Cara Therapeutics, Inc. (CARA) Earnings Call Transcript & Summary

Good day, everybody. My name is Jason Gerberry. I -- well, first off, I want to thank everybody for joining us for day 3 of the Bank of America Virtual Healthcare Conference. I'm the SMID cap, biotech and specialty pharma analyst at Bank of America, and I'm pleased to be introducing our next company presenter, Cara Therapeutics and CEO, Derek Chalmers. For those on the line, Cara is developing therapeutics for pruritus or itch that tends to be more moderate to severe in nature. The company recently reported positive Phase III data from its second confirmatory trial for KALM-2 for end-stage renal disease, patients who are suffering from itch, and the company is also exploring applications of this small AD in an oral formulation. And so we'll be looking to talk upon each of these topics today with Derek. So first off, Derek, thanks so much for joining us.

Good morning, Jason. Thank you. Thank you for hosting this morning, and good morning to everybody dialing in.

Great. So maybe we can jump into it. The recent KALM-2 data. Maybe we can talk about that first and then with the back half of the conversation, talk more about the pipeline and some of the more interesting developments that will be occurring later this year. So KALM-2, you've now reported 2 positive Phase IIIs. You've got a safety study ongoing, that's the gating item to submitting your NDA. I thought it would just be helpful now that you've gotten through a lot of your clinical hurdles to talk a little bit about some of the key aspects of the commercial opportunity for IV KORSUVA. I think in the past, you guys have cited certain analogs in the pain space as analogs for pricing, talked about consistency of price point at period of launch through longer-term, and those who follow the CMS space understand some of the oddities of CMS bundling and whether or not you guys would fall into that is an uncertainty. And then you guys have framed IV KORSUVA as a likely chronic therapy that would be highly adhered to by patients who are coming into the clinic anyway. So there's sort of a factor there that sort of lends itself to a high level of compliance. And if you put all that together, that would suggest you got $1 billion revenue-generating drug on your hand. So I'm curious if we can maybe go through those assumptions and maybe talk about which ones you have the most conviction on, which ones there's some uncertainty but you feel good about. Maybe kind of walk through each of those parameters.

Yes. Yes. No, Jason, that's a good place to start. So the first thing to say is, obviously, we're extremely pleased to replicate our first Phase III, our KALM-1 study that we published last year in the New England Journal. And the KALM-2 data really is a replication. So we hit our main primary end point there as a 3-point responder analysis under the worst itch in these hemodialysis patients. And we measure that over a 12-week period. And so we're very happy with that. And as you say, that really enables our NDA. It satisfies the efficacy component there, we think, very robustly. As I've said before, this is really the only drug that's shown significant efficacy in a randomized controlled trial for this indication for these patients. And so we're real pleased about that, and that was the basis for the breakthrough designation for the agency. So the opportunity here is significant. There's a 0.5 million or so hemodialysis patients in the U.S., up to 60% to 70% of those patients suffers from some form of pruritus. And that's a pruritus that's really untreatable today. They're really looking at emollients for some temporary relief. Some patients will take centrally-acting antihistamine is really to aid with this plead because the main issue with this really unremitting systemic chronic pruritus is that it seriously affects quality of life for hemodialysis patients. And I think this is an important point. I just want to get to your points in relation to penetration here and compliance with these patients. These patients are going to be highly motivated in terms of taking this medication. When we look at the comorbidities associated with moderate to severe pruritus here, issues such as local infections, skin infections, in some cases that translates to systemic infections. These patients have serious psychological issues that probably stem from lack of sleep when they have moderate to severe pruritus. And we know, unfortunately, there's a very good correlation with severe pruritus and increased mortality in these patients. So we think this is going to be a medication that's going to be well received. You could have mentioned there compliance rates in our completed trials and our ongoing long-term safety trials that are just wrapping up right now, that's been very, very good. The percentage of patients who moved from our randomized control phase in our Phase IIIs to open-label extension was pretty close to 90% in both of those trials. And the discontinuation rate there didn't increase at all even when we extended our trials to the 12-month period to satisfy that chronic exposure requirements. So patients like this drug. It's a drug -- when you have a drug that improves quality of life, those tend to be the drugs where you see the highest level of compliance. So we do think patients are going to be motivated to seek this out. And we do believe -- and your assertion that this is kind of an unusual patient group in terms of likelihood of peak penetration, and that is a captured patient population, if you like, in that they have to attend the dialysis clinic 3 times a week as is required for their treatment. And we administer our drug at the point-of-care post dialysis. So we know these patients are going to be there. We know they're going to get the drug, and we know severe pruritus is their #1 issue. So we anticipate probably an unusual rate of penetration into best population versus a standard PBC population. So that's going to be good for us. The other aspect to that in terms of the launch here is very early on when we're looking for an ex U.S. partnership here to aid in commercialization, particularly in Europe, we -- sort of what we thought would be the best groups in order to leverage our access to dialysis patients. And we have a very good license and arrangement with Fresenius and Vifor. We have a joint venture that we've teamed up with, and they're going to be responsible for ex U.S. commercialization principally in Europe. But part of that arrangement was also a co-promotion arrangement with Fresenius and Vifor in the U.S., specifically within Fresenius clinics because, as you know, the logistics components of a good launch is getting your drug on to that formulary early to precipitate penetration into that patient population. So in that, roughly 38% of the U.S. market that Fresenius controls, we'll be co-promoting this drug with Fresenius, and we'll be leveraging their logistics within their own clinics to make sure we can get this adopted as quickly as possible. So I think all of that should add up to a significant launch, hopefully, accelerated versus a standard patient population. And you're right, just getting to the pricing, Jason, since you mentioned a couple of aspects of pricing. Yes, because we're administering within the dialysis centers, it's likely to still fall within the ESRD bundle. As you know, that legislation has changed in the last couple of years to really encourage innovations such as KORSUVA, and CMS will reimburse the molecule, and we should say for at least 2 years out with the standard bundle. ASP is part of this TDAPA reimbursement system. I'm saying at least 2 years because as you referenced, the first drug through the Amgen's placebo now has a TDAPA period extended to 3 years with the rationale that allows a more reasonable time to assess usage before recalibrating reimbursement for the bundle as the molecule is reintroduced there. And we think that's actually a reasonable position also. So we're happy. We're going to get that 2 to 3 years ASP. What that ASP is, we -- it's a little early to get into precise price points with CMS, although I should say, we have a good relationship with CMS. And actually, we have a good relationship with OMV, who obviously controls some first strings here. We do have regular meetings. My team at Cara has done a good job on opening up those communication lines. They are keen, and they are open to suggestions in how to encourage innovation for this patient class. So we're hopeful there. And so -- and of course, things like label are going to be important when we think about reimbursement. But the way we thought about this in terms of pricing is it's a very serious symptom. And perhaps an analogous situation may be a differentiated pain drug at the bottom end of that for a price point, the $10,000, $12,000 per year type differentiated novel mechanism there. The upper end might be some innovative dermatological drugs such as MTX and AZA. So that gets you to the high teens in terms of yearly reimbursement. What we do know is, in terms of example, Amgen's placebo, which is obviously not for this modality, is in fact the calcimimetic. And -- but the reimbursement rate there is approximately 17,000 annually. So those are kind of the book ends and the price points we would think about when we think about pricing, but it's a little early to get to precise pricing at this point.

Sure, sure. So a couple of follow-ups to that, right? So you mentioned 60% to 70% of patients suffer some form of itch. How difficult is it to set policies that make sure that people fall within the strict parameters of moderate to severe, which is more like 40% as we understood it, but you said 60% to 70%. Obviously, there could be people with maybe a broader population where utilization could occur more broadly. And oftentimes, we see in different drug categories where physicians can -- that line of demarcation is pretty blurry. So yes, is the market opportunity potentially bigger than the 40% of these dialysis patients?

Yes. No, that's a great question. So in the real world, of course, and you're correct, how is this, if you like, diagnosed? And that's going to be practically down to the nurse practitioners there or the investigators there at the dialysis centers. And really, this is obviously is a patient-reported problem. And so it's going to be as simple as a questionnaire related to how bothersome their pruritus has been. We don't, in the real-world, resort to whether that's pain or pruritus NRS scores and assessments of severity levels for patients. So that will come down to a questionnaire, which is part of the reason we wanted to work with Fresenius is, of course, they are very much concerned with protocolizing new medications and the logistics of that. So this is going to come down to how they deal with such a patient-reported symptom, and it has to involve a questionnaire related to the level of pruritus, how often they're bothered by that, and then that would be the trigger as to whether they qualify for KORSUVA.

Got it. So a little bit subjective?

It's subjective for sure.

Yes. And how does Fresenius clinics -- can you talk specifically about the role that they could play in the adoption and setting the impact, their influence on formulary and early adoption for KORSUVA?

Yes. So the way Fresenius work is analogous to all these larger dialysis providers as they protocolize important medications. And that protocol is instituted across all of their -- I think it's approximately 3,800 clinics. So we certainly want that to be the mechanism whereby KORSUVA is adopted. So we've been working with both Fresenius and Vifor with the idea that they would look at a mechanism, looking at the drug, and I should say, of course, we've used Fresenius sites as part of our clinical development programs both in terms of the safety studies and also our RCT, so they're very familiar with KORSUVA. So the work that they'll be doing ahead of this launch is, as we said, defining how they will assess pruritus rates, defining where that would fall within their protocols, and instituting how they got to deal with that once we have a launch. So hopefully, that would accelerate adoption in the formulary ahead of where we would have been had we hadn't been working so closely with that group.

Got it. Great. Maybe just on the data itself, the KALM-2 data, have you had a chance to look more closely at the detailed data? Any more clarity you can provide on what sort of were the drivers of placebo effect? Was it mainly ex U.S. sites? I think that was the expectation. The difference between KALM-2 and the Phase II study with Oral KORSUVA, just kind to get a sense of what you've learned from these studies as we think about leveraging future trials in the Oral KORSUVA formulation?

Yes. No, that's a good question. So I think the important thing to point out both with KALM-1 and KALM-2 is the drug effect. The KORSUVA effect here was very consistent which is reassuring for us. We saw 51% -- and just to remind people, this 3-point threshold we set in responder is a level we ascertained in consultation with the FDA. So the FDA, of course, is very much interested in clinical meaningfulness. And so we defined this threshold empirically based on our Phase II, IV data in hemodialysis patients. And really, that was the basis for our breakthrough designation. So clinically meaningful response here, and the hemodialysis patients is approximately 2.5 points. So if you can get 3 points or better, you're certainly very clinically meaningful in reducing moderate to severe pruritus here. So the drug effect, the KORSUVA effect across both our large Phase III trials, our U.S. trial, 51% of our treated patients had at least a 3-point response and our global trial, obviously heterogeneous in terms of territories there, 54% had at least the 3 points. So very consistent. We had the clinically-meaningful threshold and a meaningful way on a significant percentage. As you say, the difference was we did see an increase in placebo rate between our U.S. trial and our global. It didn't cause us to miss significance either at the 3-point R&D, the higher threshold 4-point responder, where we saw similar results again between the 2 trials. So we have postulated and -- I wish I could tell you we had detailed subterritory data to back this up. We do have broad data that does indicate that ex U.S. placebo rates are different than U.S. placebo rates, the R&D is higher, but I don't have it by region yet. And we will, and we will be presenting this data later in the year at conference, but that seems to be a difference that's there in the data itself. And we somewhat expected this when we run these large -- either large Phase IIIs or Phase IIs. We do run interim statistical analysis just to check that our assumptions in terms of statistical power are being maintained. And when we ran that on our KALM-1 trial in, at first, after 50% of patients had completed, we had no sample size adjustment. When we run our KALM-2, we had a 20% suggested sample size adjustment. So right there, we thought that probably indicated differences in placebo rates, and it's there in the literature, particularly in Eastern Europe and other regions there that those populations tend to have a different response to placebo. So we believe that's the difference, the drug effect was consistent. And indeed, the profile, if you look at the time line in terms of the generation of signal here, and that's on Slide 12 on the posted deck, you can see those drug response lines are basically overlayable. And the difference there really is a narrowing on the placebo on the global versus the U.S. trial. There's no difference in drug response. It's just a difference in the placebo rate. So I think that's something we expected. And thankfully we designed our trials to make sure we could accommodate that by adjusting sample size to make sure we get what we need to satisfy the efficacy component there. So that was a long-winded answer to say you're correct. I think there are placebo rate differences when you move to these ex U.S. territories, when you're using patient-recorded outcomes.

So as we think about your oral formulations and if and when you move to Phase III, either atopic derm or PBC, do these trials -- would these trials need to be global? Based on what you've learned, would you just focus on doing U.S. trials? Or might that slow you down? Or do you think you can still go global, but you just need to have a more refined approach and incorporate what you've learned from some of these regional variances over time?