What happened

Shares of Karuna Therapeutics (NASDAQ:KRTX) had skyrocketed 233.1% higher as of 11:03 a.m. EST on Monday. The biopharmaceutical company announced positive results earlier in the morning from a phase 2 clinical trial evaluating experimental drug KarXT in treating acute psychosis in patients with schizophrenia. 

So what

The word "positive" doesn't really do justice to just how good the phase 2 results for KarXT really were. Jeffrey Lieberman, chairman of Columbia University's Department of Psychiatry and a member of Karuna Therapeutics' scientific advisory board, said that based on the data from the study, KarXT "could represent a game-changing therapeutic advance in the treatment of patients with schizophrenia."

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Image source: Getty Images.

Karuna announced that KarXT met the primary endpoint of the phase 2 study by delivering a mean reduction of 11.6 points in total Positive and Negative Syndrome Scale (PANSS) compared to placebo. The drug also met secondary endpoints of the study.

What really had investors excited, though, was the tolerability of KarXT. Antipsychotic drugs are notorious for negative side effects that often cause patients to discontinue use of the drugs. Karuna reported that discontinuation rates in the study were similar between patients receiving KarXT and those receiving placebo. The company said that there was "no evidence of somnolence, extrapyramidal side effects or weight gain relative to placebo" -- all of which are common worrisome side effects of current antipsychotic drugs. 

Now what

Karuna now plans to meet with the U.S. Food and Drug Administration (FDA) in the second quarter of 2020 to discuss advancing KarXT to a pivotal late-stage clinical study. Stephen Brannon, the company's chief medical officer, said that Karuna hopes to begin this phase 3 study by the end of next year. He added that Karuna plans to "explore other CNS [central nervous system] disorders that could benefit from this approach, such as psychosis in Alzheimer's disease as well as the management of pain."

While there's a lot of volatility associated with investing in biotech stocks, Karuna's great news shows that this volatility isn't always negative. Although there's no guarantee that KarXT will be successful in phase 3 testing, the drug holds a lot of promise. Karuna Therapeutics is now a stock for investors to keep on their radar screens.