Karuna Therapeutics said Monday a third study of its schizophrenia treatment succeeded, but KRTX stock reversed early gains and toppled to a seven-month low.
After five weeks of treatment, patients who received Karuna's KarXT showed an 8.4-point reduction on a scale measuring symptoms compared to placebo recipients. That was in line with reductions of 11.6 and 9.6 points in two earlier studies, analysts noted.
"With now three successful studies in hand, and a unique mechanism of action, we think this further de-risks the regulatory path forward for KarXT," Wedbush analyst Laura Chico said in a note to clients.
Karuna now plans to submit an application for Food and Drug Administration approval in the middle of this year. That would put the drug on track for a launch in late 2024.
On today's stock market, KRTX stock skidded 4.8% to 182.50. That reversed from a nearly 12% gain in premarket action. Shares briefly retook their 50-day and 200-day moving averages, according to MarketSmith.com, before tumbling to their lowest point since August.
KRTX Stock: Positive Vs. Negative Symptoms
Karuna's treatment works with receptors involved in the parasympathetic nervous system, a network of nerves that can relax the body after stress or danger. In patients with schizophrenia, treatment with KarXT led to an improvement in symptoms in as early as two weeks.
There was only one hiccup in the data. Karuna assessed the impact on positive and negative symptoms. Positive symptoms are changes in behavior or thoughts, while negative symptoms include withdrawal from the world. Patients showed a 3.5-point improvement in positive symptoms. But negative symptoms didn't hit statistical significance with only a 0.8-point improvement.
"That said statistical significance was seen at week four, and we'll be interested in learning more as to potential next steps in getting language on KarXT's effect on negative symptoms on the label," Mizuho Securities analyst Graig Suvannavejh said in a note.
He has a buy rating and 270 price target on KRTX stock.
Safety also appeared in line with earlier studies — "a good thing," Wedbush's Chico said. Just 6% of KarXT recipients dropped out of the study due to side effects vs. 5% of the placebo group.
Karuna stock is highly rated with a Relative Strength Rating of 93, according to IBD Digital, that puts its 12-month performance in the top 7% of all stocks.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
