Karuna Therapeutics, Inc. (NASDAQ:KRTX) Q3 2023 Earnings Call Transcript

Karuna Therapeutics, Inc. (NASDAQ:KRTX) Q3 2023 Earnings Call Transcript November 5, 2023

Operator: Welcome to the Karuna Therapeutics Third Quarter 2023 Financial Results Conference Call. All participants are in a listen-only mode. Please note, this call is being recorded. I will now turn the call over to Alexis Smith, Head of Corporate Affairs and Investor Relations.

Alexis Smith : Good morning, everyone, and thank you for joining the third quarter 2023 Financial Results Conference Call. I’m joined today by Bill Meury, President and Chief Executive Officer; and Jason Brown, Chief Financial Officer, who will begin our call prepared remarks. Andrew Miller, Founder and Chief Operating Officer; and Will Kane, Chief Commercial Officer, will join Bill and Jason for the Q&A portion of our call. Before we begin, I encourage everyone to visit the Investors page of our website at investors.karunatx.com to find our press release and presentation related to today’s call. Forward-looking statements related to our product development, regulatory and commercialization plans, our research activities and financial outlook may be presented during this call.

Please refer to today’s press release and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. And with that, I’ll hand it over to Bill.

Bill Meury : Thanks, Alexis. Good morning, everyone. I want to begin by thanking our R&D team and our external partners on a high-quality and timely NDA submission for KarXT for the treatment of schizophrenia. The team worked many long days and weekends over the past several months to write and submit our NDA. It was a major achievement for Karuna and represents the culmination of years of preclinical, clinical, CMC and regulatory work on KarXT detailed across several hundred thousand pages of information. Now the submission of course is just the first step in the NDA review process. There are several other important milestones and activities ahead including top line-data from the Phase 1b ABPM trial this month. We expect to hear back from the FDA on their filing decision later this month as well and we’re already preparing information for our day 120 safety update and site inspections among other things.

As we’ve talked about, we expect the standard review and therefore, a potential approval and launch in the second half of next year. As you know, the treatment of schizophrenia has been served by one class of medication for over 30 years and the potential approval of KarXT would change that for patients and their physicians. And I continue to believe this could be one of the most important product launches in biopharma in 2024-25. In terms of the prelaunch activities, they remain on track. We have the capabilities and the funding needed to optimize this program. We’ve built out our managed care access and MSL teams, we’re focused primarily on pre-approval scientific exchange meetings with payers, which started several weeks ago and on responding to medical information requests from psychiatrists and nurse practitioners.

Interest and anticipation for KarXT is very high in the community right now and we’ll continue to build over the next several quarters. Additionally, we have and will continue to present and publish new data from our emerging program this year and next year. Last month, we presented data from EMERGENT-3 at the European College of Neuropsychopharmacology meeting that highlighted KarXT’s differentiated tolerability profile demonstrated in the trial and potential to provide clinically meaningful symptom relief. The data includes new analysis on PANSS responders, which was the final prespecified secondary endpoint in the trial, and EMERGENT-3, nearly 60% of patients receiving KarXT achieved a 20% reduction of pain symptoms by week five at the end of the trial.

We also shared data on the PANSS motor symptom domain, including the PANSS Marder positive, disorganized thoughts, uncontrolled hostility, excitement and anxiety depression factors, where KarXT demonstrated statistically significant improvements from baseline to week five compared to placebo. On safety, we provided additional data to characterize the adverse events associated with KarXT and EMERGENT-3 were consistent with EMERGENT-1 and 2, the most common treatment-emergent adverse events were GI in nature, primarily occurred within the first two weeks of treatment, mild in severity and transient over time. Looking ahead, we’ll be sharing pooled efficacy and safety analysis from the EMERGENT-1, 2 and 3 trials as well as additional analysis on negative symptoms and adverse events at NEI in Colorado Springs and CNS Summit in Boston this month.

On the commercial front, preparations for the anticipated launch are on track too, including market research, sales force sizing and deployment and our peer-to-peer and consumer outreach programs. We have a team of people with a great deal of new product launch experience in neuroscience. They know what works and what doesn’t and are carefully evaluating all strategic and operational decisions to support the launch. Equally important to our regulatory achievements and pre-commercialization work for KarXT is the continued execution of our ongoing Phase 3 program, ARISE and ADEPT, which we believe reinforce the value proposition of KarXT as a potential treatment for psychosis-related conditions. For ARISE, site activation and improvement is ongoing with about 50 sites currently active across the United States and Europe.

As we maintain our target of sharing top line data in the second half of 2024, we continue to monitor site activation and enrollment rates very closely and manage factors that may impact enrollment on a day-to-day basis. Although there is no approved therapy for the adjunctive treatment of schizophrenia, the use of antipsychotics as combination treatment is seen in around 30% of patients despite the lack of clear pharmacological rationale and clinical evidence to support adjunctive use. Through ARISE, we hope to reinforce the unique weakness of KarXT’s differentiating clinical profile, and demonstrate that KarXT can be safely and effectively added on top of standard of care. I’m also pleased to share our ADEPT program evaluating KarXT for the treatment of psychosis and Alzheimer’s is fully underway following the initiation of ADEPT-2 and 3 in the third quarter.

We remain on track to share data from ADEPT-1 and 2, our relapse prevention and acute efficacy trials in 2025. As a reminder, the fundamental concept of KarXT originates from an Alzheimer’s trial, where xanomeline demonstrated promising therapeutic benefit in treating psychosis and related behavioral symptoms as well as cognition. Our ADEPT program is designed based on the insights from that initial strategy and our Phase 1b trial in healthy volunteers. And while our primary objective with ADEPT is to evaluate the efficacy and safety of KarXT in treating hallucinations and delusions associated with Alzheimer’s. We will also be collecting data, providing additional insights into the potential of KarXT in treating other prominent and clinically relevant symptoms of Alzheimer’s, including agitation, aggression and cognition.

The data from ADEPT may not only reinforce KarXT’s promise as the potential treatment for Alzheimer’s psychosis, but also help inform future developments with KarXT. Outside of KarXT, we’re also making headway in our early stage and discovery program, most notably with KAR-2618, a TRPC4/5 inhibitor that we have acquired from Goldfinch Bio at the start of this year. We plan to evaluate KAR-2618 for the treatment of major depressive disorder and anticipate initiating the Phase 1b clinical trial in 2024 with additional details such as trial design and refined timing to be shared early next year. Now on our earnings call earlier this year, I had highlighted three strategic and operational priorities that we set out to achieve in 2023. Those priorities were maximize the value of KarXT from a development perspective; two, expand our pipeline; and three, scale the operational capabilities of our company as we transition to a fully integrated R&D commercial organizations.

We’ve made excellent progress on these three fronts, which reflects the hard work and scale of our organization. With just a couple of months left in 2023, we look forward to finishing the year strong. With that, I’ll hand it over to Jason.

Jason Brown : Thank you, Bill. I’m pleased to be with you all today to share our third quarter financial results and to discuss our full year 2023 guidance. Q3 was another strong quarter for the company driven by continued progress across our ongoing KarXT Phase 3 programs, the submission of our NDA for KarXT, pre-commercialization efforts as well as significant growth across the organization. Total operating expenses for the third quarter were $136.2 million compared to $81.1 million for the same period in 2022. Operating expenses were slightly offset by $17 million in interest income, resulting in a net loss of $119.1 million. Research and development expenses for the third quarter were $104 million compared to $62 million for the prior year period.

The increase to $42 million was primarily driven by expenses related to our ongoing RXT clinical programs, increased employee head count and higher stock-based compensation. General and administrative expenses for the third quarter were $32.3 million compared to $19.1 million for the prior year period. The increase of $13.1 million was primarily driven by expenses related to our pre-commercialization efforts, increased employee head count and higher stock-based compensation. Cash, cash equivalents and investment securities totaled $1.3 billion as of September 30, 2023, compared to $1.1 billion at the end of 2022, providing us with a cash runway comfortably through 2026. The increase was due to our follow-on public offering in March of this year that resulted in a net proceeds of approximately $437 million.

Looking ahead at the rest of the year, we anticipate R&D to decrease in the fourth quarter relative to the third quarter and reiterate our guidance for the full year 2023, with total operating expense is expected to come in towards the top end of the range at around $470 million. Of that, we expect R&D and G&A expenses to be in the range of $355 million and $115 million, respectively. With the increase in R&D guidance being primarily driven by continued enrollment in our long-term safety trials by activation costs associated with the ADEPT program and costs related to our ambulatory blood pressure monitoring trial. I’ll now hand it back over to Bill.

Bill Meury : Thank you, Jason. With that, we can open the call to questions.

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Q&A Session

Operator: [Operator Instructions] Your first question is from the line of Yatin Suneja with Guggenheim.

Yatin Suneja : Hey, guys. Thank you for taking the question and congrats on all the progress. Just two quick ones for me, if I may. So the first one is with regard to the ARISE study. Could you maybe talk about your expectation? Would you expect the drug to behave similarly to the monotherapy in terms of the onset and depth of responses? And how should we think about the added tolerability impact. And then maybe on the pipeline front on 2618, you are prioritizing MDD. Could you maybe talk about the rationale going into MDD first over, let’s say, other anxiety disorder.

Bill Meury : Thank you, Yatin. Thank you for both questions. I’m going to turn it over to Andrew.

Andrew Miller : So with respect to the ARISE study from an expectations perspective, first, maybe to speak to efficacy. A reminder that the primary end point in the ARISE study, the total PANSS score is the same as the primary endpoint across EMERGENT 1, 2 and 3. So those do significantly inform our expectations about what we expect to see in the ARISE program. It’s a key difference with the ARISE program being we do expect the baseline severity of symptoms to be lower given that patients are being actively treated with existing antipsychotic medicines. Because of that, we expect a little less dynamic range and our expectation from a statistical powering perspective, is it more conservative, 4- to 5-point change on total PANSS in comparison to the 8 to 11-point change that we observed in EMERGENT program.

That still would meaningfully clear what we would consider clinically meaningful benefit in patients. And again, it’s all based on the same primary end point across the ARISE and EMERGENT programs. With respect to safety and overall tolerability, obviously, one of the things we’re most excited about with KarXT is the completely unique pharmacology, focused on the M1 and M4 muscarinic receptors. And when you look at the tolerability and safety profile, I think it’s very distinct in comparison to the adverse effects that are observed on current background standard of the care. So we continue to expect to see things consistent with the muscarinic pharmacology of KarXT and don’t expect meaningful overlap or for instance, worsening of background side effects associated with investors.

Yatin Suneja : And then you want to comment on 2618 at the preclinical evidence supporting utilization benefits?

Andrew Miller : I mean I think with 2618 and in general, TRPC4/5 as a therapeutic target for psychiatric illness and mental illness. I think there are a lot of interesting possibilities. I think that’s really the basis of your question, is that there’s evidence broadly to support both antidepressant and antilytic properties. Specifically, 2618 a molecule, but more broadly, TRPC4/5 as a target. I think our focus on MDD initially represents or representative of both our scientific confidence in that preclinical data, our ability to execute a study that we think will provide meaningful information specifically towards safety in a Phase 1b context, but also doing a study of patients that could provide some insight into the potential therapeutic benefits.

We certainly remain quite interested in a number of different anxiety disorders. Particularly, I would say generalizing anxiety disorder is something that we’re interested in evaluating with 2618 as well and look forward to being able to speak more of the details of that Phase 1b study here early next year as well as our longer-range plans for this program.

Bill Meury : And the only other thing I would add is that everything available today in MDD is effectively serotonergic and noradrenergic. And so we, of course, have some work to do to produce human efficacy data. But MDD is attractive because this would essentially be to the depression market, what in many respects, KarXT could be to the schizophrenia and the atypical market, which is a completely novel pharmacological approach, but we’ll know more at the end of ’24, early 2025.

Yatin Suneja : Thank you.

Operator: Your next question is from the line of Laura Chico with Wedbush Securities.

Unidentified Analyst: Hi. This is Ingrid on for Laura Chico. Wonder if you could talk a little bit about your expectations around real-world duration of treatment for KarXT cycling among therapies and even completely discontinuing therapies represents a hallmark of the schizophrenia space. How would you describe your base case expectations now that you’ve had longer-term experience with KarXT in clinical trials? Thank you.

Bill Meury : Yeah. I’ll make a few comments first, Ingrid and then turn it over to Will Kane, our Chief Commercial Officer. What I can tell you right now is that when you look at real-world experience with the second-generation atypicals, adherence rates are in the range of about only 50% to 60%, and the number of missed days of therapy each year is probably between 100 and 150 depending on which real-world observational study that you will look at. And so noncompliance is a real problem given the efficacy and safety experience some patients have that results in relapse, that results in ER visits and then, of course, hospitalizations and increased healthcare costs. We, of course, don’t have real-world experience yet. But we would expect that adherence with KarXT in the real-world setting could be higher, persistency could be longer and missed days of therapy lower. And I’ll just turn it over to Will to add a little bit.

Will Kane : Thanks, Bill. I’ll just echo some of the comments, Bill made, which is in the marketplace when we talk to clinicians and also to payers they see the potential for increased adherence is a real value add for KarXT. As Bill mentioned, there was the incremental increase from the typical to atypical, and given the mechanism and the clinical profile we’ve seen so far in the emergent program, there’s strong interest in seeing long-term data to realize the full potential of KarXT. And so when we don’t have real-world data, the data is indicating and signaling that there could be an opportunity here for increased adherence. And as we’ve talked about on M&A occasions, there’s a really high rate of non-adherence. Patients typically about two quarters of them of them or 75% will discontinue in the first 18 months, and that’s driven by a lack of either adequate efficacy or intolerability and KarXT may have the opportunity to really address both of those needs in the market.

Bill Meury : Thanks for the question.

Operator: Your next question is from the line of Myles Minter with William Blair.

Myles Minter : Hey congrats on the quarter. Thanks for the questions. First one is just clarifying. Are you going to announce the NDA filing acceptance if you do get that? And would you also use that as a forum to give us the ambulatory blood pressure monitoring data at that time. And then the second one is EMERGENT-5 has been fully enrolled since the second quarter. That’s patients that are treatment naive to KarXT in an outpatient setting. Can you just give us an update on the dropout rate and how that compares to EMERGENT-4 that’s ongoing in patients that have been experienced? Thanks very much.

Bill Meury : Great, Myles. I’ll take the first part of the question and then turn it over to Andrew to answer your second question. As it relates to the acceptance, we will announce that we expected at the end of the month. And then as it relates to the ABPM results, we expect to have those announced in the middle of the fourth quarter, which is only a couple of weeks away. Andrew?

Andrew Miller : Yeah, Myles, with respect to EMERGENT-4 and EMERGENT-5, obviously those studies continue to be ongoing, as you mentioned, it’s sort of premature to comment too specifically on any conclusions from those studies. I think we do look for those as being overall consistent with what we spoke to earlier, the pharmacology of KarXT unique being at the both M1 and M4 receptors. And our expectation is we’ll see in those long-term studies, something looks quite consistent with the data we’ve been able to release from the short-term studies. EMERGENT-1, 2 and 3, where we see predominantly an efficacy profile characterized by a robust effect, a broad effect and a safety and tolerability profile generally characterized by mild-to-moderate transient GI side effects.

We’ll, of course, look forward to releasing all of that data at the right time here in 2024 as the study is complete. But again, those studies are a great opportunity for us to further demonstrate the potentially differentiated profile of KarXT.

Bill Meury : Thanks for the questions, Miles.

Operator: Your next question is from the line of Paul Matteis with Stifel.

Paul Matteis : Hey, thanks for taking the questions. Ahead of the ABPM data, I was just curious, what’s your level of confidence right now that, that data with the FDA will not serve as a major amendment? Any more color you can provide or any analogs? And then just more broadly, how are you thinking about business development and the possibility of doing another TRPC4/5 like deal in the next year or so before the launch? Thanks.

Bill Meury : Thanks, Paul, for the questions. I’ll let Andrew tackle the first question, then I can answer the second question for you.

Andrew Miller : And I think with respect to the ABPM study, that was specifically a topic of discussion with the FDA at our pre-NDA meeting in second quarter earlier this year. And specifically, the idea that study, which again is a Phase 1b safety study, will be submitted at the day 120 safety update, which obviously, based on our submission in late September will happen in the late January time frame. And again, I think we’re highly confident that would not result in a sort of a major amendment to the NDA and NDA review process. Again, because of specifically that conversation with the agency at pre-NDA meeting, but also I think the general precedent that study, that’s a Phase 1b safety study submitted prior to midpoint review were certainly prior to day 120. We would not expect to result an extension to the PDUFA date.

Bill Meury : Great. Thanks, Andrew. And then Paul, as it relates to business development, it’s a good question. It’s a very important priority for us to build the pipeline. I would say it’s second only to the approval and launch of KarXT, which is obviously our most important priority. You mentioned the Goldfinch transaction, the TRPC4/5 inhibitor. Look, we look at new opportunities on a weekly, monthly basis. We think about them strategically, scientifically, financially. And I think that the TRPC4/5 inhibitor checked all of those boxes. We think about neuroscience fairly broadly with a focus on schizophrenia, Alzheimer’s, depression, anxiety, several other conditions. If we see something that we like, fits our balance sheet, make sense given our capabilities and our neuroscience focus, yes, we would do something.

Obviously, our number one priority right now is KarXT, but number number two is building the pipeline and new product flows for any company, the lifeblood. And so we’ll continue to look at things. And if we see something that we like, we’ll, of course, we’ll do it. Thanks for the questions.

Operator: Your next question is from the line of Ash Verma with UBS.

Ash Verma: Hi, good morning. Thanks for taking my question. So on the ABPM study, I wanted to ask, so I know we haven’t seen any impressive effect for KarXT in previous study and study of M4 molecule was pretty clean on the ABPM. But just mechanistically or theoretically for KarXT, like could the additional M1 agonism in any way impact on patients’ blood pressure? Thanks.

Bill Meury : Thanks for the question. I’ll turn it over to Andrew.

Andrew Miller : Yeah. Thanks, Ash. So specifically from a pharmacology perspective, is often challenging to separate the individual contributions. We have a molecule hitting multiple targets. That being said, I think when you look at the data that exists for some of the allosteric modulator programs, et cetera, I think you tend to see any potential pressure effect being tied to the M4 receptor. So our expectation is not that we will see any meaningful pressure effect with RXT certainly on the basis of an M1 and the M4 pharmacology. And I think as you referenced, we don’t seem to see a sustained chronic increase across the emergent program already. I think the ABPM study offers us the ability to further confirm that. And we certainly remain confident here with the final data coming quite soon, that we will be able to reject that statistical hypothesis of any sort of sustained 3-millimeter increase in systolic blood pressure.

Bill Meury : Thank you.

Operator: Your next question is from the line of Mohit Bansal with Wells Fargo.

Mohit Bansal : Great. Thank you for taking my question. And congrats on all the progress. Just wanted to ask regarding your competitor’s data on TRPC4/5 and there was this small increase — was increase in suicidal ideation. Again, the numbers are small. So just wanted to understand, is it just the law of small numbers? Or is there any theoretical reason why you will see high suicidal ideation with this mechanism. Thank you.

Bill Meury : Mohit, we had trouble hearing what you said. Would you mind just repeating the question?

Mohit Bansal : Sure. So this is regarding the TRPC4/5 and the data we saw in early October from Boehringer Ingelheim. So the trial was terminated due to slow recruitment, but there was a 15% rate of suicidal ideation in the treatment arm versus 4% in placebo. I’m just trying to understand, is this anything is it — has this anything to do with the mechanism? Or it is just a law of small numbers, these are really small numbers here. Thank you.

Bill Meury : Andrew. Go ahead.

Andrew Miller : Yeah. Thanks. So you’re referring to a study where the results were recently posted on clinicaltrials.gov that was actually a remote mobile-based study that was done by BI as — really as a result of the pandemic. That study was terminated early. I think the final enrollment was like low single-digit number of subjects. I think given that in some of the considerations around MDD and more generally, studies in depression or things like schizophrenia, it’s really premature to read too much into that study — those study results. Particularly when you speak to adverse effects or things like suicidal ideation, which tend to be rare. It’s often more challenging to make any conclusions about that until you get larger numbers.

There’s also, I think, more details with respect to things like to suicidal ideation, there are specific rating scales for that. We implement that across the emergent program as well. So simply looking at TAEs is not, I would say, a thorough assessment of the potential effects. And I would further say that from our perspective, we certainly don’t see any preclinical evidence or a specific scientific rationale for why that could be an adverse effect associated with TRPC4/5. We’ll certainly obviously be carefully assessing that as anyone would and being diligent in conducting studies in expression when we push forward into [indiscernible] this year with the 2618 program.

Bill Meury : Thank you for the question.

Operator: Next question is from the line of David Amsellem with Piper Sandler.

David Amsellem : Thanks. So on ARISE, can you talk to pace of enrollment? And are you still onboarding sites? Just wanted to get a flavor for where things are on that trial? And then secondly, on ADEPT and AD psychosis more specifically, how are you thinking about it vis-a-vis AD agitation. Some companies that are looking at agitation, you guys are looking at psychosis. Do you think that agitation and psychosis is sort of a distinction without much of a difference? And I just wanted to pick your brain on that. Thank you.

Bill Meury : Thanks for the questions. David, go ahead Andrew.

Andrew Miller : Yeah. Specifically for the first question around the ARISE program, we have continued to activate sites over the course of this year, really in the second and third quarter, we initiated two new countries as part of that programmable area, so we have to cross this. There’s about 20 sites that are active at this point in time. I think as Bill maybe mentioned a little earlier, obviously, whenever we’re managing studies, it’s always a day-to-day and week-to-week basis. I do think you’re likely to see some additional site activations across the ARISE program. Again, that’s pretty typical studies like this, you also see sites that will drop off over time who aren’t actively enrolling. But I think we feel good about where we are with the ARISE program, continue to see momentum as part of that program.

But obviously, we’ll provide any additional updates going forward to the extent they are already. And then with respect to the ADEPT program and our focus on psychosis, I think if you rewind the clock 10 to 15 years, there perhaps wasn’t as much distinction among psychosis and agitation. We really look at that as a separating out of an agitation-related indication over the last five to 10 years, given, frankly, the lack of approval for anything more broadly for psychosis. Specifically agitation and aggression, I think, are potentially more, I think, affected by drugs that have somnolence or sedative based effects, fundamentally, that’s sort of a hetroparadigm. Whereas when you look at hallucinations and delusions in that sort of core psychosis, that’s really where we look at taking advantage of the non-antipsychotic effects of xanomeline and as part of KarXT.

Bill referred to this in the original or the opening of the call that is the population Alzheimer’s patients where the antipsychotic effect of xanomeline was first discovered. And when you look at that data, which is all published, you see benefits specifically on hallucinations, delusions, agitation and aggression across that program. So we really look at the opportunity with KarXT as something to capture that broad effect. But specifically starting with hallucinations and delusions as the basis for the primary endpoints in the ADEPT program.

Bill Meury : And the only other thing I’d add to, David, we know that the product has a procognitive effect, which was observed in the very same trial that Andrew just talked about. And so when we think about that Alzheimer’s population, of course, the first step would be an official indication or FDA approved indication for psychosis, but we know that there’s data on other aspects of Alzheimer’s disease, both agitation, aggression and cognition, which I think creates a compelling opportunity for us as we go into in this area. Thanks for the question.

Operator: Your next question is from the line of Jay Olson with Oppenheimer.

Jay Olson : Hey. Congrats on all the progress. Since there seems to be a lot of interest in the ABPM study, can you just remind us what blood pressure signals have you seen in the past? What’s the rationale behind running this study? And ultimately, is there a legitimate blood pressure concern for KarXT that investors should be concerned about? Or is that just a false narrative contrived by competitors? Thank you.

Bill Meury : Thanks for the question, Jay. Go ahead, Andrew.

Andrew Miller : Yeah, sure. Happy to speak to sort of what we’ve seen, how that projects and ABPM and I think maybe I’ll just start with, I think with respect to ABPM, it’s not something that we have a lot of concern about internally. Obviously, we’re running the study to provide a more definitive data point about what any blood pressure effect of KarXT could be. But when we look at the EMERGENT program, which has the same dosing also in patients living with schizophrenia fundamental at the same paradigm as the ABPM study, even in that setting where we’re measuring vital signs at Cmax of the drug two hours of the first dose. We don’t see a 3-millimeter increase even in that set, which you would describe more as kind of a fundamentally a worst-case scenario.

So we translate that data into the ABPM paradigm. That’s why we have such a high level of confidence in having a successful outcome from that study. Consistently, across the program with KarXT, we generally have not observed any meaningful pressure effect and not something that was historical consideration with this mechanism really until you’ve seen some of the M4 or selective compounds come into early-stage clinical development over the last couple of years. So from our perspective, we’re obviously greatly looking forward to be able to see the final ABPM data and get that out into the public domain, which I think will provide in our minds, the most definitive data point around any potential pressure effects. But we expect that to be consistent with what we’ve already seen in our clinical assessment in the emergent program.

Bill Meury : Thanks for the question, Jay.

Jay Olson : Thank you.

Operator: Your next question is from the line of Jeff Hung with Morgan Stanley.

Jeff Hung : Thanks for taking my question. What is the latest feedback you’re hearing from payers on KarXT? And how is the benefit on cognition resonating with payers and clinicians. Thanks.

Bill Meury : Yeah. Great question, and I’ll just make a couple of comments, and then I’ll turn it over to Will Kane. We’ve already started scientific exchange meetings with Medicaid programs all across the United States. So we’re now more than 12 months away from launch. We’re going to have plenty of opportunity to sort of lay the proper groundwork so that we achieve relatively high level of formulary coverage during the first year on the market. I think we’ve already been to about 14 Medicaid programs, maybe more over the past several months. And I think the opportunity here for us to carve out a position on the formularies for KarXT is pretty significant. They haven’t had a novel pharmacological class in three decades. I think if I was — if we were getting ready to introduce another D2 antagonist, I think conversations with payers may be a little bit different, but this isn’t that. With that, I’ll turn it over to Will.

Will Kane : Sure. Thanks, Bill. So I’m particularly pleased with the interactions we’ve had to date with the payer community. Since we initiated scientific exchange in September, we’ve had over two dozen interactions across channels, Medicaid, Medicare Part D and also commercial. And we have more than a dozen just on meeting scheduled between now and the end of the year, and that number continues to go up. I think it reflects a couple of things. One is there is interest, and we — I’ve heard this directly in new treatment options for patients with serious mental illness in this case, particularly schizophrenia. There is — one of the things the preapproval information exchange allows us the opportunity to learn, if you will, almost in real time as data is presented into medical meetings, et cetera.

And so they look forward to that interaction, which is something we can really capitalize on over the next 12 months. The data is well received. I think they certainly appreciate the unique mechanism of KarXT relative to the products that they’re currently offering on their formularies. They really dive into some of the data we present, particularly the total PANSS, but questions about the subscales, which we find to be encouraging and of course, the fundamentally different safety and tolerability profile that’s reflected in the data to date. They do, to your question, have a real appreciation for the three symptom domains of schizophrenia, the positive, the negative anticognitive they know, just as the clinical community knows where the deficits are and they have relatively good drugs on the positive symptoms, but where the needs are negative and cognitive.

So they’re very interested to learn more about KarXT’s evolving clinical program and where the drug may actually be able to offer potential benefits there. So far, I think, really engaging and positive and every one of them has welcomed the opportunity to come back in the future as we present more clinical data to continue to learn more over the next 10 to 12 months.

Bill Meury : And the only thing I would add is just in general, in the area of mental health I would say every corner of the healthcare system right now is moving in the right direction. In other words, we just talked about payers and even state governments are rethinking policies as it relates to formularies and reducing the use of certain drug utilization management sort of techniques to control prescribing and we see fewer and fewer states using prior authorizations. In fact, I think in 14 states, there’s no PA allowed. You also see the elimination or the reduction in the use of step edits, and I think these are very, very good trends. If you take a look at patient advocacy groups that are doing more work than ever before to reduce stigma in isolation.

And then if you look at the providers, there are more community mental health centers being set up in communities all across the United States. And I think all of these trends are more tailwinds than they are headwinds and will enable coverage and access to KarXT and frankly, and the other new compound that’s introduced in the United States for serious mental illness? And I think it’s a very different dynamic in mental health as compared to other therapeutic areas across those aspects of the market, and there’s more momentum than there has been in years. And so that puts us in a very good position when we start to introduce KarXT in the United States next year. Thanks for the question.

Operator: Next question is from the line of Salveen Richter with Goldman Sachs.

Unidentified Analyst: Good morning. This is [indiscernible] on for Salveen. Just on the KarXT launch next year. Could you provide some color on what the early days of launch could look like? Are there specific physicians or geographies that you’re most interested in? And then on KAR-2618, I guess, is there a certain population with an MDD that would be most suitable for this asset? Thank you.

Bill Meury : Yeah. Thank you for the question. I’ll turn it over to Will. I would just say, as we think about the introduction of KarXT in the United States. This is going to be a broad-based program. There is great anticipation in the psychiatric community in the nurse practitioner community, for KarXT. And we’re going to cover as many physicians as many as nurse practitioners as many community mental health centers as can be covered. And of course, we have a lot of data that will instruct exactly where we deploy our sales organization, our managed care access teams, but there’ll be a full comprehensive well-funded program here. And I don’t think that there’s a psychiatrist or a nurse practitioner in the United States that’s not interested and at least evaluating KarXT.

The data from the EMERGENT 1, 2 and 3 program, of course, still under review at the FDA, but it’s very, very compelling. It’s a completely novel approach. It may be complementary to the D2 antagonist. And so our job is to make sure everyone is aware of those data that they get a complete, accurate balance presentation of all the information that we have, which would be consistent with our label, and then they’ll try it in patients that are either new patients, switched patients or patients perhaps that they see a utility and add on although we wouldn’t have that indication at launch. And so there’ll be no aspect of this market that we leave out and preparing it for launch.

Will Kane : Thanks, Bill. I would just add on to that, that to build on those earlier comments about what we refer to as this mental health moment where we see opportunity, particularly in states since the Medicaid population is so important to KarXT, particularly out of the gate, where we see states that don’t require prior authorizations or have 10 or one step. Those would be high priority states. And they tend to be a mix, but some large states are in that mix. So we’ll be fully prepared to capitalize on that opportunity. We will be fully loaded. We’ll have a very robust sampling program, our sales force analysis and structure is nearly complete. So we will go to market, there will be a launch that will support the potential of KarXT across clinicians and payers.

And to this point, and again, that was something Bill said, any engagement we have with the psychiatry community, whether it’s psychiatrist or nurse practitioners, et cetera. There’s a high level of interest and excitement about KarXT and that they’re looking to see our progress and potentially when that drug will be available to them.

Bill Meury : Great. Andrew, do you want to take the second question?

Andrew Miller : Yeah, specifically with respect to the TRPC4/5 program, 2618, at this point, we speak to our focus in MDD or major depressive disorder. We think about that broadly or being broadly applicable to that patient population, we’re not at this point focused on a particular subset of MDD patients. I think we believe that there’s potential benefit from a depression perspective but also from an anxiety perspective. There’s a substantial comorbidity between MDD and anxiety disorders. So that will be a natural place for us to look at the right time for specific benefits given the preclinical and scientific rationale for antilytic and antidepressant effects. But I think at this point, our focus remains on a role applicable sort of potential treatment for MDD.

Bill Meury : Thanks.

Operator: Your next question is from the Jason Gerberry from Bank of America.

Unidentified Analyst: Hi. This is Diana Ann for Jason. Congrats on the progress with the NDA submission this quarter. Just a quick one on KAR-2618. I’m curious as how you’re leveraging all the prior data with this molecule in specifically referring to the molecule failure and the FSGS trial? Was this because it was the wrong target and sort of just what underpins your confidence that it has the right profile for MDD and other CNS disorders. Thank you.

Andrew Miller : Sure. Happy to speak to that. And with respect to 2618, you’re referring to the previous development program that was running in renal disease. Obviously, medications are unrelated to depression or anxiety, but TRPC4/5 being a target that we’ve been following, given the biological rationale and preclinical data, which suggests both antidepressant as well as antilytic effects. We’ve replicated that data specifically with 2618, the molecules are not relying on other target compounds or tool compounds, but specifically with 2618 looking at those preclinical models. So that’s really the basis of our confidence with respect to this molecule. I think it does offer us a great opportunity to leverage the previous human experience with 2618.

Specifically, the program was administered to over 100 humans, 100 patients and up to a duration of 48 weeks. So that provides us a substantial amount of safety and tolerability data that we think is informative and we believe quite positive with respect to the profile of 2618. So given that a molecule substantial previous human experience, given the biological preclinical rationale for potential efficacy in treating MDD as well as anxiety disorders, that’s kind of the basis of our confidence going forward and how we think about designing the right clinical trial to highlight those potential benefits.

Bill Meury : Thanks for the question.

Unidentified Analyst: Thank you. And just one quick follow-up, sorry. So then would you anticipate being able to go straight into Phase 3 trials from Phase 1b given you do have all this prior safety data? Or is it still to be determined? Thank you.

Andrew Miller : Yeah. I mean, I think we don’t want to speculate too far in the future about our development in 2618. But I think what you’re hearing us say is we do think we’re ready to go into a Phase 1b study in patients with major stress disorder. I would say if you look at the program that we’ve run with KarXT in schizophrenia, there’s not a substantial distinction between Phase 2 and Phase 3, our EMERGENT-1 study, in our Phase II EMERGENT-2 and 3 being the Phase 3 studies are identical from a protocol perspective. So again, I think we’ll wait future results from that Phase 1b study prior to commenting to you specifically in our plans going forward from there. But we do think, given the substantial safety and tolerability data that already exists, it does offer us the opportunity to run an accelerated development program for 2618.

Operator: Your next question is from the line of Jessica Fye with JPMorgan.

Unidentified Analyst: This is Nick on for Jess. You previously talked about your commercial preparedness in the U.S. and kind of your thoughts on an initial ramp there. But can you also recap your commercial strategy outside the U.S. and which countries could be logical first choice?

Bill Meury : Yeag. It’s a good question, Nick. Thanks. Outside the United States, we, of course, have a partnership in China with Zai. And then the other two important geographies would be the EU and Japan. And as we said before, we’ll clearly need a partner with regulatory development and commercial capabilities. KarXT has value outside the United States in both of those geographies. And we hope that, that is a strategy that will come into focus in the 2024 period, mid-’24, late 2024 and more to come. Thank you.

Operator: Your next question is from the line of Marc Goldman with Leerink Partners.

Unidentified Analyst: Hi, thanks for taking my question. This is Rudy on the line for Marc. So can you talk about your current strategy for cognitive impairment in schizophrenia? Are you starting pivotal trials to pursue this as a separate indication? And secondly, can you also provide more color on your pre-commercialization work? How should we think about spending moving into 2024? Thanks.

Bill Meury : Great. Thanks for the question. Andrew will take the first part, and then we’ll take the second part.

Andrew Miller : Yeah. Specifically with respect to cognitive impairment associated with schizophrenia. Obviously, we were able to collect cognitive performance data as an exploratory endpoint as part of the emergent program. That will also be included as we think about future data with respect to EMERGENT-4 and 5 as well as the ARISE program are all opportunities to just further collect cognitive data there, of course, with cognitive data collection and demonstrated benefit in the original studies with [indiscernible] as well in patients with Alzheimer’s and patients with schizophrenia. Going forward, do you think we’re contemplating additional work specifically dedicated towards cognition? And really what that means is studies that are specifically designed, recruited and have primary endpoint that reflects cognition rather than other symptoms of schizophrenia.

So that’s something that’s certainly under consideration for us, we believe there is a broadly applicable potential benefit of KarXT across psychosis and cognition in a number of potential different indications. And I think you’ll expect to hear more from us in 2024, specifically about dedicated development towards cognition of schizophrenia.

Bill Meury : Thanks, Andrew. Will, you want to take the second question?

Will Kane : Sure. Then on the precommercialization word, so first, as we’ve indicated, our leadership is in place from a commercial perspective and the team is really focused on developing the right go-to-market strategies. As we mentioned before, we expect this to be a fully loaded campaign out of the gate. We see great opportunity for KarXT in a marketplace that is eagerly awaiting new treatment options. Our scientific exchange, as we’ve mentioned, has begun. And I think we’ve gone in great form that the collaboration between our account director team and our medical science liaison team. So they’re able to continue that dialogue with clinicians and particularly with payers and clinicians on the MSO side to the extent they have questions that we can react to and provide information to our sales force planning and design work is nearing completion, as I said, that will give us the opportunity to go to market and really address healthcare prescribers, both psychiatry nurse practitioners in psychiatry and a primary care physicians that are obviously very active in this area.

But it also allow us to cover a broader landscape, if you will, to ensure we cover the certified community behavior health centers that we provide adequate reimbursement is important to help the offices get through any prior authorization or step processes that need to be in play. We have full sampling program that’s all designed and ready to roll. So we’re in a very good position. We still have more work to do. Obviously, we’re ways away from a potential approval and we’ll want to obviously find a labeling human form our messaging, et cetera. But I think to this point, I’m very pleased, and we’re in good shape.

Bill Meury : Yeah, I would just second what Will said. We are on track. I would say we’re ahead of schedule as it relates to getting ready. And the beauty here is that the psychiatric community is anticipating KarXT. There’s a great deal of interest here. Of course, we can’t promote it until we get approval, but all systems gone. Thanks for the question.

Operator: Your next question is from the line of Jason Butler with JMP Securities.

Jason Butler : Hi, thanks for taking question. And I’ll add my congrats on the progress. Just another follow-up on commercial prep. Can you maybe speak to what you’re hearing from physicians about how they’re thinking about using the drug early in the launch? And specifically, with regards to dose flexibility, how willing they will be to push the dose to optimize efficacy early in their experience versus taking a slower and gaining experience with tolerability. Thank you.

Bill Meury : Great. Thanks for the question. I’ll just make an opening comment and then turn it over to Will. I’ve been involved with probably seven or eight neuropsychiatry launches over the course of 25 years. And in my experience, psychiatrists are the most depth at dosing and generally follow-up principle of start low and go slow. I think that’s true whether you’re dealing with antidepressants or atypical for schizophrenia or a novel compound like KarXT for schizophrenia. And I would expect that they’ll follow the same practice with KarXT using the label, of course, as guidance as they do with other atypicals. I’ll turn it over to Will, let him sort of add his comments.

Will Kane : Sure, I’ll just add on to that, that we will go to market to enable that flexibility for the prescribing community to tailor the use of the drug per the label, but also for their clinical experience so that they can maximize the patient experience with the product right out of the gate. In terms of the approach of the patient segments, et cetera, it’s a broad-based one, right? There are many patients with schizophrenia, looking for new treatment options. We’ve reiterated that many times in terms of the high rate of non-adherence and discontinuation, whether it’s patients in that have lapsed and therefore, not on any therapy for which KarXT could be a new patient start, if you will, or those that are experiencing adequate efficacy or tolerability effects that are looking for a switch or in the case of this market with the increased use of polypharmacy of 2D2s, there will be some physicians who, even though we will not promote for that until we have an indication they will see the opportunity to potentially add KarXT on to be help on patient who are not adequately addressed from an efficacy perspective.

And so it is a broad-based population. Again, there’s been very little novelty in this area, diagnostically for a long time for decades. And so you know that it really has, I think, captured their interest and they’re already thinking about the breadth of patients that may benefit from the KarXT.

Bill Meury : I think Will is right. If you had another D2 antagonist, you might be thinking about the market more narrowly, a second or a third line type of treatment, but that’s not what we’re talking about here. And I think with you go on the far left of the continuum first episode psychosis, all the way to patients who are not on therapy and who have relapsed, I think the opportunity for KarXT is that broad and it should be that broad given what we’ve seen in the emerging program. Thanks for the question.

Operator: Your next question is from the line of Charles Duncan with Cantor Fitzgerald.

Unidentified Analyst: Hi, this is [indiscernible] from Cantor. Great to hear all the progress made in 3Q, two questions for us. Can you talk about the progress of KarXT study in psychosis and Alzheimer’s? And what are, if any, the rate limiting factors for patient enrollment? And the second question is for KarXT for schizophrenia. What are your expectations for an ADCOM? And what are possible key topics for that discussion? Thank you for taking our questions.

Bill Meury : Great. Thank you. Good questions, Andrew.

Andrew Miller : Yeah. With respect to the ADEPT program, obviously, the ADEPT-1 study has been ongoing since the second half of 2022. ADEPT-2 just started more recently here in the third quarter. So those studies add slightly different points from an operational perspective, certainly in ADEPT 1, but also in ADEPT-2 focus on finding recruiting the right patients into that study. I think in any study in psychiatry, finding patients who sort of really fit the key inclusion criteria with respect to diagnosis and severity as well as general health tend to be the sort of limiting factors. That’s all built into our assumptions around a number of sites and duration of time needed to successfully for those studies. So nothing specifically that I would point to you for the ADEPT program outside of sort of more general considerations.

With respect to an ADCOM, we certainly have already begun our preparation process for a potential ADCOM. I think our views were less likely than 50% to receive an ADCOM. That’s really on the basis of having a clinical program for an indication treatment of schizophrenia adults that’s well precedented from a clinical trial design and endpoint and general methodology perspective. Our development program follows those precedents over the last several decades. But of course, that’s up to the FDA discretion whether they’d like to add an ADCOM and what the topic of that would be. But it’s certainly something that we’re already getting ready for and we’ll certainly be ready for if an ADCOM does happen.

Operator: Our final question comes from the line of Graig Suvannavejh with Mizuho.

Unidentified Analyst: Hi, this is [indiscernible] for Graig Suvannavejh. So just two questions from us. In terms of the Day 120 update, can you elaborate a little bit more specifically regarding who will be part of the update besides the ABPM data. And additionally, with the potential KarXT launch next year, how are preparations for FDA manufacturing inspections going. Thank you.

Andrew Miller : Yeah. So with respect to the day 120 safety update, really, the bulk of that information is simply a 120-day roll forward in all the patients that are currently ongoing in the immersion program. So typically, for the NDA and day 120 safety update, there’s simply a date on the calendar by which all data that’s been collected prior to that date is included in the submission. So we’ll have a four-month roll forward of that safety data set as part of the program. This is less about completing studies or specific data, but more a general roll forward of that database. With respect to manufacturing, inspection readiness, et cetera, I think in general, from a CMC perspective, we feel, I think, in a very good place from a submission perspective, from a potential inspection as well as supporting the launch, we’ve been manufacturing KarXT at multi-hundred kilogram scale commercial sale for quite some period of time.

We already have millions of capsules that are currently dispositioned and ready for a potential sale, assuming that we get approval. We use manufacturing sites that are known to the agency have been expected previously by the agency. And so we felt quite confident going forward that we have a CMC manufacturing strategy to support the potential approval as well as the launch.

Bill Meury : Thanks, Andrew. Thank you for the question.

Operator: Thank you. This does conclude today’s call. Thank you for joining. You may now disconnect your lines.