Cara Therapeutics Q4 2023 Earnings Call Transcript

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March 4, 2024

There are 10 speakers on the call.

Operator

Thank you for standing by, and welcome to Cara Therapeutics' 4th Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I would now like to hand the call over to Matt Murphy, Manager of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon. After market close today, Cara issued a news release announcing the company's financial and operating results for the Q4 and full year 2023. Copies of this news release can be found in the Investors section of our website at caratherapeutics.com. Before we begin, let me remind you that during the course of this conference call, we will be making certain forward looking statements about Cara and our program based on management's current plans and expectations. These statements are being made under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.

Speaker 1

Actual results may differ materially due to various factors, and Cara undertakes no obligation to update or revise these statements publicly as a result of new information or future results or developments. Investors should read the risk factors set forth in Cara's 10 ks for the year ended December 31, 2022 and any subsequent reports filed with the SEC, including its Form 10 Q for the quarter ended September 30, 2023. With that said, I'd like to turn the call over to Chris Posner, Caris' Chief Executive Officer. Chris?

Speaker 2

Thanks, Matt. Good afternoon and thank you for joining our call. With me today are Ryan Maynard, our Chief Financial Officer and Doctor. Joanna Gonsalves, our Chief Medical Officer. Significant developments in 2023 led us to sharpen Cara's strategy and focus.

Speaker 2

We announced in January of this year that we have prioritized the program with the highest likelihood of clinical and commercial success, oral diphila capelin for Notalja Parastatica or NP. Focusing all our resources on NP extends our cash runway into 2026, which allows us to reach all value inflection milestones in this program. NP is a highly underserved neuropathic condition with a sizable patient population and no approved therapies. We are optimistic that oral diphala keflin, if approved, could become the 1st and only oral anti pruritic therapy for MP. I want to highlight why MP has such potential and detail how our late stage oral diphelichepline clinical program can address it.

Speaker 2

Notalja paresthetica is an unexplored neuropathy and yet NP is relatively common. The disease is a chronic neuropathic pruritic condition characterized by pruritus of the upper back, often leading to pigment changes as a result of excessive scratching. Notalja Paresthetica has been dramatically understudied, But as I will highlight in a bit anecdotal evidence suggests and we believe that chronic neuropathic pruritus is often as onerous as chronic pain in terms of impacting the quality of life of patients. And while chronic pain has been targeted and studied extensively, chronic neuropathic pruritus has not. An estimated 34,000,000 U.

Speaker 2

S. Patients or 13% of the adult population suffer from chronic pruritus and approximately 2,700,000 or 8% of them have chronic neuropathic pruritus. Now out of those chronic neuropathic pruritus patients, 650,000 or 24% are Nautalgia parasitica patients under the care of a healthcare provider, predominantly a dermatologist. This number does not account for the many missed or undiagnosed patients. NOTALJA Paresthetica has a significant impact on the quality of life of patients, including on their mood, sleep and self care activities.

Speaker 2

And yet this significant health challenge has no current treatment or wide ranging efforts to address it. Anecdotal feedback from patients suggest that their pruritus is often constant and is as debilitating as pain. There are no approved treatments for NALGIA Paracitica and off label use of other therapies frequently topical and systemic treatments indicated for neuropathic pain are mostly ineffective or associated with significant side effects. In market research, almost 90% of MP patients responded that the treatments that they had been offered for MP had been minimally or not at all helpful. As a result, almost 75% of responders say that they were not currently on any therapy for MP.

Speaker 2

It is clear from the literature in our market research that there is a significant unmet need for an effective, safe and well tolerated treatment for MP. Our oral DFK program could lead the way to target and address Notalgia Parasthetica's hallmark chronic neuropathic pruritus. We believe oral DFK's neuromodulatory action presents an ideal mechanistic approach to treating chronic neuropathic pruritus. In our Phase 2 proof of concept study in MP, oral DFK at a 2 mg BID dose showed a statistically significant separation from placebo on the worst itch NRS scale as early as day 1. It also showed sustained efficacy throughout the double blind 8 week treatment period.

Speaker 2

The publication of these data in the February 2020 3 New England Journal of Medicine has attracted a lot of attention from thought leaders, investigators and patients. Highlighting this significant unmet need, this excitement has resulted in rapid enrollment in the ongoing dose finding portion of year. As a reminder, COURAGE-one is comprised of 2 parts. Part A, the dose finding portion of the study is a double blind placebo controlled 8 week study comparing 3 dosage strengths of oral DFK to placebo. We currently have 53 active sites in North America and Europe and we plan to include additional sites for the pivotal portion of the program.

Speaker 2

The primary endpoint is the proportion of patients with a greater than 4 point improvement at week 8 from baseline in the worst itch NRS scale. The readout from this portion of the trial will provide key information, specifically the dose and sample size to initiate the Phase 3 pivotal portion of the program, Part B of COURAGE 1 and the second study COURAGE 2. Ahead of these top line data, we will be hosting a panel of renowned dermatology KOLs to discuss the unmet need in MP and the potential role of oral DFK in this underserved disease and wide open therapeutic indication. We will issue an announcement with details of this event in the coming days and we hope you will join us. Moving on to KORSUV injection.

Speaker 2

In the Q4 2023, we saw a strong quarter to quarter demand growth of 22% as reflected by the vials shipped to individual clinics. This continued growth in demand is a clear testament to the value and clinical benefit KORSUVA offers to patients and their providers. However, with unfavorable reimbursement changes following the end of the TDAPA period on March 31 this year, we anticipate that DOs, dialysis organizations, will modify current treatment protocols and significantly restrict access to KORSUVA. As a result, we do not expect meaningful revenue contributions from KORSUVA going forward. Let me conclude by reiterating the following over the 3 months.

Speaker 2

We have taken decisive and swift action. We have evolved our strategy and meaningfully extended our cash runway by sharpening our focus on the program with the highest potential. NOTALJA Paraesthetic has the ingredients for a breakout program with a high probability of clinical and commercial success. I am confident and optimistic that we are on the right path to unlock Cara's growth potential and create sustainable value for all our stakeholders. I would now like to turn the call over to Ryan for additional details on our Q4 results.

Speaker 2

Over to you, Ryan.

Speaker 3

Thank you, Chris. I would like to first reiterate the importance of the financing transaction with Healthcare Royalty, which we completed in Q4. We were able to bring forward the value of our ex USA and Japan royalties and add to our balance sheet in a meaningful non dilutive manner. This combined with our prioritization announcement in January of this year allowed us to extend our cash runway into 2026, thereby enabling us to reach all value inflection milestones in our NP program. Now I'd also like to highlight how the HCR agreement is reflected in our financial statements.

Speaker 3

In Q4, we recorded the total net proceeds as a long term liability on our balance sheet. Royalties received from CSL and Maruyushi under this agreement are recorded as non cash other revenue on our P and L. We also record non cash imputed interest. As a reminder, if the royalty payments received by HCR under this agreement exceed 2 times HCR's initial contribution before 2029, then the royalties thereafter would then revert back to us. Now on to the Q4 results.

Speaker 3

In the Q4 of 2023, KORSUVA Injection generated net sales of 5,000,000 dollars We reported revenue of $3,000,000 for the 3 months ended December 31, 2023 compared to $3,300,000 for the same period in 2022. Revenue this quarter consisted of $2,300,000 of collaborative revenue related to our profit from CSLV IV's sales of KORSUVA Injection and $700,000 of other revenue related to royalties and milestone payments related to the HCR agreement. Demand for KORSUVA continued to grow in Q4 with wholesaler shipments to deals reaching 110,000 vials, which was a 22% increase from the prior quarter. The majority of these vials were inventory that was reallocated within the Fresenius network of clinics and therefore did not translate into incremental revenue for Cara. Cost of goods sold was $600,000 for the 3 months ended December 31, 2023, compared to $2,100,000 for the same period in 2022.

Speaker 3

Cost of goods sold this quarter included mainly inventory adjustment charges rather than actual vials shipped to CSL V4. Research and development expenses were $28,400,000 for the 3 months ended December 31, 2023 compared to $26,000,000 in the same period of 2022. The higher R and D expenses in 2023 were primarily due to increases in clinical trial costs related to our 3 late stage development programs, partially offset by a decrease in stock based compensation expense. R and D expense in the 3 months ended December 31, 2023 included $1,700,000 expense related to an agreement for manufacturing commitments that are no longer needed due to the reduced demand expectations of in the United States. G and A expenses were essentially flat at $6,600,000 for the 3 months ended December 31, 2023 compared to $6,400,000 last year.

Speaker 3

Cash, cash equivalents and marketable securities at December 31, 2023 totaled $100,800,000 compared

Speaker 4

to $156,700,000

Speaker 3

for the same period in 2022. The decrease in the balance primarily resulted from $92,100,000 of cash used in operating activities, offset by the $36,500,000 of net proceeds received from HCR. Now finally, we expect that our current unrestricted cash, cash equivalents and available for sale marketable securities will be sufficient to fund our currently anticipated operating plan into 2026. Our current operating plan reflects the impact of our prioritization announcement in January of 2024, which includes costs related to our planned pivotal program for MP. Now I'll turn it back to Chris.

Speaker 2

Thanks, Ryan. Cara is fundamentally a development company. By sharpening our strategic focus on NOLJA Paresthetica, we have set Cara on the path to becoming a pioneer in the field of medical dermatology. Based on preclinical and clinical data, oral DFK DFK is uniquely suited to address the unmet medical need in this highly underserved disease. And we look forward to sharing the data from the dose finding portion of the Phase twothree trial with you in Q3.

Speaker 2

Now with that, Ryan, Joe and I will be happy to take your questions. So operator, you could please open the line for Q and A.

Operator

Thank you. Our first question comes from the line of Annabel Samimy of Stifel. Your question please Annabel.

Speaker 5

Hi. Thanks for taking my question. So obviously, MP looks like a pretty attractive category for the diphila keflin's mechanism. How large a clinical program do you think this could be in Phase 3? And when you think about the dose to take forward, would you want only one dose to take forward?

Speaker 5

Would you look for a couple of doses just for that optionality for the patient? And then separately, given the rapid enrollment and clearly the high interest from the community that you got after the journal publication. Do you think that you could partner or you would want to partner this opportunity even in the late stages development rather just for commercialization. So just I know that I realize that you're a development company, but given that interest, I'm just wondering if you're getting expressions of interest from those publications. Thanks.

Speaker 2

Thanks, Annabel. Let me turn the first part to Joe and then I'll tackle the second part of your question.

Speaker 6

Yes. Thanks, Annabel. So just to address how large the Part B in the pivotal program will be, This will be based upon our results from Part A. We'll take the results together with our comfort data into account when assessing the size of study. So more to come once we get that data.

Speaker 6

As far as how many doses, ideally always it's best to take one dose forward. It just makes a simpler pivotal program. So that will be our aim.

Speaker 2

Yes. And Annabel, on the second part of your question on partnering, as you know, this asset is totally unencumbered, which is great. And given the strategic prioritization we did in the beginning of this year, we have the cash available into early 2026 to complete all the key clinical programs. So right now, our intent is to continue the development of MP. Like you said, I mean, we're super excited what we saw in the rapid enrollment is certainly indicative, we believe, of the large unmet need spurred by the New England Journal, but also by the physician interest now.

Speaker 2

And we intend to continue down this path. Okay.

Speaker 6

And if I could just follow-up with

Speaker 5

one question for Joe. I know right now it's BID. Is this was there ever any thought to exploring the once daily schedule for this or it was never an option in any of the pieces that

Speaker 6

you did? Yes. Good question, Annabel. As you know that the drug is predominantly, excreted by the kidneys. And based on the PK profile with this healthy patient population, twice daily is what is needed for this patient population.

Speaker 6

So it will remain as a BD dose.

Speaker 5

Okay, got it. Thank you.

Speaker 2

Thanks, Isabelle.

Operator

Thank you. Our next question comes from the line of Joseph Stringer of Needham and Company. Please go ahead, Joseph.

Speaker 7

Hi, thanks for taking our questions. Just a few on the expectations on the Part A readout. In the Phase 2a NP trial at the 2 mg dose on that key efficacy endpoint, the 4 point responder analysis at week 8, you had around, I think it was 41% response for KORSUVA and around 18% for placebo. So I guess is this what you consider a reasonable bar for success and what you'd consider a win when the Part A data come out? And what gives you confidence that you can replicate this data in Part A?

Speaker 2

Yes. Joe,

Speaker 6

go ahead. Yes. Thanks, Joey. So, yes, we were incredibly pleased with the data we got from COMFORT. We do have to keep in mind that the study now has slightly different design in that we have 3 active arms versus 1 placebo with so the 3 to 1 randomization, more study sites as well, greater awareness through the New England Journal, as well as our late breaker.

Speaker 6

So we anticipate that the placebo response may be slightly higher. We still expect within the same range, but likely a little bit higher than what we've seen. So we have to take all of that into account when setting our expectations for this Part A. So with that, what we hope to see is that we do have separation with 1 of the doses from placebo. Remember that this has not been powered to show statistical significance versus placebo.

Speaker 6

Really we're aiming to see separation and to be able to select the dose that demonstrates the most favorable benefit risk profile. That is really our aim to be able to move forward into our pivotal program. So that's what we hope to see.

Speaker 7

Great. Thank you for taking our questions.

Speaker 2

Thanks, Joey.

Operator

Thank you. Our next question comes from the line of Dennis Ding of Jefferies. Your question please, Dennis.

Speaker 8

Hi, thanks for taking our questions. If we can ask 2 questions on the NP data in Q3. You made comments earlier around expecting placebo effect to be a little bit higher than we have seen previously. Were there any changes to the inclusion and exclusion criteria? Or what exactly drove that comment?

Speaker 8

And then number 2, around quality of life in your previous Phase 2, it seems like it's just getting better, but it doesn't really have any impact on quality of life. Can you help frame that for us and will you be measuring that as well in the upcoming data? Thank you.

Speaker 6

Yes. So my comment thank you, Dennis. My comment regarding placebo was not due to any design elements in this Part A program. The design is pretty much the same as what we had for Comfort. But as I mentioned, and I'll just reiterate the key factors that may contribute to a higher placebo.

Speaker 6

There's a 3 to 1 randomization. So patients may feel that they are on active when they're on a placebo arm. That's different to what we had before, those 1 to 1. This is a larger study with more study sites. So, there naturally is variability when you have more sites included.

Speaker 6

And then, of course, the greater awareness. So, if you take all those factors into account, we are anticipating that the placebo response will be slightly higher. So that's where that comment came from. And then regarding your second question regarding quality of life and impact on quality of life, this is comfort with the first time we anyone had conducted a robust randomized study and we're still trying to understand what quality of life endpoints are most appropriate for this NP patient population. And so that we still navigate that we're still navigating through that and understanding what that is.

Speaker 6

They tools that are used for other dermatological conditions, not necessarily relevant to NP. And that's what we understood from our Phase 2 data and that's what we continue to work through as we move forward to our pivotal program.

Speaker 8

Thank you.

Operator

Thank you. Standby for our next question. Our next question comes from the line of Kyle Kwan of Canaccord Genuity. Please go ahead, Kyle.

Speaker 4

This is Kyle speaking for Saman. Two questions related. The first is regarding the readout happening in 3Q. Are you guys planning on disclosing any granular details on the safety of the different doses? And then second question is on the highest dose, what are the safety expectations you're expecting and what are potential limitations as well?

Speaker 4

Thanks.

Speaker 2

Thanks, Scott. Well, the first one, yes, we're going to disclose top line efficacy and safety results in Q3. That will be with the Part A readout. So the first answer to your question is yes, we will be disclosing top line efficacy and safety. And the second part, I'll turn

Speaker 5

to you. Yes. And just

Speaker 6

to add, with the top line safety, it's what we typically present. So your adverse events, most common discontinuation, so just typical safety data. And then your second question regarding the highest dose and expectations, with the highest dose of the 2 milligram twice daily, which was used in our COMFORT study. And so we would anticipate a similar readout of the safety as we saw there. And in fact, that remains very consistent with what we've seen throughout all our programs with AD and with MP.

Speaker 6

So we feel very comfortable with that profile. And it's a very acceptable one. Of course, we've got 2 lower doses. And so the expectation is that the tolerability may be better with the lower doses. But I want to reiterate that the highest dose was a very good profile.

Speaker 6

And so if we see the same, we'll be very pleased with that.

Operator

Thank you. Our next question comes from the line of David Amsellem of Piper Sandler. Your question please, David.

Speaker 9

Hey, thanks. So,

Speaker 5

kind of

Speaker 9

wanted to switch gears and dig into your comments about being a core development company. I guess with that in mind, just looking away from NP, do you have any thoughts on other potential settings for oral DFK? I guess if we're in a perfect world where resources weren't an issue? And then secondly, with the cash runway being what it is to 26, is there anything early stage out there that you might be looking at, that you might be that you might be mining the world for, so to speak, in terms of bringing anything in just to think of the business beyond oral DFK? And just how are you thinking about biz dev just in general?

Speaker 9

Thank you.

Speaker 2

Yes. Thanks, David. Great hearing from you. So the first part of your question around are we looking at other things. I mean, our goal with our prioritization in January was to focus our cash and our resources on neuropathic pruritus, I.

Speaker 2

E, Nautalgia Parastatica. We want to be really disciplined there. And what we're able to do now is fund that program through a succession of key milestones, which is great. So we're that's our sole focus right now. You asked a question of biz dev.

Speaker 2

I mean, certainly, we do look at assets. And our focused strategy gives us options to potentially leverage the value inflection points in the MP program to add more value to the company in due course, right? So right now, again, we have our streamlined organization aligned to the strategy of preserving our cash to make sure we

Speaker 9

Helpful. Thanks.

Speaker 2

Thanks, David.

Operator

Thank you. I would now like to turn the conference back to Chris Posner for closing remarks. Sir?

Speaker 2

Yes. Thank you very much. And thanks again everyone for joining us today. And I wish everyone a great afternoon. And with that, I'll close the call.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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