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

Good day. Thank you for standing by. Welcome to Cara Therapeutics Corporate Update Conference Call. [Operator Instructions]. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please note that today's conference is being recorded. I would now like to introduce Matt Murphy, Cara's Manager of Investor Relations. Please go ahead.

Thank you, operator, and good morning. This morning, Cara issued a news release announcing the company's corporate strategy focus and update. Copies of this news release and the associated SEC filings can be found in the Investors section of our website at www.caratherapeutics.com. Before we begin, let me remind you that during this conference call, we will be making certain forward-looking statements about Cara and our programs based on management's current plans and expectations. These statements are being made under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties. Actual results may differ materially due to various factors, and Cara undertakes no obligation to update or revise these statements publicly as a result of new information or future results or developments. Investors should read the risk factors set forth in Cara's 10-K for the year ended December 31, 2022, and any subsequent reports filed with the SEC including its Form 10-Q for the quarter ended September 30, 2023. With that said, I'd like to turn the call over to Chris Posner, Cara's Chief Executive Officer. Chris?

Thanks, Matt, and welcome, everyone, to our corporate strategy update conference call. With me today are Ryan Maynard, our Chief Financial Officer; and Dr. Joana Goncalves, our Chief Medical Officer. Today, we have set Cara Therapeutics on a focused and differentiated path to deliver value in the near and long term. Our actions and sharpened strategy will make us a streamlined company, concentrating our available cash and resources on the program that we believe has the highest potential for success in the clinic and in the marketplace. We now have extended our cash runway into 2026 and with our unique focus on the late-stage notalgia paresthetica program, Cara will be leading the way in a prevalent yet unexplored and underserved medical dermatology condition. We expect prioritization of NP will allow us to execute all the program's expected value inflection points within our cash runway, putting us in a position to begin work on an NDA. I'll provide details on the exciting NP program and briefly touch on the decision to close the oral CKD program and our strategy to streamline the company. After that, we'd be happy to take your questions. Cara has an opportunity to become a pioneer in medical dermatology with our high-value late-stage program in notalgia paresthetica. NP ticks all the boxes for a breakout program for a growth-oriented biotech, a differentiated asset targeting a therapeutic area with no FDA-approved therapies and which we believe has a high probability of success. An unexplored condition with high unmet need, NP has significant commercial potential due to a sizable target population. No approved or effective therapies and no current competition in development. We estimate an addressable U.S. market of 650,000 patients who are currently in the care of a physician. And there could be more as we estimate a much larger population who are undiagnosed or undertreated. As I said, our strategic decision to focus on our NP program follows our belief in its high probability of clinical and regulatory success. Oral difelikefalin's mechanism is ideally suited for NP because of its neuromodulatory activity and antipyretic action. NP is a neuropathic disorder for which chronic pruritus is the hallmark. Our positive proof-of-concept data published in the New England Journal of Medicine has generated buzz in the dermatology community, attracting significant interest across treating physicians, patients and other stakeholders. This interest has driven rapid enrollment in our ongoing clinical trial. We are now tracking ahead of our internal time lines for our Phase II/III trial. The NP program is expected to deliver a succession of clinical milestones over the next 18 months. This includes data from the dose-finding portion of the Phase II/III trial in Q3 2024, final top line results for the first pivotal study by the end of 2025 and results from the second pivotal study in early 2026. We expect our clear strategic focus will now give us the resources to complete all necessary clinical activities for our NP clinical program with our cash on hand. We believe these value inflection points will put the company on strong footing, such as positioning us to begin work on an NDA if the final results are positive. To give us a runway to get there, we've decided to discontinue our Phase III program for oral DFK in advanced chronic kidney disease. I want to stress that this decision was based on the strength and potential of the NP program and our desire to prioritize resources for it. We remain confident in oral difelikefalin's mechanism in CKD and its potential more broadly. In light of our decision to discontinue the oral CKD program and focus on NP, we have also made the decision to implement a significant workforce reduction effective January 31. Overall, our actions to streamline the company, including the planned headcount reductions give us a sharp focus on value creation. This strategy is designed to take advantage of our strengths in identifying novel indications, designing creative clinical development programs and effectively managing our cash to create momentum for building a sustainable future. In conclusion, while the actions we are taking are difficult, we believe we are making the right cause necessary to put Cara Therapeutics in the best position to win in the near term and in the long term. Our strategy prioritizes our differentiated late-stage clinical program in NP, which we believe has the best commercial potential and a high likelihood of success. We are extending our cash runway into 2026. Our extended runway is expected to give us the firepower to complete all planned clinical trials and reach key value inflection points in the NP program. Focusing on this unexplored indication creates a differentiated opportunity to be a real pioneer in medical dermatology and the drumbeat of inflection points enabled by our runway will be the gateway to more options in the future as a sustainable growth biotech company. And now with that, we will be happy to take your questions. Olivia, please open the line for Q&A.

[Operator Instructions]. Our first question coming from the line of Joseph Stringer with Needham. Your line is open.

Two from us. First, just briefly on the decision to discontinue the CKD program. Just curious, maybe if you could provide maybe a little bit more color on it. Just curious, you had a, I think, a planned readout coming up this year, but you mentioned it was mostly based on cash runway. Just curious if you had a look at the blinded data or any type of look at the data from that program? And I have a follow-up question.

Yes. Sure, Joe. So first, on the CKD trials, they remain blinded. So our decision to discontinue the program is solely based on our strategy to prioritize the NP program that we believe has the greatest long-term value. And so discontinuing the CKD program, Joe, we could extend our cash runway into 2026 and that was really important to us. It gives us the operating capital over 2 years to achieve the completion of this program and really prepare for the NDA.

And then a follow-up, just a general question on the NP program. You mentioned the commercial opportunity. And I guess, maybe help frame for us and investors, where you see the potential of this program? What a positive readout would look like in Phase III? And is this something that you think you could develop on your own?

Yes. So Joe, let me tackle the commercial side of this, and maybe I'll let Jo comment on the clinical trials themselves. So like I mentioned, the addressable population is -- we estimate right now 650,000 people. They're currently under the care of a physician, namely a dermatologist. There are no FDA-approved treatments. So we have the opportunity to really be a category creator. And like I mentioned in my prepared remarks, it really ticks all the boxes of an innovative biotech company. So we're really excited about that. And I also mentioned the enrollment. The enrollment in our Phase II/III is going really, really well. I think it speaks to kind of the buzz that was generated with the New England Journal, and we continued to be very, very optimistic about that. Jo, let me turn it to you, maybe comment to Joe's question.

Hi, Joe. So for a Phase III program, we would expect to show statistical significance compared to the placebo arm and our primary endpoint; as a reminder the primary endpoint is a 4-point responder analysis. So statistical significance versus the placebo investing point is what we would be seeking.

Our next question coming from the line of Annabel Samimy with Stifel.

Just wanted a little bit of clarification on the time line. You mentioned that you were enrolling the study more rapidly. Is there any possibility of changing the time lines to completion? Where are you in enrollment? And could you potentially complete the trial earlier than what you might have expected?

So in terms of the time lines, like I said in the prepared remarks, we are seeing excellent traction on enrollment. The current time lines would put us to Q3 2024 for the first readout of the Phase II portion of that -- the dose finding portion. And then we also mentioned we expect given those -- given the current time lines to see top line results within our cash runway, namely at the end of '25 or early '26. That's kind of where we are right now. Certainly, we'll provide much more updates as we kind of move through the enrollment, but that's kind of where we are right now.

Okay. And then when you think about the clinical trials and being able to get through with the cash runway, do you have a good sense of the size of a Phase III trials already because I think the current Phase II/III is still -- still has some dose finding in it. So how is it that you get a sense of what the size of the Phase III could be?

Yes. We've made some estimates based on what we saw in the proof-of-concept study and based on what we expect to see in the Phase II study in terms of the treatment difference. So that's led us to make some estimates in terms of what we're going to go forward with in the pivotal programs. So that's how we kind of calculated that.

Okay. And then one last question for me. I'm just going back to a question that was asked previously, is there any thought to, I guess, monetize this asset in any way or get a partner to work with you with this asset. Just given the potential size of the trial. But I mean, clearly, you have the runway. But is there -- it is quite a large market. So any thoughts about?

Yes. Well, specifically on our NP, I mean, Annabel, I think I mentioned a couple of comments before, our intent is not to commercialize this asset outside the U.S. So certainly, we'd be looking for partnerships, commercial partnerships outside the U.S., that's still going to be the intent. In the U.S., we have every intention to retain as much of the economic rates as possible. It's an indication that we feel -- we obviously have the expertise to commercialize upon, obviously, the Phase III data in the NDA and hopeful approval. So that would be our intent moving forward.

And our next question coming from the line of Sumant Kulkarni from Canaccord.

I have 2. The first one is, do you have any quantitative metrics you might be able to share on what might be considered successful on the dose finding part you expect to read out in the third quarter?