Great. Good afternoon, everyone. I'm Salveen Richter, a Biotechnology Analyst at Goldman Sachs, and we're really pleased to have Karuna here with us. We have Bill Meury, Chief Executive Officer. With that, Bill, you joined Karuna as CEO early this year, I believe. That's right. Formerly. What have you learned and have you implemented, you know, any changes in strategy as you think about this transition. Sure. A commercial story? Yeah, I think, I don't think about it as what I've, what I've sort of changed or, or even learned. I think what I came to appreciate a little bit more about the company and about the product, namely, KarXT, is first, the utility of this as an adjunctive treatment, I think is a, an important value driver. I think it's important to the medical community. I think it'll be important to the company. I think that the pro-cognitive benefit, which has really started to come into focus, most recently with the exploratory analyses that we presented a few weeks ago, requires additional clinical work. I think the overall opportunity in Alzheimer's is very, very important. In terms of transitioning the company, I certainly can add a bit there. We're an R&D organization today, pre-revenue, in about 12 months. We'll have, hopefully, revenue, earnings, and cash flow at some point in the, in the future, and we'll be an integrated R&D and commercial organization. To do that successfully, it's about putting the right people in place and the structure, process, and systems to execute. There was a really good foundation when I got into the company. I think that the clin dev, clin ops team for an emerging biopharma company is exceptional, and I think their track record shows that. The discovery capability inside the company, which doesn't get a great deal of attention now, it's not a $1 billion or $2 billion operation, but it's got big pharma expertise. There's a lot of experienced drug discovery professionals in our operation. Lastly, we have a great CMC group, and you only talk about CMC when something goes wrong, and the person who runs our CMC operation is a true professional. So, everything I've sort of learned has been positive. Now the program, I think, from a development and regulatory perspective, is starting to get very de-risked. This is gonna become a commercial story in about a year. Right. Jumping to your assets. Your lead asset, KarXT, is being developed across varied neuropsychiatric indications. Before we dive into the programs, what is your long-term strategy with regard to not only this asset, but new formulations, as well as the pipeline, including, I think, a newly acquired asset? The first-order priority is to maximize the core, and that is to be successful with KarXT in schizophrenia and Alzheimer's psychosis. That is the most important path to value creation. We've gone a long way with the entire EMERGENT program. I do think the blockbuster thesis around KarXT and those two indications, while not guaranteed, can be supported by all the facts. I think the shift that we could affect in schizophrenia is pretty profound. I think about, you know, shifts in other categories that would represent analogs. For example, when the TCAs went to the SSRIs, or when the SSRIs went in part to the SNRIs, or most recently, when the triptans went to the CGRPs. The differences between those classes and their originators are not as pronounced as the differences that exist between KarXT and the atypicals in schizophrenia, so we have to focus there. I think the adjunctive indication is gonna be an important part of that equation. The next priority is to expand the core and to look at the utility of KarXT beyond schizophrenia and Alzheimer's psychosis. There are a number of other different conditions, whether it be related to psychosis or behavioral disturbances, agitation or aggression, where KarXT could have clinical benefit and commercial potential, for example, in autism or even in mania. I think those would be ways to go sort of beyond the core. Next is to go beyond psychosis altogether and sort of transcend the core, if you want to say, which is to look at mood, anxiety, neuropathic pain, and migraine. As you know, we purchased a TRPC4 inhibitor at the beginning of the year, and that should come into focus at the end of the year, where we could announce plans if we're successful with some of the work we're doing right now to take that into the clinic. That would move Karuna into that mood, anxiety, pain sector. You know, when you look up in five years, you want to see a fairly broad and deep product line in psychiatry and neurology, and operating across areas like schizophrenia, Alzheimer's, mood, anxiety, and pain. We have the capabilities, and we have the financial resources to do this. We just have to make the right decisions and then bridge the gap between a blueprint or a plan and an execution. That's how I would think about the next four or five years. Just given you're a post-phase III company at this point, with an asset that's going after, you know, a large chronic addressable market with an unmet need, you've got first in class, best in class here. How do you think about yourself as an M&A target with regard to what you need to do for shareholders, and in the context there as well, balancing that with what that value proposition could be with regard to this whole, you know, pipeline of products? Sure. It's a good question. I get asked a lot. Look, it's of course, an outcome and not a strategy. We have to focus on what we can control. What we control is what we just talked about. We have an asset that clearly has the potential to be one of the larger product launches in biopharma, and certainly in CNS or in neuroscience in 2020 to 2024 and 2025. As I mentioned, we have all the capabilities that we need to do this, even though we're an emerging biopharma company, and we have the balance sheet. My focus is on a standalone situation. I know how those processes work. I've been through them, but the best way for us to create value is to focus on the standalone and focus on what's in front of us. Just remind us how strong the IP is around KarXT? Sure. We have, you know, really, I think it's three patent families, but two patent families matter. We have IP going out to 2039. The IP covers the combination. It covers dosage forms, dosage strengths, dosage ratios, pharmacokinetics, among other things. Every strategic and operational decision that we're making is with an eye towards 2039. The lack of a composition of matter in the context of this is fine. You think it's able to be protected? Yeah, look, I've talked to a number of different patent firms and looked very carefully at this before I even joined the company. While that is true, I believe the protection we have out to 2039 is very solid. Great. Jumping into the potential for approval here and launch, help us understand the outlook here for commercialization for KarXT and frame the launch in the context of what's played out with other neuropsychiatric launches, including schizophrenia, psychosis. I believe you previously talked, as you just did, about how this could become what SSRIs did for depression. How do you kind of create that? Yeah, I mean, if you think about new classes in neuroscience that had a profound impact on the market, I'll take just the SNRIs, for example. Yeah. You know, the differences between an SNRI and an SSRI are, I could argue, pretty modest, despite the fact they got 30% of the total SRI category. This launch, strategically, operationally, and from a financial standpoint, is gonna be wired to be a big launch. There'll be a large sales organization that adequately covers the United States, probably 300 or 400 people. We'll have a large peer-to-peer program in place. There'll, of course, be some consumer education or promotion, and I think we'll make all the right decisions as it relates to payers. We have a very experienced team in place that has a lot of experience in neuroscience. I've worked with many of them. You know, we're trying to effect a changing the guard in schizophrenia. It's rare that in an area like this, psychiatrists are dealing with one drug class. They have one option. If you look again at depression, there are eight different classes of drugs. If we do this right, and we create a new class within schizophrenia, it will be as important as the launches that the different classes that you and I were just talking about. Just globally, are you looking to partner some of the geographies? We're gonna need regulatory development and commercial capabilities to secure approval and launch KarXT outside the United States, focused largely on the EU and Japan. Ideally, that would be one partner, and I think that those discussions will start to come into focus as we get into 2024. How important is education as a lever with regard to this launch? Do you think the physicians are aware and will be early adopters, or do you have to go out and kind of explain how to think about the benefits here? Yeah, it's a good question. A company can... A large company or a small company can make two fatal mistakes when launching a product: underestimate the inertia in the market and overestimate the marketability of your product. We're not gonna do that. I think that anticipation for KarXT and for an M1/M4 that bypasses the D2 receptor and still, you know, reduces dopaminergic signaling and treats the symptoms of schizophrenia, is highly anticipated. The psychiatry community is really looking to get their hands, essentially, on KarXT. That being said, it's a new class, there will be a very large educational effort. We have the support, I think, of many of the top psychiatrists in the United States because the data set from the EMERGENT - 1, -2, -3, -4, and -5 program is very impressive. I mean, the benefit-risk profile, both in terms of efficacy and safety, is fundamentally different. While there are no head-to-head studies between KarXT and the D2 antagonist, you can really see a different profile when you look at our EMERGENT data. I think the other intriguing part of the profile, and you hear this from psychiatrists, is, one, it could be used adjunctively. The drugs are mechanistically different and should be complementary and additive, and we have a little bit more work to do there. And they're also very intrigued, as I mentioned at the beginning, at the pro-cognitive effects of KarXT. Here, again, more work is needed. Whether you look at our preclinical data, the clinical data that we've produced from EMERGENT-1, -2, and -3, and additional cognition data that we'll pull out of our EMERGENT-5 program, our ADEPT program, as well as our ARISE study, there is definitely evidence that we should do more work there, and this drug could have a benefit that the other atypicals don't. If you look at the labels of the other atypicals, there's warnings and precautions for cognitive impairment, much less cognitive improvement. That's why the psychiatry community is so interested. Back to your question, a lot of education is required, so we get it right, and we shouldn't underestimate how much is required here. ... Any initial thoughts on pricing? Look, there's a pricing category in the atypical market, and I think that we can strike the right balance and set a price that makes sense for Karuna and makes sense for the healthcare system. You know, I always remind people that these products for serious mental illnesses, relatively speaking, are economical. You're not talking about a biologic or a gene therapy that could cost $100,000, $200,000, $300,000 a year, where it's harder to figure out the calculation of what's acceptable. In serious mental illness, they're relatively economical. We're going to set a price that is sensible so that we create access for psychiatrists and for patients, and we won't raise the ceiling or drop the floor. I think we'll pick a price point that makes sense. You know, there's still a balanced conversation happening between health plans or the payers and manufacturers in mental health, and that's because success rates with these drugs are relatively low and failure rates are high. Even the payers know that more options, not fewer options, are needed, and I think we'll find ourselves in a corridor that makes sense. On the regulatory side, you had a pre-NDA meeting. Yeah. with the FDA in April. I don't know if you can share anything on kind of the what items you may need to kind of provide, or whether you're just kind of all set with everything that you've laid out. Yeah, no, I can speak to that. We're past in the NDA preparation process. We're past collecting data. We have all the data. In fact, we've completed our EMERGENT-5 program, which will be an important part of our long-term safety package. We're now sort of cleaning data, analyzing it, and writing that up for the NDA. The pre-NDA meeting that you talked about was very constructive. We talked about our data submission plan, we talked about our statistical analysis plan for the ISS and the ISE, and covered a number of other procedural matters. I would say that we're on the same page as it relates to the FDA and how they see the package. As good and as constructive as it could be, we expect to submit the NDA at the end of the third quarter in 2023. Assuming a standard review, we would have an approval in the second half of 2024. It's really operational at this point. We have a large team in place. They're working very hard. It's a big undertaking for a large company as well as a small company. It's good to be at a place where we're no longer worried about collecting data. We're now just putting it all together into the package. You initiated a phase I-B trial looking at blood pressure. That's right. Like a 24-hour ambulatory blood pressure monitoring study in adults with schizophrenia. Help us understand, or just remind us really, what the reasons were behind this. Was it in any way required by the FDA? Do you think you need it for commercialization? How much of a risk is this that. Yeah ... something could pop up that we haven't seen before? Couple of things. First, it's essentially a phase I-B study, it will be supplemental. It's not essential to the fundamental assessment of efficacy and safety. It wasn't required by the FDA, it wasn't required for submission. We did it because it's a more definitive way to describe the lack of effect on blood pressure over time. If you look at the vital signs data from our EMERGENT-1, -2, and -3 program, you don't see a change in blood pressure from baseline to week five. All right? The information here I think will strengthen the label. We did it because thinking in terms of the regulatory authorities or even in terms of drug development, is evolving as it relates to how to adequately assess blood pressure. In clinical studies, it's a single blood pressure measurement, and our study was a single measurement at Cmax, or two hours post-dose. In an ambulatory blood pressure monitoring study, you're looking at blood pressure at baseline, and at the end of the study, you know, every 30 minutes over a 24-hour period. It's a much more accurate way to get a sense of the lack of effect on blood pressure. We're launching a new class of drugs, and we have an excellent benefit-risk profile based on the data from EMERGENT, and this is just going to supplement that. I don't see, I shouldn't say any risk, but this seemed like a very logical decision for us to make and should not impact the timing or the approval. Just remind us how and at what stage of the regulatory filing do you want to kind of integrate this with your current database that you would have filed on? Yeah, it's a good question. We'll provide data from the ABPM study at the day 120 update. That was part of our discussions with the FDA. It seemed like a reasonable proposal, it shouldn't impact timing, shouldn't be considered a major amendment. Obviously, everything is subject to review, but we feel like we have a good plan and it seems like the FDA is on the same page. You have two studies. You talked about EMERGENT-5. You have EMERGENT-4 as well, designed to capture safety events. That's right. What length of follow-up did the FDA require here for the package? Yes. In total, when you look at our entire package, we need 1,500 exposures. We need 300 at six months and 100 at one year. We will have all those safety exposures as whether at submission or at day 120. It's a pretty standard package. Um, jumping back- Yeah ... to commercialization and how you could differentiate this asset from what's out there. You know, most current atypical antipsychotics cause a cognitive impairment, right? Cause cognitive impairment. Your drug not only doesn't cause that, but may have a benefit in the context of the data you presented recently. Can you just speak to how important that data was and how, even if you can't include it in the label, you can use it to educate physicians here with you? Yeah, look, it's a cardinal feature of the disease, you know, cognition. It's a predictor of long-term functional outcomes. There's no FDA-approved treatment right now, and as you know, the currently available atypicals, and it's in the labels for most of these atypicals, potentially impairs cognition. If you step back for a minute and look at the totality of the data that we have, the drug was discovered in an Alzheimer's cognition study, where a cognitive benefit and an antipsychotic effect was observed. We have preclinical data that's very convincing as it relates to its effect on cognition, mediated mostly by the M1, but also the M4 receptor. Now we have data from the all three efficacy and safety trials, EMERGENT -1, EMERGENT -2, and EMERGENT -3. There's a signal here. There's a couple different options as it relates to further characterizing the procognitive effect of KarXT. It could be, on one end, as simple as an IIT study. It could be, on the other side of the spectrum, a full registration program. There's something in the middle, which could be a proof of concept or a phase II-A type study. I think we'll walk before we run here. The scientific interest in this is high enough. The evidence we have produced so far is very encouraging. I think it's important for us to do additional clinical work. I do think it matters a great deal to psychiatrists. We can't promote the data unless we secure an indication where it's somehow captured in our label, which would be subject to discussions with the FDA. Even having this data available for the psychiatry community, given the unmet need, I think is very important. We're talking to our own scientific advisors right now, and I would expect in 2024 that we're gonna be doing something. If it eventually turns into a registration program, we still have that option, but we're gonna do a little bit more work before we do that. If you did run a trial, would it be a much broader, like, cognitive study that would incorporate more than schizophrenia psychosis, and you'd look across some of the neuropsychiatric disorders? Or how would you even frame that? In terms of [audio distortion]. We'd probably enroll patients who were cognitively impaired at baseline. you know, the exploratory analysis that we did in the EMERGENT program, we carved out those patients who were cognitively impaired, which I guess was defined as one standard deviation below normal, healthy volunteer, age-matched volunteers. And roughly 45% of the patients in our studies had cognitive impairment. We showed, I think it was a Cohen's d effect size of about 0.5. There's a real signal here. We probably would do something dedicated in schizophrenia and in cognitively impaired patients and not complicate the picture too much. Seems to me that will be very instructive to the psychiatry community. We want to go do a next-level study, then we'll make that decision at the time. Got it. just speak to your confidence that this is M1-mediated- Mm-hmm. versus, you know, coming from the M4 aspect. I think the preclinical data in the literature is pretty convincing about the role that M1 plays in mediating cognition. I'm not aware of any solid evidence that a great deal could be contributed to M4, and that literature dates back, you know, many, many years. The broader pharmacology of KarXT, M1 and M4 agonism, I think, contributes to broader efficacy, and it's hard to know what you get from just an M4 at this point. Also, looking at the drug, as adjunctive therapy on top of baseline antipsychotic and the phase III ARISE trial, can you just remind us what you've seen here? When we should expect that... That data set, I think, is second half 2024, but what should we be looking for in that upcoming read? Yeah. The ARISE trial has all the same features as the entire EMERGENT program, so it's de-risked in that regard. You know, the doses are similar, the endpoints are the same, the basic design of the study is the same. What's different is that patients are on background therapy, so they're on a D2 antagonist, and there's a five-week screening period so that we select the right patients, and then, the six-week, you know, double-blind treatment, where we add KarXT to one of the atypicals. You're looking for an effect size that's roughly half what we observed in the EMERGENT program, and it's powered to show about a four to five-point change on the PANSS. It would be an important study. You know, adjunctive treatments are used, for example, in depression, if someone is an inadequate responder to an SSRI, 1 to 3 courses of an SSRI, 20% of the time, they'll get an atypical. If you take a look at Alzheimer's, for example, where there's an approved adjunctive treatment, Namenda, 30%-40% of the time, Namenda is added to Aricept. If you look at those two analogs, if we had roughly 30% of patients who were inadequate responders to a D2 antagonist receive KarXT, it would be a pretty fundamental change in the medical community, and it would be commercially, you know, a very important achievement for Karuna. Most therapeutic areas have multiple drug classes that are mechanistically different, complementary, and additive, and that's essentially the change that we're trying to affect right here. I think psychiatrists are anticipating that these drugs can be used in combination. In fact, 30% of patients today are getting two D2 antagonists. There is a non-fixed combination market, despite the fact that mechanistically, these drugs, to be fair, are more similar than different. I think it speaks to the need either to deal with, you know, inadequate or partial efficacy. Psychiatrists will probably take two approaches. One is to add KarXT to a D2 antagonist to get greater efficacy, or add it to a D2, reduce the foundational therapy to relieve some of the side effect burden while preserving efficacy. We're anxious to get this study completed, and I do think it's an important sort of value driver for the product. Can you remind us, with the initial approval, kind of what market you address in terms of number of patients or the sales opportunity and how it increases with the adjunctive? Yeah, it's a good question. KarXT will be used in three clinical situations: new patients, it'll be a switching destination for patients who are only partially responding, and potentially add-on. Psychiatrists have some flexibility to use the drug that way. We, of course, won't promote it that way. There are about 15 million-20 million prescriptions being written in the United States for atypicals, specifically for schizophrenia, and there's probably a couple million patients. All of them will be eligible for KarXT, that, of course, will be a decision for psychiatrists of where in the treatment sort of algorithm are they going to place KarXT. I think the adjunctive treatment opportunity, you layer on top of that. You know, a successful adjunctive treatment that has a good benefit-risk profile and that's widely adopted by a medical community could get 20% to 30% of those patients. We of course, need to get the data from ARISE, but I think those are the two opportunities for how KarXT will be used. Just remind us the reason behind the delay in enrollment here in the trial and whether everything's- Yeah ... you know, good to go there and it's on track at this point. Yeah, we had to, you know, the unique aspect of ARISE is finding the right patients because we have to select the right ones 'cause we're adding it to an active medication. We wanted to add more sites to the study. We have roughly 30 sites in the U.S., roughly 20 sites outside the U.S. It takes some time to activate those sites. You have to be smart about enrollment in terms of who you're including in the study. Here, quality is just as important as speed. We needed a little bit more time to execute the program. I will tell you, the group that's running this ARISE program is the exact same group that ran the EMERGENT program. They ran that very, very effectively. While we added six months to the timeline, we should have the data by the end of the year, which would be end of 2024, which means we'd have some data, at least in the public domain and in the literature, at the time of the launch. Is there any concern about hypertension from a safety perspective in this trial? Remind us what the FDA has guided to, as to whether you need just one study or you need two trials to get the-? Yeah, it's a good question. As it relates to sort of blood pressure, no, because when we look at our own EMERGENT program, as you know, we don't see a sustained effect on blood pressure. Mechanistically, there's no reason to believe that there's going to be any issue with the drugs interacting. We've, of course, consulted with the FDA and looked at precedents for the trial. We do think one study is going to be enough. We're basically studying the same population that we studied in EMERGENT-1, -2, and -3. It's just now an add-on. There is precedence for one study to secure an indication for an adjunctive treatment claim. Yeah. Moving to Alzheimer's. Mm-hmm ... disease psychosis, 'cause you do have a pretty broad phase III program here. I guess with regard to your dialogue with the FDA, is your clinical program that you have right now set for a regulatory path here towards approval? or do you think you need to look to further engage here on that pivotal path? No, we've consulted with regulatory authorities. Here again, there's a lot of precedent for essentially an acute efficacy study, as well as a randomized withdrawal study, which is what we have in place. They're sort of the inverse of each other. In ADEPT-1, which is the randomized withdrawal, there's 12 weeks of open label and then 26 weeks of double-blind treatment. Then in ADEPT-2, there's 12 weeks of double-blind treatment and an open label. It's almost the flip side of the same coin, and there's precedent there. No worries about whether those two studies would be sufficient to establish efficacy and safety and secure approval. It may, in fact, be the case we need one study, but we have two studies. They get to the same objective, which is to establish that KarXT has a clinically meaningful benefit in Alzheimer's psychosis, using a well-established endpoint, which is the NPI. I feel like from a regulatory perspective, it's a very de-risked program. Of course, KarXT was discovered in an Alzheimer's study, where it was shown to have an antipsychotic effect. Look, I think the Alzheimer's opportunity for KarXT is very, very meaningful. That market or the number of patients is as large as schizophrenia. There's no FDA-approved products for Alzheimer's psychosis. Of course, Rexulti just received an approval for agitation. In our ADEPT program, we will be looking at psychosis. We will also be looking at agitation and aggression as a secondary or exploratory. We'll also be looking at cognition. We have an opportunity in Alzheimer's to create a dataset on psychosis, agitation, aggression, cognition, and as it relates to benefit risk, it's very compelling relative to the currently available atypicals. If you go back to the beginning, we think about the core of our company, schizophrenia on one side and Alzheimer's on the other. The ADEPT program and any additional work we do is gonna get a great deal of attention. Can you speak to where the risk comes from in this ADEPT trial versus schizophrenia psychosis? Your dose titrating, you're changing the dose regimen. You know, it is a different population. Just speak to how you're thinking about the risk aspects of this. Yeah, in turn... Listen, we did a lot of phase I work and also learned a great deal from the study that Lilly had done. What's different about the ADEPT program as it relates to doses, the doses for xanomeline are a little bit lower, but the blood levels in the elderly are comparable to the blood levels needed to show a therapeutic effect. The trospium dose is a little bit lower, and the ratio is different between xanomeline and trospium. We also have a broader range from 90 to 200, and we have a longer titration. Those four steps, measures were taken to achieve efficacy and maintain a favorable tolerability profile, which is essentially what didn't happen in the Lilly study, which is a clear antipsychotic benefit was observed, but it was not well tolerated. I think the things that we're doing here, make a great deal of sense, and there'll be maybe a little bit more dosing flexibility with the Alzheimer's indication, but I think it's de-risked from that perspective. Great. Yeah. Well, let me open it up to the audience for any questions. I think there's a question here in the front. Thank you. Think about developing the [adjunct of trial] with ARISE. Are there any specific learnings that you're taking from the EMERGENT program? You know, it's, ARISE is very similar to EMERGENT with, as it relates to the endpoint and roughly the duration. One of the things that we did do in the ARISE program is to add a titration step. We've lengthened titration a little bit, which could help. Mm-hmm. Other than that, it's almost a carbon copy of EMERGENT -1, -2, and -3, or excuse me, -1 and, yeah, -1, -2, and -3. Great. Well, with that. Okay. Thank you so much, Bill. Thanks, Salveen. Really appreciate it. Good to see you. to see you. Thank you very much. Good to see you. see you. Thank you. Good to see you.