Analysts point to a missed secondary endpoint and cardiovascular risks that may delay FDA approval as possible reasons for the unexpected drop in Karuna’s stock following the data reveal.
A woman with her head in her hands/Courtesy of Shutterstock
Despite positive results Monday from a Phase III trial of KarXT (xanomeline-trospium) and analysts’ recommendations to buy, Karuna Therapeutics’ stock dropped more than 19% in 48 hours this week.
Safety and tolerability remained consistent with the prior Phase II and III results, according to Karuna. Hence, analysts who spoke with BioSpace were surprised to see the selloff that ensued following the data drop.
Data from Karuna’s second Phase III trial of KarXT, a muscarinic agonist, again met its primary endpoint for improving symptom severity in schizophrenia. Patients in the KarXT arm of the trial scored 8.4 points lower than their placebo counterparts on the Positive and Negative Syndrome Scale (PANSS). This was slightly less than the nearly 10 point-difference seen in the previous Phase III trial.
“It’s probably one of the most exciting developments in a very long time in serious mental illness,” Philip D. Harvey, professor of psychiatry and behavioral sciences at the University of Miami Miller School of Medicine, told BioSpace. These results follow promising efficacy data from Phase II, marking three studies in a row to hit their targets—a rare occurrence in the industry, Harvey said.
The drug is now in studies to analyze its effects when added to other treatments, such as antipsychotics.
Still, Karuna saw its stock drop 16% Monday from investor selloff, then continued to drop after the company announced a $400 million capital raise.
The continued drop makes sense, Graig Suvannavejh, managing director and senior biopharmaceuticals and biotechnology equity research analyst at Mizuho, told BioSpace.
Nearly anytime a company announces it is issuing stock to raise capital; the price goes down, he said. However, the initial decline suggests the Phase III data raised questions for investors.
“This is what the investor world does … hem and haw over the smallest details and find a reason to nitpick,” Suvannavejh said.
He speculated on three likely causes for the dip:
- Trial miss on the secondary endpoint
- Concern over cardiovascular risk
- Potential commercial delay as the company gathers additional data concerning that risk
Secondary Miss in Negative Symptoms
While KarXT hit the trial’s primary endpoint of overall reducing schizophrenia symptoms, it missed a secondary endpoint of specifically decreasing negative symptoms compared to the placebo at week four.
Negative symptoms include apathy, difficulty speaking and withdrawal from social life and interests—up to 60% of patients with schizophrenia experience at least one negative symptom. Currently, there is no FDA-approved drug for these symptoms; all current drugs for schizophrenia treat positive symptoms relating to psychosis.
KarXT’s biggest competitor is Cerevel Therapeutics’ lead asset, emraclidine. Cerevel is currently in Phase II trials, about two years behind Karuna, by Suvannavejh’s calculations.
The ability to also treat negative symptoms could have potentially been a differentiator for Karuna’s drug Suvannavejh said, potentially dimming investor excitement.
“I think it’s a very solid study,” Suvannavejh said. “But investors are ‘investors.’”
Yatin Suneja, a biotech analyst at Guggenheim Partners, noted that while the miss may have affected stock prices this week, it shouldn’t affect approval.
“Negative didn’t hit, but that doesn’t matter because the drug is going to be approved for schizophrenia, not for negative symptoms,” he told BioSpace.
Cardiovascular Concerns
Another potential concern among investors is KarXT’s safety profile, Suvannavejh said. The latest Phase III trial showed an increased rate of hypertension - 6% in the treatment arm versus 2% in the placebo. No participants discontinued treatment due to hypertension.
Karuna will launch a small cardiovascular safety study, specifically measuring ambulatory Blood Pressure Monitoring (ABPM), in April 2022 to determine whether a cardiac risk is present.
Meanwhile, Cerevel completed an ABPM trial in December 2022 that resulted in what it called clear evidence that emraclidine does not induce hypertension. Cerevel had also seen some outlier cardiovascular signals in its earlier study and ran this study at the FDA’s request.
Harvey noted that the origin of the cardiac issues is a target emraclidine and KarXT share, making the Cerevel data relevant to Karuna’s drug.
Suvannavejh agreed: “My prediction is [KarXT is] going to look fine on cardiovascular safety.”
Potential Delay to Approval
Karuna did not respond to BioSpace’s request for comment before publication and stated it is on target to submit a New Drug Application (NDA) for KarXT by mid-2023.
With that timeline, the results of the ABPM study will come after the NDA submission. The FDA would then determine if this information would count as a major amendment, which could add a three-month delay to the review process.
“Time is of the essence because [Karuna and Cerevel] are competing to be first on the market,” Suneja said.
In the meantime, Karuna continues to add to its safety database by running further trials to assess long-term safety, tolerability and efficacy. As of Friday morning pre-market, the stock has rebounded 8% from Tuesday’s close.
