's two studies in our ADEPT program. ADEPT, well, there's three: ADEPT-1, 2, and 3. ADEPT-1 is a relapse—it's the relapse. It's a 38-week relapse prevention trial, and ADEPT-2 is a 12-week acute efficacy trial. And so we'll characterize the effect of the drug in Alzheimer's patients two different ways. Then we have an open-label extension for safety. The primary endpoint in the ADEPT program is the NPI, which is a standard endpoint to use to look at psychosis in patients with Alzheimer's. KarXT was discovered in an Alzheimer's study of cognition by Lilly. It was an over 300-patient study, and so there's proof of concept here. We also know that schizophrenia and Alzheimer's share many of the same characteristics, biochemically, brain regions, among other things. In fact, schizophrenia was once called premature dementia. Mm. All right? And we expect the results of the study in 2025... call it the second half of 2025. What's a little bit different about the ADEPT program relative to EMERGENT is we're using lower doses of both xanomeline and trospium, and the ratio between the two is, you know, also higher, and we have another two weeks of titration, and that's just to make sure. What we're solving for with the ADEPT program is not a signal of efficacy, because we, we have some data that it's gonna work. It's to make sure that we achieve a tolerability profile that is acceptable. And look, there's no products approved for Alzheimer's psychosis. A product from Otsuka called Rexulti just got approved for agitation. There's a lot of overlap. But one of the things that I think is relevant for KarXT is we know the drug is pro-cognitive. In fact, it was shown to improve cognition in an Alzheimer's study, and we've seen it in our schizophrenia program, multiple exploratory analyses. We have to do a dedicated cognition study to have a claim, but we know there's a pro-cognitive effect. We expect it to work on psychosis, and there's so much overlap with agitation that this could be an option for psychiatrists where you have cognition, psychosis, and agitation in one compound. Rexulti is a very effective drug, but it's an antipsychotic, doesn't have pro-cognitive benefits. They got the agitation claim, probably also works in psychosis, but with no other treatments approved, the Alzheimer's opportunity for KarXT may be not as large as schizophrenia, but could be. Okay. You know, the number of prescriptions being written by psychiatrists 65 and older for psychosis is remarkable. It's a very large category. And the benefit risk, when you look at safety and side effects, it's just a better option. That's not to sort of disparage a class of drugs that's made a big difference for many, many people, but KarXT is a better option, so I'm optimistic about the program. Absolutely. And just the last thing on that program, wanted to touch on the safety profile in elderly patients. You know, what you think is needed there and what you're seeing, and do you think that the FDA might want some long-term follow-up, where they're looking for falls or anything else that would kind of help de-risk the profile moving forward? Yeah, they'll look for all those, those things. In fact, we'll collect that in the open label extension. You know, in terms of safety and side effects, what we're really focused on is just managing the GI effects. Okay. We don't expect problems with syncope or falls or cardiovascular safety. We'll investigate all that, but we have, you know, over 1,500 exposures with KarXT right now. We, of course, have the safety data that was produced from the Lilly trial, and so we believe we have a benefit risk will be the profile that'll be acceptable to the regulators, as well as to psychiatrists and their patients. Great. Okay, and just to kind of finish us off here, if you could recap what we're gonna see in the next year- Mm-hmm. and highlight... There's a lot to talk about. Mm-hmm. So we didn't get to everything. Yeah. But, you know, highlight anything else you think would be impactful to think about in terms of additional indications or whatever you think. Yeah. So some of this will be shared probably at another investor conference in January. But first, we have the submission at the end of the month. We expect to receive an acceptance, which would be 60 days later. Those will be important announcements. We have the results from our ABPM study, which I expect will be positive, which will be available in the fourth quarter of 2023. And then, during the review period, there's a couple different milestones. Of course, our 1-day, 120-day safety update, which we're already getting ready for. I don't think there's anything problematic there. We do have the results from the ARISE trial at the end of the year, which will be important. We have additional clinical development work that we are contemplating now that we could be ready to share with, you know, the outside world, in early 2024 around KarXT. And then, like I said, we have two early-stage programs. One is a muscarinic receptor modulator that we could be taking to the clinic, which we would probably announce in 2024. And the TRPC4/5, we hope to take into a phase I B study, which would be mostly for safety and side effects, but also we'll collect some efficacy endpoints in depression. And so I'd say that's, that's enough for a company like Karuna right now. You got a lot coming up. Yeah. Yeah. Yeah. Well, Bill, thank you so much for joining today. Really appreciate it, and thanks to all of you investors in the room, and to those watching online, really appreciate your attendance as well. Thanks.