Karuna Therapeutics Inc. (KRTX) Surges After Trial Meets Primary Endpoint

Premarket Monday, Karuna Therapeutics Inc. (NASDAQ: KRTX) announced positive topline results from its Phase 3 EMERGENT-2 trial, which met its primary and key secondary endpoints.

The trial evaluated the drug's efficacy, safety, and tolerability in adults with schizophrenia, with Karuna stating it demonstrated a "statistically significant and clinically meaningful 9.6-point reduction in the Positive and Negative Syndrome Scale total score compared to placebo."

Here's how analysts reacted to the news:

Citi analyst Neena Bitritto-Garg raised the firm's price target on the stock to $280 per share from $162, reiterating a Buy rating. Citi continues to see the EMERGENT-2 results as a "near best-case scenario" that positions KarXT to be the "go-to branded antipsychotic starting in schizophrenia and possibly beyond."

"We see a multi-billion dollar peak sales opportunity in just those two indications, and despite the move today, we think shares could continue to run over the next few weeks as buy-side starts giving the company credit for KarXT's broader potential," explained Bitritto-Garg.

Wedbush analyst Laura Chico maintained an Outperform rating and $178 price target on the stock, telling investors they anticipate a positive stock reaction following the data. "With the data offering validation of the mechanism and strategy, and KarXT representing a novel mechanism of action, we do think physicians will be excited to use the drug," said the analyst.

William Blair analyst Myles Minter kept an Outperform rating on the stock, explaining in a research note that "efficacy was driven by statistically significant improvements in both positive and negative symptoms and we expect additional data on cognition to come later."

"Combining this efficacy profile beat with KarXT's differentiated novel cholinergic mechanism should have shares up materially today and our bull case heading into the data was a greater than $200 stock," added Minter.

Finally, RBC Capital Markets analyst Brian Abrahams, who has an Outperform rating and $160 price target on Karuna shares, told investors the data, at first glance, looks to have lived up to and likely exceeded high Street expectations.

"No major safety red flags from what we can tell initially from the press release and slide deck- Some GI effects and cholinergic related AEs but nothing that looks like it would derail the program; no syncope or major differences in HR/BP effects previously observed, and profile continues to look very differentiated from existing antipsychotics which we continue to believe along with strong efficacy will make KarXT a treatment of choice in schizophrenia, generating out year sales of $1.3B on our estimates," wrote Abrahams.

Karuna shares surged 64% Monday, hitting an all-time high.

By Sam Boughedda

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