Karuna Therapeutic IPO to Raise $89.2 Million for Neuropsychiatric Drug Development
Boston-based Karuna Pharmaceuticals originally filed for its IPO in April and began trading today. It is trading on the Nasdaq under the ticker symbol KRTX. On June 17, it set its pricing between $15 and $17 per share to raise $74.4 million.
The company is working on developing therapies for neuropsychiatric diseases. Karuna is expecting data from a Phase II clinical trial later this year of KarXT xanomeline/trospium chloride, a muscarinic receptor modulator, to treat acute psychosis associated with schizophrenia.
It also plans to finish its Phase Ib trials in schizophrenia and a Phase Ib and Phase II trial for psychosis in Alzheimer’s disease, complete a planned Phase Ib trial and complete a Phase II trial for pain, and develop its pipeline.
In its latest filing, the company stated, “We intend to use the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments, to fund the completion of our ongoing Phase II clinical trial and the completion of a planned Phase III clinical trial for the treatment of psychosis in schizophrenia.”
On April 1, the company reported it had raised an additional $12 million on an extension of its Series B financing which had been announced in March. This addition brought the total Series B financing round to $80 million. The new investment came from Sofinnova Investments, joining the initial Series B participants, ARCH Venture Partners, Fidelity Management & Research Company, Eventide Asset Management, Pivotal bioVenture Partners, Partner Fund Management, Wellcome Trust, Sands Capital, Alexandria Venture Investments, and founder PureTech Health.
“We are grateful for the support of all our investors who share our commitment to developing and delivering novel therapies to patients with disabling neuropsychiatric disorders,” stated Steve Paul, Karuna’s chairman and chief executive officer, at the time. “The significant funding of Karuna’s Series B will allow our team to further explore KarXT’s therapeutic benefit in new indications outside of our ongoing Phase II clinical trial for the treatment of acute psychosis in patients with schizophrenia, including geriatric psychosis and pain and advance development of novel KarXT formulations and our early stage discovery pipeline.”
KarXT is made of xanomeline, a novel muscarinic cholinergic receptor agonist that has shown therapeutic benefits in human trials of schizophrenia and Alzheimer’s disease, and trospium chloride. Trospium chloride is an FDA-approved muscarinic receptor antagonist that can enter the central nervous system.
KarXT was developed to preferentially target and stimulate M1/M4 muscarinic receptors in the brain while inhibiting their stimulation in peripheral tissues to improve tolerability.
In the three-month period ending March 2019, Karuna reported a pretax loss of $12 million. For 2018, it reported a pretax loss of $17.51 million.
Current antipsychotic treatments leverage the same mechanism of action as they did when first discovered in the 1950s, inhibiting D2 dopamine receptors. They are used to address a broad range of neuropsychiatric disorders, such as schizophrenia, bipolar disorder, psychotic depression, psychosis and agitation in dementia patients.
In the 1990s, muscarinic receptor agonists emerged as a promising approach to treatment of psychosis and cognitive impairment. These receptors bind the neurotransmitter acetylcholine, and there are five distinct muscarinic receptors found in the brain and peripheral tissues. Karuna’s approach focuses on targeting and stimulating muscarinic receptors in the CNS, but not in peripheral tissues, with preferential stimulation of the M1 and M4 muscarinic receptors believed to deal with the negative symptoms of schizophrenia, such as apathy, reduced social drive and motivation loss, as well as cognitive problems in memory and attention.