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

Let's get started, and we'll get all in. So good day, everybody. Thanks for joining us at the Bank of America Annual Healthcare Conference in Las Vegas. My name is Jason Gerberry, I'm one of the biotech analysts at BofA, and I'm pleased to be introducing Cara Therapeutics and CEO, Chris Posner. So Chris, thanks so much for joining us at the conference.

Yes, Jason, thanks for having us.

Yes. So great. So maybe I don't know if you wanted to coming off the quarter and 6 months into the gig as CEO of Cara, maybe what are your initial observations? And maybe just kind of set the agenda for the rest of the year, what you're most excited about?

Yes, Jason. Well, thanks. I mean I joined as the President and CEO in November of last year, and I was on the Board for about 3.5 years before and jumped in with 2 feet. I really believe in the mission. Starts with our mission, and we have our North Star us to be the world leader in chronic pruritus, and that's what we're set out to do. And -- we have -- as you know, Jason, we have 3 kind of critical priorities, and that's to launch KORSUVA injection, which we'll sure talk about during the session. The second is to continue developing our oral difelikefalin platform, advancing our programs, and we have 2 Phase III programs that we're very excited about that, Jo, I'm sure will talk to. And then lastly, it's really to maximize the platform itself and looking at other indications where pruritus is really implicated, and we have 2 really interesting proof-of-concept program. So from a strategic priority standpoint, it's clear, we're focused and it's about execution. I would also tell you we're excited about, too, is how we're managing our balance sheet. We extended the runway into the first half of 2024, cash runway. And we feel really good about continuing to advance on our priorities with a solid balance sheet.

Great. Maybe IV KORSUVA in the launch since it's the most topical part of the story. -- launched in April. You've got a commercial partner in Vifor. How does -- can you maybe talk a little bit how the partnership works and how much of a day-to-day insight do you have on how things are going versus just getting the end of the quarter. Here's how the performance was and what you need to reflect in your accounting. Can you just give us a little bit of a sense of how much of a line of sight you haven't and how things are going so far?

Yes, sure. I mean -- so first of all, it's been a great partnership. It's a really tight partnership. So we have obviously some governance committees like a joint commercial committee and a joint steering committee. And we meet on a regular cadence, but we don't just wait for those meetings to discuss things as a team. In terms of kind of the launch, Vifor is responsible for the commercial launch fully, Cara is not expanding commercial. We're not standing up a commercial organization or anything to do with that, Vifor's doing it. We launched in April this year, as I mentioned on the call yesterday, and things are really tracking to our expectations. I mean, we set out a couple of things with Vifor that we wanted to accomplish in April at launch. The first was around the product supply and ordering. And we're having dialysis centers now starting to order from the wholesalers. That's a great sign. We're actually having commercial patients now on product. So we feel really good about that first pillar of the foundational pillar. The second thing is around really motivating and educating nephrologists, and the Vifor team has a really good execution. They have a 100-person sales force. They've been out there full force doing product promotions since April. And what we've seen is they've reached nearly every nephrologist in their target list, at least once, and physicians are starting to prescribe the product. And I'll tell you, just anecdotally, real palpable excitement around this really novel treatment when they didn't have anything before. And the last thing I'll tell you about the early launch is around our patients. We think both teams think the patients could be a really critical driver for demand. And the Vifor team has really ramped up its patient pull-through activities. They announced a really first of its kind partnership with the American Kidney Fund, which is a patient advocacy group dedicated to raising the awareness of price because we feel that if patients talk to their physicians and nurses about pruritus as well as the solution called KORSUVA injection that could really help with the uptake as well. So net-net, we're really pleased with where we are after the first really 30, 40 days of the launch.

You have, I guess, more of a derm background, right? Dialysis is a unique marketplace, right? It's -- we've got dialysis centers. They're very guideline-driven from my sense. They're very economically focused because of the CMS bundle. Now in the first 2 years, you don't have to deal with that. So maybe you can -- how do you think about the first 2 years on the market, under this TDAPA reimbursement construct? I mean, I think there's only one analog and that would be Parsabiv. So is that a good analog in your view? I think the mechanism by which Parsabiv work was similar to a drug that was already on the market in Sensipar. So maybe there was a little bit more familiarity. But just curious how you kind of respond to that and how you frame that.

Well, I mean you said it right, background is more in the medical dermatology field, but have been on the Board at Cara for the last 3-plus years prior to taking the CEO job. And this ecosystem, which you call end-stage renal disease is a rather unique ecosystem that's very different than the typical prescription market, that's for sure. What we see in terms of kind of the analog, I'll talk to that first. Parsabiv is a decent analog because it's the only drug to go through the sort of reimbursement that KORSUVA is and which is called TDAPA, as you know. And that means the product is reimbursed outside the bundle over the first 2 years. So Parsabiv is very similar to KORSUVA injection because we're both kind of going through that different reimbursement model. And there's a large incentive to prescribe the product for these dialysis organizations and nephrologists during the TDAPA. So it talks about the potential in these rather unique market dynamics of what a launch could look like. And Parsabiv obviously did very well during the TDAPA period where the analog kind of falls off the rail, so to speak, is the post-adapt environment. As you know, Parsabiv went into the bundle in 2021 after the TDAPA period ended. And what happened was that there was a generic equivalent called Sensipar, which is an oral version that went into the bundle with it, and it really brought down the weighted cost that was added to the funding for the bundle. So KORSUVA will go into the bundle after its TDAPA period, but there will be no generic equivalent or no oral equivalent that would be added into that bundle calculation. So we feel real good about kind of the longevity of the growth trajectory of KORSUVA injection.

And how do you think -- if the bundle doesn't readjust, right, at a level commensurate with your net pricing for the product. How do you think organizations will price and value the benefit of alleviating that pruritus, right? It's kind of a tricky thing to probably put a price tag on, but these are very economically-driven organizations, as I understand them to be.

But they have a North Star too of treating patients. So if I look at KORSUVA injection, it's the first and only approved product to treat pruritus and dialysis patients. The current standard of care is Benadryl essentially antihistamines.And this is not a histamine mediated disease, so they don't really work terribly well. So there's a terrific unmet need. We hear that in market research, we hear that in the field. So as TDAPA expires in a few years and we go into the bundle, I have every reason to believe that CMS will recognize the utilization and add the appropriate funding to the bundle to ensure that the dialysis organizations are made whole. They're not in the business to lose money as well. So I think there's going to be some contracting that comes into play as well. But end of the day, to me, it's all about the value proposition because under your example, what happens if they don't provide funding, of course, there's nothing for these patients. Are they going to go back to Benadryl when it doesn't work? I can't imagine that.

Okay. Fair enough. In terms of KORSUVA, it's a novel treatment for a lot of these practitioners do you think good in the early first few quarters, there's sort of trialing as you typically would see with the new medication as they get comfortable with the real-world experience in the safety profile, but I don't think there was like an extensive Phase IIb piloting program that preceded the market launch of this to help DOs get familiarized with it. So just curious how you kind of see that early acclimation process going?

Well, I think there's going to be some trial and experience building, but a couple of things I'd speak to. One, the product was approved about 8, 9 months ago, last August, and we haven't done -- we've done a lot since then, right? The Vifor team has been out there in the community, educating nephrologists and working with the dialysis organizations talking about pruritus as a disease that needs to be recognized and needs to be treated and now the solution in KORSUV injection. So there's been a lot of market shaping work that's gone on over the last 9 months and good launches really start years in advance, right? And we've done that. I would also tell you in terms of kind of the trial period. I mean, these market dynamics are rather unique, right? I mean these are a very concentrated market with a captive patient audience. So the typical launch curves that I kind of draw out are typically S-shape, right? It takes a little time. I think here you see a more steeper launch curve given the dynamics of the market where you're really dealing with a few dialysis organizations. You're dealing with a very concentrated nephrology audience of around 4,000, and you have patients that are in the seat 3 days a week, 52 weeks a year. Those paint a picture of a stronger uptake curve. But to me, the combination of all the market prep and market shaping were couple of dynamics in the market, really talk about the potential. I mentioned yesterday, we're already seeing orders from the dialysis centers, and I think there's this pent-up demand.

Okay. Great. Now my understanding is when you're in the TDAPA phase, there is still a co-pay that's associated with the treatment. And most patients are reimbursed through Medicare. As I understand it, even patients have commercial insurance if you're in dialysis for a certain duration of time, you flip over to Medicare. So in economically, a manufacturer can't cover the co-pay cost, obviously, then in that situation. So where is that economic cost going to be born on to? And just wondering to what tense it's a reasonably high-price list-price drug where those co-pay costs would go? And could that be a factor as investors think about early utilization.

Yes, you're right. I mean there -- this is a Medicare population predominantly, and it's an 80-20 split. So the patient has to bear 20% of the cost from end-stage renal disease for Medicare. The majority of these patients have some secondary coverage that would cover the co-pay, be it Medicaid or even a Medigap sort of insurance. So a majority of these patients will have supplemental insurance. And we also see in our research that a lot of dialysis organizations would absorb the cost of some of these co-pays if the patient has to bear that. So we'll see how that plays out. But Parsabiv kind of went through the same thing. And you're right as well, manufacturers cannot support patient co-pays given it's a government insurer.

Yes. Okay. So this is not a product that will track in some of the third-party aggregators on QVAR or Symphony. So how should investors generally be thinking about volume dynamics that you give? Can you talk a little bit about the metrics that you plan to provide in the upcoming quarters, just to help people track this and get a sense of how things are going?

Yes. So really, this quarter's call that was yesterday, I provided more qualitative color commentary on the early days of the launch. Moving forward, we're going to provide 3 critical metrics. The first is going to be total sales, of KORSUVA injection. The second will be the Cara's portion of the sales that will be in our P&L. And then the third is a great demand proxy. I call it out-movement data, and that's data going from -- and that's the units going from the wholesalers to the dialysis organizations. So we'll provide that in aggregate. Dialysis organizations or centers don't really tend to hold a lot of inventory. So we think that's a really good proxy for demand. That's what we'll provide in the early days to show some transparency on kind of the uptake of demand and launch.

Got it. Okay. And maybe can you talk a little bit about ESRD patients. Do these patients often need to have a caretaker drive them to their dialysis centers, post treatment? Or is there any restrictions in the label regarding driving immediately after treatment?

Yes. Maybe, Jo, you can speak to the label and I'll address kind of the practicalities and what have you.

So Jason, just as a reminder, in our clinical study, a few patients actually experienced [indiscernible]. When we look at the numbers of patients reported as we look at dizziness was about 7% of patients versus 4% or placebo. Somnolence was lower, 4% versus 2%. So overall, we expect that can be small proportion of patients who experienced dizziness and somnolence once they prescribed. So Chris if you want to...

Yes. And the key question, is this going to be a limit or how do patients kind of come into the dialysis and leave the dialysis.

Yes. Like are they monitored?

I mean, yes...

For a certain period of time...

They are. At the end of the dialysis session, they're weighed again and things like that and obviously asking how they feel. But I think the critical point of that, the majority of them, almost 80%, have either a caregiver or a medical transport, taking them to and from the dialysis centers to home. So the majority don't drive themselves regardless...

Okay. All right. And you kind of have a unique partnership dynamic where your partner owns dialysis centers. So how does that work in terms of -- is that a commercial advantage to have a partner when you think about the ultimate selection of Vifor as a commercial partner and how that could dictate how a product like IV KORSUVA gets put on protocols.

Well, Vifor has a special joint venture with Fresenius, clearly a Fresenius accounts for nearly 40% of all dialysis clinics in the U.S. It certainly doesn't hurt in terms of uptake, I'm sure. But for us and really for Vifor, their sales force is focused on the 4,000 nephrologists across the U.S. as well as all the dialysis organizations, not necessarily discriminating just the Fresenius. So we have wide coverage, and we would expect a strong uptake across the board.

Okay. And can you talk a little bit about the second half launch preparations for Europe? You've you got the recent approval and any commentary that you can provide just in terms of how you see the product being reimbursed in Europe? I know it takes anywhere 12 to 18 months, there's probably some unique differences to the marketplace as well in terms of how dialysis care is reimbursed?

Yes. Well, I mean, we're quite excited about the European approval called Kapruvia in Europe, and that was April 28, and the U.K. was April 29. So we're quite excited about the opportunity. You're looking at roughly 300 -- just to paint the picture, you're looking at roughly 300,000 dialysis patients in Europe. Roughly 40% of those would be addressable by KORSUVA injection. So it's a very sizable market. And again, the other critical element, similar to the U.S., there's no approved therapies in Europe or these patients. Vifor is commercializing -- Vifor Fresenius is commercializing ex U.S. And they've done -- I mentioned some of the market prep work that we've done here in the U.S. that we believe is critical to create the runway for launch. Same thing we're doing in Europe. So in pan-Europe, I mean, we were very active in Congress with CME programs, really elevating the awareness of this condition that needs to be properly taken care of. So all that market prep is working or has been undergoing and working, seeing really good tracking numbers from our awareness studies. So we should be in good shape to launch. In terms of the launch itself, second half of this year, we'll begin to roll the launch out country by country specific to when they get reimbursement. Obviously, that takes some time Germany, we anticipate will be the first country this year to launch. It's more of a free-pricing market, at least for the first year. And then some of the other Western European countries will follow. Reimbursement is unique country to country, and that will determine that. And yes, so we're quite excited again about the potential, the commercial potential in Europe.

Okay. Maybe in the last 10 minutes or so, we can talk about Oral KORSUVA. This has been a program that arguably you guys haven't got a ton of credit for in the stock, probably in some of the prior Phase IIs people that caught up on the secondary endpoints around the responder thresholds. So maybe looking ahead, you've got a couple of Phase II readouts for notalgia paresthetica and PBC itch and -- how are you kind of framing expectations in lieu of kind of maybe investors focusing some on the responder thresholds and trying to just manage that expectation going into these readouts.

Let me turn to Jo, maybe you can talk about notalgia paresthetica.