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

Good day, everybody, and thanks for joining us at the Bank of America Annual Healthcare Conference. My name is Jason Gerberry, I'm one of the biopharma analysts at BofA, and I'm pleased to be introducing our next company presenter, Cara Therapeutics and CEO, Derek Chalmers. So Derek, first off, thanks for joining us at the conference this year.

Good morning, Jason. Thanks for the invitation.

Great. So look, Cara is one of the companies at the forefront of developing anti-itch [Audio Gap] one of the company's best medications and I know you've got some prepared remarks and some slides that you want to reference out of the gates. So maybe I'll hand the mic over to you, and then we can jump into Q&A after that.

Okay. Sounds good, Jason. Yes, just very briefly, just to remind folks, of course, so if you go to Slide #3, 2021 is going to be a pretty defining year for us in terms of our overall mission of developing novel first-in-class therapeutics to treat chronic pruritus. If we look at the upcoming events, we do expect FDA approval of our first NDA for our lead product candidate, which is KORSUVA Injection, which I'm sure we're going to get into a little bit, Jason, here, indicated for the treatment of pruritus associated with chronic kidney disease, specifically in hemodialysis patients. So that NDA is under priority review right now. If approved, we do anticipate U.S. commercial launch in the second half of this year. And we do have commercial license agreements already in place for the U.S. and actually, most major territories ex U.S., which we can also talk about. And then behind our lead product candidate KORSUVA Injection, we have an oral tablet formulation of our lead candidate difelikefalin in development to treat pruritus across a range of clinical populations. And we do aim to get to Phase III registration trials in 2 of those indications by year-end. So clearly, a lot of significant milestones to come here. But just as a reminder, if you move to Slide 4 in the deck here, let me just highlight the significant unmet need with respect to chronic pruritus. So we know that pruritus is a prominent symptom of really high prevalence across a whole range of clinical populations, as indicated here, including in systemic diseases such as chronic kidney disease and chronic liver disease and inflammatory diseases, such as dermatological conditions, and there we're specifically interested in atopic dermatitis, which is an exciting -- fire brigade that's, I'm sorry, interrupting us right now. And also certain neuropathic conditions where we see a high level of pruritus. So the negative impact on quality of life and the increased likelihood of co-morbidities for these patients across all these populations is significant. And when we look at empirical script data as we have here in the U.S., it's in the order of something like 20 million scripts annually for the treatment of pruritus and the vast majority of these are generic corticosteroids or indeed antihistamines, which are generally ineffective or are not appropriate for clinic use. So there really is a significant unmet need here for a novel therapeutic approach for pruritus. So what is our approach being here at Cara? So if you look at Slide #5, we've developed KORSUVA or difelikefalin, which is a first-in-class, and it's really an only in class, highly selective, peripherally active kappa agonist as a novel therapeutic approach to treating pruritus. And we have specific advantages in terms of mechanism of action with KORSUVA as illustrated here. So KORSUVA acts directly on the sensory afferents which innervate the dermis and the epidermis and relay the pruritus. So it's a direct inhibition of the pruritic signal that activates kappa receptors predominantly on C-fibers, downstream from the action of so-called pruritogens, which are really mostly immune molecules, which are released in response to various pathologies. So because we are downstream from these pruritogens, we can inhibit pruritus really regardless of the pathophysiology. And this was, I think, an important aspect of our recent data in atopic dermatitis where we saw a clear significant signal in the mild-to-moderate population. And to this point, we've really been concentrating on systemic disease-related pruritus in CKD patients. And that was really proof that, that idea, that mechanism could be broadly applicable, and that's the first clinical data that really confirms that for us in a different population. So we've got a direct, if you like, neuronal activity with KORSUVA. And it's also well-established that kappa receptors are localized on immune cells as illustrated here. And activation of these kappa receptors inhibits the release of these pruritogenic substances. So it's these 2 complementary mechanisms that direct neuromodulatory effect and the ability to inhibit immune molecule release which underlines the mechanism here and our belief that this should be broadly applicable, really regardless of the initiating pathophysiology. So we flip on to Slide #6 here. This is highlighting our KORSUVA pipeline. And we have 2 distinct formulations in development, an intravenous formulation of difelikefalin KORSUVA Injection, specifically for CKD associated pruritus in hemodialysis patients, as I said earlier, under NDA review, and I'll summarize the commercial arrangements there in a little bit; and then we have Oral KORSUVA, which is a tablet formulation of difelikefalin that we have in development as you see across a range of these clinical populations, including CKD pre-dialysis patients, atopic dermatitis patients, primary biliary cholangitis, and also we're looking at itch of a neuropathic origin specifically and a condition called notalgia paresthetica, and we retain the commercial rights for oral KORSUVA. So we plan to move 2 of these programs that have completed Phase II and CKD to dialysis patients and also in atopic dermatitis patients into registration trials by year-end. But let me just go back to our primary program with KORSUVA Injection on Slide #7 and talk about the opportunity here. So CKD-associated pruritus is really -- it's a serious intractable pruritus in hemodialysis patients. And it occurs with high frequency, is associated with an increased risk of a number of co-morbidities, including excoriations, local infections and actually, in some cases, systemic infections and is highly correlated with decreased quality of life. In the most severe patients, it's also correlated with increased mortality for those patients. And there's nothing yet approved here in the U.S. or indeed in the EU. So the opportunity is significant. Of the 500,000-or-so hemodialysis patients here in the U.S., approximately 60% of those experience some level of pruritus, with 40% to 50% of those at the moderate-to-severe level. And as I said earlier, our NDA is currently under priority review. We have a PDUFA target action date of August 23. And if approved, we do anticipate launching that in the U.S. in the second half of this year. And if we move on to Slide #7, with respect to commercialization here in the U.S., we have an established license agreement with Vifor Pharma in place now since the fourth quarter of last year. And we really see a number of key advantages in this agreement with Vifor. Most importantly, we get to leverage and employ Vifor's already established nephrology-focused infrastructure, including this large sales force they have in place, experienced sales force with established relationships across a range of dialysis organizations from the largest to the independent, and I think that's going to enhance adoption of KORSUVA Injection upon launch. And we've already been working with the Vifor market access teams to enhance our reimbursement efforts for KORSUVA Injection, and we do plan to leverage their existing supply chain agreements to our economic advantage. So some significant advantages I think to employing Vifor here for our U.S. commercial effort. Just to summarize quickly the conditions of the license agreement. Upon signing, we received a payment of $150 million, that was $100 million in cash, $50 million equity investment in Cara's common stock. Upon U.S. regulatory approval, we are eligible to receive an additional $50 million equity investment at a calculated premium to our stock price. Vifor has the exclusive rights to commercialize KORSUVA Injection, specifically on non-Fresenius Medical Care clinics under this last-license agreement, and that's under a Cara 60%, Vifor 40% profit share arrangement. Recall from our original 2018 Vifor Fresenius license agreement that we already have an established 50-50 profit share arrangement in Fresenius clinics in the U.S. And then on top of that, we're also eligible to receive payments of up to $240 million upon achievement of predefined tiers of U.S. net sales. So we think this is a significant agreement, and we do believe this is going to aid in the momentum we can see in KORSUVA Injection launch. Moving on to the next slide. We were also pleased to announce last quarter that the EMA had accepted the marketing authorization application for difelikefalin injection in Europe submitted by Vifor Pharma. That EMA is going to be reviewed under the centralized marketing authorization procedure. And under our 2018 license agreement summarized here with Vifor Fresenius, they'll be responsible for the commercialization in Europe and Cara eligible to receive double-digit royalty payments based on annual net sales and up to $440 million in tiered commercial milestones, all of which are sales related. And we do expect that EMA decision in the second quarter of 2022. And just to complete on the commercial agreements, we already have established agreements for the other major territories with Maruishi and Kissei in Japan and with CKD Pharma in South Korea. So moving on to next slide and upcoming major milestones. So with our NDA under review, we do anticipate, as I said, second half U.S. commercial launch for KORSUVA Injection. We expect our EMA decision on the MAA for difelikefalin injection, second quarter of 2022 with commercial launch thereafter. The oral KORSUVA program having now generated close to Phase II data in both predialysis CKD and atopic dermatitis, we aim to move both of those Phase III programs forward in the second half of this year, certainly by year-end. And we continue to enroll in our other 2 Phase II trials in PBC and neuralgia paresthetica. So finally, just to round this off on where we are, balance sheet-wise, in our final slide here. We're well positioned from a balance sheet perspective to support all of this activity without any need to access the capital markets. We did end the year -- end the quarter, sorry, with a significant amount of cash, almost $230 million, and we've guided that's going to be sufficient to carry us through all of the ongoing oral activity that I've described and into 2023 and that's not giving any effect to the potential milestones I've already mentioned in terms of our commercial agreements or indeed any potential product revenue we should see after KORSUVA Injection U.S. launch. So well positioned from a balance sheet perspective to execute on our plans for Oral KORSUVA development. So I'll stop there, Jason, and hand it back to you for a chat by the fire.

Great. So maybe we'll start with intravenous KORSUVA just because it's the kind of the next important set of milestones in the company story. And I guess I'm wondering, are you surprised in any way that there won't be an AdCom novel mechanism of action in the dialysis setting. We saw a situation at least with another drug, roxadustat, where FDA sort of came in late and said, "Hey, we want an AdCom." Now there could be some company-specific factors to that, hard to speculate, don't want to speculate. But more or less just curious how comfortable you are that, ultimately, there won't be an AdCom.

Right. So as I just pointed out, that could change, right? I went through a mid-cycle review, we have always a full review to come. But today, the indication is no AdCom there. And frankly, looking at our Phase III package here, we had 2 well-designed large Phase III trials that met their both primary and secondary endpoints in terms of safety analysis. I know you've looked at the data. We really didn't see any major issues or anything new from those Phase III programs we haven't seen in previous clinical development programs. And it was a large safety database we established there, over 1,500 exposures overall. So we were very comfortable with the package. And as you say, today, there's no indication of an AdCom. Just to caution that we have one more cycle and review. And as you've indicated, that can change. But to this point, we've certainly had an indication of no AdCom and no major issues with the NDA.

Right. Okay. Yes. I mean, in terms of the clock, right? They have to do -- they do have to give you, I think, 55 days notice to prepare for an Advisory Committee and with an August PDUFA, there isn't a lot of time for that. I would -- I'll be stating the obvious.

Right. Exactly. And our late cycle review is coming up at the end of this quarter.

Yes. Okay.

So we'll know relatively soon if there is a need for an AdCom.

Yes. Got it. You've also talked about the scenarios around scheduling being either not scheduled or a lightly scheduled medication. I wouldn't think as a physician-administered drug in the IV setting that, that really matters much. But are these dialysis centers equipped to administer scheduled medications? Would that be in any way a commercial factor? Or do you think it's -- as a schedule IV drug, lightly scheduled, probably wouldn't be much of a factor for the DOs.