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

Welcome, everyone. We're continuing the 40th JPM conference. I'm one of the associates at the Smid-Cap biotech research team. My name is Daniel Wolle. I'm joined today by President and CEO, Chris Posner of Cara Therapeutics. If you want to ask questions, as a reminder, there is a big blue ask-a-question button you can submit that, and I can ask the questions to the question portal. Without further ado, Chris?

Yes. Thank you, Daniel. It's really an exciting time for Cara Therapeutics. It's exciting as we transition to a fast-growing commercial stage company with an approved product in the U.S. and for late to mid-stage programs in the clinic. And I kind of embody that excitement. And for me personally, I was a Board member at Cara for 3 years and became CEO in November. And moving from the board to the CEO role was really an opportunity. I simply could not pass up given the confidence I have in the company and really our future prospects. And Daniel, we're really just getting started at Cara and 2022 is really shaping up to be a truly a transformational year at Cara. Now before we dig in quickly on Slide 2, a necessary reminder are forward-looking statements, and you can refer to this and our other regulatory filings on the website. So turning to Slide 3. For me and our company, it all starts with their mission or what I like to call our North Star. And our mission is to change the way pruritus is treated. Pruritus is a significant medical condition impacting millions of people worldwide. And yet patients have few to no treatment options. And pruritus can have really debilitating effects on quality of life. And we are really confident. We are really confident we can be the leader with assets to address this significant unmet need. We are confident that we could build the market and really change patients' lives. And the opportunity is there, and we are really well set up to seize it. Now on Slide 4. This mission addresses the significant unmet need. And if you look at the numbers, 1 in 8 people suffer from chronic pruritus and chronic pruritus could potentially arise from systemic conditions like chronic kidney disease, from dermatologic conditions like atopic dermatosis or even neurologic conditions like notalgia paresthetica. But regardless of what condition the pruritus originates, the obvious manifestation of chronic pruritus is that people experience a manning persistent urge to scratch. This isn't just like a mosquito bite because the implications run much deeper. This condition can lead to depression, loss of sleep, sleep deprivation and really a drastic decrease in the quality of life. Yes, there's been a significant lack of scientific innovation in this space, and it still remains largely an underserved market. And in fact, the go-to treatments are really still conventional medications such as topical steroids and antihistamines. Now with this as a backdrop, as we flip to Slide 5, we have dedicated our research and development efforts in chronic pruritus with programs in each of the 3 originating disease areas, which forms a very attractive total market opportunity. Again, looking at the numbers, there are roughly 500,000 addressable patients in advanced chronic kidney disease, around 3 million people suffering from chronic liver disease, upwards of 12 million people with atopic dermatitis and approximately 1 million people with notalgia paresthetica. We have a strong foundation with really 3 critical growth elements if you turn to Slide 6. And these 3 critical growth elements are in place to target this opportunity and drive significant growth now and in the future. First, we have an approved product, KORSUVA injection. It's the first and only product approved for the treatment of chronic pruritus in adults that have chronic kidney disease and are on hemodialysis. Second, we have a product platform fueling our pipeline that spans multiple disease areas with 2 Phase III programs starting this quarter. And lastly, we have a strong balance sheet that will allow us to deliver growth from this significant market opportunity. So let me take you through each of the growth elements. And our growth story starts on Slide 7, and it starts now. In contrast to many biotech companies, we have an approved product, KORSUVA injection, and we intend to begin commercialization with Vifor Pharma in April. Now this is a first-of-its-kind treatment for moderate to severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. And we are very optimistic regarding the launch. First and foremost, we have the ideal partner in Vifor for the launch of KORSUVA. And we have very attractive profit-sharing economics, and the market conditions are very unique in the dialysis market, and they're very conducive to strong uptake right out of the gates. Now as we look at the market opportunity, as we go to Slide 8, first, there is a sizable patient population that is very much underserved. There are approximately 500,000 end-stage renal disease patients undergoing regular dialysis. Now chronic pruritus is one of the many comorbidities of CKD and it affects around 40% or 200,000 CKD patients undergoing hemodialysis. In terms of competition for IV KORSUVA, it's limited to nonexistent. There are no FDA-approved treatments other than ours. And the mainstays at present are still largely antihistamines and topical steroids, and we know both have significant limitations in terms of both efficacy and safety. Now that's why the market is very much anticipating the launch of KORSUVA injection. And as we go to Slide 9, there is a very strong value proposition of KORSUVA injection. First, this is a highly innovative product, and it is the first and only FDA-approved treatment for pruritus in CKD patients. And with our robust clinical development program with over 1,300 patients, we generated efficacy and safety data. And quite frankly, we achieved the best-case scenario with the label. Now as we think about the launch and market penetration, there are unique dynamics of the dialysis markets that are very conducive to a strong uptake. So I'll turn your attention to Slide 10. This is a remarkably concentrated market dominated by 2 dialysis providers: Fresenius and DaVita. And they are combined to control upwards of 75% of the dialysis market. Now our commercial partner, Vifor, has a unique partnership with Fresenius via their joint venture, but they also have excellent long-standing relationships with the other providers. And as we think about reimbursement, this is a patient population covered mainly by Medicare regardless of age. And we recently announced that we secured TDAPA reimbursement from Medicare that will be effective April 4. So we have reimbursement the first day of launch. Now to give you a sense of what drugs that go through this ESRD process via TDAPA, we look at Parsabiv. That's the only drug to have secured TDAPA. And what we saw was a cumulative net sales of about $1.4 billion from 2018 to 2020. Now on Slide 11, a successful launch is really about execution. And I've said it before, we have the ideal partner to commercialize KORSUVA injection. Vifor Pharma is the leading nephrology company. And in the U.S., we granted Vifor an exclusive license to commercialize the product. They have an established infrastructure with 100-plus sales representatives. They have a long-standing presence in nephrology offices and dialysis organizations. And quite frankly, they have been actively engaged in disease education and other appropriate market-shaping activities since the approval of KORSUVA injection last August. And lastly, I mentioned before, we have attractive profit sharing economics from Vifor in the non-Fresenius clinics the profit split is Cara at 60%, Vifor at 40%. And in the Fresenius clinics, the profit split at Cara and Vifor is 50% each. The economics of the agreement are profitable day 1 of launch for Cara. Now in addition to the market dynamics and securing the ideal commercial partner to execute the launch, the expected launch success for KORSUVA injection on Slide 12, it really will be supported by the favorable reimbursement. Now in line with our expectations, we recently were granted reimbursement for Medicare using the transitional drug add-on payment adjustment or TDAPA which means it will be reimbursed outside the bundle for at least 2 years. This will be effective April 4, 2022. Now there are good reasons to expect solid reimbursement scenarios in the post TDAPA period as CMS has expressed a strong willingness to continue to engage with Cara and Vifor really to ensure patients have access to KORSUVA injection post the TDAPA period. So we're very optimistic that there will be additional funding in the post-TDAPA period. Now switching gears from our near-term growth opportunity with the launch of KORSUVA injection to our pipeline that will drive growth in the future. Our strategy with our pipeline is to leverage the first and only position of KORSUVA injection into a wider franchise with the potential to be the dominant company in pruritus across several indications. So turning to Slide 13. With difelikefalin, we have a validated mode of action that is applicable across pruritus caused by different diseases. Though the underlying pathophysiology of it, it's quite complex. We believe we've harnessed the power of an important pathway to alleviate pruritus. So importantly, regardless of what is triggering the itch, KORSUVA plays a role downstream and inhibits the transmission of itch in the sensory neuron. Now on Slide 14, with this validated approach, difelikefalin is itself the platform that feeds our R&D engine. Now our pipeline is centered on the oral formulation of difelikefalin across multiple disease areas where there are no targeted chronic pruritus treatments and really where an oral formulation is ideal for convenience and marketability. Now the oral formulation platform significantly expands the addressable patient populations, and we are currently targeting and pursuing 4 additional areas with over 16 million potential patients. So let me specifically highlight our pipeline and provide an overview of our building blocks that we're executing our late-stage pipeline in 4 key indications. So if you turn to Slide 15, this gives you a look at our pipeline. We have 2 late-stage programs in nondialysis-dependent advanced CKD and in atopic dermatitis where we intend to initiate both by the end of this quarter. Now we have 2 active Phase II proof-of-concept programs with near-term readouts in both notalgia paresthetica as well as primary biliary cholangitis. So we'll go through each. Starting on Slide 16, we are initiating our Phase III program this quarter with oral KORSUVA in nondialysis-dependent advanced chronic kidney disease. Pruritus management is a major unmet need among patients even before they initiate and require dialysis. Now similar to the treatment options for patients on dialysis suffering from pruritus, there are very little. There is nothing FDA-approved. And the mainstays are really antihistamines. But as with dialysis patients, the itch is not histamine-mediated. So they're generally ineffective. Now in terms of the addressable patient population, we're going to focus on advanced CKD defined by patients in stage 4 and 5, not currently on dialysis. This accounts for roughly 1.2 million people. And up to 30%, 1/3 of these folks are -- would really benefit from therapy options in the United States. Now we had a successful Phase II dose-ranging study as we turn to Slide 17 that really answered the necessary questions on the patient population on dosing and effect size that gives us a clear path forward to design our Phase III programs. Now as you may recall, we reported positive dose-ranging Phase II where the higher 1 milligram once a day dose was statistically significant versus placebo on the primary endpoint of the worst itch numerical rating scale improvement at week 12. Now upon our end of Phase II meetings with the FDA, we agreed to a patient population that will include Stage 4 or 5 patients as we believe these results will really closely resemble what we saw in the IV KORSUVA results. So we're incredibly excited about initiating this Phase III program this quarter. Now on Slide 18, turning to our atopic dermatitis program. We will begin a full Phase III program in the first quarter this year as well in moderate to severe pruritus associated with atopic dermatitis. Now we're excited about the opportunity, [indiscernible], I come from the medical derm space. And I will tell you, there is a significant need for an oral antipyretic drug. Now AD is often defined based on the appearance of lesions and rash on the skin, but itch remains the most burdensome symptom associated with this disease. And in fact, atopic derm is often called the itch that rashes. Now there are 12 million diagnosed patients that experience chronic pruritus. So this is a very sizable market. In terms of current available therapies, while they target the inflammatory component of AD and do not always provide adequate relief of pruritus, even upon clearance of their skin lesions. So as such, there really remains a need for a drug that targets pruritus, especially in patients with mild to moderate atopic dermatitis whose pruritus may be ineffectively managed by topical therapies. Now on Slide 19. Our Phase II data we generated in atopic derm is very encouraging. In terms of the results, recall that in our Phase II, we had a prespecified mild to moderate AD population, which was roughly 64% of the study population. And oral KORSUVA showed early and sustained statistical separation versus placebo on the primary change from baseline on the daily itch NRS scale, starting week 1 that was sustained through week 12. And furthermore, on the very important secondary greater than 4-point NRS responder rate, which will be the registration endpoint required in Phase III, we achieved statistical significant difference between placebo and the combined treatment groups. And again, in terms of the safety profile, which is incredibly important in the derm space, we saw very consistent with what we've seen with other clinical programs, and it's very well tolerated. So net-net, given the antipruritic effects we saw in Phase II coupled with the end of Phase II meetings we have with the FDA, again, we're very excited to move the program forward to power up the Phase IIIs. So starting on Slide 20. We have 2 more programs to round out our pipeline, both in Phase II with data readouts expected this year. In Slide 20, the Phase II proof-of-concept study in notalgia paresthetica started in the beginning of 2021, and top line data is expected by the second quarter of this year. Now NP is a common neurosensory condition affecting the upper back. And chronic pruritus, similar to AD is a central symptom of NP. And people with notalgia paresthetica actually say, "it's an itch you can't scratch, given its location in the middle of the back." Again, like we see in the other pruritus-causing conditions, there is a significant void in effective treatments for these patients. Conventional treatments, such as antihistamines and topical steroids are used and both have demonstrated limited utility due to efficacy and safety. Now there is certainly a sizable opportunity for an effective therapy addressing these patients. And in my opinion, this could serve as really a key indication to potentially other neurologic pruritus conditions. Now in our other Phase II program on Slide 21, we are evaluating oral KORSUVA in chronic liver disease associated pruritus and to initially establish the proof of concept, we were studying oral KORSUVA in patients with primary biliary cholangitis, which has been estimated that about 70% of these patients experienced pruritus. Now again, like the other disease areas, there are no FDA-approved therapies for pruritus related to the PBC, and we expect the readout from the Phase II proof-of-concept study in the second half of this year. Now as we turn to Slide 22, we have the strategic elements in place for both near-term and long-term growth. And on Slide 22, we show here, we have a very strong financial foundation to advance our pipeline and enable our growth journey. We have financial runway through the end of 2023 with about $237 million in cash. And quite frankly, this is on the conservative end as it does not include the expected KORSUVA injection product revenue. Now as we look ahead on Slide 23, 2022 promises to really be a catalyst-rich year for Cara. We have an approved product with an ideal partner for the launch of IV KORSUVA. We have a robust R&D engine where we are initiating 2 Phase III programs in atopic derm in the nondialysis-dependent CKD. And we have data readouts from our Phase II proof-of-concept studies in both notalgia paresthetica and primary biliary cholangitis. So Daniel, I'll conclude on Slide 24, again, a simple thank you. But also, to reiterate how excited we are to enter 2022. I'm excited as the new CEO. We achieved our first FDA approval of KORSUVA injection. We have the ideal partner for Pharma to make this an incredible success. And beyond this launch, we are focused on expanding and accelerating the clinical development of our oral difelikefalin portfolio. And Daniel, you and I spoke before, and I will tell you we have both the resources and the people to do just that and really create value for patients and investors alike. So with that, Daniel, I'll turn it back to you, but I also want to introduce Tom Reilly, our CFO; and Dr. Jo Goncalves, our Chief Medical Officer, to address any questions. Thank you.

Thanks, Chris, for the presentation. And as a reminder, if you want to ask questions, please you can submit those questions using the big blue button, and I can be able to get back to Chris and Jo and talk. So maybe as a first question, focusing on the IV KORSUVA, what has been the progress for launch preparations? And ultimately, when should we expect to see revenue from KORSUVA injections flowing through Cara's financials?

Yes. Thanks, Daniel, for the question. I mean, quite simply, launch preparations are going very well. Since the approval, we've been working with CMS, with Vifor as well. But with CMS to secure reimbursement for KORSUVA injection, and we, as I mentioned in my prepared remarks, we have received TDAPA approval in December, which will be effective April 4. So reimbursement check. Additionally, the Vifor national account team has been working with the key dialysis organizations to secure formulary approval and proper protocol positioning of KORSUVA, we'd expect that in the first quarter of this year, prior to April. And I think my experience, a great launch occurs well before the actual launch. So the Vifor sales team of 100 person strong, they've been out in the field with disease state educational programs really educating clinicians on the prevalence and pathophysiology and the importance of managing CKD-associated pruritus in their heme patients. So end of the day, it's a very highly concentrated audience, and we put the right activities in place and are executing against them. In terms of expecting to see revenue, we intend to launch in April, so we would expect to see revenue in the second quarter of this year.

And then as you talk with these prescribers, what's the level of awareness that they are giving you back in terms of feedback about the [indiscernible] pruritus? And how would they characterize the proportion of patients who will be eligible for KORSUVA injection once it comes online?

Yes. It's, again, a great question, and it all feeds into the prelaunch activities. Again, I would just remind everyone that the Vifor sales team of 100-plus folks have been out there actively engaged with both nephrologists and the dialysis organization. So there's a very high level of awareness among the nephrology community, both in terms of itch related to CKD, adult patients on hemodialysis as well as the lack of treatment options, quite frankly, for these patients. So again, as we think about the addressable patient population, we market down around 200,000 people, and that comes from the algorithm, about 500,000 folks undergoing hemodialysis and roughly 40% of them experienced moderate to severe pruritus, which would be a very good candidate for KORSUVA injection.

We actually have a question on the portal. Given the sale of Vifor to Australian pharma, how can you -- how would you characterize your engagement with you and whether it has changed or it remains the same as you go forward?

Yes, Daniel. So business as usual. In fact, if you saw kind of some of the announcements from the CSL team and the Vifor team, KORSUVA injection and the launch of KORSUVA injection was mentioned many times as a critical value driver for the future. So again, I mean, business as usual, in fact, the sales force for Vifor even despite Omicron is back in, in-person promotion, in-person education starting in January 3. So again, that won't be a roadblock. In fact, that potentially is a strength of additional resources from the CSL.

So you've managed to get this TDAPA designation, but now we are working with Vifor to determine pricing. So maybe give us an understanding of what are the considerations that go into determining the price between you and Vifor for the injection.

Yes. I mean -- so we have not announced the price yet, we're finalizing that with Vifor and we'll do that in due course. But essentially, it's a value-based approach. We look at the level of unmet need, and we look at the impact on a patient's quality of life. And if you look at kind of level of unmet need, there are no FDA-approved therapies for these patients. And the primary drug of choice is antihistamines, which we know this is not a histamine-mediated disease. So they're relatively ineffective both in terms of efficacy. And you really have to push the dose on these. And they have kind of some interesting tolerability things around sleep, et cetera. And if you look at the kind of the impact of quality of life, it could have really significant burdensome impact on patients. You have reduced quality of life, disruptive sleep, you have higher infection rates you have more missed or shortened dialysis sessions. And these are just to name a few. So I think those combined in terms of the level of unmet need, the impact on a patient's quality of life form a very strong value proposition, and that would determine kind of how we think about price. But I think Vifor agrees as a partner that we believe very strongly that this drug should be accessible for all appropriate patients that could benefit from it.

Okay. You have mentioned -- so following the granting of the TDAPA by CMS that they have expressed interest in continuing working with you even past the 2-year period. So how are you thinking about potentially extending the TDAPA? And maybe you can elaborate for us what type of support CMS can offer to do to be able to accomplish that?

Well, I'll step back and kind of think about TDAPA, what did that be? So TDAPA allows for reimbursement, of course, of injection outside the bundle. This is a cavitated system where you get paid per patient per dialysis treatment. So for at least a minimum of 2 years, KORSUVA injection will be reimbursed at ASP outside the bundle. So that's the fact. The only other drug to go through this was Parsabiv from Amgen back in 2018. And what we saw during this TDAPA period, and I mentioned this in the prepared remarks, Parsabiv accrued a cumulative $1.4 billion in sales over their 3-year TDAPA period. CMS has a willingness to continue and express the willingness to continue to engage with us and Vifor to secure funding post TDAPA. So for us, as you look at KORSUVA injection and you project out 2, 3 years post TDAPA, you see a breakthrough drug with no alternatives. And we expect a very strong launch with a significant number of patients being treated with KORSUVA injection. So I think there's going to be -- the value equation to both us and CMS is strong in terms of making this accessible for patients even post TDAPA.

I have to ask this. Given that you're launching in 4Q, how should we think about the shape of the launch trajectory? And maybe how do you think about the peak potential opportunity for IV -- KORSUVA injection?

Yes. It's a question. Obviously, I get a lot and we get a lot. And first of all, we intend to launch -- I don't know if you said 4Q or 2Q, but we intend to launch April this year, I apologize. In terms of our expectations, we expect a very strong uptake. And it's really -- I'll tell you, Daniel, it's really driven by this unique market dynamics in dialysis. It's a very highly concentrated customer audience. The top 2 customers Fresenius and DaVita account for 75% to 80% of the dialysis in the United States. It's a highly concentrated payer audience, as I mentioned before, this is a one-payer system essentially in Medicare, all end-stage renal disease patients fall under Medicare essentially. And we already have secured reimbursement day 1. It's a highly concentrated physician audience. Roughly 4,000 nephrologists account for over 75% of dialysis. And Vifor, I mentioned before, has been calling on these folks since August. And the other thing I'll say, and it's different than some of my other experiences in my past life, this is -- the patient flow dynamics are really unique. Patients are in the dialysis or clinics 3 days a week, 52 weeks a year. So the chances of kind of influencing a physician and a patient, you have a lot more shots on goal and some of my previous life, a patient may come in once every 3 months or so. So really, it's the market dynamics, coupled with the reimbursement that really land itself to a very optimistic belief in strong adoption right off the gate -- right out of the gates.

Should we expect any guidance on revenue in 2022?

Yes. Tom, do you want to tackle that one?

Yes. So for guidance, right now, we believe there's a significant revenue opportunity for KORSUVA injection based off the highly concentrated market. And we're working with our partner Vifor and at the appropriate time, we'll come forward with our revenue guidance.

Okay. And then this morning, you released a press release regarding the positive result from Japanese study of IV -- of KORSUVA injection in hemodialysis patients. Maybe can you briefly comment on that and also give us an understanding of the revenue opportunity there is for you, especially considering that there's already an approved product in Japan for that indication?

Yes. Let me -- I mean, we're incredibly pleased to issue that press release this morning. It's always great to have positive data and then having a positive Phase III trial is really what you shoot for, obviously. In terms of Japan, how we think about the market opportunity, we obviously have a partner in Maruishi. And there is really a large patient opportunity in Japan. There are over 300,000 patients on hemodialysis in Japan and the percentage of patients with moderate to severe pruritus is very similar to what we've seen in the United States with roughly 30% to 40% of these patients experience moderate to severe pruritus. So with this partnership with Maruishi and their sublicense to Kissei, we think very highly of the potential of KORSUVA injection in Japan. I'd be remiss not to also mention, yes, that's our near-term result with our Phase III data. But Daniel, we also have a very large opportunity for KORSUVA injection in Europe. There are 300,000 patients on hemodialysis in EU. And again, a very similar percentage of patients, 20% to 40% experience moderate to severe pruritus. And there are no approved products to treat CKD, AP in hemodialysis patients in Europe. And we expect pricing differences, clearly, but there's still a significant opportunity. And our partners before Fresenius outside the U.S. and Europe and we would anticipate to hear from the EMA in the second quarter of this year, and remind you that would come with a $15 million milestone payment upon approval.

Okay. Maybe shifting to oral KORSUVA. You've expressed in the prepared remarks your excitement to move to the Phase III. Maybe can you give us what the data points that led you to that excitement and as you advance the product into Phase III?

Yes. Let me turn that question to Jo, our Chief Medical Officer. Jo?