Karuna Pharma Closes on $42 Million Series A

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Boston-based biotech company Karuna Pharmaceuticals completed a $42 million Series A financing. The round included the issuance of $22 million in shares upon conversion of debt into equity. ARCH Venture Partners, the Wellcome Trust, Steven Paul, PureTech Health and other undisclosed investors participated.

Karuna is a clinical-stage company focused on muscarinic cholinergic receptors to treat psychosis and cognitive impairment in numerous central nervous system (CNS) disorders, including schizophrenia and Alzheimer’s disease, in addition to neuropathic pain.

The funds will be used to advance the company’s lead product candidate KarXT (Karuna-xanomeline-trospium chloride). It plans to launch a Phase II trial in patients with schizophrenia in the third quarter of this year and also expand into other indications, including non-opiate pain.

It is completing a second Phase I trial with a proprietary co-formulation of xanomeline, a muscarinic agonist the company exclusively licensed from Eli Lilly. It has shown efficacy in patients with schizophrenia and Alzheimer’s disease, but had peripheral cholinergic side effects. It is combined with trospium chloride, a muscarinic antagonist that works only outside the brain and central nervous system.

KarXT is engineered to improve tolerability and “unlock the potential of muscarinic cholinergic receptor agonists” that target M1/M4 muscarinic cholinergic receptors in the brain. It is also designed to block their activation in tissues other than the brain.

In the Phase I trial, it has shown a significant and clinically meaningful decrease in pre-specific cholinergic side effects with KarXT compared to xanomeline alone. The company presented data in May 2017 at The Society of Biological Psychiatry’s (SOBP) 72nd Annual Scientific Program and Convention and The American Society of Clinical Psychopharmacology (ASCP) Annual Meeting. The data presented then built on topline data that had been announced in December 2016, which provided proof-of-concept that KarXT improves the tolerability of xanomeline. In the trial, KarXT reduced the incidence of prespecified cholinergic side effects by a statistically significant and clinical meaning extent of 46 percent compared to xanomeline alone. In addition, each individual cholinergic adverse event was observed at a lower rate in the KarXT treatment arm. The cholinergic side effect rate was similar to placebo during the lead-in period.

“Karuna has all of the characteristics we look for in a game-changing CNS company,” said Robert Nelsen, co-founder and managing director of ARCH Venture Partners, in a statement. “Its lead drug candidate has a unique mechanism of action for treating both psychosis and cognition, as well as an exciting non-opiate application for pain. These are therapeutic indications where there is a profound need for new treatments. We are excited about the clinical data that have already been generated, and we look forward to help to drive the next chapter of growth.”

In mid-June, Karuna was awarded about $8 million by the Wellcome Trust, which is being used to continue advancing KarXT into Phase II. Wellcome had already awarded Karuna $3.8 million to fund the Phase I study. Both awards were structured as unsecured convertible loans.

The global charitable foundation is based in the U.K. At the time, Lynsey Bilsland, from Wellcome’s Innovations team, stated, “Karuna’s treatment candidate has the potential to have a significant impact on patients affected by schizophrenia and other psychotic disorders. Research in this important area has long been under-resourced, and doctors and patients currently rely on treatments which have existed for decades. Wellcome is committed to supporting the innovation vital to developing global understanding and treatment of mental illness and improving life for patients affected.”


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