UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

☐ Preliminary Proxy Statement

☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒ Definitive Proxy Statement

☐ Definitive Additional Materials

☐ Soliciting Material Pursuant to §240.14a-12

Karuna Therapeutics, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)

Payment of Filing Fee (Check all boxes that apply):

☒ No fee required.

☐ Fee paid previously with preliminary materials

☐ Fee computed in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

April 27, 2023

Dear Stockholder:

You are cordially invited to attend the 2023 Annual Meeting of Stockholders of Karuna Therapeutics, Inc. (the “Company” or “Karuna”). The meeting will be held online on June 20, 2023 at 9:00 a.m., Eastern Time. You may attend the meeting virtually via the internet at www.virtualshareholdermeeting.com/KRTX2023, where you will be able to vote electronically and submit questions. You will need the 16-digit control number, which is located on the Notice of Internet Availability that you received in the mail, on your proxy card or in the instructions accompanying your proxy materials, to attend the Annual Meeting.

Details regarding admission to the meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.

At this Annual Meeting, stockholders will consider and vote on the following matters:

Under Securities and Exchange Commission rules, the Company is providing access to the proxy materials for the Annual Meeting to shareholders via the internet. Accordingly, you can access the proxy materials and vote at www.proxyvote.com. Instructions for accessing the proxy materials and voting are described below and in the Notice of Annual Meeting that you received in the mail. Your vote is very important. Whether or not you plan to attend the meeting, please carefully review the enclosed proxy statement and then cast your vote, regardless of the number of shares you hold. If you are a stockholder of record, you may vote over the internet, by telephone, or, if you request to receive a printed set of the proxy materials, by completing, signing, dating and mailing the accompanying proxy card in the return envelope. Submitting your vote via the internet or by telephone or proxy card will not affect your right to vote online during the virtual meeting if you decide to attend the Annual Meeting. If your shares are held in street name (held for your account by a broker or other nominee), you will receive instructions from your broker or other nominee explaining how to vote your shares, and you will have the option to cast your vote by telephone or over the internet if your voting instruction form from your broker or nominee includes instructions and a toll-free telephone number or internet website to do so. In any event, to be sure that your vote will be received in time, please cast your vote by your choice of available means at your earliest convenience.

We hope that you will join us on June 20, 2023. Your investment and continuing interest in the Company are appreciated.

TABLE OF CONTENTS

NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS

Boston, Massachusetts

April 27, 2023

Important Notice Regarding the Internet Availability of Proxy Materials for the Company’s 2023 Annual Meeting of Stockholders to Be Held on June 20, 2023: The Notice of 2023 Annual Meeting of Stockholders, proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, are available at www.karunatx.com by following the link for “Investors & Media.”

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KARUNA THERAPEUTICS, INC.

99 High Street, 26th Floor

BOSTON, MASSACHUSETTS 02110

PROXY STATEMENT

FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 20, 2023

AT 9:00 AM EDT

GENERAL INFORMATION

When is this proxy statement and the accompanying material scheduled to be sent to stockholders?

We have elected to provide access to our proxy materials to our stockholders via the internet. Accordingly, on or about April 27, 2023 we will begin mailing to our stockholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our 2022 Annual Report. The Notice of Internet Availability also instructs you on how to submit your proxy or voting instructions through the internet or to request a paper copy of our proxy materials, including a proxy card or voting instruction form that includes instructions on how to submit your proxy or voting instructions by mail or telephone. For shares held in street name (held for your account by a broker or other nominee), you will receive a voting instruction form from your broker or nominee. The Annual Report on Form 10-K for the year ended December 31, 2022 is available on our website at www.karunatx.com by following the link for “Investors & Media.”

Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?

Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we are providing access to our proxy materials over the internet rather than printing and mailing the proxy materials. We believe electronic delivery will expedite the receipt of materials, will help lower our costs and reduce the environmental impact of our annual meeting materials. Therefore, a Notice of Internet Availability will be mailed to holders of record and beneficial owners of our common stock starting on or around April 27, 2023. The Notice of Internet Availability will provide instructions as to how stockholders may access and review the proxy materials, including the Notice of Annual Meeting, proxy statement, proxy card, and Annual Report on Form 10-K, on the website referred to in the Notice of Internet Availability or, alternatively, how to request that a copy of the proxy materials, including a proxy card, be sent to stockholders by mail. The Notice of Internet Availability will also provide voting instructions. In addition, stockholders of record may request to receive the proxy materials in printed form by mail, or electronically by e-mail, on an ongoing basis for future stockholder meetings. Please note that while our proxy materials are available at the website referenced in the Notice of Internet Availability, and our Notice of Annual Meeting, proxy statement and Annual Report on Form 10-K are available on our website, no other information contained on either website is incorporated by reference in or considered to be a part of this document.

Who is soliciting my vote?

The board of directors of Karuna Therapeutics, Inc. is soliciting your vote for the 2023 Annual Meeting of Stockholders.

When is the record date for the Annual Meeting?

The board of directors has fixed the record date for the Annual Meeting as of the close of business on April 24, 2023.

How many votes can be cast by all stockholders?

A total of 37,443,954 shares of common stock of the Company were outstanding on April 24, 2023 and entitled to be voted at the meeting. Each share of common stock is entitled to one vote on each matter.

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How do I vote?

If you are a stockholder of record and your shares are registered directly in your name, you may vote:

If your shares of common stock are held in street name (held for your account by a broker or other nominee):

How do I attend the Annual Meeting online?

We will be hosting our Annual Meeting via live webcast only. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/KRTX2023. The webcast will start at 9:00 a.m. Eastern Time on June 20, 2023. Stockholders may vote and ask questions while attending the Annual Meeting online. In order to be able to attend the Annual Meeting, you will need the 16-digit control number, which is located on your Notice of Internet Availability, on your proxy card or in the instructions accompanying your proxy materials. Instructions on how to participate in the Annual Meeting are also posted online at www.proxyvote.com.

What are the Board of Director’s recommendations on how to vote my shares?

The board of directors recommends a vote:

Proposal 1: FOR election of the three Class I director nominees (page 7);

Proposal 2: FOR the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers (page 47); and

Proposal 3: FOR ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm (page 48).

Who pays the cost for soliciting proxies?

The Company will pay the cost for the solicitation of proxies by the board of directors. The solicitation of proxies will be made primarily by mail and through internet access to materials. Proxies may also be solicited personally, by telephone, fax or e-mail by employees of the Company without any remuneration to such individuals other than their regular compensation. The Company will also reimburse brokers, banks, custodians, other nominees, and fiduciaries for forwarding these materials to their principals to obtain the authorization for the execution of proxies.

Will my shares be voted if I do not return my proxy?

If your shares are registered directly in your name, your shares will not be voted if you do not vote over the internet, by telephone, by returning your proxy or by ballot at the Annual Meeting. If your shares are held in street name, and you do not timely return a proxy to your bank, broker or other nominee to vote your shares, your bank, broker or other nominee may, on routine matters, either vote your shares or leave your shares unvoted. Your bank, broker or other nominee cannot vote your shares on any non-routine matter.

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The election of directors (Proposal 1) and advisory vote on the compensation paid to our named executive officers (Proposal 2) are each non-routine matters. The ratification of the appointment of our independent registered public accounting firm (Proposal 3) is a routine matter. Accordingly, if you do not give your bank, brokerage firm or other nominee voting instructions on Proposals 1 or 2 they may not vote your shares with respect to such matter and your shares will be counted as “broker non-votes” with respect to such proposal. A “broker non-vote” occurs when shares held by a bank, brokerage firm or other nominee are not voted with respect to a particular proposal because the bank, brokerage firm or other nominee does not have or did not exercise discretionary authority to vote on the matter and has not received voting instructions from its clients. We encourage you to provide voting instructions to your bank, broker or other nominee by giving your proxy to them. This ensures that your shares will be voted at the Annual Meeting according to your instructions. You should receive directions from your bank, broker or other nominee about how to submit your proxy to them at the time you receive this proxy statement.

Can I change my vote?

You may revoke your proxy at any time before it is voted by notifying the Secretary in writing, by returning a signed proxy with a later date, or by transmitting a subsequent vote over the internet or by telephone prior to the close of the internet voting facility or the telephone voting facility. You may also attend the virtual meeting and vote during the meeting. If your stock is held in street name, you must contact your broker or nominee for instructions as to how to change your vote.

How is a quorum reached?

The presence, by virtual attendance or by proxy, of holders of at least a majority of the total number of outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Shares held of record by stockholders or brokers, bankers or other nominees who do not return a signed and dated proxy or attend the Annual Meeting virtually will not be considered present or represented at the Annual Meeting and will not be counted in determining the presence of a quorum. Abstentions and broker non-votes, if any, will be counted for purposes of determining whether a quorum is present for the transaction of business at the meeting.

What vote is required to approve each item and how are votes counted?

Votes cast by proxy or online at the Annual Meeting will be counted by the persons appointed by the Company to act as tabulators for the meeting. The tabulators will count all votes FOR and AGAINST, abstentions and broker non-votes, as applicable, for each matter to be voted on at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and, therefore, do not have the effect of votes in opposition to such proposals. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.

A. Proposal 1 - Election of three Class I director nominees

The three nominees for director to receive the highest number of votes FOR election will be elected as directors. This is called a plurality. Proposal 1 is a non-routine matter. Therefore, if your shares are held by your brokerage firm in street name and you do not timely provide voting instructions with respect to your shares, your brokerage firm cannot vote your shares on Proposal 1. Shares held in street name by banks, brokerage firms or other nominees who indicate on their proxies that they do not have authority to vote the shares on Proposal 1 will not be counted as votes FOR or WITHHELD from any nominee. As a result, such “broker non-votes” will have no effect on the voting on Proposal 1.

You may:

Votes that are withheld will not be included in the vote tally for the election of directors and will not affect the results of the vote.

B. Proposal 2 - Advisory Vote on the Compensation Paid to Named Executive Officers

To approve Proposal 2, holders of a majority of the votes cast on the matter must vote FOR the proposal. Proposal 2 is a non-routine matter. Therefore, if your shares are held by your brokerage firm in street name and you do not timely provide voting instructions with respect to your shares, your brokerage firm cannot vote your shares on Proposal 2. If you ABSTAIN from voting on Proposal 2, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the

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proposal. As a result, such “broker non-votes” and abstentions will have no effect on the voting on Proposal 2. Proposal 2 is non-binding. Because this vote is advisory and not binding on us or our board in any way, our board may decide that it is in our and our stockholders’ best interests to compensate our named executive officers in an amount or manner that differs from that which is approved by our stockholders.

C. Proposal 3 - Ratification of selection of KPMG LLP as our independent registered public accounting firm

To approve Proposal 3, the votes cast FOR must exceed the votes cast AGAINST. Only FOR and AGAINST votes will affect the outcome. Abstentions will have no effect on the voting of Proposal 3. Proposal 3 is a routine matter. Therefore, if your shares are held by your bank, broker or other nominee in street name and you do not vote your shares, your bank, broker or other nominee may vote your shares on Proposal 3.

Although stockholder approval of our audit committee’s appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2023 is not required, we believe that it is advisable to give stockholders an opportunity to ratify this appointment. If this proposal is not approved at the Annual Meeting, our audit committee will reconsider its appointment of KPMG LLP as our independent registered public accounting firm for the year ended December 31, 2023.

If there are insufficient votes to approve Proposals 1, 2 or 3, your proxy may be voted by the persons named in the proxy to adjourn the Annual Meeting in order to solicit additional proxies in favor of the approval of such proposal. If the Annual Meeting is adjourned or postponed for any purpose, at any subsequent reconvening of the meeting, your proxy will be voted in the same manner as it would have been voted at the original convening of the Annual Meeting unless you withdraw or revoke your proxy. Your proxy may be voted in this manner even though it may have been voted on the same or any other matter at a previous session of the Annual Meeting.

Could other matters be decided at the Annual Meeting?

The Company does not know of any other matters that may be presented for action at the Annual Meeting. Should any other business come before the meeting, the persons named on the enclosed proxy will have discretionary authority to vote the shares represented by such proxies in accordance with their best judgment. If you hold shares through a broker, bank or other nominee as described above, they will not be able to vote your shares on any other business that comes before the Annual Meeting unless they receive instructions from you with respect to such matter.

What happens if the meeting is postponed or adjourned?

Your proxy may be voted at the postponed or adjourned meeting. You will still be able to change your proxy until it is voted.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K, or Form 8-K, that we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the Annual Meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

What does it mean if I receive more than one proxy card or voting instruction form?

It means that you have multiple accounts at the transfer agent or with brokers. Please complete and return all proxy cards or voting instruction forms to ensure that all of your shares are voted.

What if I have technical difficulties or trouble accessing the Annual Meeting?

If you encounter any technical difficulties with the virtual meeting platform on the meeting day, please call the technical support number that will be posted on the virtual shareholder meeting log-in page. Technical support will be available starting at 8:45 a.m. Eastern Time on June 20, 2023 and will remain available until the Annual Meeting has ended.

Can I ask pertinent questions during the Annual Meeting?

You may submit questions during the meeting by logging into the meeting website at www.virtualshareholdermeeting.com/KRTX2023 using your 16-digit control number and typing your question into the “Ask a

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Question” file and clicking “Submit”. Only questions pertinent to the business to be conducted at the Annual Meeting will be answered during the meeting, subject to time limitations.

Who should I call if I have any additional questions?

If you hold your shares directly, please call Mia Kelley, Vice President, Legal Affairs, and Secretary of the Company, at (857) 449-2244. If your shares are held in street name, please contact the telephone number provided on your voting instruction form or contact your broker or nominee holder directly.

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PROPOSAL 1: ELECTION OF DIRECTORS

Our board of directors is divided into three classes, with one class of our directors standing for election each year. The members of each class are elected to serve a three-year term with the term of office of each class ending in successive years. Bill Meury, Laurie Olson and David Wheadon, M.D. are the directors whose terms expire at this Annual Meeting, and each of Mr. Meury, Ms. Olson and Dr. Wheadon has been nominated for and has agreed to stand for re-election to the board of directors to serve as a Class I director of the Company until the 2026 Annual Meeting and until his or her successor is duly elected and qualified.

It is intended that, unless you give contrary instructions, shares represented by proxies solicited by the board of directors will be voted for the election of the director nominees listed below. We have no reason to believe that the director nominees will be unavailable for election at the Annual Meeting. In the event that any of the director nominees are unexpectedly not available to serve, proxies may be voted for another person nominated as a substitute by the board of directors, or the board of directors may reduce the number of directors to be elected at the Annual Meeting. Pursuant to our by-laws, the board of directors has fixed the number of directors at nine. Vacancies on the board of directors are filled exclusively by the affirmative vote of a majority of the remaining directors, even if less than a quorum is present, and not by the stockholders. Your proxy cannot be voted for a greater number of persons than the number of director nominees named in this proxy statement.

Information relating to the director nominees and each continuing director, including his or her period of service as a director of the Company, principal occupation and other biographical material, is shown below.

Voting Requirement to Approve Proposal

For Proposal 1, the three nominees receiving the plurality of votes properly cast will be elected as directors.

Recommendation of the Board of Directors

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE

“FOR”

THESE DIRECTOR NOMINEES FOR CLASS I DIRECTORS:

BILL MEURY

LAURIE OLSON

DAVID WHEADON, M.D.

(PROPOSAL 1 ON YOUR PROXY CARD)

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DIRECTOR BIOGRAPHIES

The following table sets forth information concerning our directors as of April 27, 2023. The biographical description of each director includes the specific experience, qualifications, attributes and skills that the board of directors would expect to consider if it were making a conclusion currently as to whether such person should serve as a director.

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9

10

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EXECUTIVE OFFICERS

The following table sets forth information regarding our executive officers, as of April 27, 2023:

(1) Mr. Meury is also a director of the Company and his biographical information appears on page 8.

(2) Dr. Paul is also a director of the Company and his biographical information appears on page 10.

Andrew Miller, Ph.D. has served as our Chief Operating Officer since August 2018 and served as a member of our board of directors from April 2012 to March 2019. Dr. Miller was our founder and prior to serving as our Chief Operating Officer, he was our President and Chief Executive Officer from July 2016 to August 2018. From August 2008 to July 2016, Dr. Miller held several positions at PureTech Health plc, last serving as a Vice President, Venture Partner, and in such capacity served as Chief Operating Officer of Tal Medical and acting Chief Operating Officer of Entrega, Inc. He is currently a member of the board of directors of Entrega, Inc. Dr. Miller received a B.S. in Chemical Engineering from the University of Illinois with highest honors and completed his Ph.D. in Chemical Engineering at the Massachusetts Institute of Technology.

Troy Ignelzi has served as our Chief Financial Officer since March 2019. Prior to that, Mr. Ignelzi was the Chief Financial Officer of scPharmaceuticals Inc. from March 2016 to February 2019, and provided consulting services to scPharmaceuticals Inc. in February and March 2016. Mr. Ignelzi previously served as Chief Financial Officer and as a member of the executive leadership teams at Juventas Therapeutics Inc., a privately held biotechnology company, from October 2014 to February 2016. From October 2013 to October 2014, Mr. Ignelzi served as Senior Vice President—Operations and Business Development of Pharmalex GmbH. Prior to Pharmalex, Mr. Ignelzi was Vice President—Business Development at Esperion Therapeutics, Inc., a public pharmaceutical company, from January 2009 to September 2013. Mr. Ignelzi served as Vice President, Business Development & Strategic Planning at Insys Therapeutics, Inc., a specialty pharmaceutical company, from February 2007 to February 2009. Previously, Mr. Ignelzi had served as a specialty senior sales representative at Eli Lilly from February 2002 to August 2005. Mr. Ignelzi currently serves as a member of the board of directors of Vedanta Biosciences, Inc. and previously served as a member of the board of directors of CinCor Pharma, Inc. Mr. Ignelzi holds a B.S. in Accounting from Ferris State University.

Stephen Brannan, M.D. has served as our Chief Medical Officer since March 2017. From July 2016 to February 2017, Dr. Brannan was an independent consultant. Prior to that, he served as the Vice President Clinical Research and Medical Affairs at Forum Pharmaceuticals Inc. from August 2015 to June 2016. From May 2011 to August 2015, Dr. Brannan served as the Therapeutic Head of Neuroscience at Takeda Pharmaceutical Company. Dr. Brannan has been active in the development of multiple important central nervous system treatments, including Cymbalta, Exelon Patch, Trintellix, and VNS for Treatment Resistant Depression, while holding various roles at Forum, Takeda, Novartis, Cyberonics and Eli Lilly. Prior to joining the pharmaceutical industry, Dr. Brannan worked on the faculty at the University of Texas Health Science Center at San Antonio, or UTHSCSA. Dr. Brannan trained in psychiatry at UTHSCSA, received his A.B. from Harvard College and holds a M.D. degree from the University of Texas Health Science Center at Dallas (Southwestern Medical School).

William Kane has served as our Chief Commercial Officer since February 2023. From November 2021 to December 2022, Mr. Kane was an independent consultant. From June 2020 to October 2021, Mr. Kane was Executive Vice President and Chief Commercial Officer of BioXcel Therapeutics, Inc. Prior to that, he served in multiple leadership roles at Allergan plc, most recently as Senior Vice President, U.S. General Medicine, from January 2017 to May 2020, and prior to that, as Vice President, Internal Medicine Brands, from July 2014 to December 2016 and Vice President, CNS Marketing, from October 2013 to June 2014. Mr. Kane has also held senior level commercial positions at leading biopharma companies, including Pfizer and Sepracor (now Sunovion Pharmaceuticals). Mr. Kane holds a B.A. in Government from Connecticut College and an M.B.A. from the Wharton School at the University of Pennsylvania.

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CORPORATE GOVERNANCE

Board Composition

We currently have nine directors and the terms of office of the directors are divided into three classes:

Class I consists of Bill Meury, Laurie Olson and David Wheadon, M.D., Class II consists of Christopher Coughlin, James Healy, M.D., Ph.D. and Jeffrey Jonas, M.D., and Class III consists of Atul Pande, M.D., Steven Paul, M.D. and Denice Torres. At each Annual Meeting of Stockholders, the successors to directors whose terms will then expire shall serve from the time of election and qualification until the third Annual Meeting following election and until their successors are duly elected and qualified. A resolution of the board of directors may change the authorized number of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management of our company.

Board Independence

Our board of directors has determined that each of our directors, except for Bill Meury, who serves as our President and Chief Executive Officer, Steven Paul, M.D., who serves as our Chief Scientific Officer and President of Research and Development, and Jeffrey Jonas, M.D., who formerly served as the Chief Innovation Officer of Sage Therapeutics, Inc., or Sage, where Dr. Paul formerly served as a member of the compensation committee, has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is independent within the meaning of the director independence standards of the Nasdaq Stock Market, or Nasdaq, rules and the SEC.

At least annually, our board of directors will evaluate all relationships between us and each director in light of relevant facts and circumstances for the purposes of determining whether a material relationship exists that might signal a potential conflict of interest or otherwise interfere with such director’s ability to satisfy his or her responsibilities as an independent director. Based on this evaluation, our board of directors will make an annual determination of whether each director is independent within the meaning of Nasdaq and SEC independence standards.

Board Meetings and Attendance

Our board of directors held nine meetings during the fiscal year ended December 31, 2022. Each of the directors attended at least 75% of the meetings of the board of directors and the committees of the board of directors on which he or she served during the fiscal year ended December 31, 2022 (in each case, which were held during the period for which he or she was a director and/or a member of the applicable committee). The Company encourages its directors to attend the Annual Meeting of Stockholders. Each of our directors then in office attended our 2022 annual meeting of stockholders.

Board Committees

Our board of directors has established three standing committees: the audit committee, the compensation committee, and the nominating and corporate governance committee, each of which is comprised solely of independent directors, and is described more fully below. Each of the audit committee, compensation committee and nominating and corporate governance committee operates pursuant to a written charter and, on an annual basis, each committee reviews and assesses the adequacy of its charter and submits any proposed changes to its charter to the board of directors for approval. The charters for the audit committee, compensation committee and nominating and corporate governance committee are all available on our website at www.karunatx.com under “Investors & Media” at “Corporate Governance” and “Charters and Governance.”

Audit Committee

Our audit committee is currently composed of Christopher Coughlin, James Healy, M.D., Ph.D. and Laurie Olson, with Mr. Coughlin serving as chair of the committee. Our board of directors has determined that each member of the audit committee meets the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable listing standards of Nasdaq. Our board of directors has determined that each of Mr. Coughlin and Dr. Healy is an “audit committee financial expert” within the meaning of the SEC regulations and applicable listing standards of Nasdaq. During the fiscal

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year ended December 31, 2022, the audit committee met four times. The report of the audit committee is included in this Proxy Statement under “Report of the Audit Committee.” The audit committee’s responsibilities include:

Compensation Committee

Our compensation committee is currently composed of Atul Pande, M.D., Christopher Coughlin and Denice Torres, with Dr. Pande serving as chair of the committee. Our board of directors has determined that each current member of the compensation committee is “independent” as defined under the applicable listing standards of Nasdaq. During the fiscal year ended December 31, 2022, the compensation committee met five times. The compensation committee’s responsibilities include:

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Historically, our compensation committee has made most of the adjustments to annual cash compensation for the executive team, determined executive bonus and equity awards, and established new performance objectives at the chief executive officer and Company levels. Additionally, our compensation committee considers matters related to the overall effectiveness of the Company’s compensation strategy, and potential modifications to that strategy in relation to market trends, plans or approaches to compensation. Generally, the compensation committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the chief executive officer, our compensation committee solicits and considers evaluations and recommendations submitted to the compensation committee by the chief executive officer. In the case of the chief executive officer, the compensation committee is responsible for recommending his compensation for approval by the board.

For all executives and directors, as part of its deliberations, the compensation committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current Company-wide compensation levels and analyses of executive and director compensation paid at a peer group of other companies approved by our compensation committee. The compensation committee also retains Aon’s Human Capital Solutions practice, a division of Aon plc (formerly known as Radford), or Aon, as its external compensation consultant and considers Aon’s input on certain compensation matters as it deems appropriate. No other fees were paid to Aon except fees related to determining or recommending compensation.

The compensation committee may establish and delegate authority to one or more subcommittees consisting of one or more of its members when the committee deems it appropriate. Additionally, the compensation committee may delegate its authority to grant certain equity awards to one or more officers of the Company, including our chief executive officer, and in 2022 it delegated such authority to our then-chief executive officer, Steven Paul, M.D.

Compensation Committee Interlocks and Insider Participation

For the 2022 fiscal year, Atul Pande, M.D., Christopher Coughlin and Denice Torres served as members of our compensation committee. None of the members of our compensation committee is, or has ever been, an officer or employee of our company. During the 2022 fiscal year, no executive officer of our company served as: (i) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our compensation committee; (ii) a director of another entity, one of whose executive officers served on our compensation committee; or (iii) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of our company.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is composed of Laurie Olson, Atul Pande, M.D. and David Wheadon, M.D., with Ms. Olson serving as chair of the committee. Our board of directors has determined that each current member of our nominating and corporate governance committee is “independent” as defined under the applicable listing standards of Nasdaq. During the fiscal year ended December 31, 2022, the nominating and corporate governance committee met four times. The nominating and corporate governance committee’s responsibilities include:

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Our board of directors may from time to time establish other committees.

Identifying and Evaluating Director Nominees

Our board of directors is responsible for selecting its own members. The board of directors delegates the selection and nomination process to the nominating and corporate governance committee, with the expectation that other members of the board of directors, and of management, will be requested to take part in the process as appropriate.

Generally, our nominating and corporate governance committee identifies candidates for director nominees in consultation with management, through the use of search firms or other advisors, through the recommendations submitted by stockholders or through such other methods as the nominating and corporate governance committee deems to be helpful to identify candidates. Once candidates have been identified, our nominating and corporate governance committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the nominating and corporate governance committee. The nominating and corporate governance committee may gather information about the candidates through interviews, detailed questionnaires, background checks or any other means that the nominating and corporate governance committee deems to be appropriate in the evaluation process. The nominating and corporate governance committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of our board of directors. Based on the results of the evaluation process, the nominating and corporate governance committee recommends candidates for the board of directors’ approval as director nominees for election to the board of directors.

Director Qualifications and Diversity

Our nominating and corporate governance committee’s priority in selecting board members is the identification of persons who will further the interests of our company through their established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, and professional and personal experiences and expertise relevant to our growth strategy. They will consider, among other things, the following qualifications, skills and attributes when recommending candidates for the Board’s selection as director nominees for the Board and as candidates for appointment to the Board’s committees: a nominee shall have experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing; a nominee shall be highly accomplished in his or her respective field, with superior credentials and recognition; a nominee shall be well regarded in the community and shall have a long-term reputation for high ethical and moral standards; a nominee shall have sufficient time and availability to devote to our affairs, particularly in light of the number of boards of directors on which such nominee may serve; and, to the extent a nominee serves or has previously served on other boards, the nominee shall have a demonstrated history of actively contributing at board meetings.

Our board of directors also believes that diversity of viewpoints, background, experience and other characteristics, such as gender, race, ethnicity, culture, nationality and sexual orientation, are an important part of its makeup. When evaluating candidates for nomination as new directors, our board of directors will:

(1) Consider candidates with diverse backgrounds in terms of knowledge, experience, skills and other characteristics in the context of the needs of the Company at that point in time with a view to creating a Board with a diversity of experience and perspectives; and

(2) Include in the pool from which new director nominees are chosen candidates with a diversity of gender, race, ethnicity, culture, nationality or sexual orientation (and any third-party engaged to identify candidates for such pool will be asked to do the same).

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The nominating and corporate governance committee will consider candidates recommended by stockholders. The policy adopted by the nominating and corporate governance committee provides that candidates recommended by stockholders are given appropriate consideration in the same manner as other candidates.

Non-Management Director Meetings

In addition to the meetings of the committees of the board of directors described above, in connection with the board of directors’ meetings, the non-management directors met five times in executive session during the fiscal year ended December 31, 2022.

Communication with the Directors of Karuna Therapeutics

Any interested party with concerns about our company may report such concerns to the board of directors or the chairman of our board of directors or nominating and corporate governance committee, by submitting a written communication to the attention of such director at the following address:

c/o Karuna Therapeutics, Inc.

99 High Street, 26th Floor

Boston, Massachusetts 02110

United States

You may submit your concern anonymously or confidentially by postal mail. You may also indicate whether you are a stockholder, supplier, or other interested party.

A copy of any such written communication may also be forwarded to the Company’s legal counsel and a copy of such communication may be retained for a reasonable period of time. The director may discuss the matter with the Company’s legal counsel, with independent advisors, with non-management directors, or with the Company’s management, or may take other action or no action as the director determines in good faith, using reasonable judgment, and applying his or her own discretion.

Communications may be forwarded to other directors if they relate to important substantive matters and include suggestions or comments that may be important for other directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances, and matters as to which we receive repetitive or duplicative communications.

The audit committee oversees the procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or audit matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting, internal accounting controls or auditing matters.

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Leadership Structure and Risk Oversight

Effective as of January 2023, our board of directors elected Mr. Meury to serve as our president and chief executive officer and as a member of our board of directors, and Mr. Coughlin, previously our lead independent director, to serve as chairman of the board. As such, the leadership structure of our board of directors currently separates the positions of chief executive officer and chair of the board of directors, although we do not have a corporate policy requiring that structure. Separating these positions allows our chief executive officer, who is also a member of our board of directors, to focus on our day-to-day business operations and strategic direction, while allowing our board chair, who is an independent member of the board of directors, to focus on matters related to corporate governance, including management oversight and strategic guidance. While the board of directors believes that this is the most appropriate structure at this time, the nominating and corporate governance committee evaluates the board leadership structure from time to time, and may recommend alterations to this structure in the future.

Prior to January 2023, our board of directors was chaired by our former president and chief executive officer, Dr. Paul, who now serves as our chief scientific officer, president of research and development, and as a member of our board of directors. Our corporate governance guidelines provide that, if the chairman of the board of directors is a member of management or does not otherwise qualify as independent, the independent directors of the board may elect a lead independent director but are not required to do so. From March 2022 to January 2023, Mr. Coughlin served as our lead independent director in order to provide an effective independent voice in our leadership structure, encourage objective oversight of management’s performance and enhance the effectiveness of the board of directors as a whole. As lead independent director, Mr. Coughlin presided over executive sessions of the board and other meetings of our independent directors, served as a liaison between our chairman of the board and the independent directors, advised on board meeting agenda items and facilitated the board’s input on such agenda items, and performed such additional duties as our board of directors otherwise determined and delegated.

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our financial condition, development and commercialization activities, operations, strategic direction and intellectual property as more fully discussed under “Risk Factors” in our most recent Annual Report on Form 10-K and in our subsequent filings with the SEC. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

The role of the board of directors in overseeing the management of our risks is conducted primarily through committees of the board of directors, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees. The full board of directors (or the appropriate board committee in the case of risks that are under the purview of a particular committee) discusses with management our major risk exposures, their potential impact on us, and the steps we take to manage them. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairman of the relevant committee reports on the discussion to the full board of directors during the committee reports portion of the next board meeting. This enables the board of directors and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

Environmental, Social, and Governance Efforts

Our board of directors and management believe that ESG matters are central to the success of the Company and have made the furtherance of ESG initiatives a priority. In 2022, we formalized nominating and corporate governance committee oversight of ESG initiatives. In this role, our nominating and corporate governance committee is actively involved in ESG initiatives across the Company and makes recommendations to our board of directors regarding the Company’s ESG initiatives. Our board of directors oversees ESG issues more broadly to ensure that ESG risks and opportunities are being appropriately addressed by management. In order to appropriately incentivize our executive officers to prioritize ESG matters, we included an ESG metric tied to employee satisfaction, diversity and inclusion in our 2022 and 2023 corporate goals.

Our ESG program is centered around patients, our employees, and our communities.

Patients

At Karuna, our goal is to discover and develop medicines with the potential to make a difference for people living with psychiatric and neurological conditions. As such, we invest in innovation on behalf of such patients, including those living with schizophrenia and psychosis in Alzheimer's disease, or AD. In furtherance of this goal, in 2022 and 2021 we incurred research and development expenses of $224.2 million and $128.2 million, respectively. We also engage with and support patients through our work with patient advocacy organizations, key opinion leaders, and other patient stakeholders to improve the understanding of, and reduce stigma surrounding, mental illnesses such as schizophrenia and AD-related psychosis. In 2022, we hired our first employee dedicated exclusively to advancing these patient advocacy activities, and we look forward to expanding upon these efforts in the future.

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Our Employees

We believe that our employees are critical to the success of our mission, and that our future success will depend in large part on our continued ability to attract, hire and retain qualified personnel. We continuously strive to ensure that employee morale remains strong, and conduct employee engagement satisfaction surveys and monitor employee turnover rates as part of this process.

Compensation and Benefits

We offer robust compensation packages, including competitive base pay, incentive compensation and equity programs, and provide a broad range of benefits, including a 401(k) plan, healthcare and insurance benefits, a health savings account, paid time off, paid family and medical leave, and various health and wellness programs. Through our equity incentive plan, we aim to attract, retain and reward personnel through the granting of equity-based compensation awards in order to increase shareholder value and the success of our Company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Growth and Wellness

We are committed to the professional development of our employees, who can take advantage of various learning opportunities and training programs. As part of our development program, we provide our employees with reimbursement for certain external training programs that are related to their current work or career development. In addition, aligned with our mission and to support our employees’ mental health, we offer employees online resources to assist with professional and financial coaching, wellness courses, and therapy services. Employee-led committees focused on learning and development as well as recognition and wellness play a critical role in improving our offerings in these areas.

Diversity, Equity and Inclusion

We are committed to cultivating and preserving a culture of diversity, equity and inclusion, and aim to foster an inclusive environment through respect, collaboration, and open communication. At the board level, in 2022 we implemented the “Rooney Rule” with respect to new director positions, requiring the board to include in the pool from which new director nominees are chosen candidates with a diversity of gender, race, ethnicity, culture, nationality or sexual orientation. We also embrace and encourage the differences among our employees that make them unique, and believe that these differences, as well as corresponding diversity of opinions and thought, contribute to our success as a company. Our efforts are driven by an employee-led diversity, equity and inclusion committee with support and guidance from the executive team.

Our Communities

We take our responsibility as a member of our local community seriously. Our employee-led community, outreach and giving committee helps to guide our strategy and approach for community engagement and partnerships with various non-profit organizations. For example, we sponsor certain non-profit organizations whose missions align closely with our own, such as This Is My Brave, which aims to reduce stigma in serious mental illness, and Clubhouse International, which provides support for those living with mental illness. We are also involved with other non-profit organizations, such Life Science Cares and Catie's Closet, that seek to improve the lives of disadvantaged individuals in the Boston area and surrounding communities.

We are committed to continued improvement with respect to ESG matters across the organization, and will continue to assess and implement changes as we examine our policies and practices and identify areas for improvement.

Code of Business Conduct and Ethics

We are committed to the highest standards of integrity and ethics in the way we conduct our business. Our board of directors adopted a Code of Business Conduct and Ethics, which applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Business Conduct and Ethics establishes our policies and expectations with respect to a wide range of business conduct, including the preparation and maintenance of our financial and accounting information, our compliance with laws, and possible conflicts of interest.

Under our Code of Business Conduct and Ethics, each of our directors and employees is required to report suspected or actual violations to the extent permitted by law. In addition, we have adopted separate procedures concerning the receipt and investigations of complaints relating to accounting or audit matters. These procedures have been adopted by the board of directors and are administered by our audit committee.

A current copy of our Code of Business Conduct and Ethics is posted on our website at www.karunatx.com. If we make any substantive amendments to, or grant any waivers from, the Code of Business Conduct and Ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

Our compensation committee is responsible for reviewing and approving, or recommending for approval by the board of directors, the compensation of our named executive officers, including base salary, cash and equity incentive compensation levels, severance arrangements, change in control benefits and other forms of executive compensation. The compensation committee is also responsible for evaluating our company’s performance against its goals and making related recommendations to our board of directors, assessing the performance of our named executive officers, and ensuring our compensation program is aligned with the objectives described below and competitive with those of other companies in our industry that compete with us for talent. This section discusses the principles underlying our compensation committee’s policies and decisions with respect to the compensation of our named executive officers.

For 2022, our named executive officers were as follows:

Executive Summary and Company Background

We are a clinical-stage biopharmaceutical company driven to create and deliver transformative medicines for people living with psychiatric and neurological conditions. Our pipeline is primarily built on the broad therapeutic potential of our proprietary lead product candidate, KarXT (xanomeline-trospium), an oral modulator of muscarinic receptors that are located both in the central nervous system, or CNS, and various peripheral tissues. KarXT combines xanomeline, a novel muscarinic agonist, with trospium, an approved muscarinic antagonist, to preferentially stimulate muscarinic receptors in the CNS. We are initially developing KarXT for the treatment of acute psychosis in adults with schizophrenia, as well as for the treatment of psychosis in Alzheimer's disease, or AD.

Key 2022 Achievements

Research and Development

Commercialization

Corporate

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2022 “Say-on-Pay” Vote

At our 2022 annual meeting of stockholders, our stockholders were provided with the opportunity to cast a non-binding advisory vote (a “say-on-pay” proposal) on the compensation of our named executive officers for fiscal 2021. The stockholders approved, on an advisory basis, the compensation of our named executive officers, as disclosed in our 2022 proxy statement, with support from 78.8% of the votes cast. Leading up to our 2022 annual meeting, our compensation committee and management team felt it was essential to understand the level of support and engage in dialogue with our shareholders regarding our compensation program to elicit a better understanding of their perspectives in advance of the vote at our annual meeting.

2022 Shareholder Engagement

In advance of our 2022 annual meeting, we reached out to a majority of our largest shareholders to highlight various topics covered in our proxy statement, including the Company's compensation practices, corporate governance matters and an update on our latest ESG initiatives, and offered to talk through any questions or concerns these shareholders had with respect to these or any other relevant topics. We are always open to hearing from our shareholders regarding any concerns or ways that we can improve our executive compensation program and our evolving business needs. The board of directors and management expect to continue improving upon our engagement with our shareholders to understand their views of our business, corporate governance practices and compensation practices and are committed to seeking input from our shareholders.

Key Aspects of 2022 Executive Compensation: Strong Performance Orientation

Delivered Very Strong Stock Price Performance and Total Shareholder Return

We completed our initial public offering in June 2019. Our Total Shareholder Return, or TSR, for 2022 was 50%, and our cumulative TSR since our June 2019 IPO through the end of 2022 was 882%, outperforming relevant indices.

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Substantial Majority of CEO and other NEO Compensation, Total and Equity, is Variable and At-Risk

Approximately 94% of our former chief executive officer’s 2022 total compensation, and 100% of the long-term incentive equity component, were variable and at risk. Our compensation philosophy is performance-based and focuses on aligning the financial interests of our executive officers with those of our shareholders. Generally, this is accomplished by placing a substantial portion of our executive officers’ total compensation “at risk.” We consider compensation to be “at-risk” if it is subject to achievement of meaningful pre-set, objective financial or operating goals, such as in our annual cash incentive program, or if it depends on stock price appreciation or value, as in our long-term incentive program.

Until December 31, 2022, consistent with the market practice of similar, recently-public companies in our industry, and in order to focus executives on growth and increasing shareholder value at this early stage of our development, equity grants consisted solely of options, which are appreciation awards that only have value if the stock price increases. In our view, stock options are inherently performance-based, requiring stock price appreciation before there is any real value earned, and are simple. No amount of time will make a stock option deliver any value unless the company’s stock price increases. In addition, stock options reward our named executive officers for increasing shareholder value over the lengthier term of the option, relative to other equity compensation, which we believe is consistent with the longer pharmaceutical development cycle.

The graphics below illustrate the mix of fixed base salary, annual incentive and long-term target incentive compensation we provided in 2022 to our chief executive officer and, on an average basis, to our other named executive officers, and the high proportion that is variable and at-risk.

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The performance-based metrics and the proportion of total compensation that was variable and at-risk further enhanced the link between pay and performance for the former chief executive officer and our other named executive officers and strengthened the alignment of the interests of the executive officers with those of our shareholders.

Although we have historically provided long-term incentive awards solely through the issuance of stock options, in January 2023, our board of directors began utilizing grants of restricted stock units, or RSUs, in addition to stock options, for the purpose of rewarding our executive officers. Grants of RSUs encourage executive ownership of Karuna shares, provide balance to stock option grants, which only have value if the stock appreciates, and align the incentives of our executives with the interests of our stockholders. These awards also provide executives with some certainty regarding the value of the compensation they are receiving during periods of stock market volatility, which furthers our fundamental goal of awarding compensation that helps attract and retain highly skilled employees. In addition, awarding full-value shares in the form of RSUs in the long-term portion of total compensation is less dilutive than stock option grants and consistent with the compensation practices of a majority of our peer group. The compensation committee envisions that, over time, as the Company evolves and grows, the executive compensation program and the amount and forms of compensation will continue to evolve.

Short-Term Annual Cash Incentive: Rigorous, Pre-Set Clinical and Other Development and Corporate Other Goals

At the outset of 2022, we established research and development, regulatory, operational and financial objectives under our annual cash incentive program. These objectives were rigorous, aggressive and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks. The compensation committee evaluated performance achievement relative to the goals.

Peer Group: Assessed and Updated Peer Group to Reflect Current Market Capitalization

Consistent with best practices for corporate governance, the compensation committee annually reassesses the group of peer companies used as a reference point for evaluating executive compensation. In connection with determining the compensation of the chief executive officer and other executive officers, in the second half of 2021, the compensation committee conducted a review of our peer group to ensure its continued appropriateness, and updated the peer group utilized by our compensation committee with respect to compensation decisions for 2022.

In light of the increase in our organizational size and market capitalization, the compensation committee revised the peer group selection criteria. The peer group selection criteria were updated to reference a market capitalization range of approximately $1.1 billion to $10.0 billion and headcount generally below 200 based on the publicly available data at the time of selection, which resulted in the removal of four companies and the addition of five new companies, as compared to our 2021 peer group.

Philosophy and Objectives of our Compensation Program

The core elements of the compensation committee’s executive compensation philosophy are as follows:

Reward achievement of corporate and strategic goals (pay for performance): Our overarching mission is to create and deliver transformative medicines for people living with psychiatric and neurological conditions. We have developed a set of clearly defined corporate and strategic goals to accomplish this mission, with the majority of the total compensation of our executive officers tied to the achievement of such goals. Our executive officers are incentivized to achieve these goals, which include measurable research and development, regulatory, operational and financial objectives, and awarded for doing so, all of which, the compensation committee believes, will help build long-term stockholder value. Performance measures are reviewed annually to ensure that we continue to align our pay programs with our business strategy, create sustainable value and motivate the right behaviors.

Align the interests of our executive officers and employees with those of our stockholders by promoting an ownership culture: Equity-based compensation constitutes a significant portion of our executive officers’ overall compensation. The compensation committee uses equity, when appropriate, as a long-term incentive to reward executive officers for (i) achieving multi-year strategic goals and (ii) delivering sustained long-term value to stockholders. The compensation committee believes using equity in this manner aligns the interests of executive officers with those of our stockholders by ensuring that they share a common interest in our stock

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price performance. We value an ownership mindset and believe that granting equity bolsters this culture among executive officers by giving them a personal stake in Karuna’s growth and success.

Offer competitive compensation to attract and retain talent: The biopharmaceutical industry is fiercely competitive, particularly in the metropolitan Boston area, and we must compete for executive talent. To manage our business and carry out our strategy, we seek high-caliber executive officers and managers who have diverse experience, expertise, capabilities, and backgrounds. In recruiting our executive officers and determining competitive pay levels, the compensation committee references the amounts and compensation structures of executive officers in the companies in our compensation peer group and in industry surveys.

Design straightforward compensation programs and plans and administer them transparently: In order for incentive compensation to serve its purpose of motivating participants to achieve results, the participants must have a clear understanding of the goals and targets by which they will be measured, and the rewards that they will receive for various levels of achievement of those goals, including the value of those rewards. The compensation committee seeks to design programs that give participants a clear line of sight to understandable metrics and sufficient control over performance in furtherance of the goals, to motivate them effectively to achieve our business objectives and to reward them appropriately, as a means of executing our strategy.

Components of our Compensation Program

In order to achieve its executive compensation program objectives, the compensation committee utilizes the components of compensation set forth below. The compensation committee regularly reviews all components of the program in order to verify that each executive officer’s total compensation is consistent with our compensation philosophy and objectives and that each component is serving a purpose in supporting the execution of our strategy.

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Compensation Program Governance

We assess the effectiveness of our executive compensation program from time to time and review risk mitigation and governance matters, which include maintaining the following best practices:

Role of the Compensation Committee

The compensation committee is responsible for establishing our compensation philosophy and objectives; determining the structure, components and other elements of our compensation program; and reviewing and approving the compensation of the named executive officers, other than the chief executive officer. The compensation committee is responsible for recommending for approval by the board the compensation of our chief executive officer.

To verify the alignment of the program with our business strategy and with the items that we believe drive the creation of stockholder value, the compensation committee reviews the elements of our executive compensation program throughout the year and determines whether it would be appropriate to make any changes to program components.

Our board of directors and its compensation committee annually review the compensation for each of our executive officers in relation to our peers (see “Compensation Peer Groups and Peer Selection Process” section below). In setting executive cash compensation (base salaries and incentive cash bonuses) and granting equity incentive awards, the compensation committee and the board of directors consider compensation for comparable positions in the market; the qualifications, experience and historical compensation levels of our executives; each officer’s individual performance as compared to our expectations and objectives; our desire to motivate the executive to achieve short- and long-term results that are in the best interests of our stockholders; and the desire and need to ensure the executive’s long-term commitment to our Company. The compensation committee and the board of directors generally target compensation for each executive officer to be competitive with the compensation provided by our peers for the same or a similar position. The compensation committee uses independent third-party benchmark analytics as a reference point to inform compensation decisions on each executive, including the mix of base salary, bonus and long-term incentives.

Our board of directors, with respect to our chief executive officer, and our compensation committee, with respect to our other executive officers, have historically determined the compensation of each of our executives. Our compensation committee typically reviews and discusses management’s proposed compensation with the chief executive officer for all executives other than the chief executive officer, with management absent for such discussions. Based on those discussions and its discretion, taking into account the factors noted above, the compensation committee then approves, or recommends to the board of directors for approval, the

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compensation for each executive officer, with the chief executive officer absent for any discussions by the compensation committee or the board of directors with respect to chief executive officer compensation.

Role of the Compensation Consultant

In connection with fulfilling its duties, the compensation committee recognizes that there is value in procuring independent, objective expertise and counsel, and has the authority to retain an independent compensation consultant to assist it in carrying out its responsibilities and duties. Our compensation committee engaged the Human Capital Solutions practice of Aon plc, or Aon, as its independent compensation consultant to advise on executive compensation matters for 2022, including overall compensation program design, peer group development and updates, and director and executive compensation benchmarking.

We develop our compensation programs after reviewing publicly available compensation data and subscription survey data for our peer group, as provided by Aon. The board of directors and the compensation committee consider Aon’s data, analysis and recommendations on certain compensation matters as they deem appropriate.

Aon reports directly to our compensation committee and the committee has the sole authority to retain, terminate and obtain the advice of Aon at the Company’s expense. Our compensation committee has assessed the independence of Aon consistent with Nasdaq listing standards and has concluded that the engagement of Aon does not raise any conflicts of interest.

Compensation Peer Groups and Peer Selection Process

In evaluating the total compensation of our named executive officers, our compensation committee, using information provided by Aon, annually reassesses a peer group of publicly traded, national and regional companies in the biopharmaceutical and biotechnology industries that is selected based on a balance of the following criteria:

In light of the increase in our organizational size and market capitalization, the compensation committee revised our previous peer group selection criteria to reference a market capitalization range of approximately $1.1 billion to $10.0 billion and headcount generally below 200 based on the publicly available data at the time of selection. As a result, based on the criteria set forth above, our peer group for 2022 compensation decisions, referred to as our 2022 peer group, was approved by our compensation committee in September 2021 and was comprised of the companies listed below. As of September 2021 when our peer group was approved, Karuna’s market cap was in the 52nd percentile as compared to the market cap of our peer group (using a 30-day average), and was in the 30th percentile as compared to the number of full time employees of our peer group.

The five companies marked with an asterisk were added to the 2022 peer group; four companies that no longer met the criteria were removed (Homology Medicines, Inc., MyoKardia, Inc., Principia Biopharma Inc. and Zogenix, Inc.).We believe that the compensation practices of our 2022 peer group provided us with appropriate compensation benchmarks for evaluating the compensation of our named executive officers for 2022. Notwithstanding the similarities of our 2022 peer group, due to the nature of our business, we compete for executive talent with many public companies that are larger and more established than we are or that possess greater resources than we do, or with smaller private companies that may be able to offer greater equity compensation potential, as well as with prestigious academic and non-profit institutions.

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Although our compensation committee and board generally target compensation for each executive officer to be competitive with the compensation provided by our peers for the same or a similar position, they may consider other criteria, including market factors, the experience level of the executive and the executive’s performance against established corporate goals, in determining variations to this general target range.

Role of the Chief Executive Officer

The compensation committee works with our chief executive officer to set the target total direct compensation of each of our named executive officers other than our chief executive officer. As part of this process, our chief executive officer evaluates each named executive officer, determines his recommendations for the target compensation of each named executive officer, and delivers his evaluations and compensation recommendations to the compensation committee.

Elements of our Compensation Program

Annual Base Salary

We provide base salaries to our named executive officers to compensate them with a fair and competitive base level of compensation for services rendered during the year. Prior to making its decision, our compensation committee typically reviews and discusses with the chief executive officer his recommendations for the compensation of our named executive officers other than the chief executive officer. For 2022, we targeted the 50th percentile of our 2022 peer group for base salaries. As shown in the table below, the annual base salary of each of our named executive officers was increased in 2022 in order to move the amounts more closely into alignment with the market medians. Our board of directors made the determination to increase Dr. Paul’s base salary above the 50th percentile of our 2022 peer group in order to reflect his tenure in the industry and performance in prior years.

The table below presents the base salaries for each of our named executive officers for the years 2021 and 2022, as approved by the board of directors and compensation committee, as applicable. The 2022 base salaries became effective on January 1, 2022.

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Annual Cash Incentive Bonuses

Our annual bonus program is intended to reward our named executive officers for meeting individual and/or corporate performance goals for a fiscal year. For 2022, we targeted the 50th percentile of our 2022 peer group for annual cash incentive award opportunities. In February 2022, our compensation committee approved the annual performance-based cash incentive program for 2022 and established the corporate goals for 2022. In February 2023, the compensation committee reviewed our achievements against these corporate goals to arrive at a corporate funding factor of 145%.

The table below shows the target award under the annual performance-based cash incentive program as a percentage of each named executive officer’s annual base salary in 2022, the target cash award opportunity in dollars for 2022 and the actual cash bonus payments to our named executive officers for 2022 performance, which were paid in February 2023, as well as the actual bonus payment as a percentage of the target award opportunity. Our compensation committee considers it appropriate that each named executive officer’s annual cash bonus is based entirely upon achievement of our corporate performance goals.

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Long-Term Incentives; Equity-based Compensation

Although we do not have a formal policy with respect to the grant of equity incentive awards to our named executive officers, we believe that equity grants provide our named executive officers with a strong link to our long-term performance, create an ownership culture and help to align the interests of our named executive officers and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incents our named executive officers to remain in our employment during the vesting period.

The compensation committee typically recommends for approval by the board of directors long-term incentive grants for named executive officers at the start of their employment, and annually thereafter in connection with their annual performance review. Additionally, the board of directors may periodically, on a limited and judicious basis, grant additional equity awards based on individual role, performance and contribution, as well as competitive market data and information.

None of our named executive officers are currently party to an employment agreement that provides for an automatic award of stock options or other equity. In 2022, we granted equity awards to our named executive officers with time-based vesting. The number of shares subject to these equity awards was determined by reviewing the equity grants made to the executive officers of our 2022 peer group, both evaluating the Black-Scholes option fair value of the grants as well as the value such awards represented compared to the value of the company overall. For 2022, we targeted the 75th percentile of our 2022 peer group with respect to annual equity incentive awards. Our compensation committee made the decision to target the 75th percentile to account for the fact that we compete for executive talent with public companies that are in many cases outside of our peer group, including many public companies that are larger and more established than we are or that possess greater resources than we do, and with smaller private companies that may be able to offer greater equity compensation potential, as well as with prestigious academic and non-profit institutions. Our compensation committee determined that setting long-term incentive grants at the 75th percentile would help us attract and retain top caliber executive talent while ensuring that such compensation was tied to the creation of shareholder value.

The stock options that we grant to our named executive officers typically become exercisable as to 25% of the shares underlying the option on the first anniversary of the grant date, and as to an additional 1/12th of the shares underlying the option quarterly thereafter, subject to the named executive officer’s continued service through each vesting date. The time-based vesting schedules of awards granted in 2022 were consistent with our previous time-based vesting awards. The exercise price of all stock options equals the closing price of our common stock as reported on the Nasdaq Global Market on the grant date.

The following table sets forth the number of shares of common stock issuable upon exercise of time-based stock options granted to our named executive officers in 2022:

Although we have historically provided long-term incentive awards solely through the issuance of stock options, in January 2023, our board of directors began utilizing grants of RSUs in addition to stock options for the purpose of rewarding our executive officers. Grants of RSUs encourage executive ownership of Karuna shares, provide balance to stock option grants, which only have value if the stock appreciates, and align the incentives of our executives with the interests of our stockholders. These awards also provide executives with some certainty regarding the value of the compensation they are receiving during periods of stock market volatility, which furthers our fundamental goal of awarding compensation that helps attract and retain highly skilled employees. In addition,

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awarding full-value shares in the form of RSUs in the long-term portion of total compensation is less dilutive than stock option grants and consistent with the compensation practices of a majority of our peer group.

401(k) Plan

We administer a 401(k) retirement plan which is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all of our employees are eligible to participate. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit and have the amount of the reduction contributed to the 401(k) plan. We contribute to each employee’s 401(k) account, in the first quarter of each year, 3% of his or her eligible earnings from the prior year. Such contributions are not subject to vesting.

Health and Welfare Benefits

All of our full-time employees, including our named executive officers, are eligible to participate in certain medical, disability and life insurance benefit programs as offered by us. We pay the full premiums for dental, vision, term life insurance and disability for all of our employees, including our executive officers. We do not sponsor any qualified or non-qualified defined benefit plans for any of our employees or executives.

Severance and Change of Control Benefits

Each named executive officer is also eligible for severance benefits in specified circumstances, as set forth in each such officer’s employment agreement. Under the terms of these agreements, upon execution and effectiveness of a severance agreement and release of claims, each named executive officer will be entitled to severance payments if at any time, including within 12 months following a change in control, we:

We provide these severance arrangements because we believe that, in a competitive market for talent, severance arrangements are necessary to attract and retain high quality executives. In addition, the change in control benefit allows and incentivizes executives to maintain their focus on our business during a period when they otherwise might be distracted. Please refer to “ — Employment arrangements with our named executive officers” below for a more detailed discussion of severance benefits for our named executive officers.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code, or Section 162(m), disallows a federal income tax deduction for public corporations of remuneration in excess of $1 million paid in any fiscal year to certain specified executive officers. In designing our executive compensation program and determining the compensation of our executive officers, including our named executive officers, the compensation committee considers a variety of factors, including the potential impact of the Section 162(m) deduction limit. The deductibility of some types of compensation depends upon the timing of an executive officer’s vesting or exercise of previously granted rights. Further, interpretations of and changes in the tax laws, and other factors beyond the compensation committee’s control also affect the deductibility of compensation. The compensation committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent consistent with its compensation goals. However, to maintain flexibility to compensate our executive officers in a manner designed to promote our short-term and long-term corporate goals, our compensation committee has not adopted a policy that all compensation must be deductible. The compensation committee believes that our stockholders’ interests are best served if its discretion and flexibility in awarding compensation is not restricted in order to allow such compensation to be consistent with the goals of our executive compensation program, even though some compensation awards may result in non-deductible compensation expense.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718, or FASB ASC Topic 718, for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of our board of directors, including stock options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is

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performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.

Compensation risk assessment

We believe that our executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to remain focused on both short-term and long-term strategic goals, in particular in connection with our pay-for-performance compensation philosophy. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

Hedging and Pledging Policy

We have an insider trading policy that is applicable to all of our employees and the non-employee members of our board of directors. The policy prohibits those individuals and their related persons from engaging in any hedging transactions involving our securities at any time, including buying or selling puts, calls, other derivative securities of the Company, or any derivative securities that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, whether direct or indirect, to profit from any change in the value of the Company’s securities. In addition, the policy prohibits those individuals and their related persons from pledging any Company securities as collateral for a loan or using Company securities as collateral in a margin account.

Compensation Recovery (Clawback) Policy

Once Nasdaq’s proposed listing standards, pursuant to SEC rules and the Dodd-Frank Wall Street Reform and Consumer Protection Act, become effective, we intend to adopt a compensation recovery, or clawback, policy consistent with those new requirements, setting forth the circumstances in which certain executive officers may be obligated to repay or forfeit "excess compensation" in connection with an accounting restatement.

Compensation Committee Report

This Committee Report shall not be deemed to be incorporated by reference into any filing made by the Company under the Securities Act of 1933 or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent the Company incorporates such Report by specific reference.

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with the management of the Company. Based on this review and these discussions, we have recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 23, 2023.

The preceding report has been furnished by the following members of the Committee:

Atul Pande, M.D.

Christopher Coughlin

Denice Torres

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EXECUTIVE AND DIRECTOR COMPENSATION

Executive Compensation

Summary Compensation Table

The following table sets forth the total compensation awarded to, earned by and paid to our named executive officers during the fiscal years set forth below.

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Grants of Plan-Based Awards for Fiscal Year 2022

The following table sets forth information concerning each grant of an award made to a named executive officer during the fiscal year ended December 31, 2022 under any plan, contract, authorization or arrangement pursuant to which cash, securities, similar instruments or other property may be received.

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Equity Compensation

Outstanding equity awards at December 31, 2022

The following table sets forth information concerning the outstanding equity awards held by each of the named executive officers as of December 31, 2022.