Karuna looks to build on positive schizophrenia data with one of the biggest public raises this year
Riding high on positive schizophrenia data it believes has the potential to reshape the entire field, Karuna Therapeutics put out word late Monday that it’s shooting for some new cash. And execs are swinging for the fences.
The biotech announced plans Monday afternoon to raise $600 million in a public offering, with a possibility of the total rising to $690 million if all options are exercised. The move aims to capitalize on Phase III data revealed Monday morning showing Karuna’s schizophrenia program significantly reduced symptoms compared to placebo.
Karuna shares $KRTX were largely flat in Tuesday’s pre-market session after closing Monday up 71%. The biotech did not reveal how many new shares it would offer.
With the raise, Karuna became the latest public biotech over the last few months to raise huge capital following a positive data readout. The method spiked in popularity during the depths of the biotech bear market earlier this year. Things kicked off in March when a trio of companies raised more than $1.5 billion in a 24-hour span.
But despite those that managed to raise capital, the XBI — a composite measure of the biotech market writ large — continued to sink throughout the spring. By the middle of June, the XBI had fallen below its pre-pandemic levels, essentially erasing a year and a half of massive industry growth and falling roughly 60% from its February 2021 peak.
Things have started turning around, albeit slowly. The XBI is up 18% since the start of August, finishing Monday at $93.89. It remains to be seen, however, whether this is the start of a trend or simply a blip on the radar in the new market reality.
Nevertheless, Karuna will charge ahead with the raise as it prepares to submit its new drug application in mid-2023. Monday’s news came from the first of four planned Phase III studies, showing the drug, dubbed KarXT, significantly reduced symptoms on a seven-point rating scale after five weeks compared to placebo. Previously, the drug had passed a Phase II test in late 2019.
Editor’s note: This article has been updated to correct the number of Phase III studies Karuna is conducting for KarXT. Karuna is running four Phase III trials, not five.