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

Great. Good afternoon, everyone. My name is Jess Fye. I'm a senior biotech analyst at JPMorgan, and we're continuing the 2021 health care conference today with Cara Therapeutics. Just a quick note that instead of going across the hall for the breakout session this year, you can ask the question by using the blue Ask a Question button on your screen, that will send them to me through a portal, and I can ask management those questions after the presentation. Without further ado, let me turn it over to Cara's CEO, Derek Chalmers.

Great. Good afternoon, Jess, and thank you very much for the invitation to be here today, if not in-person, at least virtually. So let me start by saying 2021 is going to be a highly significant year for us here at Cara on a number of fronts. We do expect FDA approval for our lead product candidate, which is KORSUVA Injection. It's a breakthrough drug for the treatment of pruritus and dialysis patients. If approved, we do also expect commercial launch of that product with our partner, Vifor Pharma, in the second half of the year. And we also expect Phase II readouts from our Oral KORSUVA program. The first of those being topline data from our trial in atopic dermatitis patients, and that's going to come in the first half of this year. And then on top of that, we do plan to move Oral KORSUVA into Phase III registration trials in the second half of 2021. So a very big year ahead for the company, probably our most significant year-to-date, but I thought it made sense, let me start at 30,000 feet with a brief reminder of what we're focused on at Cara, and then I'll update where we are in each of our main clinical development programs, and I'll finish with the timeline on the expected major milestone events through 2021. And of course, I'll make some forward-looking statements during the afternoon. So if we move to Slide #3 then. So what we're focused on at Cara today, we are a company really focused on the development of a novel therapeutic approach for the treatment of chronic systemic pruritus. I think most of us are familiar with pruritus being a major symptom of dermatological conditions such as atopic dermatitis, but it also occurs with high prevalence across a range of other disease areas, as indicated here, including end organ diseases such as CKD and chronic liver disease as well as chronic inflammatory disorders and in certain neuropathic conditions. And when we look at the empirical script data for the treatment of pruritus here in the U.S. It's in the region of 20 million scripts annually. The vast majority of these being generic corticosteroids or centrally acting antihistamines, which are really not so effective in this condition. So there really is a significant unmet need here for a novel approach for a very large contingent of patients. So how we approach this at Cara, if we move to Slide 4. At Cara, we've developed a novel class of highly selective, peripherally acting, kappa agonist therapeutics, a really first-in-class molecules, which exhibit robust antipruritic activity, and difelikefalin is our lead molecule here, and that's our API in each of our product candidates. And the mechanism of action here is outlined on Slide 4. Pruritus itself originates in the skin, of course, in the epidermal junction, and it's relayed by a specific class of sensory afferent C-fibers, which are sensitive to a variety of neurosensitizing substance, proantigens, which are released from various immune cells, depending on the underlying pathophysiology. So KORSUVA acts to activate capita receptors directly on sensory afferents and downstream from the action of these immune molecules. So directly inhibiting sensory C-fiber activity as well as blocking the release of pruritogens from activated immune cells. And it's this dual mechanism of action, which we believe will translate into a broad antipruritic activity across clinical populations, really regardless of the initiating pathophysiology, and we've developed our pipeline for KORSUVA bearing that in mind. So if we move on and look at the pipeline itself on Slide 5, we have a summary here, across the various clinical populations. We have 2 distinct formulations in development: KORSUVA Injection, which is an intravenous formulation, specifically for the treatment of chronic kidney disease associated pruritus and hemodialysis patients. Here, we submitted our first NDA last month. We've already established strategic alliances for commercialization of KORSUVA Injection in the U.S. with C4 Pharma, and I'll summarize the license agreement for you shortly. And in other major territories, including in the EU with Vifor Fresenius. In Japan with Maruishi Kissei. And in South Korea with CKD Pharma. And then the second major component of our pipeline is the development of Oral KORSUVA, an oral formulation of difelikefalin and development to treat pruritus across a range of clinical populations, including CKD pre-dialysis patients, Stage III-V, chronic liver disease patients, atopic dermatitis patients. And as we announced earlier this week, we've expanded this program with the initiation of a Phase II trial and to pruritus of neuropathic origin in patients with notalgia paresthetica. So let me walk you through each of these in a little more detail, and then we'll want to talk about where we're going in each of these programs. So first, on Slide 7, for CKD associated pruritus. This is a commonly occurring serious and tractable systemic pruritus in hemodialysis patients. It's associated with increased risk of comorbidities, including local and systemic infections. It's highly correlated with the decreased aspects of quality of life for these patients. And in the most severe patients, correlated with increased mortality risk. There are currently no approved therapies in the U.S. or Europe. So the opportunity for KORSUVA Injection in treating CKD-aP in hemodialysis patients is significant. So of the 500,000 or so dialysis patients in the U.S., around 60% experienced some level of pruritus with 40% to 50% of those at the moderate to severe level. Now we submitted our NDA for this indication to the FDA last quarter and have granted priority review by virtue of our Breakthrough Therapy Designation. We do anticipate commercial launch in the second half of this year. Now, with respect to commercialization of KI in the U.S., last quarter, we were very pleased to announce the completion of a commercial license agreement with Vifor Pharma for the treatment of CKD-aP in the U.S. in dialysis patients. We see a number of key advantages of the Vifor agreement for our U.S. commercialization strategy, and those are summarized on Slide #8. Most importantly for us, it allows us to imply Vifor's already established dedicated nephrology focused commercial organization, including an experienced salesforce with existing relationships across a large, medium and independent dialysis organization. So with no need to fund a de novo Cara nephrology focused salesforce, we have anticipated significant savings and projected future commercial infrastructure costs going forward. It will also enable us to work with the Vifor market access team to enhance our reimbursement efforts and leverage existing wholesale and supply chain agreements that Vifor already has in place. We've already established a very efficient working relationship with Vifor across multiple functional groups from our existing collaboration focused on EU commercialization, and we'll leverage that as we move forward with our current U.S. agreement. So if we move to Slide 9. With those advantages in mind, let's take a look at the key financial terms of the agreement. Cara received an upfront payment of $150 million last quarter, $100 million of that in cash and an equity investment of $50 million to acquire Cara's stock at 20% premium to a vend price. Upon U.S. regulatory approval for KORSUVA Injection, Cara will be eligible to receive an additional $50 million equity investment, again, at a calculated premium for then stock price. Vifor has the exclusive rights to commercialize KORSUVA Injection in non-Fresenius Medical Care North America dialysis clinics under a Cara 60%, Vifor 40% profit sharing arrangement. Based on profit from net non-Fresenius clinic sales recall that from our original Cara, Vifor, Fresenius license agreement, we have an established 50-50 profit split arrangement in Fresenius clinics already in place and established here in the U.S. So those are the main financial terms. We're also eligible to receive payments of up to $240 million upon achievement of prespecified tiers of U.S. net sales under the same arrangement. So overall, the key elements of the agreement for Cara is, we maximize the potential commercial success of KORSUVA Injection by implying Vifor's established nephrology sales team, and Cara retains the potential commercial upside by virtue of our profit sharing arrangement. So we're very happy with this particular license agreement. And on Slide 10, we've summarized already established commercial license agreements for ex-U.S. territories that are in place. Now let me shift to the second major part of our pipeline, our ongoing development of Oral KORSUVA, which we believe could be a potential novel treatment option for patients with pruritus across multiple clinical populations, and here, we've got 4 ongoing development programs. We've completed a Phase II trial in CKD predialysis patients, that's Stage III-V, and we have ongoing Phase III trials in atopic dermatitis, chronic liver disease and also in notalgia paresthetica. So starting with CKD Stage III-V patients on Slide 13. Per National Kidney Foundation numbers, there are approximately 30 million CKD patients in the U.S. with an estimated 40% to 50% incidence of some level of pruritus. And that's in line with empirical script data, where we see approximately 1/3 of diagnosed CKD patients receiving a script, again, predominantly generic corticosteroids to temporarily treat pruritus. So as with hemodialysis patients, the opportunity for KORSUVA in this patient population is significant with nothing approved to date in the U.S. or the EU. And Slide 14 outlines our Phase II dose ranging trial for Oral KORSUVA in CKD predialysis patients. This was designed as a 3:1 randomization to examine 3 tablet strengths of KORSUVA versus placebo and approximately 240 patients. Patients, of course, qualified for randomization by exhibiting moderate to severe pruritus during the run-in period, and they received Oral KORSUVA AD over the 12-week treatment period. Primary efficacy endpoint was the change from baseline and the weekly mean of the daily worst itch NRS score at week 12, and then secondary and additional endpoints included responder analysis at 3-point level and complete levels as well as quality of life measurements. So briefly looking at that data on Slides 15, if we look at the primary endpoint, we see a nice dose-dependent reduction and mean more NRS with Oral KORSUVA treatment versus placebo with the 1 mg tablet strength exhibiting a statically significant mean change of approximately 4.4 points from baseline at the week 12 time point. And if we move to 16, when we look at the time course for this effect with the 1 mg oral tablet strength, it looks very similar to that of KORSUVA Injection in hemodialysis patients. We see separation from placebo between 1 and 2 weeks and a sustained developing signal through the entire treatment period, so no desensitization or loss of signal. Moving on to 17. Looking at the secondary endpoint of 3-point responder analysis, and this is the threshold we previously established as being clinically meaningful reduction for CKD patients. And again, we see a nice dose-dependent response for KORSUVA with 72% responder rate at the 12-week time point for the 1 mg tablet strength, just massing statistical significance here due to the high placebo rate at that particular time point, but it was statistically significant at the majority of time points through the 12 week period. On Slide 18, looking at the higher threshold complete responder level, that's the proportion of patients exhibiting worst NRS values of 1 or 0 in the final week of treatment, all 3 tablet strengths of KORSUVA exhibit dose dependent, statistically significant improvements over placebo with approximately 40% of patients at the 1 mg level exhibiting a complete response. So overall, on Slide 19, we certainly achieved our primary endpoint in the Phase II trial. We've identified 1 milligram tablet strength as the dose to progress to Phase III. Oral KORSUVA was generally well tolerated. The safety profile, in fact, was very similar to that of KORSUVA Injection on Phase III studies, and our aim is to complete the end of Phase II meeting for this program this quarter and initiate a Phase III in the second half of this year. So our net projected Oral KORSUVA Phase II data readout will actually be in atopic dermatitis. And if we move to Slide #20, our Phase II trial in atopic derm as the dose-ranging trial really designed in an analogous fashion to our CKD Oral KORSUVA trial, it's a 3:1 randomization, 3 tablet strengths of KORSUVA versus placebo over 12-week treatment period and approximately 400 adult patients with moderate to severe pruritus. Primary endpoint, again, change in mean NRS from baseline, and the main secondary here was the 4-point responder analysis, of course, already established registration endpoint for atopic dermatitis. We do expect last patient last visit for this trial in this quarter, and we do expect to read out topline data in the first half of this year. So on Slide 21, I wanted to talk a little bit about how we see positioning of Oral KORSUVA in the treatment paradigm for atopic dermatitis patients. So pruritis, of course, is a defining symptom of atopic dermatitis, and it's evident at the moderate to severe level regardless of the degree of pathology. So across the entire spectrum of patients for mild disease to severe disease. So in contrast to approved biologics and indeed immunomodulator drugs currently in development, which focus on the 20% of patients or so in the moderate to severe pathology category, Oral KORSUVA has a potential broad applicability across the AD patient population, either as a monotherapy, first-line therapy, or indeed in combination with other immunomodulators. So we're excited that this Phase II is coming to completion, and we really look forward to reporting topline data from this trial very soon. So finally, let me move to Slide 22. Just to summarize our cash position. As of the end of Q3, we had approximately $280 million in cash, which carries us into 2023. Of course, not accounting for any potential milestone payments under our existing license agreements and collaborations. And I'll finish finally on 23, busy year ahead for our company, a very exciting year for our company. And these are our projected milestones through the year for KORSUVA Injection. We do expect notification of NDA acceptance and priority review notice this quarter and consequent NDA approval and commercial launch in the second half of 2021. So Oral KORSUVA, we have a number of data points this year. We do expect topline data from our Phase II trial in AD in the first half of the year and assuming positive outcome for that, we are planning to initiate registration Phase III programs for both atopic dermatitis and CKD Stage III-V patients in the second half of 2021 as well as read out data from our peripheral concept trial in primary biliary cholangitis patients in the second half of the year. So let me stop there, Jess, and I'm very happy to answer any questions that you or any of the audience has. So thank you very much.

Great. Thanks for the presentation, Derek. I'm going to just -- let me just remind folks to use the blue Ask a Question button if you want to send a question to the portal. We've got a couple coming in. So I'll start with those. First one is, will the atopic dermatitis readout include data from the 4-week extension?

No. So what we're going to see in the topline data readout is both the primary endpoint, that's the mean NRS change from baseline, as well as the 4-point responder analysis as well as a safety summary.

Great. And can you talk about how you think about the size of each of the 4 indications that you're initially targeting with Oral KORSUVA?

Yes. So broadly speaking, as I said initially, if we -- and we run this analysis with IQVIA, if we look at the scripts annually in the U.S. for treating pruritus really across codes, it's greater than 20 million scripts annually. And the ultimate aim here for us and part of the rationale for our announcement this week and moving to neuropathic edge is to establish that Oral KORSUVA has the potential to treat pruritus really across patient population. So ultimately, we would like to amass the evidence of broad efficacy across the major categories of pruritus and then move for a broad label with Oral KORSUVA. Now, we're obviously adhering to FDA rules in terms of moving those programs forward in a patient-specific manner. So the first 2 programs we're moving to Phase III this year will be CKD pre-dialysis patients. And as I mentioned in the presentation, this is a significant number, per script number, several million are seeing scripts annually for pruritus. So that will be one program we move to Phase III, large opportunity, and assuming positive data in our Phase III trial with atopic, that would be the second program we move forward. And as I said, the position for this molecule is really applicable to the whole spectrum of atopic dermatitis patients, and that's some 30 million patients here in the U.S. So those 2 alone are certainly very significant opportunities.

Okay. Got it. And maybe sticking with Oral KORSUVA for a bit, what's the size of the Phase III safety trial that you've initiated for the CKD nondialysis population?

Yes. So we haven't initiated that. We're planning our end of Phase II meeting this quarter. And so the sizing of that is actually based on the effects as we've obviously generated from our dose ranging trial here that we briefly looked at some of the data from. So the size of that trial is in the region of 400 patients. And as usual, as we run these large trials, as we've done for all of our Phase III trials, we run an interim assessment, conditional power assessment just to make sure that our assumptions on powering were correct and really derisk our statistical mess on our endpoints, and we'll be running an interim assessment on that Phase III also.

Got it. Assuming positive [indiscernible] look like?

Sorry, you cut out a little bit there, Jess. Could you repeat that?

Yes. Assuming positive Phase II results in the atopic derm, what would the potential registrational path look like?

Yes. So an atopic derm is actually very similar in terms of design for -- as we're projecting for CKD predialysis. So we'd be looking for a label of treating moderate to severe pruritus in atopic dermatitis patients. So with this Phase II data in hand soon, we will model that size-wise based on the effect size we see in that Phase II trial. Within that Phase II trial, we stratified to include both mild to moderate patients, in fact, the majority of patients within that, and moderate to severe, and we would model to include both of those going forward into the Phase III trial. So we'll base the size of that trial on the empirical Phase II data we derive from this dose range and trial as it reads out.

And would that require a single Phase III or 2 Phase IIIs?

We project 2 Phase IIIs. This is a brand-new indication for KORSUVA, where we don't have a lot of prior exposures. Unlike the case where CKD predialysis patients, who we really have, as you know, over 1,500 exposures in dialysis patients. And there, we will be making the case that with those exposures in hand, all of which are at higher KORSUVA exposure levels than achievable with the oral that we would reference those patients as part of our safety database, and it perhaps may be possible to run that program with one pivotal Phase III trial. Certainly something we'll be discussing with the FDA.

So while we're on that topic, what else do you expect to clarify with the FDA or learn during the first quarter end of Phase II meeting?

Confirmation of endpoint is our main reason to run those -- to have those end of Phase II meetings, make sure we're an agreement on statistical analysis for our Phase III program and overall design for that to align with what we'd like to see in our label at the end of the day. So those are the main question for us, and of course, the ability to run that program with one pivotal Phase III since we already have the confirmed efficacy in the Stage V dialysis patients.

Can you talk about what you see as the bar for the magnitude of effect on worst itch NRS that would meaningfully differentiate Oral KORSUVA as an antipruritic? And kind of related to that, how do you think about placebo response?