Cara Therapeutics, Inc. (NASDAQ:CARA) Q1 2023 Earnings Call Transcript May 15, 2023

Cara Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.49, expectations were $-0.52.

Operator: Good afternoon. My name is Lateef, and I will be your conference facilitator. I would like to welcome everyone to the Cara Therapeutics First Quarter Financial Results and Update Conference Call. [Operator Instructions] Please be advised that this call is being recorded. I would now like to introduce Matt Murphy, Cara’s Manager of Investor Relations. Mr. Murphy, you may begin your call.

Matt Murphy: Thank you, operator, and good afternoon. Just after market close today, Cara issued a news release announcing the Company’s financial and operating results for the first quarter 2023. Copies of this news release and the associated SEC filing can be found in the Investors section of our website at www.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 programs 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. 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-K for the year ended December 31, 2022, and any subsequent reports filed with the SEC, including its Form 10-Q for the quarter ended March 31, 2023. With that said, I’d like to turn the call over to Chris Posner, Cara’s Chief Executive Officer. Chris?

Christopher Posner: Thanks, Matt. Good afternoon, everyone and thank you for joining our call. With me today are Ryan Maynard, our Chief Financial; and Dr. Joana Goncalves, our Chief Medical Officer. I would like to start by giving a quick overview of what I will address today. For the update on the KORSUVA injection launch in the U.S., I will provide additional metrics that we are tracking to give better insight into the progress of demand and uptake. These will help to give some clarity and show the opportunity within the different customers and segments of the market. I will also review the launch progress in countries around the world. In addition, I will highlight our robust clinical sales pipeline and the advancement of our high value development programs for oral difelikefalin.

I am pleased with the progress to date and can confirm that we continue to track to our previously communicated timelines. After that Ryan will provide you with a financial update, and then we will open up the call to Q&A. I will begin with the launch of KORSUVA injection in the U.S. For the first quarter of 2023, net sales for KORSUVA were $5.7 million, translating into $2.8 million of profit recorded as revenue to us. Wholesaler shipments to dialysis clinics more than doubled quarter-over-quarter and reached 46,000 vials. 64% of these vials were shipped to Fresenius or FMC clinics, with the remainder split between DaVita and the other dialysis organizations. This increase in vial shipments suggests a meaningful acceleration in demand. Anecdotal feedback on KORSUVA from both providers and patients continues to be highly positive, supporting this expansion in breadth and depth in its utilization.

At FMC, orders more than tripled quarter-to-quarter, reaching 30,000 vials. By the end of the first quarter, 500 FMC clinics or 18% had placed reorders, up from 7% of clinics at the end of Q4. More importantly, 1,500 clinics, or 56% of FMC clinics had dosed at least one patient, up from 29% of clinics at the end of Q4. Total patient demand remains difficult to assess without specific information about the levels of inventory remaining at individual clinics. However, we continue to see significant growth in the number of FMC clinics exhausting their third quarter 2022 bolus inventory and expect that the majority of the FMC clinics will be in a reorder mode in the second half of this year. At DaVita, demand growth continues to be steady. At the end of first quarter, 300 clinics, or 11% of DaVita clinics had ordered KORSUVA, that’s up from 7% of clinics at the end of Q4.

Reorder rates among these clinics remained very encouraging, with 70% placing repeat orders. Given the on demand approach at DaVita clinics for ordering KORSUVA, the growth in clinic orders represents a good proxy for the growth in patient demand. At midsize and independent DOs [ph], KORSUVA continues to perform well. At the end of the first quarter, 13% of these clinics had placed orders, and that’s up from 11% at the end of Q4. In addition, 66% of these clinics have placed repeat orders. Now the strongest performance today amongst this group has been at USRC, and that’s the largest of the midsize DOs. Roughly 66% of clinics have ordered KORSUVA and 72% of these clinics have placed repeat orders. Stepping back and looking at the big picture, KORSUVA’s overall market penetration leaves significant room for growth, with a vast majority of the market still untapped.

To get there, CSL Vifor continues to make progress building the market, navigating the idiosyncrasies of each segment across the entire deal landscape. This is reflected in key trends this quarter. Clinic orders doubled quarter-to-quarter. Almost 60% of FMC clinics are dosing a patient and each segment is seeing an increase in clinics ordering the product. We remain confident and our partner CSL Vifor remains fully dedicated to capturing the latent upside in this market and maximizing the commercial potential of KORSUVA in the long-term. Additionally, we are working in close collaboration with the kidney community to help CMS understand the need for a durable and appropriate reimbursement mechanism for TDAPA designated products post their TDAPA period.

We remain confident that additional funding will be made available for TDAPA designated products, and we remain hopeful that a substantive and positive update will be released during this year’s rulemaking cycle. Next, on the international front. The rollout of Kapruvia in Europe continues to gain momentum. In the first quarter, Kapruvia generated $1.2 million in net sales, translated into $125,000 of royalty revenues to us. Rollout has begun in four additional countries, France, Finland, the Netherlands and Switzerland, bringing the total number of launch countries to seven. The initial feedback from patients and providers has been very encouraging and in line with the patient testimonials we have received in the U.S. We continue to expect the additional countries in Europe and other countries around the world to come online throughout the next 12 to 18 months once reimbursement is secure.

Also, a decision from the U.K National Institute for Health and Care Excellence or NICE, is expected imminently. In Japan, we continue to expect a regulatory decision in the second half of 2023. As a reminder, approval in Japan would trigger a $2 million milestone payment to Cara. Last but certainly not least, I’d like to briefly discuss our promising wholly owned oral pipeline. Fundamentally, Cara is a development company and we are committed to building our nephrology and medical dermatology franchises with oral difelikefalin. These efforts will drive us to our goal of being a differentiated company as the world leader in treating chronic pruritis in the long run. Enrollment in our Phase 3 programs in pruritis associated with advanced chronic kidney disease and in atopic dermatitis is progressing as expected.

We anticipate the internal readout of Part A of our KIND 1 AD trial in the fourth quarter of this year with final top line results from this program in the first half 2025. We also continue to expect top line results for our KICK advanced chronic kidney disease program in the second half of 2024. Startup activities for our Phase 2/3 program in notalgia paresthetica kicked off in the first quarter of this year, and they are progressing well. The NP program is tracking to the internal readout of KOURAGE 1 Part A in the second half of 2024 and final topline results for the program in the first half of 2026. To summarize, we are continuing to work closely with CSL Vifor to accelerate the uptake of KORSUVA, and we remain confident that these efforts will drive near-term growth.

Additionally, we remain optimistic regarding CMS’s future decision on the post TDAPA funding mechanism and hope to see an update during this year’s rulemaking cycle. Underscored by the highly positive feedback we are hearing from patients and providers around the world, we continue to believe in the long-term success of KORSUVA injection. More importantly, we see tremendous value creation for Cara with our three late stage programs with oral difelikefalin. We are fully committed to advancing these programs as rapidly as possible in order to maximize the potential difelikefalin within our two therapeutic franchises. We look forward to providing you with updates on our progress throughout this year. Now I’d like to turn the call over to Ryan for additional details on our first quarter financial results.

Over to you, Ryan.

Ryan Maynard: Thank you, Chris. Total revenue was $6.2 million for the 3 months ended March 31, 2023, compared to $4.8 million for the same period in 2022. Revenue this quarter consisted of $2.8 million of collaborative revenue related to our profit from CSL Vifor’s net sales of KORSUVA injection to third parties and $3.2 million of commercial supply revenue. We also recognized a $125,000 of royalty revenue this quarter, representing our royalties from the net sales of Kapruvia in the first quarter of 2023. Cost of goods sold during the 3 months ended March 31, 2023 was $2.6 million and relates to our commercial supply shipments of KORSUVA injection to CSL Vifor. Research and development expenses were $24.3 million for the 3 months ended March 31, 2023, compared to $21.3 million in the same period of 2022.

The increase in R&D expenses is primarily due to the increased clinical spend related to our three late stage clinical programs. General and administrative expenses were $6.9 million for the 3 months ended March 31, 2023, compared to $9.4 million in the same period of 2022. The reduction in G&A expense was due to a decrease in stock-based compensation in the first quarter of 2023 as compared to the same period in 2022. Stock-based compensation in 2022 included costs related to the modification of certain equity awards to our former CEO. Cash, cash equivalents and marketable securities at March 31, 2023 totaled $123.4 million, compared to $156.7 million at December 31, 2022. The decrease in the balance primarily resulted from cash used in our operating activities.

We expect that our current unrestricted cash and cash equivalents and available-for-sale marketable securities are sufficient to fund our currently anticipated operating plan into the second half of 2024. This guidance assumes all the spend related to our three late stage clinical development programs, and KORSUVA revenue profit share contribution. Finally, I’d like to highlight for everyone that we are exploring certain non-diluted financing opportunities to extend our runway further. I will now turn the call back over to Chris.

Christopher Posner: Thanks, Ryan. I want to reiterate that we are laser focused on making the KORSUVA injection launch a success. And additionally, we remain confident in the massive potential of our pipeline behind oral difelikefalin. We have full confidence that our long-term strategy will help us achieve our goal of becoming the world leader in the treatment of chronic pruritis and ultimately delivering significant value to our shareholders. With that, Ryan, Joana, and I will be happy to take your questions. So Latif, let’s open up the line for Q&A.

Q&A Session

Operator: Operator Instructions] Our first question comes from the line of Joseph Stringer of Needham and Company. Please go ahead, Joseph.

Operator: Thank you. Please hold for our next question. Our next question comes from the line of Annabel Samimy of Stifel. Your question please, Annabel.

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

Operator: Thank you. Our next question comes from the line of Jason Gerberry of Bank of America Securities. Your question please, Jason.

Operator: Thank you. [Operator Instructions] Our next question comes from the line of Sumant Kulkarni of Canaccord Genuity. Your question please, Sumant.

Operator: Thank you. At this time, I’d like to turn the call back to Christopher Posner, for closing remarks. Sir?

Christopher Posner: Thanks. Thanks, Latif. Yes, I just want to take a minute just to wrap things up. I said in my comments, if you look at the key performance indicators of the business, specifically with KORSUVA injection, we are encouraged. I mean, CSL Vifor continues to make progress building this market. It’s really reflected in the key trends this quarter. Clinics or clinic orders doubled. 60% of the FMC clinics are dosing a patient. And each segment is really seeing increases in clinic order. So it’s encouraging. And we’re getting very positive feedback from both patient and physicians on the product. And that’s really translating into very strong reorder rates. Again, very positive in terms of where we are. We continue to make really good progress.

And Joe mentioned a little of that in our pipeline to our stated commitments. So net-net, we look really forward to continuing to update you on the progress of the KORSUVA launch and our pipeline as we progress. So with that, I’ll end the call.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.