10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number: 001-38958

 

Karuna Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-0605902

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

99 High Street, 26th Floor

Boston, Massachusetts

02110

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (857) 449-2244

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

KRTX

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 31, 2022, the registrant had 34,362,777 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Consolidated Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Loss

3

 

Consolidated Statements of Stockholders’ Equity

4

 

Consolidated Statements of Cash Flows

5

 

Notes to Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

Signatures

34

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

KARUNA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

628,317

 

 

$

206,953

 

Investment securities, available-for-sale

 

 

563,717

 

 

 

287,038

 

Accounts receivable

 

 

81

 

 

 

1,750

 

Prepaid expenses and other current assets

 

 

27,035

 

 

 

21,138

 

Deferred offering costs

 

 

528

 

 

 

455

 

Total current assets

 

 

1,219,678

 

 

 

517,334

 

Restricted cash

 

 

261

 

 

 

261

 

Right-of-use lease assets - operating, net

 

 

5,131

 

 

 

6,453

 

Property and equipment, net

 

 

2,919

 

 

 

3,092

 

Other non-current assets

 

 

423

 

 

 

531

 

Total assets

 

$

1,228,412

 

 

$

527,671

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

15,716

 

 

$

1,939

 

Accrued expenses

 

 

22,751

 

 

 

16,099

 

Current portion of operating lease liability

 

 

2,278

 

 

 

2,175

 

Total current liabilities

 

 

40,745

 

 

 

20,213

 

Operating lease liability, net of current portion

 

 

3,608

 

 

 

5,328

 

Other non-current liabilities

 

 

104

 

 

 

104

 

Total liabilities

 

 

44,457

 

 

 

25,645

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized and 0 
   shares outstanding as of September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 150,000,000 shares authorized at
   September 30, 2022 and December 31, 2021;
34,345,991 and 29,770,558 
   shares issued and outstanding at September 30, 2022 and December 31,
   2021, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

1,675,645

 

 

 

790,391

 

Accumulated deficit

 

 

(487,995

)

 

 

(287,871

)

Accumulated other comprehensive loss

 

 

(3,698

)

 

 

(497

)

Total stockholders’ equity

 

 

1,183,955

 

 

 

502,026

 

Total liabilities and stockholders’ equity

 

$

1,228,412

 

 

$

527,671

 

 

The accompanying notes are an integral part of these consolidated financial statements

1


 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

License and other revenue

 

$

81

 

 

$

 

 

$

5,359

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

61,950

 

 

 

38,775

 

 

 

158,243

 

 

 

83,108

 

General and administrative

 

 

19,125

 

 

 

12,393

 

 

 

51,756

 

 

 

32,554

 

Total operating expenses

 

 

81,075

 

 

 

51,168

 

 

 

209,999

 

 

 

115,662

 

Loss from operations

 

 

(80,994

)

 

 

(51,168

)

 

 

(204,640

)

 

 

(115,662

)

Other income (loss), net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

3,884

 

 

 

114

 

 

 

4,611

 

 

 

363

 

Sublease income

 

 

147

 

 

 

122

 

 

 

433

 

 

 

131

 

Impairment loss on right-of-use assets

 

 

 

 

 

 

 

 

 

 

 

(677

)

Total other income (loss), net

 

 

4,031

 

 

 

236

 

 

 

5,044

 

 

 

(183

)

Net loss before income taxes

 

 

(76,963

)

 

 

(50,932

)

 

 

(199,596

)

 

 

(115,845

)

Income tax provision

 

 

 

 

 

 

 

 

(528

)

 

 

 

Net loss attributable to common stockholders

 

$

(76,963

)

 

$

(50,932

)

 

$

(200,124

)

 

$

(115,845

)

Net loss per share, basic and diluted (Note 6)

 

$

(2.38

)

 

$

(1.72

)

 

$

(6.52

)

 

$

(4.00

)

Weighted average common shares outstanding used in
   computing net loss per share, basic and diluted

 

 

32,349,111

 

 

 

29,572,289

 

 

 

30,693,117

 

 

 

28,953,654

 

 

The accompanying notes are an integral part of these consolidated financial statements

2


 

Karuna Therapeutics, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(76,963

)

 

$

(50,932

)

 

$

(200,124

)

 

$

(115,845

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on available-for-sale
   investments

 

 

(703

)

 

 

(30

)

 

 

(3,201

)

 

 

(74

)

Comprehensive loss

 

$

(77,666

)

 

$

(50,962

)

 

$

(203,325

)

 

$

(115,919

)

 

The accompanying notes are an integral part of these consolidated financial statements

3


 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance, December 31, 2021

 

 

29,770,558

 

 

$

3

 

 

$

790,391

 

 

$

(287,871

)

 

$

(497

)

 

$

502,026

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

22,768

 

 

 

 

 

 

 

 

 

22,768

 

Exercise of common options

 

 

162,545

 

 

 

 

 

 

6,274

 

 

 

 

 

 

 

 

 

6,274

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,498

)

 

 

(2,498

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(123,161

)

 

 

 

 

 

(123,161

)

Balance, June 30, 2022

 

 

29,933,103

 

 

$

3

 

 

$

819,433

 

 

$

(411,032

)

 

$

(2,995

)

 

$

405,409

 

Issuance of common stock upon
   public offering, net of $
43,125
   in under-writing discounts and
   commissions and $
328 in
   offering costs

 

 

4,011,628

 

 

 

 

 

 

819,047

 

 

 

 

 

 

 

 

 

819,047

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,021

 

 

 

 

 

 

 

 

 

12,021

 

Exercise of common options

 

 

401,260

 

 

 

 

 

 

25,144

 

 

 

 

 

 

 

 

 

25,144

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(703

)

 

 

(703

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(76,963

)

 

 

 

 

 

(76,963

)

Balance, September 30, 2022

 

 

34,345,991

 

 

$

3

 

 

$

1,675,645

 

 

$

(487,995

)

 

$

(3,698

)

 

$

1,183,955

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Income (loss)

 

 

Equity

 

Balance, December 31, 2020

 

 

26,988,458

 

 

$

3

 

 

$

482,955

 

 

$

(144,066

)

 

$

39

 

 

$

338,931

 

Issuance of common stock upon
   public offering, net of $
17,250 
   in under-writing discounts and
   commissions and $
233 in
   offering costs

 

 

2,395,834

 

 

 

 

 

 

270,017

 

 

 

 

 

 

 

 

 

270,017

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

13,288

 

 

 

 

 

 

 

 

 

13,288

 

Exercise of common options

 

 

159,518

 

 

 

 

 

 

3,059

 

 

 

 

 

 

 

 

 

3,059

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44

)

 

 

(44

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(64,913

)

 

 

 

 

 

(64,913

)

Balance, June 30, 2021

 

 

29,543,810

 

 

$

3

 

 

$

769,319

 

 

$

(208,979

)

 

$

(5

)

 

$

560,338

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,203

 

 

 

 

 

 

 

 

 

8,203

 

Exercise of common options

 

 

62,195

 

 

 

 

 

 

749

 

 

 

 

 

 

 

 

 

749

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(50,932

)

 

 

 

 

 

(50,932

)

Balance, September 30, 2021

 

 

29,606,005

 

 

$

3

 

 

$

778,271

 

 

$

(259,911

)

 

$

(35

)

 

$

518,328

 

 

The accompanying notes are an integral part of these consolidated financial statements

4


 

Karuna Therapeutics, Inc.

CONSOLIDATED Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(200,124

)

 

$

(115,845

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

34,789

 

 

 

21,491

 

Impairment loss on right-of-use assets

 

 

 

 

 

677

 

Amortization of premiums and accretion of discounts on
   investment securities

 

 

(327

)

 

 

735

 

Depreciation and amortization expense

 

 

807

 

 

 

270

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accrued interest on investment securities

 

 

(399

)

 

 

156

 

Accounts receivable

 

 

1,669

 

 

 

 

Prepaid expenses and other current assets

 

 

(5,897

)

 

 

(8,397

)

Right-of-use assets

 

 

1,322

 

 

 

1,004

 

Other non-current assets

 

 

108

 

 

 

(508

)

Accounts payable

 

 

13,777

 

 

 

1,005

 

Accrued expenses

 

 

6,643

 

 

 

6,134

 

Operating lease liability

 

 

(1,617

)

 

 

(706

)

Other non-current liabilities

 

 

 

 

 

104

 

Net cash used in operating activities

 

 

(149,249

)

 

 

(93,880

)

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of investment securities

 

 

(459,353

)

 

 

(289,504

)

Maturities of investment securities

 

 

180,199

 

 

 

302,149

 

Sales of investment securities

 

 

 

 

 

8,990

 

Acquisition of property and equipment

 

 

(625

)

 

 

(2,303

)

Net cash (used in) provided by investing activities

 

 

(279,779

)

 

 

19,332

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from public offering, net of underwriting discounts
   and commissions

 

 

819,375

 

 

 

270,250

 

Payment of offering costs

 

 

(401

)

 

 

(233

)

Proceeds from exercise of stock options

 

 

31,418

 

 

 

3,808

 

Net cash provided by financing activities

 

 

850,392

 

 

 

273,825

 

Net increase in cash, cash equivalents and restricted cash

 

 

421,364

 

 

 

199,277

 

Cash, cash equivalents and restricted cash at beginning of period