Edited Transcript of CARA earnings conference call or presentation 27-Feb-20 9:30pm GMT

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [3]

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Thank you, Jack. Good afternoon, everybody, and thanks for joining us on the call today. 2019 was certainly a very significant and productive year for Cara as we advance the late-stage clinical development of our lead candidate, KORSUVA, across a range of pruritic clinical populations.

In May of last year, we announced positive top line results from our KALM-1 pivotal Phase III trial of KORSUVA injection in hemodialysis patients with moderate to severe chronic kidney disease-associated pruritus or CKD-aP. The full results from this trial were published in the New England Journal of Medicine in November of last year.

In December of last year, we identified the appropriate tablet strength of oral KORSUVA to bring forward into a Phase III registrational program in non-hemodialysis patients with CKD-associated pruritus, following positive top line results from our dose ranging Phase II trial in this patient population. We also expanded our oral KORSUVA clinical development program into 2 new pruritic indications with high unmet need, atopic dermatitis and chronic liver disease-associated pruritus. And we initiated both of those Phase II trials in the middle of 2019.

Lastly, we made important corporate advances in 2019. We strengthened our financial position with a public follow-on offering of approximately $136 million. We also entered into a commercial license agreement with Enteris BioPharma for oral formulation rights to its Peptelligence technology to develop and commercialize oral KORSUVA in any indication.

Building on this momentum from 2019, we expect multiple major clinical data readouts and regulatory advancements in 2020. And on the call, I’ll provide an update on each of our programs and what we expect for the rest of this year.

Before we dive into those programs, as a quick reminder on KORSUVA’s broad antipruritic mechanism of action, which is in contrast to other modalities that focus on blocking 1 specific pruritogen such as NK1 antagonists, which have been in the news this week. The action of KORSUVA on dermal and epidermal immune cells blocks the release of a range of nerve sensitizing molecules of pruritogens, and KORSUVA directly diminishes the stimulation of dermal sensory fibers, principally C-fibers, downstream from the action of the pruritogen.

And this does dual neuronal and anti-inflammatory effect that we believe provides for antipruritic activity regardless of the initiating pathophysiology, whether that’s chronic kidney disease, chronic liver disease or some type of dermatological condition.

Okay, so let’s begin with our lead program for KORSUVA injection in hemodialysis patients with CKD-associated pruritus. This pivotal program includes 4 Phase III studies, KALM-1, a U.S. efficacy trial, which read a positive top line data last year; KALM-2, our global efficacy trial, which we expect top line data from in the second quarter of this year; and 2 open-label safety trials.

In KALM-1, we observed a robust, sustained antipruritic effect of KORSUVA over the 3-month treatment period. KORSUVA injection met the primary endpoint, significantly reducing itch intensity with 51% of subjects achieving at least a 3-point improvement in worst itch intensity or NRS compared to 29% of subjects in the placebo group.

The trial also met all secondary endpoints. And in addition, KORSUVA was generally well tolerated with a safety profile consistent with prior clinical trials.

Like KALM-1, our ongoing global KALM-2 trial was designed to investigate the efficacy of KORSUVA injection at a dose of 0.5 micrograms per kilo versus placebo, and this is administered 3 times per week after scheduled dialysis sessions over the 12-week treatment period.

In October of last year, we announced an increase in target enrollment for KALM-2 to 430 patients, about a 20% increase from the original target of 350 based on the recommendation of the independent data monitoring committee to maintain our prespecified conservative statistical power for the primary endpoint.

KALM-2 was fully enrolled to this level in December of last year, and we expect top line data from this trial in the second quarter, followed by the submission of our first new drug application for KORSUVA injection in the second half of this year.

In terms of safety exposures, we currently have a safety database in line with ICH guidelines for NDA submission, with over 1,500 total patient exposures with more than 600 patients completing 6 months of treatment and over 300 patients completing 1 year of continuous treatment.

As you know from these calls, CKD-associated pruritus is an area of high unmet need with no therapies currently approved in the U.S. or Europe. Per the National Kidney Foundation, there are over 500,000 dialysis patients in the U.S., with 60% of these patients reporting some level of pruritus, 40% to 50% in the moderate to severe range. So clearly, a significant unmet need.

We do intend to commercialize KORSUVA injection in the U.S., and we’ve established commercial license agreements in the other major commercial markets, including Japan, South Korea, and the European Union. In the EU, we have a collaboration with Vifor Fresenius, which allows us to leverage the broad reach of Fresenius to dialysis patients across Europe. And we also believe this collaboration positions us well for commercial success in the U.S., where we’ve established a co-promotion and profit sharing agreement with Vifor Fresenius, specifically within Fresenius clinics in this country. That allows us to utilize the nephrology focused expertise of Fresenius, and we expect help build momentum for the adoption of KORSUVA injection upon launch.

So as we advance KORSUVA injection to an NDA filing in the second half of this year, pending our positive KALM-2 results, we have also initiated key precommercial activities across functional groups at Cara, including medical affairs, commercial and CMC, where we’ve already established a supply agreement for commercial scale manufacturing.

So that’s where we stand in terms of KORSUVA injection development, and we’ll continue to update you on our commercial preparations as we approach the NDA filing and beyond. Near term, of course, we’re very much looking forward to KALM-2 Phase III results in the next couple of months.

So let’s move on to our pipeline programs focused on oral KORSUVA and start with our lead program in predialysis CKD patients with moderate to severe pruritus.

Based on pruritus-related drug prescription data of the approximately 7.3 million people diagnosed with CKD here in the U.S., about 33% are currently receiving some sort of treatment for pruritus. These treatments typically include generic antihistamines or corticosteroids, neither of which effectively alleviate the pruritus burden long term. So this is a large, again, patient population with significant unmet need.

In December of last year, we reported positive top line results from our 12-week Phase II trial, evaluating the safety and efficacy of 3-tablet strands of oral KORSUVA, 0.25 milligrams, 0.5 and 1 milligram once daily. Based on the data, we identified the 1 milligram tablet strength of oral KORSUVA is the dose level to take forward into Phase III. And we’re pleased with the clinically meaningful responses we observed in patients treated with oral KORSUVA.

Patients treated with this dose achieved the primary endpoint of a statistically significant reduction in the weekly mean of the daily worst itch intensity scores at week 12. In terms of responder analyses, we also observed 72% of patients under 1 milligram dose achieved a 3-point or greater improvement from baseline and the weekly mean of the worst itch intensity scores, and this was compared to 58% of patients on placebo, barely missing statistical significance.

Looking at the higher threshold complete responder level, this is a proportion of patients exhibiting worst itch NRS values of 1 or 0 in the final week of treatment, all 3 tablets strengths of KORSUVA exhibited dose-dependent statistically significant improvements over placebo, with approximately 40% of patients to the 1 milligram level exhibiting a complete response versus 14% on placebo.

Lastly, and of course, importantly, oral KORSUVA was generally well tolerated with a safety profile consistent with that seen in our earlier KORSUVA clinical trials.

So having successfully identified the tablet strength to take forward for this indication, we plan to hold an end of Phase II meeting with the FDA to enable the initiation of a pivotal Phase III program in the second half of this year.

In 2019, we also initiated Phase II trials for the treatment of pruritus in 2 additional patient populations, atopic dermatitis and primary biliary cholangitis or PBC. And we do aim to see top line data from both of these trials later in 2020.

In January of this year, we expanded our Phase II trial in atopic dermatitis patients to include approximately 320 adult patients with moderate to severe pruritus from 240, and we incorporated an interim conditional power assessment and to the design to be conducted again after approximately 50% of the targeted patient number complete the designated 12-week treatment period.

Based on that current sample size and our ongoing enrollment rates, we do expect to complete the interim statistical analysis for this trial in the second quarter of this year. In this trial, in terms of design, subjects were randomized to 3 tablet strengths of oral KORSUVA, 0.25, 0.5 and 1 milligram, taken twice daily versus placebo. The primary efficacy endpoint is the change from baseline and the weekly mean of the daily 24 itch worst NRS score at week 12 of the treatment period, and secondary endpoints include the proportion of patients achieving an improvement of — from baseline of at least 4 points, as well as change from baseline and each itch-related quality of life scores at the end of week 12.

So overall, our progress in 2019 has laid the foundation for a very significant year ahead at Cara. We expect several important clinical and regulatory milestones in the year ahead, starting in the next quarter with top line data from our pivotal KALM-2 Phase III trial, which, of course, is going to enable filing of our first NDA in the second half of this year. So we do look forward to updating you in all the progress across all these programs in the coming quarters. And with that, I’ll turn the call over to Rick to cover the financial results for the quarter and also for the full year.

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Richard Makara, Cara Therapeutics, Inc. – VP, Head of Accounting, Controller, Principal Financial Officer & Principal Accounting Officer [4]

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Thanks, Derek. As a reminder, the full financial results for the fourth quarter and full year 2019 can be found in our press release issued today after the market closed.

For the year ended December 31, 2019, we reported a net loss of $106.4 million or $2.49 per basic and diluted share compared to a net loss of $74 million or $2.06 per basic and diluted share for 2018. For the fourth quarter of 2019, we reported a net loss of $28.6 million or $0.61 per basic and diluted share compared to a net loss of $20.7 million or $0.52 per basic and diluted share for the same quarter of 2018.

Revenues for the year ended December 31, 2019, were $19.9 million compared to $13.5 million in 2018. Revenues in 2019 and 2018 were primarily related to our license agreement with Vifor Fresenius. Revenues in 2019 and 2018 also included $140,000 and $33,000, respectively, from the sale of clinical compound to Maruishi.

In the fourth quarter of 2019, we recognized revenue of $4.5 million related to the Vifor Fresenius collaboration agreement compared to $5.5 million during the same quarter in 2018.

Research and development expenses were $113.8 million for the year ended December 31, 2019, compared to $75.5 million in 2018. The higher R&D expense in 2019 were principally due to net increases in clinical trial costs, increases in stock compensation expense, payroll and related costs as well as expense in connection with the Enteris license agreement in 2019.

For the fourth quarter, we reported R&D expense of $29.9 million compared to $22.8 million in the same period of 2018. The higher R&D expenses in 2019 were principally due to a net increase in cost associated with clinical trials as well as increases in payroll and related costs.

G&A expenses were $17.7 million for the year ended December 31, 2019, compared to $15.3 million in 2018. The increase was primarily due to increases in stock compensation expense, payroll and related costs, consultant costs, legal and accounting fees, insurance costs and franchise taxes. Those increases were partially offset by decreased rent and utilities.

G&A expenses were relatively consistent at $4.6 million during the fourth quarter of 2019 compared to $4.7 million in the same period of 2018.

Other income was $4.5 million for the full year 2019 compared to $3 million in 2018. The increase was primarily due to a higher average balance of our portfolio of investments in 2019. Other income was $1.2 million in the fourth quarter of both 2019 and 2018.

As of December 31, 2019, our cash, cash equivalents and marketable securities totaled $218.2 million compared to $182.8 million at the end of 2018. The increase primarily resulted from $136.5 million of cash raised in a follow-on offering of our common stock in July 2019 and $6.1 million received from the exercise of stock options, partially offset by $109.2 million of cash used in operating activities.

Turning to our financial guidance. Based on the projected costs for our clinical development plans and timing expectations, we expect that our current cash, cash equivalents and marketable securities as of December 31, 2019, will be sufficient to fund our operations into the second half of 2021, not accounting for any potential milestone payments under existing collaborations.

I’ll now turn the call back over to the operator for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chris Howerton with Jefferies.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division – Equity Analyst [2]

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Congratulations on quite a year last year. So for me, Derek, I think just a couple of questions, primarily related to the pipeline. So where the CKD — oral CKD program and the results are what they are, what do you hope to get in terms of alignment with the FDA? And have you kind of thought any more about what the ultimate primary endpoint you think would be either received by the investment and clinician community that will get the best reaction?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [3]

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Okay, Chris, thanks. I thought you were going to have an additional question. Was that 1 question, 1 long question, or do you have — was that…

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Christopher Lawrence Howerton, Jefferies LLC, Research Division – Equity Analyst [4]

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That was 1 long question. I like to hear myself talk, as you know.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [5]

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Yes. Yes. It’s — I like those mellifluous tones as well. So on the CKD oral. As you know, we were pleased with that data. We hit our primary endpoint. It was a study designed to identify the optimal dose strength to take forward, and we did so.

And in terms of endpoint definition, as you know, we spent a long time on this in terms of our hemodialysis patient analysis, essentially, end-stage CKD. And when we looked at that, actually, in consultation with the FDA as we discuss the designation of breakthrough for KORSUVA, we actually empirically took our data and looked at clinical meaningfulness in terms of reduction in worst itch NRS score for that patient class. And that number, as you know, is a little less than 3-point and we were nice enough with our FDA friends to run that up to 3-point, and that certainly is a clinically meaningful reduction for a CKD patient with NRS scores. So that would be our proposal as a primary endpoint going forward with the CKD oral study.

Now we also, as you know, have a range of secondary endpoints we’re interested in there. And we would look at most likely higher threshold responder analysis there, perhaps in the (inaudible) But as far as we have determined, again, empirically, and part of our consultation with the FDA, a 3-point responder analysis does — is the threshold for clinical meaningfulness there.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division – Equity Analyst [6]

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Sure. And so then outside of perhaps the primary endpoint, are there other — and I’m not — I guess, I’m putting words in your mouth, but what — what would you like to gain alignment with on the FDA during that meeting? Or what are the things that you think need to be worked out?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [7]

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You hit the nail on the head, right, Chris. We won agreement on our registration endpoint and our proposal based again on our analysis for CKD patients would be a 3-point responder and we would most likely look at 4-point beyond that as well as our usual quality of life measures. And that’s the main goal, at least in the clinical portion of our end of Phase II meeting with the FDA.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division – Equity Analyst [8]

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Got it. Okay. And is there — the other topic of discussion with respect to the oral CKD program has been perhaps higher-than-expected placebo response. Have you given any additional thought in terms of how you expect to control that in further trials?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [9]

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Yes, we have. You’ll not be surprised to hear, Chris, we have thought about that on more than 1 occasion, we’ve thought about that. So — but let me say right off the bat, the aim of this Phase II trial, of course, is to be able to obtain empirical data in the patient population we want to examine in Phase III. And actually, based on our proposed endpoint, use that data to power the Phase III appropriately even to overcome, which we think, based on our past experience in this patient population, is an unusual anomalous placebo response. So that’s the first thing to say. We have the data now that we can power that trial appropriately. And even if we are off the mark in our proposed measures to reduce that placebo response, we still will have an appropriately powered trial. And as you know, we’re very fond of running interim analysis to make sure we’re on track in our larger trials. So that is our overall approach. So that’s how we’re going to solve, if this, if you like, to view as a problem.

But again, we have thought about this in terms of other elements we could adopt into that Phase III that should help the placebo response, we believe. And we’ve mentioned this before, we do believe there certainly was a potential for some expectation bias in these patients. A lot of the sites we use, the clinical sites we used in our oral KORSUVA trial were sites that had previously participated in KORSUVA injection trials for hemodialysis patients. So there was experience with the drug, albeit in a different formulation in the end stage, if you like, for that particular patient population. But certainly, that could have been a possibility. And the solution there is somewhat obvious, we’re going to use de novo sites that haven’t had previous experience with the drug. So that’s one thing we can easily adopt.

We’re also looking at the possibility of using a longer run-in period. It’s possible that these earlier stage CKD patients, perhaps they have more labile pruritus that may wax and wane a little more than end-stage patients. And so to identify the more consistent pruritic patients, we can incorporate a longer run-in period, which is easily incorporated. And then finally, by nature of the very design of the Phase III, looking at one optimum dose versus placebo or one-to-one randomization, that alone should reduce the placebo response from the designed 3:1 randomization we used in that Phase II trial. So certainly, we’re going to have that as part of our design.

So those are all easy elements we can change that should help the placebo. Again, ultimately, we now have the data to power that trial, and we’ll make sure we do so. And then we’ll confirm that we’ve maintained the power we desire there with an interim analysis when we do run that trial.

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Christopher Lawrence Howerton, Jefferies LLC, Research Division – Equity Analyst [10]

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Right. Sorry, I think my phone cut out there for a minute, but that’ll make sense to me. And I guess, just 1 maybe quick question would be, what was the rationale for increasing the size of the atopic dermatitis trial?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [11]

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Yes. Again, that was based on maintaining a high level of power to see a statistical difference. And when we started that trial, we really didn’t have any oral KORSUVA data with pruritus endpoints. And of course, as we’ve just discussed, we now — and we did at the end of last year, achieved the primary endpoint for oral KORSUVA in CKD-aP patients. And with that data in hand, we could model, based on some assumptions related to placebo rates, a powering analysis. And based on that, we decided it made sense to increase the sample size just to make sure we had the appropriate power. And again, with the increased sample size, we also incorporated an interim conditional power analysis, just to make sure that we were on track again. So that’s really 2 new adaptations for AD. And that trial is recruiting very well, and we do expect to complete the interim analysis next quarter.

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Operator [12]

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Our next question comes from the line of David Amsellem with Piper Sandler.

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David A. Amsellem, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [13]

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So, Derek, you may have addressed this but I wanted to just drill down in more detail. Can you talk about the Phase III for oral KORSUVA in CKD in the context of background medications? And what are your thoughts on which background medications could be part of the inclusion criteria, and which would be excluded? And what did you learn from the Phase II study regarding the use of background medications, that’s #1.

And then #2 is just a bigger picture question. To the extent that you do have positive data in atopic dermatitis, that’s obviously a different call point in a different physician vertical, if you will. And is that something that you would plow ahead with in the Phase III you’re on your own? Or is that something that you’d look to partner? And I guess the broader question is beyond CKD what would you look to commercialize on your own? And what would you look to partner?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [14]

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Thanks, David. So on the first question, we have looked — and I think we’ve mentioned this before, we did look at the background meds in our Phase II trial for the pre-dialysis CKD patients. And there was some difference there between those patients and what we’d seen in hemodialysis patients. So a higher percentage of patients using centrally acting drugs such as gabapentin or pregabalin. That doesn’t seem to have heavily skewed our data, however.

But going forward, we’re of the mind that if we can eliminate these variables relatively easily and it doesn’t interfere with recruitment, then we would. Most likely, we may leave patients with their antihistamines, which is a relatively small percentage in that patient population, because that tends to help them sleep. But it’s most likely we try to eliminate as much as possible in the Phase III design. So that’s what we would do there. In terms of atopic derm, yes, that’s a different call point, and it’s a large population, of course, also, ultimately, from a commercial standpoint. I think we are perfectly capable of running a late-stage trial in atopic derm. As you know, we spent some time recruiting experienced development personnel into the company so that we can handle that beyond the registration level trial. It’s true that, that would require some effort commercially, and it’s most likely at that point, we’d look to partner at that particular indication with a larger partner. But running late-stage trials is basically what we’re designed to do here, as you know, David, and I think we could easily accommodate a late-stage trial in atopic derm.

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David A. Amsellem, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [15]

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Okay. And I would imagine, Derek, that the logic would apply to the liver disease setting as well as you run the late-stage study but may explore a partnership there?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [16]

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Yes. Yes. And just to reiterate, and I think you and I have had this discussion, I think, on this call previously. Our strategy here in terms of ultimate label for the oral formulation of KORSUVA is, of course, a broad one, and the strategy we’re following is — there are, if you like, various pathophysiologies that lead to pruritus, and they have definitive and separate, if you like, pathophysiologies. And we’re looking to see activity in these different patient populations as evidence, if you like, ultimately. That this is a mechanism, and we talked about the mechanism earlier, that should have broad applicability. And so it’s unlikely we’d run registration programs in every patient population we’re looking at here. We will be selective on the first patient populations we take forward. But ultimately, all of this data is going to be useful when we have that discussion related to getting a broader label for moderate to severe pruritus.

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Operator [17]

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

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division – MD [18]

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I like your use of the word mellifluous. I hope I can live up to those expectations. So just going back to the placebo bogey for a minute. Can you tell us, I guess, hopefully, at this point, you’ve consulted with a number of physicians or consultants. Do you still feel that the AD population is less variable and that it’s — you’re not going to see as much of a placebo response in that population? Second, when you upsize the trial, did you assume the placebo assumptions of the CKD population? Or when you brought it to 320? And then did you have a set amount to upsize it to, if necessary, beyond — at your interim analysis? Or is it just something that’s calculated by the IDSND — IDSM — ID whatever…

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [19]

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IDMC.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division – MD [20]

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Right, IDMC at that moment based on their specific calculations. So that’s my first long-winded question. I have a couple more.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [21]

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Yes. No, that’s a great question. And so an AD population, in terms of looking at placebo, there’s a lot of data out there. As you know, from a lot of different drug classes looking at particularly disease alterations in terms of endpoint, but also looking at pruritus. And so there’s a lot of available information. So when we look at that and chelate that and look at the normal placebo rates we see, and then we looked at the variability we had within our CKD-aP oral trial. Those were really the 2 factors we thought about in terms of looking at what would be the sample size to maintain high statistical power to see a specific treatment effect. And that’s how we modeled it. So it was modeled based on, if you like, historical placebo rates that had been seen in the atopic population as well as the treatment effects we’ve seen with oral and to a certain extent, the variability we’d seen there. So that was the idea of upping the sample size to accommodate the possibility of an increased placebo response essentially. And again, you’re right, with — we’ve introduced in the interim conditional power assessment, we can actually if you like, confirm those assumptions, when we have 50% of our patients complete.

And again, you’re correct, based on the IDMC recommendation, we can then alter that sample size to make sure we’re going to maintain a conservative power level to see a statistical difference. We’re also interested in this particular trial and not only looking at mean NRS change. We’re also going to be looking at responder analysis with that. So that was really the whole rationale. We had kind of historical data versus, or if you like, in conjunction with data we generated with oral KORSUVA. That was the basis of upsizing that sample size there for atopic.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division – MD [22]

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Okay. And if I understand correctly, you are now powered sufficiently to see statistical significance on the secondary endpoint for atopic dermatitis or…

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [23]

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Well, I wouldn’t say we are not — well, we’re — that’s our aim, is to maintain sufficient power to see a response on that secondary endpoint as well. And again, that — again, that will have some advice on that from the IDMC, as you point out, when we have the analysis of 50% of the patients completing the treatment period.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division – MD [24]

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Okay. And then just curious about the PBC trial. You didn’t upsize that one. So are you treating that one differently? Is there something different about that trial that you didn’t do anything to that?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [25]

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Well, that’s — again, listen, I think we’ve discussed this before and I said that, that we truly see as a proof-of-concept trial for liver disease. As you know, PBC is an orphan indication that it’s quite difficult to recruit in that patient population where, in fact, expanding beyond the U.S. and to the U.K. at this point to gather more patients for that. So there, we want to make sure we can get enough patients to see a signal, but that’s a much more challenging populations. And that gets back to the discussion I had with David, we hope to see data there that it’s going to be supportive, ultimately, of getting a broader label for oral KORSUVA in pruritus.

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Operator [26]

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Your next question comes from the line of Jason Gerberry with Bank of America.

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Chi Meng Fong, BofA Merrill Lynch, Research Division – Research Analyst [27]

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This is Chi on for Jason. I guess the first question is a piggyback to your earlier question about alignment with the FDA at the Phase II meeting for the oral CKD. Just curious, Derek, given there are several hundred, if not thousand patients, have exposed to the IV formulation of CKD, curious of thoughts on whether there could be potential additional conversation with the FDA on the alignment of whether that could be a smaller trial to be run for Phase III or maybe a smaller safety database, given you already have wealthy amount of safety database from the IV dose already? And then I have a follow-up after that.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [28]

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Yes. Thanks, Chi. Yes, I think we’ve also discussed that possibility previously here and that has been our thought for oral CKD. We do have, as you pointed out, several thousand patient exposures with IV KORSUVA in CKD, if you like, end-stage patients. Actually, at a higher exposure level than that we obtained with our oral tablet formulation. So we do think it’s a reasonable case that we should be able to reference those safety exposures as part of our Phase III program for oral CKD and pre-dialysis patients. Of course, ultimately, that’s a decision for the FDA, but I think it’s reasonable we could propose that as a path forward there. And perhaps as an upside, as you indicate, that may result in a reduced number of registration trials for that particular program. Again, we can’t guarantee that. It’s certainly something we thought about and something we’ll investigate when we have our FDA interactions.

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Chi Meng Fong, BofA Merrill Lynch, Research Division – Research Analyst [29]

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Got it. And maybe if I can clarify on the expanding the trial sites for the trial numbers for the — I’m sorry, the subject size for the AD. When you said you are modeling based on the historical AD response rates based on available data and also the effect that you see in the CKD — in your own CKD trial, are you taking into account the placebo response on this CKD or not? I wasn’t sure about that. So I just want to confirm whether that is a factor on whether the — factor into the trial size increase.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [30]

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Yes. Thanks, Chi. We’re looking at the treatment effect we achieved with CKD oral, but predominantly, we’re looking at historical placebo rates in the atopic population, and we realize these are completely different patient populations, and it’s much more likely that AD patients have had their condition for much, much longer than early-stage CKD. So we do expect different placebo response rates from AD than we see in CKD, but with the benefit of the treatment effect we’ve seen with oral, that’s something we can incorporate into those models. And that again, in combination with what we expect in the AD population was the basis for increasing the sample size there.

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Chi Meng Fong, BofA Merrill Lynch, Research Division – Research Analyst [31]

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Got it. And maybe if I can ask a quick follow-up, if you can provide any incremental color or guidance on how we should think about burn this year versus last year?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [32]

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Yes. Well, as Rick pointed out, overall, we do expect our cash position to carry us through this year and into the second half of 2021, and that’s obviously executing on all the programs we’ve been discussing. The quarterly burn, as you know, we don’t guide from quarter-to-quarter, it’s going to be a little lumpy through this year. And Rick, do you want to add anything to that?

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Richard Makara, Cara Therapeutics, Inc. – VP, Head of Accounting, Controller, Principal Financial Officer & Principal Accounting Officer [33]

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Yes. No, I mean, I think with the higher level of trial activity, it would be expected that it will be higher in 2020 than it was in 2019.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [34]

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As we complete our Phase III trials, Chi, and then file the NDA in the second half of the year.

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Operator [35]

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The next question comes from the line of Charles Duncan with Cantor Fitzgerald.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division – Associate Analyst [36]

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This is Pete Stavropoulos on for Charles. Congratulations on 2019. So for the oral KORSUVA atopic dermatitis study, are you including or excluding any patients on a particular medication or refractory to any particular medication, including dupilumab?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [37]

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Pete. Yes, we are. We’re washing patients of all their medications. So they’re going to come clean into that trial. No medications.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division – Associate Analyst [38]

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Okay. And for the KALM-2 study. When you increase the sample size in order to maintain statistical significance or I mean, powering, is there any particular geography that you grab the new patients from? Or was it dispersed among all the centers?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [39]

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Well, when we increased the sample it is about approximately a 20% increase in sample size there. Most of those patients, in fact, almost all of those patients came from U.S. sites, the additional 20%. And overall, the vast majority of patients in KALM-2 are indeed from U.S. clinical sites.

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Pete George Stavropoulos, Cantor Fitzgerald & Co., Research Division – Associate Analyst [40]

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Okay. And how many of the clinical sites actually overlap between the first study and the second study?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [41]

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Virtually none. So those were separate sites in KALM-2 than from KALM-1.

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Operator [42]

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Our next question comes from the line of Alan Carr with Needham & Company.

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Joseph Robert Stringer, Needham & Company, LLC, Research Division – Associate [43]

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This is Joey on for Alan. A quick one on the AD coming results Phase II. Maybe you can help us frame expectations potentially around maybe response rates or improvements in NRS. You mentioned there’s a number of oral and even some injectable data out there. But in terms of Phase II comparison, what would be 1 or 2, in your view, as best comparators?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [44]

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Yes. Thanks, Joey. I mean, it is hard to come up with a comparator because, as you know, we are really the only company that is investigating this modality. There’s not a lot of prior data using this approach other than with nonselective, if you like, medications that have been used there. So there is a standard the FDA likes for derm conditions and that’s a 4-point responder analysis, and that’s what we’re looking at as our main secondary analysis here. Again, the reason we have used mean NRS as a primary and have done so consistently in all our Phase IIs is that continuous variable is much more sensitive to identify an appropriate dose. And as you know, it’s a dose-ranging trial, but we will be looking at the 4-point responder analysis. And again, that was one of the reasons that we adjusted sample size in that trial.

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Operator [45]

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Our next question comes from the line of Arlinda Lee with Canaccord.

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Eunshuk Shim, Canaccord Genuity Corp., Research Division – Associate [46]

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It’s Ben Shim on for Arlinda. Many of my questions have been answered, and I’d just like to maybe ask one thing. As we get closer to data and then to ultimately filing for the IV pruritus. Maybe — could you provide us a little bit more detail on the cadence and magnitude of upcoming milestones that you may potentially earn from Vifor this year? And will they be accounted for in any special way? Or are they going to be just straight revenue?

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [47]

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Great. Thanks, Ben. In terms of milestones with Vifor, specifically, I think we’ve guided before on total amount there and divided that in terms of regulatory and commercial. So there is $30 million in regulatory milestones that will be coming to us via that particular arrangement. We haven’t actually guided as to particular quarter, we expect to see these, Ben. But that’s the level of milestones that is part of that license agreement.

Beyond that, there’s another $430 million in commercial milestones through sales out west the U.S. But as we go forward and we file the NDA, and we have more visibility on the time line for launch and approval, then we’ll guide as to when we expect those milestones. But again, to reiterate, and Rick said, all the guidance we’ve given in terms of financial and runway here is excluding any projected milestones from Vifor Fresenius or in the Maruishi or CKD Pharma.

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Operator [48]

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Our next question comes from the line of Esther Hong with Janney.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division – Director of Biotechnology [49]

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I’ve got 2 questions. So the first one, regarding the interim statistical analysis next quarter for atopic dermatitis. What’s the range, lower and upper end, of the increase in sample size, if it’s required? And then I’ve got a follow-up.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [50]

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Thanks for that. So we haven’t actually divested publicly yet the upper range of what we would increase the sample size to there. One thing I can say is that we’re going to look at that on a curve. We’ll have an ability for the IDMC to guide us to a specific patient number. And also, that would be directed towards, if you like, the most active dose that we see. Again, this is a dose-ranging trial. So that’s what we’re most interested in. But we haven’t actually guided as to what the upper limit of that would be at this point.

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Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division – Director of Biotechnology [51]

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Okay. And then my follow-up is, so as we get closer to KALM-2 data potentially launched, can you remind us of your launch strategy? Any additional details on how Vifor Fresenius plans to rollout KORSUVA? Will you initially focus on Fresenius clinics together? Leave that to Fresenius? Any details.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [52]

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Yes. Unfortunately, I can’t give you much detail on that. That’s confidential at this point, Esther. We are, of course, working with Vifor Fresenius to coordinate that. We have undertaken a whole range of activities and preparation for launch, pre-commercial activities, really across the company. We have established and we are expanding an MSL team here at Cara. We’re working to broaden our KOL universe, increase awareness of CKD-associated pruritus. We’ve established regional, national advisory boards. We’re sponsoring strategic education opportunities, including CME symposia at the appropriate meetings. And we’re trying real hard to increase our KORSUVA publication footprint and that — you’re going to see that throughout this year.

And then, of course, on our commercial side, we will be hiring some senior level people in sales and marketing, in market access later in 2020. So there is an integrated cross-functional plan in place to accommodate the launch, and we’re also coordinating, as you indicate, with Vifor Fresenius, specifically, in relation to our co-promotion arrangement here in the U.S.

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Operator [53]

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Ladies and gentlemen, that concludes our Q&A session. I would now like to turn the call over to Derek Chalmers for closing remarks.

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Derek T. Chalmers, Cara Therapeutics, Inc. – Co-Founder, President, CEO & Director [54]

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Yes, thank you, everybody, for participating on the call today. I’d also like to thank our hard-working Cara team, our study investigators and all the patients, who continue to participate in our clinical trials. And we’re very much looking forward to updating you real soon and throughout the year. So thank you very much. Have a great night.

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Operator [55]

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Ladies and gentlemen, this concludes today’s call. Thank you again for your participation. You may now disconnect. Everyone, have a wonderful day.