UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from __________ to ____________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of July 31, 2023, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
29 |
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Item 4. |
29 |
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PART II. |
31 |
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Item 1. |
31 |
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Item 1A. |
31 |
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Item 2. |
31 |
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Item 3. |
31 |
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Item 4. |
31 |
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Item 5. |
31 |
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Item 6. |
32 |
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33 |
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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)
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June 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investment securities, available-for-sale |
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Short-term investments, other |
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— |
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Accounts receivable |
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— |
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Prepaid expenses and other current assets |
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Deferred offering costs |
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Total current assets |
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Restricted cash |
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— |
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Right-of-use lease assets - operating, net |
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Property and equipment, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of operating lease liability |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Other non-current liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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License and other revenue |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Other income, net: |
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Interest income |
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Sublease income |
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Total other income, net |
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Net loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax provision |
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— |
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( |
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— |
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( |
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Net loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share, basic and diluted (Note 6) |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding used |
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The accompanying notes are an integral part of these consolidated financial statements
2
Karuna Therapeutics, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized losses on available-for-sale |
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( |
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( |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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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)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Value |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock upon public |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of common options |
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— |
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— |
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— |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of common options |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Value |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of common options |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of common options |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance, June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements
4
Karuna Therapeutics, Inc.
CONSOLIDATED Statements of Cash Flows
(In thousands)
(Unaudited)
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Six Months Ended |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Amortization of premiums and accretion of discounts on |
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( |
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Depreciation and amortization expense |
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Changes in operating assets and liabilities: |
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Accrued interest on investment securities |
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( |
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Accounts receivable |
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( |
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Prepaid expenses and other current assets |
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Right-of-use assets |
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Other non-current assets |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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Operating lease liability |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of investment securities |
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( |
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( |
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Purchase of short-term investments (certificates of deposit) |
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( |
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Maturities of investment securities |
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Acquisition of property and equipment |
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( |
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( |
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Net cash (used in) provided by investing activities |
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( |
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Cash flows from financing activities |
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Proceeds from public offering, net of underwriting discounts |
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Payment of offering costs |
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( |
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( |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental disclosures of cash flows information |
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Lease liabilities arising from obtaining right-of-use assets |
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$ |
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$ |
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Purchases of property and equipment included in accounts payable |
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$ |
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$ |
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Deferred offering costs included in accounts payable and accrued expenses |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of the Business and Basis of Presentation
Description of the Business
Karuna Therapeutics, Inc. (the “Company”) was incorporated under the laws of the State of Delaware in July 2009 as Karuna Pharmaceuticals, Inc. and is headquartered in Boston, Massachusetts. In March 2019, the Company changed its name to Karuna Therapeutics, Inc. The Company is an innovative clinical-stage biopharmaceutical company driven to create and deliver transformative medicines for people living with psychiatric and neurological conditions.
Since the Company’s inception, it has focused substantially all of its efforts and financial resources on organizing and staffing the Company, acquiring and developing its technology, raising capital, building its intellectual property portfolio, undertaking preclinical studies and clinical trials, preparing for the potential commercialization of KarXT, and providing general and administrative support for these activities. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, regulatory approval of products, uncertainty of market acceptance of products, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability, the impact of the ongoing and evolving COVID-19 coronavirus pandemic, and the need to obtain adequate additional financing to fund the development of its product candidates.
In March 2023, the Company completed a follow-on public offering under an effective registration statement on Form S-3 (File No. 333-239657) and a related prospectus supplement in which it issued and sold
The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company experienced negative operating cash flows of $
The Company expects that its cash, cash equivalents and available-for-sale investments of $
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).
The consolidated financial statements include the accounts of Karuna Therapeutics, Inc. and its wholly owned subsidiary, Karuna Securities Corporation, a Massachusetts corporation. All inter-company transactions and balances have been eliminated in consolidation.
6
The accompanying consolidated balance sheet as of June 30, 2023 and the consolidated statements of operations, comprehensive loss, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022, and the statements of cash flow for the six months ended June 30, 2023 and 2022 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and the results of its operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2022. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period.
Note 2. Summary of Significant Accounting Policies
The significant accounting policies and estimates used in preparation of the consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. During the three and six months ended June 30, 2023, there were no material changes to the Company’s significant accounting policies, except for the addition of the following policy:
Acquired In-Process Research and Development (IPR&D) and Development Milestones
Acquired IPR&D and development milestones include the initial costs of externally developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use. Prior to regulatory approval of the compound, initial costs are expensed when incurred, and milestone payment obligations related to these transactions are expensed when the event triggering an obligation to pay the milestone occurs. Milestone payments made upon or after regulatory approval are capitalized and amortized over the remaining useful life of the related asset.
Recently Issued Accounting Pronouncements
New pronouncements issued but not effective until after June 30, 2023 are not expected to have a material impact on the Company’s consolidated financial statements.
Note 3. Prepaid Expenses and Other Assets and Accrued Expenses