Q3 2022 Cara Therapeutics Inc Earnings Call

November 7, 2022

Good afternoon, My name is Shannon and I will be your conference facilitator.

I would like to welcome everyone to the Cara Therapeutics third quarter 2022 financial results and update conference call. All lines have been placed 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 simply press star and the number one one on your telephone keypad.

Be advised that this call is being recorded I would now like to introduce Matt Murphy Caris manager of Investor Relations. Mr. Murphy you may begin your call.

Thank you operator, and good afternoon, just after market close today <unk> issued a news release announcing the companys results for the third quarter of 2022.

Copies of this news release and SEC filings can be found in the investors section of our website at Www Dot Cara Therapeutics Dot com.

Before we begin I would like to remind you that during the course of 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 1095, and they are subject to various risks and uncertainties.

Actual results may differ materially due to various factors and Cara is under no duty to update these statements publicly.

Investors should read the risk factors set forth in <unk> 10-K for the year ended December 31, 2021, and the 10-Q for the quarter ended September 32022, and any subsequent reports filed with the SEC.

With that said I'd like to turn the call over to Chris Posner Caris, Chief Executive Officer, Chris.

Thanks, Matt and good afternoon, everyone.

Third quarter was about traction for Kara where strong execution on our strategy has started to propel us on the road to accelerated growth for years to come.

We believe our goal to become the World leader in Pruritus has a unique long term value proposition. Our clear focus is to provide potential solutions to this underserved condition affecting millions across many disease areas.

As we gain strategic momentum this focus is a differentiating factor.

The third quarter showed that the pieces are in place for near term and long term success of our strategy.

<unk> injection is accelerating as we anticipated we are quickly expanding internationally with the launch of course, Suva and could prove via in countries around the world.

And our rapidly advancing oral diastolic cephalin pipeline presents the opportunity to build sizeable franchises in nephrology and dermatology.

We are pleased with the launch progress for <unk> injection in the third quarter net sales for pursuit of injection were $16 2 million.

<unk> profit sharing revenue was $7 4 million.

And demand jumped a 100 fold to over 180000 vials shipped from wholesalers to clinics.

Product demand is the key to <unk> injections momentum and how it builds towards a successful franchise.

The significant quarter to quarter acceleration in demand as a result of continued strong execution from the CSL before and Fresenius field forces. It also reflects the underlying strong value proposition of <unk> injection for the appropriate dialysis patients.

As we outlined last quarter large dialysis organizations are the key drivers of long term sustainable demand and in the third quarter. Most of the demand acceleration did come from the <unk> primarily from Fresenius.

For some extra color almost all for serious medical care clinics placed an order by the end of the quarter and we are closely monitoring reorder rates to understand the number of patient starts and all clinics.

Davita is up.

Alex has been more gradual which we expect it based on similar prior launches in this space. Nevertheless, there is positive momentum we have seen more than half of the davita clinics, who are previously ordered core Suva reorder.

Moreover, we are seeing continued growth at mid sized and independent dialysis organizations with high penetration and solid reorder rates.

Positive anecdotal market feedback keeps rolling in across our stakeholder groups patients caregivers medical providers and our launch partner CSL before have relayed very encouraging comments on the clinical benefit from <unk> injection.

Driving all of this is the continued strong market engagement.

In the third quarter <unk> launched a comprehensive.

<unk> D pruritus awareness program in conjunction with the National Kidney Foundation that includes a <unk> associated pruritus webpage info graphics, Faq sheets patient testimonials and a Facebook live event.

This is on the heels of the <unk> associated pruritus awareness programs with the American kidney fund and the American Association of kidney patients, which were launched in the second quarter.

In early October <unk> conducted a large symposium at the 2022 American Nephrology Nurses Association fall meeting and recently <unk> had a significant presence at the American Society of Nephrology annual meeting with multiple initiatives targeting pace.

<unk> and providers, including a new patient campaign.

Overall after the second full quarter into the U S launch, we see significant progress and momentum driven by the acceleration of product demand.

This is the essence of any successful product launch we are still early in this launch and we continue to expect demand and wholesaler shipments to normalize over the coming quarters with some potential quarter quarterly variability in the process.

Keeping the big picture and view the <unk> injection launch is on its way and we are very pleased with how it's progressing.

Internationally <unk> has made significant strides in making <unk> available globally in.

In the EU that could prove via launch has started with Germany, leading the rollout across the continent. Germany has also updated its clinical guidelines to include <unk> as a first line option for the treatment of pruritus in chronic kidney disease.

We are pleased with this positive development at the start of the launch <unk> launch has also commenced and Austria. We expect the majority of the EU countries to launch in 2023.

Now our product was also approved in <unk> under the name core Suva, and Canada and could prove it in Singapore, and Switzerland, and we expect approval in the last access consortium country, Australia in the coming months.

In Japan, our partner <unk> Pharmaceuticals, recently announced filing for approval with the <unk>.

We expect a decision on this application in the second half of 2023.

Moving on to our pipeline.

We're making great progress in our strategic priority of expanding the utility of oral that fellow Catherine we are enrolling patients in our ongoing phase III clinical trials in pruritus associated with advanced chronic kidney disease and atopic dermatitis.

We continue to expect reporting topline data for the <unk> program in the second half of 2024, and we are still on target for the internal readout of part a of the phase III <unk> study in the second half of 2023.

We recently presented exciting additional data for oral <unk> and <unk>. The late breaker presentation at the <unk> Congress in Milan highlighted <unk> rapid onset of action, which occurred as early as day, one and it's sustained effect throughout.

The active extension phase two week 12.

We have a meeting scheduled with the FDA this quarter to discuss the steps to a pivotal clinical trial program and NP and we look forward to providing an update on the program in the future when appropriate.

Finally onto our 16 week proof of concept trial in pruritus associated with PBC.

Given the continued slow enrollment we made a strategic decision to discontinue the study an unblinded the data the small number of patients limits the interpret ability of the data however.

Efficacy was trending in the right direction and there were no new safety signals.

It is important to note that the data do not preclude us from pursuing this indication at a later date.

With the potential of MP advancing towards a pivotal program at this time, we are focusing our resources on building, our dermatology franchise and expanding our nephrology franchise, we have significant opportunities in both therapeutic areas and we are pleased with the progress we have made.

To date.

In conclusion.

We believe that this quarter has shown that we are continuing to build momentum we are gaining traction in our strategy to drive long term growth for Cara and create value for our shareholders. This was evident three ways this quarter.

Product demand is accelerating for <unk> injection.

We are rapidly moving towards becoming a world leader in pruritus and we are laser focused on maximizing the potential of oral diastolic cephalin in nephrology and dermatology.

Now I'd like to introduce Ryan Maynard, our new Chief Financial Officer for his first quarterly earnings call with Kara Ryan will provide details on our third quarter results and we will all be available for your questions. After that over to you right now.

Chris.

I'm happy to be a part of this amazing team at this very exciting time in <unk> growth story.

Now onto the Q3 results.

As a reminder, the full financial results for the third quarter of 2022 can be found in our press release issued today after the market closed.

Total revenue was $10 8 million for the three months ended September 32022, compared to $20 3 million for the same period in 2021.

Revenue this quarter consisted of $7 4 million of collaboration revenue related to the profit sharing revenue from CSL V for sale of course Suva injection.

Third parties and $3 4 million of commercial supply revenue.

Revenue of $23 million in the comparable period of 2021 related to certain milestone payments associated with the regulatory approval of course Suva injection.

Cost of goods sold during the three months ended September 32022 was $3 1 million and relates to our commercial supply shipments in the quarter to CSL before.

R&D expenses were $24 7 million for the three months ended September 32022, compared to $15 5 million in the same period of 2021.

The increase in R&D expenses is due to the combination of the increased clinical trial spend related to our two phase III clinical programs.

And the recognition of a $5 million milestone payment due to tariffs.

G&A expenses were $6 9 million for the three months ended September 32022, compared to $5 9 million in the same period of 2021.

The higher G&A expenses for the three months ended September 32022 were primarily due to increased head count related costs as we look to build out the key function to support <unk> growth.

Cash cash equivalents and marketable securities at September 32022 totaled $179 5 million.

Compared to $236 8 million at December 31, 2021.

The decrease in balance primarily resulted from $57 3 million of cash used in operating activities.

Finally.

We expect that our current unrestricted cash and cash equivalents and available for sale marketable securities are.

Are sufficient to fund our currently anticipated operating plan into the first half of 2024.

This runway guidance now assumes a core Suva revenue profit share contribution going forward consistent with the levels. We have reported for this quarter.

I'd like to point out that this is not our forecast for forward looking <unk> revenue, but rather a conservative runway outlook.

I will now turn the call back over to Chris.

Thanks, Ryan and with that Brian Joe and I'll be happy to take your questions. Shannon you can now open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.

Our first question comes from the line of <unk> Kulkarni with Canaccord Genuity. Your line is now open.

Good afternoon. Thanks for taking my questions I have a couple the first one is a clarification on the 184 chaos of wireless.

<unk> shipped in the third quarter is that a U S only number.

All right what would the U S on infection.

And my second question is on atopic dermatitis.

When you get data readout for <unk>.

One eight in the second half of 2023.

What do you expect to communicate to the street on that.

<unk>, it's Chris on your first question. The 184000 vials is U S only shipments.

Shipments from the wholesalers to the dialysis clinics in the U S.

On the second question on <unk>, Let me turn that to Joe <unk>.

So for atopic dermatitis, two things will be sharing one will be the sample size and the second will be the dose selected in part B and if he can pivotal study.

Okay. Thanks, I'll hop back in the queue.

Thank you.

Our next question comes from the line of Joe.

Joseph Stringer with Needham <unk> Company. Your line is now open.

Okay.

Hi, Thanks for taking my questions two from US one on sort of margins here. It looks like the <unk> 22 margins came in very similar to what a GQ.

Margins were just curious if you think this was again in line with expectations and you do you expect this to continue.

Forward and then the second question is on the mission of the Fresenius sales force.

<unk>.

We're all of those.

The impact of that.

Is that.

All of those.

That salesforce added in <unk> or are there some additional.

Impacts from that coming online in the fourth quarter and beyond.

Hey, Joe It's Craig.

Yes.

Let me let me let me answer the last question and then I'll turn it to Ryan you could talk about the margins real quick on your last question the percentage of renal sales force really came online in.

In the beginning of the third quarter. So this is reflective of the numbers I mentioned are reflective of the <unk> sales force in the third quarter.

And then on margins Ryan anymore. So this is Ryan you are correct and our margins are very consistent this quarter from last and I would expect that that would continue going forward.

Great. Thanks for taking my questions.

Okay.

Thank you.

Our next question comes from the line of Daniel <unk> with Jpmorgan. Your line is now open.

Okay.

Hi, guys. Thanks for taking our questions.

Just a clarifying question how much of the seven 4 million.

Revenue is driven by a 184000 vials.

Files represent increase our demand versus stocking.

Given prior remarks that the <unk> demand should represent the biggest change from what was observed in <unk> and net user demand and looking at the reported numbers today, how should we think about fourth quarter revenue.

And then lastly should we expect full year guidance to be provided for 2023.

Hey, Daniel It's Chris Let me give that question one and three.

Ryan three is the guidance right, yes, so Daniel Thanks for your question. This is Ryan.

So it's important to note that that $7 4 million of revenue is shipments from.

V for two wholesalers.

No that is not the 180000 that you're talking about which is wholesalers to clinics. So that's the important first piece.

As far as full year guidance for revenue for core Suva, we're not yet at this stage. We're at the early innings, we're in the second quarter.

We're reporting on the second quarter of launch and we're not going to give full year of course Hoover revenue guidance, but we did as you see give guidance on a runway, which I thought was important to come off of the very conservative guidance. We gave in Q2, which is to include zero of course, we have our revenue. So I thought that was going to be prudent and helpful.

Turn it back to Chris for the second question, Yes, Daniel.

In the quarterly the <unk> quarterly call My focus our focus is really on demand on demand generation, that's true kind of in any launch I've ever been a part of that is going to be the focus in <unk>.

We're really pleased with the acceleration in Q3 and demand that primarily came from a percent is as I mentioned, but also we saw a good acceleration in the <unk> and again, a gradual pickup in davita. So in the fourth quarter, where our eyes are going to be on demand as well and we're going to look closely to see how the product's getting pull through.

For <unk> and continued uptake at Davita and I would fully expect this acceleration to continue.

Thank you.

Our next question comes from the line of Jason <unk> with Bank of America. Your line is now open.

Hi, This is chi on for Jason Thanks for taking a question to <unk>.

First one on gross to net I'm curious if you can comment on gross to net on IV course to try to get.

I'm trying to make sense at the 184005 ship from.

Sellers to Dallas Center, So I understand that that's not where the sales are recognized spot.

Roughly right if I think about it I've got $50 base price per vial.

If you account for gross to net is that around $20 million share roughly in the ballpark. If you can comment on that that would be helpful.

Second question is on.

Your penetration and Davita centers appreciate all the colors that you provide that.

You have a lot of orders from your photos from priority Arsenious order almost all of them almost all the centers their order entry queue.

If you can give a little flavor on sort of your penetration in davita, what proportion of the visa centers or their <unk>.

And and weighed how do you see that what will be the main driver to get at.

The IV course too far.

The dialysis centers that would be helpful. Thank you.

Certainly cheat, let me, let me pass on the gross to net to Ryan and I'll come back and address the Davita.

Ryan here again, so I.

I understand it it takes a little bit of clarification. So the gross to net that we report and is all that we will report as shipments from <unk> to wholesalers and so we're not going to get into the gross to net related to the 180000 vials that was shipped to the dialysis.

<unk>. So the math that you are attempting to do you can't do based on what we've reported.

So I hope that's helpful.

Yes Chi on Davita I mentioned in my prepared remarks that we have seen a major acceleration in customer ramp up and that was primarily in the <unk> clinics, but also we saw we saw a strong acceleration across the other providers, including Davita specific to davita, they tend to adopt new products and bringing new products.

And protocols more gradually but.

But we expect that ramp up to continually gain steam and we've seen an increase in the number of davita clinics ordering and as I mentioned fully expect this to continue.

I'd also point out that of course, who is on formulary at Davita.

They do have protocols in place and I would also point out the <unk>, even though they have a very unique and special relationship with Fresenius. They also have a very strong relationship with davita selling them their portfolio of dialysis products and they even mentioned on their call <unk> call. They actually just signed a recent deal on it.

With our potent for treatment of anemia with Davita. So net net we're really confident that davita is going to continue to gradually adopt this product and bring it in for their patients.

Okay.

Great. Thank you.

Youre welcome.

Thank you.

Our next question comes from the line of Chris Howerton with Jefferies. Your line is now open.

Hi, first question for me. This is Jay by the way is not just a clarification on that the universe as percentage of sales is there a difference between.

You've observed between the vials shipped to the universities for attendees at the time.

Yes, I mentioned.

Jim mentioned that the third quarter the bulk of the demand really was in the Fresenius clinics.

With also also kind of acceleration in the <unk> and to a lesser extent davita. So that's kind of the double click on demand if you will in the third quarter.

Gotcha, So I can.

Hey, Jay I think you cut off there you go.

Oh, Okay, sorry about that.

That's all right and then I have one one more after that.

On the commercial supply revenue, so how should we thinking how should we be thinking about the.

Long term steady state inventory draw down over time, or what kind of equalize or yeah, how should we think about that.

Sure.

Hi, a J Ryan here again, so yes, it is definitely lumpy.

I recognize that but.

Keep in mind that this is a an agreement between us and <unk> for that is focused solely on the manufacturing of the product and shipping it to <unk>. So the timing of which relates mainly to how it moves through the batch in the manufacturing and less with demand so I'm not going to comment on how.

It's been manufactured and I understand it's lumpy, but you can probably expect a little lumpiness going forward.

Okay that helps with expectation and then my last question is.

Are there any additional effort by <unk> and not just <unk> promote fee.

Awareness and advocacy advocacy program.

Yes, a J I mean CSO V floor is our commercial partner.

So we're not expanding.

To launch this product.

This is on <unk> four and quite frankly, they are they are an exceptional partner with exceptional market intimacy in nephrology.

And you can see the results Theyre doing a really good job as we move two quarters into launch in and remember a J I have talked before we are building a market and theres nobody nobody better to build the market and somebody with that intimate knowhow in the nephrology dialysis space then CSO V for and then we added on obviously the percentage of sales for so that's a contra.

Fact between <unk>, 4% is and so we're actually incredibly pleased.

With the dedication of <unk>, 4% as to building this market and we're really starting to see the results two quarters in.

Okay, maybe more directly would you would you consider advertising.

<unk> is doing the advertising.

Gotcha, alright, thanks al.

Yes.

Thank you. Our next question comes from the line of.

Stacy Lee with Stifel. Your line is now open.

Hi, This is stacy calling in for Annabel Congrats on the great quarter, and then just two questions on our end.

Anything that you book revenues when you ship to wholesalers and then milestone one dialysis providers order from the wholesalers is there a point when these to be very clear.

And then secondly at what point will we have more clarity on the proposed rule that CMS made regarding the post the dapper period for innovative drugs.

What are the next steps that need to occur in the timeline before we see a change in the mechanism.

Yeah, Hey, Stacy.

In terms of kind of the trade inventory and demand I would expect to see some variability still Ryan likes to say lumpiness over the next few quarters and Thats pretty typical in any launch I would expect that to start to normalize as we head into 2023 can't give an exact date, but I would expect that.

<unk>.

Two.

Settle down and kind of more equate in 2023.

CMS, it's a great question CMS came out with their final rule last week or two weeks ago.

And they did not address the comments.

In the RF.

And the final rule, what they did do though is acknowledged the comments and indicated they're going to consider them as they consider possible future rulemaking to address posted up a reimbursement for innovative drugs. So what we expect is to hear something probably more.

More in the final rule for 2024, which would be this time kind of next year, that's our expectation and that's what we expected even with this rulemaking cycle I'd also say Stacy as well.

Kara <unk> four and other key stakeholders will.

We will be we will continue to be in contact with CMS and doing lobbying efforts et cetera, and I feel very strongly as CMS really has an open mind here. They understand that it's important that there is resolution before <unk> comes out of this to dapper period in 2024. So we are.

We're really hopeful that more clarity will come as part of the 2024 rulemaking cycle.

Amazing that was really helpful. Thank you guys.

Thanks Stacy.

Thank you. Our next question comes from the line of David <unk> with Piper Sandler Your line is now open.

Hey, Thanks, So just a couple.

So just a clarification question well for Q <unk>.

Revenues look more like an approximation of demand or is it going to be it's still going to be some real inventory in there.

Just given that we're still in the early stages of the launch so I just wanted to get a sense for.

What <unk> may or may not look like vis vis inventory I think that'd be helpful. And then secondly, you mentioned earlier, Chris about Davita and how uptake tends to be.

Ordering product in general tends to be more gradual if you will so just wanted to get a sense from you as to why that is why that.

Diseases uptake tends to be to be slower or is it anything specific to <unk> is it just sort of.

General standard operating procedure that would be helpful. Thanks.

Yes, David Nice to hear from you.

So your first question around expectations for <unk>, obviously, we're not going to give forward looking guidance.

I would still expect there to be again Ryan's word lumpiness in terms of trade inventory in demand when im looking at is a continued ramp up in demand that's what's critical and as I just mentioned to the previous question from Stacy is that I would expect that to start to normalize sometime next year.

And Thats pretty typical when you're building a market and people are taking on product.

Last question on Davita, Yes, David It is a gradual adoption we saw it with parcels.

<unk>.

And in terms of rationale I mean, just that organization tends to bring on a product more gradually to get experienced suggests our algorithms appropriately it's not specific to <unk>.

Also be clear Davita doesn't have a salesforce like fresenius as well so that's another important.

<unk> in terms of more rapid uptake that we're seeing at Fresenius.

I would also.

<unk> out, though which is significant is that we are seeing a good pickup in davita right. We are seeing clinics coming onboard a week to week and we are seeing those that are coming onboard actually having a very strong reorder rate. So we actually feel really good about where we are and meeting our expectations.

From the Davita organization, and we're really excited about the quarters to come.

Great. Thank you.

Youre welcome.

Thank you.

To ask a question at this time, please press star one on your Touchstone telephone.

Our next question is a follow up comes from <unk> Kulkarni with Canaccord Genuity. Your line is now open.

Thanks, So much for the follow up question is independent of the rulemaking process that we have some timelines and look forward to but what are the latest thought process on how this quarters, while attending relative to setting a good utilization rate.

If this is still a premature question how many quarters do you think we need to see buyers start to get a better update on this variable thats keep a English stability posted online.

Yes demand.

Again, a super question.

On the CMS in terms of how they look at utilization.

We are building a market, we're two quarters in and really if you think about the LDR was really just came on board in the third quarter, namely strong acceleration of Fresenius. So.

I would fully expect utilization, obviously to continue to ramp up and as we near the end of <unk> I think we're going to have a really good.

Really good sense of what sort of patient population, we have on <unk> that will help CMS in terms of their estimation of potential funding either through kind of the rule, making cycle potential add on payment or within the bundle itself.

And I'll just conclude.

Conclude too.

They typically look at the full two years of utilization and we saw with <unk> I think it was really important there was an additional year added on to that but to get a good steady state two years of utilization data to calculate the funding.

Got it thank you.

Got it.

Thank you Im currently showing no further questions at this time I will now turn the call back over to the Cara team for closing remarks.

Yes, Thank you Shannon and really thank you everyone for joining our quarterly call and we're really excited about where we are as a company.

In terms of adding both short term and long term value and we will continue to focus on execution.

With our partner with IV <unk> and under Joe's leadership continue to execute our clinical trial programs. So with that I'll conclude the call. Thank you.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

[music].

Okay.

Yes.

Okay.

Yes.

Yeah.

Yes.

Okay.

[music].

Good afternoon, My name is Shannon and I will be your conference facilitator.

Welcome everyone to the Cara Therapeutics third quarter 2022 financial results and update conference call. All lines have been placed 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 simply press star and the number one one on your telephone keypad. Please be advised that this call is.

Is being recorded.

I would now like to introduce Matt Murphy Caris manager of Investor Relations. Mr. Murphy, you may begin your call.

Thank you operator and good afternoon.

Just after market close today <unk> issued a news release announcing the Companys results for the third quarter of 2022.

Copies of this news release and SEC filings can be found in the investors section of our website at Www Dot Cara Therapeutics Dot com.

These statements are being made under the private Securities Litigation Reform Act of 1095, and they are subject to various risks and uncertainties.

Actual results may differ materially due to various factors and Cara is under no duty to update these statements publicly.

Investors should read the risk factors set forth in <unk> 10-K for the year ended December 31, 2021, and the 10-Q for the quarter ended September 32022, and any subsequent reports filed with the SEC.

With that said I'd like to turn the call over to Chris Posner Caris, Chief Executive Officer, Chris.

Thanks, Matt and good afternoon, everyone.

Third quarter was about traction for Kara where strong execution on our strategy has started to propel us on the road to accelerated growth for years to come.

We believe our goal to become the World leader in price has a unique long term value proposition. Our clear focus is to provide potential solutions to this underserved condition affecting millions across many disease areas.

As we gain strategic momentum this focus is a differentiating factor.

The third quarter showed that the pieces are in place for near term and long term success of our strategy.

<unk> injection is accelerating as we anticipated we are quickly expanding internationally with the launch of course silver and could prove via in countries around the world.

And our rapidly advancing oral diastolic cephalin pipeline presents the opportunity to build sizeable franchises in nephrology and dermatology.

We are pleased with the launch progress for <unk> injection in the third quarter net sales for pursuit of injection were $16 2 million.

Harris profit sharing revenue was $7 4 million.

And demand jumped a 100 fold to over a 180000 vials shipped from wholesalers to clinics.

Product demand is the key to <unk> injections momentum and how it builds towards a successful franchise there.

For some extra color almost all for <unk> medical care clinics placed an order by the end of the quarter and we are closely monitoring reorder rates to understand the number of patient starts and all clinics.

Davita is up.

Alex has been more gradual which we expected based on similar prior launches in this space. Nevertheless, there is positive momentum we have seen more than half of the davita clinics, who are previously ordered <unk> Suva reorder.

Moreover, we are seeing continued growth at mid sized and independent dialysis organizations with high penetration and solid reorder rates.

Driving all of this is the continued strong market engagement.

In the third quarter CSL before launched a comprehensive <unk>.

<unk> D pruritus awareness program in conjunction with the National Kidney Foundation that includes a CK D associated pruritus webpage info graphics fact sheets patient testimonials and a Facebook live event.

This is on the heels of the <unk> associated pruritus awareness programs with the American kidney fund and the American Association of kidney patients, which were launched in the second quarter.

<unk> and providers, including a new patient campaign.

Overall after the second full quarter into the U S launch, we see significant progress and momentum driven by the acceleration of product demand.

Keeping the big picture and view the <unk> injection launch is on its way and we are very pleased with how it's progressing.

Internationally <unk> has made significant strides in making core suva available globally in the EU. The <unk> launch has started with Germany, leading the rollout across the continent, Germany has also updated its clinical guidelines to include <unk> as a first line option.

For the treatment of pruritus in chronic kidney disease.

We are pleased with this positive development at the start of the launch.

<unk> launch has also commenced and Austria, we expect the majority of the EU countries to launch in 2023.

Now our product was also approved in <unk> under the name <unk> in Canada, and <unk> in Singapore, and Switzerland, and we expect approval in the last access consortium country, Australia in the coming months.

In Japan, our partner <unk> pharmaceutical recently announced filing for approval with the <unk>.

We expect a decision on this application in the second half of 2023.

Moving on to our pipeline.

We are making great progress in our strategic priority of expanding the utility of oral that fellow Catherine we are enrolling patients in our ongoing phase III clinical trials in pruritus associated with advanced chronic kidney disease and atopic dermatitis.

The active extension phase two week 12.

Finally onto our 16 week proof of concept trial in pruritus associated with PBC.

Given the continued slow enrollment we made a strategic decision to discontinue the study an unblinded the data the small number of patients limits the interpret ability of the data however.

Efficacy was trending in the right direction and there were no new safety signals.

It is important to note that the data do not preclude us from pursuing this indication at a later date.

To date.

In conclusion, we believe that this quarter has shown that we are continuing to build momentum we are gaining traction in our strategy to drive long term growth for Kara and create value for our shareholders. This was evident three ways this quarter.

Product demand is accelerating for <unk> injection.

We are rapidly moving towards becoming a world leader in pruritus and we are laser focused on maximizing the potential of oral <unk> in nephrology and dermatology.

I'm happy to be a part of this amazing team at this very exciting time in <unk> growth story now.

Now onto the Q3 results.

As a reminder, the full financial results for the third quarter of 2022 can be found in our press release issued today after the market closed.

Total revenue was $10 8 million for the three months ended September 32022, compared to $20 3 million for the same period in 2021.

Revenue this quarter consisted of $7 4 million of collaboration revenue related to the profit sharing revenue from CSL V for sale of course, Suva injection to third parties and $3 4 million of commercial supply revenue.

Revenue of $23 million in the comparable period of 2021 related to certain milestone payments associated with the regulatory approval of course Suva injection.

Cost of goods sold during the three months ended September 32022 was $3 1 million and relates to our commercial supply shipments in the quarter to CSL before.

R&D expenses were $24 7 million for the three months ended September 32022, compared to $15 5 million in the same period of 2021.

The increase in R&D expenses is due to the combination of the increased clinical trial spend related to our two phase III clinical programs and the recognition of a $5 million milestone payment due to tariffs.

G&A expenses were $6 9 million for the three months ended September 32022, compared to $5 9 million in the same period of 2021.

The higher G&A expenses for the three months ended September 32022 were primarily due to increased head count related costs as we look to build out the key function to support <unk> growth.

Cash cash equivalents and marketable securities at September 32022 totaled 179, 5 million compared to $236 8 million at December 31 2021.

The decrease in balanced primarily resulted from $57 3 million of cash used in operating activities.

Finally.

We expect that our current unrestricted cash and cash equivalents and available for sale marketable securities.

Are sufficient to fund our currently anticipated operating plan into the first half of 2024.

This runway guidance now assumes a core super revenue profit share contribution going forward consistent with the levels. We have reported for this quarter.

I'd like to point out that this is not our forecast for forward looking <unk> revenue, but rather a conservative runway outlook.

I will now turn the call back over to Chris.

Ryan and with that Brian Joe and I'll be happy to take your questions. Shannon you can now open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of <unk> Kulkarni with Canaccord Genuity. Your line is now open.

Good afternoon. Thanks for taking my questions I have a couple the first one is a clarification on the 180 <unk> wireless that were sold and shipped in the third quarter is that a U S. Only number worldwide what would the U S manufacturing.

And my second question is on atopic dermatitis.

You get the interim readout for kind <unk> <unk> eight in the second half of 2023, what do you expect to communicate to the street on that.

<unk>, it's Chris on your first question. The 184000 vials is U S only.

Shipments from the wholesalers to the dialysis clinics in the U S on.

On the second question on <unk>, Let me turn that to Joe <unk>.

So for atopic dermatitis, two things will be sharing one will be the sample size and the second will be the dose selected going into part B and the second pivotal study.

Got it thanks, I'll hop back in the queue.

Thank you.

Our next question comes from the line of.

Joseph Stringer with Needham <unk> Company. Your line is now open.

Hi, Thanks for taking my questions two from Us one.

Sort of margins here it looks like the <unk> 22 margins came in very similar to what the TQ.

Margins were just curious if you think this was again in line with expectations and you do you expect this to continue.

Going forward and then the second question is on the kitchen of the Fresenius sales force.

<unk>.

We're all of those.

The impact of that was that.

All of those.

That sales force added in <unk> or are there are some additional.

Impact from that coming online in the fourth quarter and beyond.

Hey, Joe it's Chris.

In the beginning of the third quarter. So this is reflective of the numbers I mentioned are reflective of the percentage of sales force in the third quarter.

And then on margins Ryan Newman, Yes. So this is Ryan you are correct and the margins are very consistent this quarter from last and I would expect that that would continue going forward.

Great. Thanks for taking my questions.

Okay.

Thank you.

Our next question comes from the line of Daniel <unk> with Jpmorgan. Your line is now open.

Okay.

Hi, guys. Thanks for taking my question.

Just a clarifying question how much of the seven 4 million.

<unk> revenue is driven by the 184000 vials.

Files represent increase or demand versus stocking.

And then lastly should we expect a full year guidance can be provided for 2023.

Hey, Daniel It's Chris Let me give.

Question, one and three.

Ryan three is the guidance right, yes, so Daniel Thanks for your question. This is Ryan.

So it's important to note that that seven $4 million of revenue is shipments from.

The four two wholesalers.

No that is not the 180000 that you're talking about which is wholesalers.

So that's the important first piece.

As far as full year guidance for revenue for core Suva, we're not yet at this stage. We're at the early innings, we're in the second quarter.

Ill turn it back to Chris for the second question Daniel.

<unk> and continued uptake at Davita and I would fully expect this acceleration to continue.

Thank you.

Our next question comes from the line of Jason <unk> with Bank of America. Your line is now open.

Hi, This is chi on for Jason Thanks for taking the question two.

First one on gross to net I'm curious if you can comment on gross to net on IV <unk> trying to get.

I was trying to make sense at the 184000 vials shipped from our wholesalers.

Wholesalers to Dallas centers, I understand that that's not where the sales are recognized spot.

Roughly right if I think about it I'm sure I've got the dollars base price per vial, if you would.

<unk> gross to net is that around $20 million share roughly in the ballpark.

I can comment on that that would be helpful.

The second question is on.

Your penetration and Davita centers appreciate all the colors that you provide that.

You have a lot of orders from orders from primarily Fresenius order almost off down or the almost all the centers their order entry queue. So if you can give a little flavor on sort of your penetration in davita, what proportion of the visa centers or <unk>.

<unk>.

And how do you see that what will be the main driver to get.

Addition of IV <unk>.

Davita dialysis centers that would be helpful. Thank you.

Yes, certainly changed let me, let me pass on the gross to net to Ryan and I'll come back and address the Davita.

Ryan here again so.

I understand it it takes a little bit of clarification. So the gross to net that we report and is all that we will report as shipments from <unk> four to wholesalers and so we're not going to get into the gross to net.

<unk> to the 180000 vials that was shipped to the dialysis organizations.

So the math that you are attempting to do you can't do based on what we've reported.

So I hope that's helpful.

Articles more gradually.

But we expect that ramp up to continually gain steam and we've seen an increase in the number of davita clinics ordering and as I mentioned fully expect this to continue.

I'd also point out that of course, who is on formulary at Davita.

They do have protocols in place and I'd also point out that <unk>, even though they have a very unique and special relationship with Fresenius. They also have a very strong relationship with davita selling them their portfolio of dialysis products and they even mentioned on their call <unk> call. They actually just signed a recent deal on it.

With our potent for treatment of anemia with Davita. So net net we're really confident that davita is going to continue to gradually adopt this product and bring it in for their patients.

Okay.

Great. Thank you.

You are welcome.

Thank you.

Our next question comes from the line of Chris Howerton with Jefferies. Your line is now open.

First question for me. This is AJ by the way is not just a clarification on that the universe is fresenius sales is there a difference between.

That you've observed between the vials shipped to the universities for attendees at the time.

Yes, I mentioned.

Jim mentioned that the third quarter the bulk of the demand really was in the Fresenius clinics.

With also also kind of acceleration in the <unk> and to a lesser extent davita. So that's kind of the double click on demand if you will in the third quarter.

Gotcha, So I can.

Hey, Jay I think you cut off there you go.

Oh, Okay, sorry about that.

And then I have one one more after that.

Sure on the commercial supply revenue so how should we be thinking how should we be thinking about the.

Long term steady state inventory draw down over time, or what kind of equalize or yeah, how should we think about that.

Sure.

Hi, a J Ryan here again, so yes, it is definitely lumpy.

Recognize that.

It's being manufactured and I understand it's lumpy, but you can probably expect a little lumpiness going forward.

Okay that helps with expectation and then my last question is.

Are there any additional effort by <unk> and not just <unk> promote fee.

Awareness and advocacy advocacy program.

Yes, a J I mean CSO V floor is our commercial partner.

So we're not spending dollars to launch this product.

This is on <unk> four and quite frankly, they are they are an exceptional partner with exceptional market intimacy in nephrology and you can see the results Theyre doing a really good job as we move two quarters into launch in and remember a J I have talked before we are building a market and there is nobody else.

Nobody better to build the market and somebody with that intimate knowhow in the nephrology dialysis space then CSO V for and then we added on obviously the percentage of sales for so and Thats a contract between <unk>, 4% is and so we're actually incredibly pleased.

With the dedication of <unk>, 4% is to building this market and we're really starting to see the results two quarters in.

Okay, maybe more directly would you would you consider advertising.

<unk> is doing the advertising.

Gotcha, alright, thanks al.

Yes.

Thank you. Our next question comes from the line of Stacy.

Stacy Lee with Stifel. Your line is now open.

Hi, This is stacy calling in for Annabel Congrats on the great quarter, and then just two questions on our end.

Anything that you book revenues when you ship to wholesalers and then file so there's one dialysis providers order from the wholesaler is there a point when these to be very clear up and then secondly at what point will we have more clarity on the proposal that CMS made regarding the post the DARPA period for innovative drugs.

What are the next steps that need to occur in the timeline before we see a change in the mechanism.

Yeah, Hey, Stacy.

In terms of kind of the trade inventory and demand I would expect to see some variability still Brian likes to say lumpiness over the next few quarters and that's pretty typical in any launch I would expect that to start to normalize as we head into 2023 can't give an exact date, but I would expect that.

<unk>.

Settle down and kind of more equate in 2023.

CMS, it's a great question CMS came out with their final rule last week or two weeks ago.

And they did not address the comments.

In the RF.

More in the final rule for 2024, which would be this time kind of next year, that's our expectation and that's what we expected even with this rulemaking cycle I'd also say Stacy as well.

Kara <unk> four and other key stakeholders.

We're really hopeful that more clarity will come as part of the 2024 rulemaking cycle.

Amazing that was really helpful. Thank you guys.

Thanks Stacy.

Thank you. Our next question comes from the line of David <unk> with Piper Sandler Your line is now open.

Hey, Thanks, So just a couple.

So just a clarification question well for Q <unk>.

Revenues look more like an approximation of demand or is it going to be it's still going to be some real inventory in there.

Just given that we're still in the early stages of the launch so I just wanted to get a sense for what.

<unk> may or May not look like these are the inventory I think that'd be helpful. And then secondly, you mentioned earlier, Chris about Davita and how uptake tends to be.

Ordering product in general tends to be more.

Gradual if you will so just wanted to get a sense from you as to why that is why that.

Diseases uptake tends to be to be slower or is it anything specific to <unk> is it just sort of the.

General standard operating procedure that would be helpful. Thanks.

Yes, David Nice to hear from you.

So your first question around expectations for <unk>, obviously, we're not going to give forward looking guidance.

I would still expect there to be again Ryan's word lumpiness in terms of trade inventory in demand when I'm looking at is a continued ramp up in demand that's what's critical and as I just mentioned to the previous question from Stacy is that I would expect that to start to normalize sometime next year.

And Thats pretty typical when you're building a market and people are taking on product.

Last question on Davita, Yes, David It is a gradual adoption we saw it with possibility.

<unk>.

And in terms of rationale I mean, just that organization tends to bring on a product more gradually to get experienced adjusts our algorithms appropriately it's not specific to <unk>.

Also be clear Davita doesn't have a salesforce like fresenius as well so that's another important.

<unk> in terms of more rapid uptake that we're seeing at Fresenius.

I would also.

<unk> out, though which is significant is that we are seeing a good pickup in davita right. We are seeing clinics coming onboard a week to week and we are seeing those that are coming on board actually having a very strong reorder rate. So we actually feel really good about where we are and meeting our expectations.

From the Davita organization, and we're really excited about the quarters to come.

Okay. Thank you.

Youre welcome.

Thank you.

Minor to ask a question at this time, Please press star one on your Touchstone telephone.

Our next question is a follow up from some months Kulkarni with Canaccord Genuity. Your line is now open.

If this is still a premature question how many quarters do you think we need to see buyers start to get a better update on the stadium.

<unk> skipper English stability posted online.

Yes demand.

Super question.

On the CMS in terms of how they look at utilization I mean listen we're building market. We're two quarters in and really if you think about the LDR was really just came on board in the third quarter, namely with a strong acceleration of Fresenius. So.

Yes.

I would fully expect utilization, obviously to continue to ramp up and as we near the end of <unk> I think we're going to have a really good.

Really good sense of what sort of patient population, we have on <unk> that will help CMS in terms of their estimation of potential funding either through.

Kind of the rule, making cycle potential add on payment or within the bundle itself.

And I'll.

I'll just conclude too.

They typically look at the full two years of utilization and we saw with parse a bit but I think it was really important there was an additional year added on to that but to get a good steady state two years of utilization data to calculate the funding.

Got it thank you.

Got it.

Thank you Im currently showing no further questions at this time I will now turn the call back over to the Cara team for closing remarks.

Yes, Thank you Shannon and really thank you everyone for joining our quarterly call and we're really excited about where we are as a company.

In terms of adding both short term and long term value and we will continue to focus on execution.

With our partner with IV <unk> and under Joe's leadership continue to execute our clinical trial programs. So with that I'll conclude the call. Thank you.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Q3 2022 Cara Therapeutics Inc Earnings Call

Request a DemoDemo

TVRD

Tvardi Therapeutics

Earnings