Cara Therapeutics(CARA) - 2019 Q4 - Annual Report

Part I Item 1. Business Cara Therapeutics is a clinical-stage biopharmaceutical company developing KORSUVA (CR845/difelikefalin) for pruritus, focusing on regulatory approval, U.S. commercialization, and expanding oral formulations Overview Cara Therapeutics is a clinical-stage biopharmaceutical company developing KORSUVA for pruritus, which has shown efficacy in CKD-aP trials, and is financed through equity and license agreements with no products currently for sale - The company's primary focus is on developing and commercializing treatments for pruritus by targeting peripheral kappa opioid receptors (KORs)[14] - The lead product candidate is KORSUVA (CR845/difelikefalin), a first-in-class KOR agonist[14] - KORSUVA injection has demonstrated statistically significant reductions in itch intensity in Phase 3 and Phase 2 trials for hemodialysis patients with moderate-to-severe CKD-aP[15] - The company has partnered with Vifor Fresenius Medical Care Renal Pharma (VFMCRP) to commercialize KORSUVA injection in dialysis patients worldwide, excluding the U.S., Japan, and South Korea; Cara retains U.S. rights and will co-promote with VFMCRP in U.S. Fresenius Medical Care clinics[15] - The company has no products currently available for sale and has financed its operations primarily through equity/debt sales and payments from license agreements[18] Recent Developments In late 2019, the company saw a CFO/CSO resignation, adopted a new inducement plan, and secured a license for oral KORSUVA technology, following a $136.5 million public offering and a manufacturing agreement - Dr. Mani Mohindru, former CFO and Chief Strategy Officer, resigned effective December 20, 2019[19] - Entered into a non-exclusive license agreement with Enteris Biopharma on August 20, 2019, for its Peptelligence® technology to develop, manufacture, and commercialize oral products[23] - Completed a follow-on public offering on July 29, 2019, raising net proceeds of $136.5 million from the sale of 6,325,000 shares at $23.00 per share[25] - Entered into a Master Manufacturing Services Agreement with Patheon UK Limited on July 8, 2019, for non-exclusive manufacturing services for drug products[27] The Market Opportunity The company targets significant market opportunities in pruritus (CKD-aP, AD, CLD-aP) and post-operative nausea and vomiting (PONV), where millions are affected with limited or no approved treatments - Chronic Kidney Disease-Associated Pruritus (CKD-aP) affects a significant portion of the 37 million people with CKD in the U.S.; approximately 40% of the 3.2 million global dialysis patients experience moderate to severe pruritus, with no approved treatments in the U.S. or Europe[33][34][35] - Pruritus associated with Atopic Dermatitis (AD) is a defining feature of the condition, which affects up to 25% of children and 2-5% of adults, negatively impacting quality of life[36] - Chronic Liver Disease-Associated Pruritus (CLD-aP) is a common symptom for millions of Americans with CLD; in 2013, approximately 2.5 million patients with CLD received a prescription for an anti-pruritic, yet there are no approved therapies for CLD-aP in the U.S.[39][40] - Post-Operative Nausea and Vomiting (PONV) is a significant factor in hospital length of stay, with estimated annual costs in the U.S. around $1 billion; over 700 million units of PONV drugs were sold in the U.S. in 2017[42] Our Strategy The company's strategy focuses on advancing KORSUVA injection for CKD-aP towards approval, building a U.S. sales force, expanding Oral KORSUVA into other pruritic conditions, and seeking partnerships for I.V. CR845 for acute pain/PONV - Advance KORSUVA injection for moderate-to-severe CKD-aP in hemodialysis patients, with top-line data from the global KALM-2 Phase 3 study expected in Q2 2020[44][46] - Build a specialty sales and marketing organization to commercialize KORSUVA injection for CKD-aP in U.S. dialysis centers, if approved[47] - Expand the use of Oral KORSUVA into other pruritic indications, including non-dialysis stage III-V CKD-aP, CLD-aP, and Atopic Dermatitis (AD), with top-line data from Phase 2 trials in CLD-aP and AD expected in 2020[48] - Seek partnerships for further development and commercialization of I.V. CR845/difelikefalin for acute post-operative pain and/or PONV, following positive top-line data from a Phase 2/3 trial[49] Our Product Candidates The company's pipeline centers on CR845/difelikefalin in injectable (KORSUVA) and oral forms, with KORSUVA injection in Phase 3 for CKD-aP (Breakthrough Therapy Designation) and oral forms in Phase 2 for other pruritic conditions | Program | Product Candidate | Primary Indication | Status | | :--- | :--- | :--- | :--- | | Pruritus | KORSUVA (CR845/ difelikefalin) Injection | Pruritus CKD – Hemodialysis | KALM-2 (Global) Phase 3 ongoing; KALM-1 completed; Phase 3 safety trials ongoing; Breakthrough Therapy Designation granted | | | Oral KORSUVA (CR845/difelikefalin) | Pruritus CKD (Stage III - V) | Phase 2 trial completed; topline data reported | | | Oral KORSUVA (CR845/difelikefalin) | Pruritus CLD – PBC | Phase 2 efficacy trial ongoing | | | Oral KORSUVA (CR845/difelikefalin) | Pruritus AD | Phase 2 efficacy trial ongoing | | Post-Op Setting | CR845/difelikefalin Injection | Acute Post-Operative Pain/PONV | Adaptive Phase 2/3 trial completed; top-line data reported | - KORSUVA injection for CKD-aP: The KALM-1 pivotal Phase 3 trial met its primary and all secondary endpoints; the global KALM-2 trial is fully enrolled, with top-line data expected in Q2 2020; an NDA filing is anticipated in the second half of 2020[56][60][61] - Oral KORSUVA for non-dialysis CKD-aP: A Phase 2 trial met its primary endpoint at the 1.0 mg dose, showing a statistically significant reduction in itch scores versus placebo; the company plans an End of Phase 2 meeting with the FDA to initiate a Phase 3 program in H2 2020[70][71] - Oral KORSUVA for CLD-aP and AD: Phase 2 trials are ongoing for pruritus in patients with Primary Biliary Cholangitis (PBC) and Atopic Dermatitis (AD), with top-line data for both expected in 2020[74][77][78] - I.V. CR845 for Post-Operative Pain/PONV: A Phase 2/3 trial showed statistically significant pain relief at the 1.0 mcg/kg dose and significant reductions in PONV at both 0.5 and 1.0 mcg/kg doses[81][82][83] Collaboration and License Agreements The company has key partnerships, notably with VFMCRP for KORSUVA injection in dialysis patients globally (ex-U.S., Japan, South Korea), and agreements with Maruishi and CKDP for specific territories - VFMCRP Agreement: Granted VFMCRP a license to commercialize KORSUVA injection for pruritus in dialysis patients worldwide (ex-U.S., Japan, South Korea); Cara received a $50M upfront payment and Vifor purchased $20M of common stock; Cara is eligible for up to $470M in regulatory and commercial milestones, plus tiered double-digit royalties; in the U.S., the companies will co-promote in FMCNA clinics under a profit-sharing arrangement[93][94][96] - Maruishi Agreement: Granted Maruishi an exclusive license for CR845/difelikefalin in Japan for acute pain and uremic pruritus; Cara received a $15.0M upfront fee and is eligible for up to $10.5M in milestones, plus tiered royalties[97][98] - CKDP Agreement: Granted CKDP an exclusive license for CR845/difelikefalin in South Korea; Cara received a $0.6M upfront payment and is eligible for up to $3.8M in milestones, plus tiered royalties[99][100] Manufacturing and License Agreements The company has secured agreements with Enteris Biopharma for oral formulation technology and Patheon UK Limited for non-exclusive commercial manufacturing of KORSUVA injection - Enteris Biopharma: Entered a non-exclusive license for Enteris's Peptelligence® technology for oral drug delivery; Cara paid an $8.0 million upfront fee ($4.0M cash, $4.0M stock) and is obligated to pay future milestones and low-single digit royalties[105][106][107] - Patheon UK Limited: Established a Master Manufacturing Services Agreement (MSA) for non-exclusive manufacturing of drug products; related agreements govern the commercial supply of CR845/difelikefalin injection at Patheon's Monza, Italy and Greenville, North Carolina sites[113][117] Sales and Marketing Cara Therapeutics plans to establish its own U.S. commercial organization for KORSUVA injection in dialysis, while out-licensing ex-U.S. rights, with market research indicating strong physician interest due to efficacy and safety - The company plans to build its own commercial organization and distribution capability in the U.S. for KORSUVA injection in the dialysis setting[119] - For Oral KORSUVA, the company plans to develop and commercialize on its own in the U.S. while exploring partnerships for ex-U.S. territories[119] - Market research indicates a clear unmet need for managing CKD-aP among dialysis patients, with physicians impressed by CR845/difelikefalin's efficacy and safety profile[121][122][123][124] - Market research for PONV suggests anesthesiologists view CR845's novel mechanism and efficacy favorably, particularly for high-risk patients and as a potential new rescue therapy option[126] Intellectual Property The company's IP strategy focuses on wholly-owned patent protection for CR845/difelikefalin, with U.S. patents expiring no earlier than 2027 (potential extension) and new oral formulation patents potentially extending to 2039 - The company wholly owns its patent portfolio for its synthetic peptide amide kappa opioid agonists[136] - The portfolio includes fifteen issued U.S. patents covering CR845/difelikefalin composition and methods of use; the earliest U.S. patent is expected to expire no earlier than 2027, with potential for a 5-year extension under the Hatch-Waxman Act[136] - Patent applications have been filed internationally for novel oral formulations of CR845/difelikefalin, which if granted, would expire no earlier than 2039[127] - Patents for CR845/difelikefalin have been granted in 31 European countries and other key markets including Australia, Canada, China, and Japan, expiring no earlier than November 12, 2027[136] Competition Cara Therapeutics faces intense competition from large pharmaceutical and biotech companies, with no approved CKD-aP products in the U.S., and a fragmented market for chronic pruritus and PONV - The company faces competition from large pharmaceutical and biotech companies with greater financial and technical resources[144] - For CKD-aP, there are no approved products in the U.S., but competitors include Sanwa Kagaku Kenkyusho and Toray Industries (nalfurafine, approved in Japan)[148][149] - For chronic pruritus, competitors with product candidates include Menlo Therapeutics (serlopitant), Trevi (nalbuphine ER), and Vanda (tradipitant)[150] - The PONV market is highly fragmented with numerous generic products; I.V. CR845/difelikefalin would likely be used as an add-on therapy for high-risk patients[151] Manufacturing The company relies entirely on third-party contract manufacturers for all product supplies, with a non-exclusive commercial manufacturing agreement in place with Patheon for KORSUVA (CR845/difelikefalin) injection - The company has no manufacturing facilities and relies on third parties for all manufacturing needs[152] - A non-exclusive commercial manufacturing agreement is in place with Patheon for KORSUVA (CR845/difelikefalin) injection[152] - Product candidates are manufactured using reliable synthetic processes from readily available starting materials, amenable to scale-up without special equipment[153] Government Regulation and Product Approval The company's operations are subject to extensive U.S. and international regulations, including a lengthy drug approval process, with KORSUVA injection having FDA Breakthrough Therapy Designation, and ongoing post-approval compliance requirements - The drug approval process in the U.S. requires extensive preclinical and clinical testing (Phase 1, 2, 3) to establish safety and efficacy before an NDA can be submitted to the FDA[158][160][162] - The FDA granted Breakthrough Therapy Designation to KORSUVA injection for CKD-aP in hemodialysis patients, which is intended to expedite the development and review process[174][175] - If approved, product candidates may be regulated as a "controlled substance" by the DEA, which imposes strict registration, security, and recordkeeping requirements[182][183] - The company is subject to federal and state healthcare laws, including the Anti-Kickback Statute, False Claims Act, and data privacy laws like HIPAA, which restrict business practices[189][190][192] - Commercial success depends on securing coverage and adequate reimbursement from government payers (Medicare, Medicaid) and private insurers, who are increasingly focused on cost-containment[201][202] Item 1A. Risk Factors The company faces substantial risks including significant financial losses, dependency on KORSUVA injection's success, clinical and regulatory uncertainties, intense competition, reliance on third parties, intellectual property challenges, and evolving healthcare laws - Financial Risks: The company has a history of significant net losses ($106.4M in 2019) and an accumulated deficit of $400.7M as of Dec 31, 2019; it anticipates continued losses and will require additional funding to complete development and commercialization efforts[220][228] - Product Dependency: The business is substantially dependent on the success of its lead candidate, KORSUVA (CR845/difelikefalin) injection; failure to complete Phase 3 trials, receive regulatory approval, or successfully commercialize this product would have a material adverse impact[234][235] - Clinical & Regulatory Risks: The regulatory approval process is lengthy and unpredictable; clinical trials may be delayed or fail, and undesirable side effects could halt development or lead to a restrictive label; Breakthrough Therapy Designation does not guarantee a faster review or approval[250][254][262][266] - Commercialization Risks: The company faces significant competition, has no commercial infrastructure, and must achieve market acceptance and adequate reimbursement from payers, which is uncertain[300][305][311] - Third-Party Reliance: The company relies on third-party CROs for clinical trials and contract manufacturers for product supply; failure of these parties to perform satisfactorily could delay development and commercialization[323][330] - Intellectual Property Risks: The ability to protect proprietary rights is difficult and costly; patents may be challenged, circumvented, or may expire before product commercialization, and the company may face infringement lawsuits from third parties[392][408][413] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[471] Item 2. Properties The company's principal offices are located in Stamford, Connecticut, occupying approximately 24,000 square feet of leased office space, with the lease expiring in November 2023 - The company's principal offices are in a leased space of approximately 24,000 square feet in Stamford, Connecticut[472] - The current office lease expires in November 2023[472] Item 3. Legal Proceedings The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, operating results, or financial condition - The company is not currently a party to any material legal proceedings[473] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[475] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cara Therapeutics' common stock trades on The Nasdaq Global Market under "CARA", with no cash dividends ever paid or anticipated, and a stock performance graph comparing its return to relevant indices - The company's common stock is traded on The Nasdaq Global Market under the symbol "CARA"[478] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[481] | | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cara Therapeutics, Inc. | 100.00 | 169.11 | 93.18 | 122.77 | 130.39 | 161.58 | | Nasdaq Biotechnology | 100.00 | 111.42 | 87.26 | 105.64 | 95.79 | 119.17 | | Nasdaq Composite | 100.00 | 105.73 | 113.66 | 145.76 | 140.10 | 189.45 | Item 6. Selected Financial Data This section presents selected financial data for the five years ended December 31, 2019, showing increased revenue to $19.9 million in 2019, a widened net loss to $106.4 million, and growth in total assets and stockholders' equity | (in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | $19,886 | $13,469 | $911 | $86 | $3,803 | | Research and development | $113,820 | $75,531 | $48,524 | $49,253 | $21,221 | | General and administrative | $17,745 | $15,320 | $11,872 | $9,233 | $7,770 | | Net loss | $(106,373) | $(74,013) | $(58,125) | $(57,280) | $(24,690) | | Net loss per share | $(2.49) | $(2.06) | $(1.86) | $(2.10) | $(1.00) | | (in thousands) | As of Dec 31, 2019 | As of Dec 31, 2018 | | :--- | :--- | :--- | | Cash, cash equivalents and marketable securities | $218,165 | $182,779 | | Total assets | $232,959 | $190,823 | | Total liabilities | $46,246 | $57,193 | | Total stockholders' equity | $186,713 | $133,630 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2019, revenue increased to $19.9 million, while net loss widened to $106.4 million due to higher R&D and G&A expenses, with the company ending 2019 with $218.2 million in cash, sufficient into H2 2021 | (in thousands) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Total Revenue | $19,886 | $13,469 | $911 | | R&D Expense | $113,820 | $75,531 | $48,524 | | G&A Expense | $17,745 | $15,320 | $11,872 | | Net Loss | $(106,373) | $(74,013) | $(58,125) | - The increase in R&D expense in 2019 was primarily due to costs for Phase 3 trials of KORSUVA injection, Phase 2 trials of Oral KORSUVA, and an $8.0 million upfront payment for the Enteris License Agreement[543] - The company ended 2019 with $218.2 million in cash, cash equivalents, and marketable securities; management expects these funds to be sufficient to finance operations into the second half of 2021[561][575] - Net cash used in operating activities was $109.2 million in 2019, compared to $22.3 million in 2018; the increase was primarily due to higher net loss and changes in deferred revenue[581][582] - Net cash provided by financing activities was $142.6 million in 2019, mainly from a public offering that raised net proceeds of $136.5 million[590][558] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its investment portfolio, which is conservatively managed with $199.9 million in marketable securities as of December 31, 2019, mitigating significant impact from rate changes - The company's main market risk is interest rate risk on its portfolio of cash and marketable securities[618] - As of December 31, 2019, the company had $199.9 million invested in marketable securities, including corporate bonds, commercial paper, and U.S. government obligations with maturities through December 2021[617] - Due to the conservative nature and short duration of its investments, a hypothetical 1% increase in interest rates would result in an immaterial decrease in the fair value of the investment portfolio[620] - Credit quality risk is managed through an investment policy that specifies credit standards and limits exposure to any single issuer or investment type[621] Item 8. Financial Statements and Supplementary Data This section contains the company's audited financial statements for FY2019, including Balance Sheets, Statements of Comprehensive Loss, Stockholders' Equity, and Cash Flows, along with the independent auditor's unqualified opinion - Includes the Report of Independent Registered Public Accounting Firm (Ernst & Young LLP), which provides an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[628][629][640] - The critical audit matter identified was Revenue Recognition, specifically the complexity and judgment involved in estimating the total research and development costs to complete obligations under a license agreement, which impacts the timing of revenue recognition[633] - Presents the audited Balance Sheets, Statements of Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows[625] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports that there have been no changes in or disagreements with its accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure - None[928] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, a conclusion affirmed by the independent auditor, with no material changes reported - Management concluded that disclosure controls and procedures were effective as of December 31, 2019[929] - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[931] - Ernst & Young LLP, the independent auditor, has audited and confirmed the effectiveness of the company's internal control over financial reporting[932] - There were no material changes in internal control over financial reporting during the fourth quarter of 2019[933] Item 9B. Other Information The company reports that there is no other information to disclose for this item - None[936] Part III Item 10. Directors, Executive Officers and Corporate Governance Information concerning directors, executive officers, and corporate governance is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2020 Annual Meeting Proxy Statement[939] Item 11. Executive Compensation Information concerning executive compensation is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2020 Annual Meeting Proxy Statement[940] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership and equity compensation plans is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2020 Annual Meeting Proxy Statement[941] Item 13. Certain Relationships and Related Transactions and Director Independence Information concerning related party transactions and director independence is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2020 Annual Meeting Proxy Statement[942] Item 14. Principal Accountant Fees and Services Information concerning principal accountant fees and services is incorporated by reference from the company's 2020 Annual Meeting Proxy Statement - Information is incorporated by reference from the 2020 Annual Meeting Proxy Statement[943] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists the documents filed as part of the Annual Report on Form 10-K, including financial statements, schedules, and a detailed list of exhibits such as corporate governance documents and material contracts - Lists the Financial Statements of Cara Therapeutics, Inc. included in the filing[945] - States that all other financial statement schedules are omitted because they are not applicable or the required information is already included in the financial statements or notes[949] - Provides a detailed list of exhibits filed with the report, including the Amended and Restated Certificate of Incorporation, material license and manufacturing agreements, and executive officer certifications[950][952][953]