Q2 2022 Cara Therapeutics Inc Earnings Call
Okay.
Good afternoon. My name is Denise and I will be your conference facilitator I would like to welcome everyone.
Cara Therapeutics second quarter 2022 financial results and update conference call. All lines have been played on mute to avoid any background noise. After the speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time, Please press star and the number one one on your telephone keypad.
Please be advised this call is being recorded.
Time, I'd like to introduce Iris purchase Kony, Chief strategy Officer, and head of Investor Relations from Cara Therapeutics, Mr. Francisco <unk> you may begin your call.
Thank you Denise and good afternoon.
Just after market close today, we issued a press release detailing our corporate progress and financial results for the second quarter 2022.
The press release can be found on our website at www Dot Cara Therapeutics dotcom.
We also listen to a live webcast and replay of today's call on the investors section of the website.
Participating in todays call are Chris goes no cara's, President and Chief Executive Officer, Rick Makara, Carrots, interim Chief Financial Officer, and Dr. Joanna consult us Carroll Chief Medical Officer.
Before we begin let me remind you that statements made on today's call regarding matters that are not historical in fact are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 exam.
Examples of these forward looking statements include statements concerning the company's ability to successfully commercialize course who've injection in Korea risks that Christy of injection and kept really of revenue expenses and costs may not be as expected planned future regulatory meetings and or submissions and potential future regulatory.
The performance of the company's commercial partners, including before expected timing of the initiation enrollment and data readouts from the company's planned and ongoing clinical trials the potential results of ongoing clinical trials timing of future regulatory and development milestones for the company's product candidates.
So for the Companys product candidates to be alternatives in the therapeutic areas investigated including N P and the potential for oral that's L. A kaufman to address additional paretic indications the size and growth of the potential markets for pruritus, the companys expected cash reach and the potential impact of COVID-19 geopolitical 10.
And macroeconomic conditions, and the company's clinical development and regulatory timelines and plans.
Because such statements are subject to risks and uncertainties actual results may differ materially from those expressed or implied by such forward looking statements.
Are described more fully in Cara therapeutics filings with the Securities and Exchange Commission, including the risk factors section of the company's annual report on Form 10-K for the year for the year ending December 31st 2021, and its other documents subsequently filed with or furnished to the securities and Exchange Commission, including.
Its Form 10-Q for the quarter ended June 30th 2022.
All forward looking statements contained in today's call speak only as of the date on which they were made Cara therapeutics undertakes no obligation to update such statements to reflect events that occur or circumstances that exist. After the date on which they were made except as required by law.
This I will now turn it over to Chris.
Thanks, Iris and good afternoon, everyone.
The second quarter was truly foundational for care building the base for our continued growth this year and in the years ahead.
We made big strides towards our goal of creating a differentiated company and becoming the world leader in pruritus. Our focus is on treating this distressing underserve condition that affects millions of patients across many diseases.
The second quarter showed us we are on the right path with concrete validation of our strategy along with our partner <unk> pharma, we made significant progress in the launch of course of injections.
For the second quarter, we recorded total revenues of 23 million. This consisted of $8 million in profit sharing revenue from course who've injection and 15 million and a milestone payment from the EU approval of <unk> in April .
In addition, our strong phase II proof of concept data in their tells you pair study highlighted the broad potential of our oral that's helicopter platform.
We'll give more details on our progress this quarter and Rick will follow with a review of <unk> financial results. After that we will take your questions.
In the first quarter on the market core servers adoption dynamics are in line with our expectations and in line with the only recent branded product launch in that setting spin.
Specifically independent and midsize dialysis organizations have been the first to adopt and administer a course of injection.
More rapid product adoption by these organizations is predominantly due to a shorter contract negotiations be simpler technical implementation of product information pricing and reimbursement in respect of EMR systems and see faster establishment of treatment protocol.
Yes.
We have heard positive anecdotal feedback from the field on the performance of the product week to week, we have seen an increase in the total number of clinics ordering and we have seen repeat orders across the majority of clinics.
Turning to the large dialysis organizations, which make up 75% of the market. They are more complex and therefore, it takes somewhat longer with regard to all these steps. However, we are pleased to report that those key elements are in place at the L. D O's and they have started to order core Suva early.
In the third quarter.
These early launch dynamics, which are typical of the dialysis market support our reported product launch metrics V. For US net sales of course <unk> injection was $17 million. This comprises mostly the initial stocking at the wholesaler based on the anticipated demand from L. D.
Those coming online.
We expect that a significant portion of this inventory will get sold into dialysis clinics in the third quarter the.
The wholesaler shipments of dialysis clinics was about 2000 vials, reflecting the early but rapid adoption in the independent and midsize organizations. We have seen demand from this market segment also accelerated.
As we head into the third quarter more firepower has been added to develop the market and help drive product adoption. Specifically, we are pleased with the addition of the Fresenius renal pharma sales force to the promotion of course <unk> injection, the Fresenius Salesforce will focus exclusively.
For sending us dialysis clinics and affiliated health care providers.
This will significantly increase our share of voice and Fresenius clinics, and we expect for <unk> to be a major driver of product sales in the coming quarters.
It is also important to note. The V force promotional plan has not changed and it's Salesforce will continue to promote core Suva to health care providers associated with both Fresenius and non Fresenius clinics.
Lastly, we are pleased with the recent CMS rule proposal that includes a request for information regarding an appropriate payment mechanism for drugs with to dapper designation posted to adapt the period, we generally believe that the different payment mechanisms outlined in CMS is proposing.
<unk> will provide adequate reimbursement for pursuit of a post the expiration of its to dapper period.
We further support the concept of linking drug payment to drug utilization inappropriate patients.
While we do not expect a final decision by CMS regarding the posted up a reimbursement mechanism this year.
We are confident that CMS is focus on ensuring long term access to innovative drugs like course Suva.
Our pipeline is another potential exciting driver of long term growth, we continue to validate oral day fell a caseloads potential across many indications and diseases.
The recent positive topline results in our comfort phase II proof of concept trial for oral diphenyl a cephalin in hotels, you first Attica shows the potential broad applicability of D F K in chronic pruritus.
N P is a nerve disorder characterized by chronic pruritus of the upper middle back and treated by medical dermatologists.
All our other programs there are no approved treatment options for N P. And currently used treatments have limited efficacy or safety concerns.
The comfort study met its primary endpoint of change from baseline in daily W. I N. R. S score at week, eight showing a highly statistically significant difference from placebo.
Oral diphenyl, a caf one had a rapid onset of efficacy as early as week, one which was sustained throughout the entire study period.
D. S. K also reached statistic statistical significance on the additional endpoint a proportion of patients with a four point improvement in the W. I N. R. S score starting at week, two and we earn through week eight.
D S. K was well tolerated with a safety profile consistent with prior studies in other indications.
We plan to share the detailed clinical data from this study at an upcoming medical meeting.
We also expect to meet with the FDA in the second half of 2022 to discuss the next steps in the development for <unk>.
We will provide more details for this exciting program at a later time.
And our other pipeline programs, we continue to expect releasing top line results for our phase II proof of concept study in primary biliary cholangitis in the second half of 'twenty two.
Our phase III programs in atopic dermatitis, and non dialysis dependent chronic kidney disease, which we initiated in the first quarter of 2020 to continue to track to our previously announced timelines.
In summary, the second quarter has set the foundation for both our near and long term growth and we are executing on our three strategic priorities. The first priority is to maximize the commercial potential of course, Suva injection with our partner <unk> for pharma.
One quarter into the launch we are tracking to our expectations. The man was initially driven by independent and midsize dialysis organizations L deals have started to order and the key demand levers are in place, including more sales force firepower.
We like the cadence of how these are coming together to drive an acceleration of demand in the coming months.
We continue to execute on our second strategic priority of advancing our phase III programs for oral day fell at casselman and advanced chronic kidney disease and atopic dermatitis.
And we made significant progress on our third priority to expand the clinical utility of oral diphenyl, a caf one across the spectrum of disease categories associated with pruritus.
Positive phase two N P data validate the broad applicability of the oral that felt a careful and platforms.
We are excited and confident for what is ahead the progress across our strategy in the second quarter is a foundational step towards delivering long term sustainable growth and value for our shareholders.
I'd like to hand, it over to Rick for details on our second quarter results over to you Rick.
Thanks, Chris as a reminder, the full financial results for the second quarter of 2022 can be found in our press release issued today after the market closed.
Cash cash equivalents and marketable securities at June 32022 totaled $204 7 million compared to $236 8 million at December 31, 2021, the decrease and the balance primarily resulted from $30 million.
Of cash use and operating incentives.
The second quarter of 2022, net loss was $44 2 million or eight cents per basic and diluted share compared to a net loss of $30 $7 million or <unk> 61 per basic and diluted share for the same period in 2021.
Total revenue was $23 million for the three months ended June 32022, there was no revenue during the same period of 2021.
Revenue consisted of $15 million of license and milestone fee revenue related to the milestone payment earned for the approval of <unk> by the European Commission in April 2022, and $8 million of collaborative revenue related to the profit sharing revenue from before sales of <unk> injection.
Yes.
There was no cost of goods sold during the three months ended June 32022, or 2021 as there was no commercial supply revenue for either period.
R&D expenses were $19 $9 million for the three months three months ended June 30 of 2022 compared to $25 2 million in the same period of 2021 to lower R&D expenses were principally due to a $10 million milestone earned by and tariffs during the three months ended June 32.
'twenty, one partially offset by increases in direct clinical trial costs and related consulting costs. During the three months ended June 32022.
G&A expenses were $7 6 million for the three months ended June 32022, compared to $5 $7 million in the same period of 2021, the higher G&A expenses were principally due to increases in stock based compensation expense, which included additional compensation expense relating to the mark.
Vacation.
<unk> former Chief Executive officers equity awards in November 2021, as well as increases in accounting and auditing fees and payroll related costs.
Other income was <unk> 3 million for the three months ended June 30 of 2022 compared to <unk> 1 million in the same period of 2021.
The increase was primarily due to an increase in interest income, resulting from higher yield on the company's portfolio of investments. During the three months ended June 30 of 2022, partially offset by increased amortization expense.
Available for sale Securities during the three months ended June 32022.
Now looking forward to financial guidance based on timing expectations and projected costs for current clinical development plans, which include conducting supported phase one trials phase II trials in PBC, and NP and phase III trials.
<unk> care expects that its current unrestricted cash and cash equivalents and available for sale marketable securities will be sufficient to fund. Its currently anticipated operating expenses and capital requirements into the first half of 2024 without giving effect to product revenue we receive.
From the commercialization of <unk> injection pork approve you or any potential milestone payments or potential additional product revenue, we may receive under collaboration agreements.
Now I'll turn it back over to Chris.
Thanks, Rick with that Rick Joe and I will be happy to take your questions. So Denise we can now open the call up for questions.
Great at this time, we will conduct a question and answer session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Just a few moments, while we compile the Q&A roster.
Our first question comes from the line of Daniel Wally with J P. Morgan. Your line is now open.
Hi, everyone. Congrats on the quarter and thank you for taking my question two questions first one can you help us understand the wholesaler number of 1812 files and how that translates to 16 million in net course at <unk> health.
Second can you provide us with some color on the cadence of coding establishment of reimbursement establishment of different Dallas center during the quarter and how that might evolve in the following quarters.
And last but not least is the later to that can you quantify for US your remarks regarding the the next cells that are mostly due to wholesaler versus end user demand. Thank you.
Yeah, Daniel Great hearing from you. So let me let me take those one at a time.
So the first is around the net sales number.
It's about revenue recognition essentially it's a timing thing so we book revenue when the wholesaler or wind sorry, when V. Four ships product to the wholesaler.
So that's when we recognize revenue the 18 12 vials are what the clinics order from the wholesaler. So there's two there's two different things in the in the revenue recognition. So it's an important part and the second question you had was around coding and essentially what we're asking is a.
Are the dialysis organizations ready.
To.
Provide access to this product are they set up and the the short answer is yes on the LDL front. They are ready the systems are updated.
And in fact as I mentioned, we are actually seeing orders.
Beginning in the third quarter. So we're actually quite optimistic about what we should expect in the months to come.
Alright, and last but not least if you can quantify that that remark that are mostly what you saw was wholesaler stocking versus end user demand.
Yeah. So so again the way we book revenue. Daniel is we are we recognize that when V. Four ships vials to the wholesaler.
So that's the $16 8 million in net sales. So what we're also then providing if you remember I committed to providing the number of units that the dialysis clinics have actually order from the wholesalers as we believe that's a good proxy for end user demand. So that's the <unk> hundred 12 vials, so two different things.
So it's not as simple as just multiplying the WAC price times, the number of vials two different things.
Okay got it thank you.
Got it.
Thank you one moment please for our next question.
Our next question comes from Chris Howerton with Jefferies. Your line is now open.
Great. Thank you so much for taking the questions I think I have two one kind of related to the line of questioning the Daniel had about the wholesaler and the stocking.
I guess.
How can you can you give us a little more color I guess on kind of the expectations. We could have on the organic demand from larger institutions and I guess, if you could comment at all about.
Presenting his versus Davita, you know my assumption would be in a bed presenting it would be easier to execute on that side given the relationship with before.
And then the second question that I have is related to the NP indication.
Just what types of features would you seek to gain alignment with the FDA regarding presumably the phase III design.
And then as it correlates to that.
In the past there was discussion about getting a very broad label for oral <unk>.
<unk> for just in a broad antipruritic I'm curious if you're still on track for that in relation to the.
The different domains of indications. Thank you.
Great Chris So let me I'll tackle the first one I'll turn it to Joe to tackle NP. So let me be I'll be crystal clear I'll try to be clear crystal clear in terms of channel stocking in demand I'm gonna take both of those separately. So channel channel striking our channel strategy. It's an important part as you probably know of any launch strategy and.
And levels are defined in accordance with future demand as projected by before so V for put product into the channel anticipating future demand. That's the channels. The strategy and are quite pleased with how that progress and thats, how we booked a $16 8 million in total sales and obviously <unk> profit is $8 million.
But the key is demand and essentially what I'm, saying is the future demand is going to be really dependent on the L. D. O is coming online and that's exactly what we're seeing and it came online.
Just more recently and we're seeing ordering already so it's on formulary, we're seeing ordering I can't comment specifically on the different customers you mentioned Fresenius and Davita can't comment specifically on those two customers, but I will say that we are quite pleased I was quite thrilled with the.
<unk> of the Fresenius sales force to the mix, that's additive and complementary to before so we would fully expect the LD OS gradually adopting this product in the end really contributing to the majority of growth moving forward and you know Chris It's a very similar pattern, we actually saw with possible where the.
M D O is the mid size and the ideas with the initial uptake.
With more gradual uptake in the LDR and then becoming the majority of the.
Growth and and I would expect that same sort of sequence and that's exactly what we're saying so.
So on the MP, Joe if you want to tackle that one thanks, Chris.
With the FDA, we plan to have further discussion about our clinical development program.
Before the end of the year this year.
And it would really be focused on what the clinical development program would look like.
We know we need to do some dose finding.
The discussion will be what that program would look like of course Carroll will try to see if we can accelerate the program.
That dose finding.
As well as validated studies.
So we expect that to revolve.
Revolve around typical questions that need to be asked of the FDA.
Fourth developing a clinical program as far as the broad label goes for them, that's going to keep them as a broad label.
First tackle the <unk> path and then take it from there and give further update after that after that meeting.
Okay, that's great.
Excellent. Thank you so much for taking my questions and congratulations again.
Thanks, Chris.
Thank you one moment for our next question.
Our next question comes from Joseph Stringer with Needham <unk> Company your line.
Your line is now open.
Sure.
Hi, Thanks for taking our questions congrats on the quarter.
Can you comment on the.
The initial that the margins from the four here coming from net sales.
Down to before the profit margin before the profit loss share is up.
Slide <unk>.
In terms of.
Yes.
What.
It's sort of a percentage there and is that in line with <unk>.
Sort of what you would expect going forward in subsequent quarters and then on the <unk> launch.
Can you can you kind of walk us through the cadence of.
When you would expect sale.
Sales.
Contribution from that is country specific reimbursements come online, yes, thanks for taking my questions.
Yes, Joe Absolutely, let me, let me give the financial profit sharing to Rick and then I'll tackle the <unk> Rick. Thanks for the question Joe. So we don't provide specific guidance on the profit share calculation.
What I can tell you is that based on the net sales for the quarter the profit share was within.
Within line with our expectations. So we were not surprised by it.
If that helps.
And Joey on <unk>.
Obviously, we're quite excited we got approval in April of this year.
And we're on track to launch in several countries in the second half of this year, obviously with our partner before.
So I would anticipate seeing some large countries come online in.
In terms of kind of the market development I would say the four has done a very nice job in terms of developing the market.
As they did in the U S and Theyre doing a similar.
A similar cadence of market development activities outside the U S and as countries come on line, that's really going to be dependent on reimbursement.
And in their negotiations with the with the National payers. So I would expect again, a few countries to come online in the second half of this year.
Great. Thank you so much for taking our questions.
Thanks, Joe.
Okay, great. Thank you standby for the next question. Please.
Our next question comes from David <unk> with Piper Sandler Your line is now open.
Okay.
Hey, thanks.
And our near term focus question and Thats about the quarterly sales and profit sharing cadence. So you mentioned Chris the.
The wholesaler.
Stocking so.
I apologize if I missed this but as it stands to reason than that.
Perhaps.
The recorded sales and profit share in <unk> might be somewhat softer or because you're getting buy in from the large dialysis organizations.
That youre going to Youre going to see a V for continue.
To sell into the channel So just help us understand.
How you how you should think about cadence in <unk>, and I guess fourth quarter as well.
No no certainly David let me, let me tackle that one so with it with any launch I mean, especially the way we recorded we record revenue when obviously V for ships to wholesalers and then there's the demand generation. So it was really a matter of timing. So here is what we would expect we would expect obviously demand to accelerate given that percentage.
As in Davita, the LD OS or really online now we have we're on formulary protocols in place systems update it and we're already starting to see some ordering at those clinics and you know there's a marketplace dominated by really two customers that account for 75% to 80% of all the dialysis patients. So demand will accelerate I would fully fully.
The launch inventory as mentioned on the call to get drawn down accordingly in the third quarter and into the floor.
But to me, it's really about demand.
And that's where I'm encouraged and I'm excited that when you layer on the Fresenius Salesforce, coupled with you know obviously getting on the formulary and getting protocols in place and in the staffing train.
I'm very optimistic.
Optimistic that we're going to experience a good acceleration then you know as with most launches.
Between the trade inventory in the end user demand that will reach some sort of steady state in the next few quarters.
Okay. That's helpful and then the follow up is regarding.
Inventory can you just talk about.
What we should think about in terms of steady state how many weeks in the channel.
He stayed and is it fair to assume that in our inventory levels are.
Customarily gonna be tightly managed here.
Yeah, I would I would take the latter part of your question and when I say steady state inventories.
It's more customer clearly before put product into the channel with the anticipation rightfully so a demand.
And that's the channel strategy at launch and Thats exactly what we saw and that's exactly what they executed.
Exactly as you said I would see steady state with inventory at a.
Very tight and where and where sales net sales is probably more can grow into end user demand during a steady state.
Got it okay. That's helpful. Thank you.
Thanks, David.
Thank you please standby for the next question.
Our next.
<unk> come from Oren <unk> with H C Wainwright.
Colin Your line is now open.
Thank you so much I have a couple if I could.
Follow up on the earlier question about margins and obviously you can't give guidance for before but we can all do math here.
I think you reported collaboration revenue of 47% about of net sales, which you know assuming at the 60% profit split of non Fresenius account, if I can back into a nearly 80% operating margin for the.
For the sales to date and I just want to make sure before we get silly and carry numbers like that forward shouldn't we assume that there maybe are some material costs that were not growth against those numbers. This time around considering was just channel fill from a I guess it'd be for accounting perspective or can we just go ahead.
And say Wow.
This is as this drug grows it's only going to be at least this profitable.
Going forward and as we start thinking about as we model of revenue how much we see.
Estimated close to you and I have a follow up thanks.
You Gotta wear and let me, let me give wreck the first question.
Yeah. So.
On the profit share, yes, I mean, you did the math right and like I said when I got the initial question based on net sales of just under $17 million.
<unk> share of $8 million was was within what we expected so that wasn't a surprise.
For this quarter and going forward.
It shouldnt shouldnt be that much different.
Yes.
That's why somebody I guess, that's why somebody bought the Adler.
What's that Org go ahead is that I guess, that's why somebody acquired before because that's a lot of profit [laughter], yes, it's in the horseshoe ring as I say, we're in the kind of what we saw this this quarter.
Alright, and you can if you have something else to follow up on that on that and I have another question unrelated.
No go ahead go ahead.
Sorry about that just regarding the timing of the large dialysis centers coming on board I mean, I had assumed sort of right out of the gates.
That fits then yes, I guess would be the most likely earliest indicator earliest adopter just given.
Setup and it sounds like they are just coming online into the third quarter and I'm wondering if there.
Was there any hang up there because I thought in early May you talked about having all of that sort of reimbursement and.
And pricing data sort of online or in systems, which I assume you mean, it for <unk> and Davita as well so what would be the reason why it would take months to sort of start in the first orders coming in from the LDS Yeah.
So what I would tell you. This I mean before has done a really nice job working across the board with the L. D. O M. D O is any ideas there.
This is not sequential right. They do this all at the same time.
M D O's and ideas, we fully expect that to come online earlier, just smaller organizations. Your typical M. D. O may have 200 clinics.
And so what has to transpire is obviously and you you probably know this is not to get on formulary you got protocols in place get on formulary contracts in place and then ensure the systems are updated in the stack.
Staff is trained because we are changing the way dialysis is done.
So that's a much quicker process than the MTO and ideas on the LD OS.
Yes, I mean, it took <unk> theyre more complex quite frankly.
And they took a little longer as we expected versus the M D Oz and <unk> and ideas and what I wouldn't say, there's any hang ups. It's just part of the process and you're you're taking like a fresenius that may have 2800 clinics and you're not only getting protocols and contracts in place Youre, making sure. All the staff is trained in this.
Systems are updated so they could order so you know.
That's what I mentioned in my prepared remarks, I'm I'm actually quite pleased.
That you know that they are able to implement.
These contracts that quick and you know given now that the sales force of Fresenius has also onboard I mean, it provides me and our team here as well as before obviously with a lot of optimism now since the <unk> or the market essentially.
Alright, thanks for the clarity I appreciate it.
You got to work.
Great. Thank you very much one moment for our next question.
Our next question comes from Jason <unk> with Bank of America. Your line is now open.
Oh, Hey, guys. Thanks for taking my questions.
I was wondering if you could talk a little bit about the two large deals and just the sort of treatment protocol decision, making is this sort of a singular top down decision that permeates all the clinics within the LBO or is the decision making more fragment. There just sort of wondering if you can kind of.
A little more light on that dynamic and then thinking about with the commentary about <unk>.
With the the ordering patterns I mean are we talking about sort of small medium large in terms of just the.
The indication of demand that youre seeing for three care. Thanks.
Hey, Jason Yes, certainly so the protocols, especially at the <unk> our centralized.
And then they are pushed down to the individual clinics.
So in terms of the protocols I can't speak specifically to protocols on Fresenius davita or any of the MD OS, but what I can tell you is that theyre not rate limiters, if a if a physician identifies an appropriate patient they get the product that's the good thing.
And I think the other thing I would comment on is why we're so encouraged is that the system is getting the systems and getting folks trained up across all of these clinics is a process and we're actually seeing that come to fruition and actually with some with some speed. So we're quite thrilled about what we're seeing in terms of the <unk>.
Dynamics and demand generation.
When it comes to Q3 as I mentioned before I mean, given the channel strategy.
The launch inventory, we would fully expect that to burn down in Q3.
In congruence with the acceleration of demand and how that looks in Q4, we'll have to see how demand transpires, but as you know right now between us and V for we're not giving any forward looking guidance around our sales and demand.
Okay.
Thanks.
You got it Jason.
Great that was the and have no more questions at this point I would like to turn.
It back to management for closing remarks.
Well, thank you Denise and really thanks, everyone for joining us today and I'm wishing everybody a great week ahead.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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