Cara Therapeutics(US:CARA)2020-11-09 21:24PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Cara Therapeutics, Inc.'s unaudited condensed financial statements, detailing financial position, performance, and accounting policies Condensed Financial Statements Condensed financial statements show total assets decreased to $147.1 million by September 2020, a $70.5 million net loss for nine months, and increased cash used in operations Condensed Balance Sheet Data (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $75,281 | $18,305 | | Marketable securities | $56,094 | $199,860 | | Total current assets | $132,837 | $165,656 | | Total assets | $147,136 | $232,959 | | Liabilities & Equity | | | | Total current liabilities | $16,598 | $42,894 | | Total liabilities | $19,289 | $46,246 | | Total stockholders' equity | $127,847 | $186,713 | | Accumulated deficit | ($471,226) | ($400,727) | Condensed Statements of Comprehensive Loss (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $9,266 | $5,785 | $22,993 | $15,375 | | Research and development | $21,067 | $35,992 | $80,711 | $83,956 | | General and administrative | $5,219 | $4,226 | $15,187 | $13,128 | | Operating loss | ($17,020) | ($34,433) | ($72,905) | ($81,709) | | Net loss | ($16,509) | ($32,842) | ($70,499) | ($77,762) | | Net loss per share (Basic & Diluted) | ($0.35) | ($0.74) | ($1.51) | ($1.88) | Condensed Statements of Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($87,575) | ($78,059) | | Net cash provided by (used in) investing activities | $143,880 | ($45,254) | | Net cash provided by financing activities | $671 | $142,576 | | Net increase in cash, cash equivalents and restricted cash | $56,976 | $19,263 | Notes to Condensed Financial Statements This subsection details the company's business, accounting policies, and financial statement items, including its clinical-stage status, collaboration agreements, and a $150 million Vifor license agreement - Cara Therapeutics is a clinical-stage biopharmaceutical company focused on developing new chemical entities to alleviate pruritus, having incurred substantial net losses and negative cash flows from operations since inception2325 - The company has significant collaboration and licensing agreements with Vifor Fresenius Medical Care Renal Pharma Ltd (VFMCRP), Maruishi Pharmaceutical Co, Ltd, and Chong Kun Dang Pharmaceutical Corp (CKDP) for its lead product candidate, CR845/difelikefalin97107112 - Revenue recognition is primarily tied to these licensing agreements, with $21.8 million recognized from the VFMCRP agreement and a $0.6 million milestone payment from the CKDP agreement for the nine months ended September 30, 2020115123153 - Subsequent to the quarter's end in October 2020, the company entered a significant license agreement with Vifor (International) Ltd, receiving a $100 million upfront payment and an additional $50 million from common stock sale26211214 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition and operations, covering COVID-19 impact, the KORSUVA pipeline, operating results, liquidity, and capital resources, with $150 million from Vifor expected to fund operations into 2023 Introduction & Recent Developments This section introduces the company's focus on pruritus treatments with KORSUVA, recent COVID-19 impacts, a $150 million Vifor license agreement, and the appointment of a new CFO - The COVID-19 pandemic has affected patient enrollment for Phase 2 clinical trials of Oral KORSUVA but is not expected to delay the New Drug Application (NDA) submission for KORSUVA injection, which remains on track for Q4 2020236 - In October 2020, the company entered a license agreement with Vifor, receiving a $100.0 million upfront payment and an additional $50.0 million for common stock purchase, significantly strengthening its financial position239 - Effective October 1, 2020, Thomas Reilly was appointed as the company's Chief Financial Officer240 Our Product Candidate Pipeline The company's pipeline focuses on KORSUVA (CR845/difelikefalin) in injectable and oral forms, with NDA submission for injection in Q4 2020 and oral form Phase 2 data expected in 2021 - The company's lead product, KORSUVA (CR845/difelikefalin) Injection for CKD-aP in hemodialysis patients, has completed two pivotal Phase 3 trials (KALM-1 and KALM-2), both meeting primary and key secondary endpoints246250 - An NDA submission to the FDA for KORSUVA Injection is expected in the fourth quarter of 2020, with a Marketing Authorisation Application (MAA) to the EMA to follow shortly thereafter245 - The Oral KORSUVA program is advancing with ongoing Phase 2 trials for pruritus in patients with Atopic Dermatitis (AD) and Chronic Liver Disease (CLD), with top-line data for both expected in the first half of 2021259265 Collaboration and License Agreements This subsection details key strategic partnerships, including a recent Vifor agreement for KORSUVA injection U.S. commercialization with $150 million upfront, and existing agreements for global rights and milestones - In October 2020, the company granted Vifor an exclusive license for U.S. commercialization of KORSUVA injection in dialysis patients, including a $100M upfront payment, a $50M equity investment, up to $240M in sales-based milestones, and a 60/40 profit-sharing arrangement in Cara's favor275276277 - The May 2018 agreement with VFMCRP covers commercialization rights for KORSUVA injection in most territories outside the U.S., Japan, and South Korea, with Cara eligible for up to $470 million in regulatory and commercial milestones plus tiered double-digit royalties283284 - The company has existing agreements with Maruishi for Japan and CKDP for South Korea, which include potential milestone payments and royalties, with a $0.6 million milestone achieved and received from CKDP in May 2020285289290 Results of Operations This subsection compares financial results for Q3 and nine months ended September 30, 2020, showing increased total revenue, a 41% decrease in Q3 R&D expenses, and higher G&A expenses Revenue Comparison (in thousands) | Revenue Type | Q3 2020 | Q3 2019 | % Change | Nine Months 2020 | Nine Months 2019 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | License and milestone fees | $9,257 | $5,785 | 60% | $22,377 | $15,235 | 47% | | Clinical compound revenue | $9 | $0 | N/A | $616 | $140 | 341% | | Total Revenue | $9,266 | $5,785 | 60% | $22,993 | $15,375 | 50% | R&D Expense Comparison (in thousands) | Period | R&D Expense 2020 | R&D Expense 2019 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $21,067 | $35,992 | -41% | | Nine Months Ended Sep 30 | $80,711 | $83,956 | -4% | - The decrease in R&D expenses for Q3 2020 was primarily due to lower costs associated with the completed KALM-1 and KALM-2 Phase 3 trials for KORSUVA injection, partially offset by increased costs for the Phase 2 trial in Atopic Dermatitis and NDA submission preparation320 G&A Expense Comparison (in thousands) | Period | G&A Expense 2020 | G&A Expense 2019 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $5,219 | $4,226 | 24% | | Nine Months Ended Sep 30 | $15,187 | $13,128 | 16% | Liquidity and Capital Resources The company's liquidity is supported by $131.4 million in cash and securities as of September 2020, with an additional $150 million from Vifor expected to fund operations into 2023, though significant losses are anticipated - As of September 30, 2020, the company had $131.4 million in unrestricted cash, cash equivalents, and available-for-sale marketable securities334 - Including the $150.0 million in proceeds from the Vifor license agreement received in October 2020, the company believes its existing capital is sufficient to fund operating expenses and capital expenditures into 2023334 Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($87,575) | ($78,059) | | Net cash provided by (used in) investing activities | $143,880 | ($45,254) | | Net cash provided by financing activities | $671 | $142,576 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses market risks, primarily interest rate and credit quality risks on the company's investment portfolio, noting a conservative policy and immaterial impact from a hypothetical 1% interest rate increase - The company's primary market risk exposure is to interest rate fluctuations on its portfolio of cash equivalents and marketable securities, which consist of investment-grade debt instruments366 - Due to the conservative nature and short duration of its investments, the company believes its interest rate risk is mitigated, with a hypothetical 1% increase in interest rates having an immaterial impact on the portfolio's fair value368369 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of September 30, 2020, with only a non-material change related to ASU 2016-13 adoption - Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020371373 - A change was made to internal controls over financial reporting during the quarter to address the adoption of ASU 2016-13 (Financial Instruments—Credit Losses), but it did not have a material impact, and no other material changes were reported374375 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that would materially adversely affect its business, operating results, or financial condition - As of the filing date, the company is not a party to any material legal proceedings379 Item 1A. Risk Factors This section details numerous business risks, including a history of losses, dependence on KORSUVA, regulatory uncertainties, competition, reliance on third parties, and the adverse impact of the COVID-19 pandemic - The company has a history of significant losses, with an accumulated deficit of $471.2 million as of September 30, 2020, and anticipates continued losses for the foreseeable future381390 - The business is substantially dependent on the success of its lead product candidate, KORSUVA (CR845/difelikefalin) injection, with no guarantee of regulatory approval or successful commercialization382401 - The COVID-19 pandemic poses a risk to business operations, clinical development, and regulatory timelines, potentially causing delays in trial site initiation and patient enrollment388414 - The company relies on third parties for conducting clinical trials and manufacturing its product candidates, and any failure by these parties to perform satisfactorily could delay development and commercialization387503510 Other Items (Items 2, 3, 4, 5, 6) This section covers remaining standard disclosure items, reporting 'None' or 'Not applicable' for Items 2-5, and listing exhibits filed with the report, including corporate governance documents and officer certifications - There were no unregistered sales of equity securities, defaults upon senior securities, or other material information to report for the period655 - The report includes a list of exhibits filed, such as the Amended and Restated Certificate of Incorporation, Bylaws, a new employment agreement, and required CEO/CFO certifications658