Business Overview and History
Cara Therapeutics was incorporated and commenced operations in 2004, focusing on developing novel therapies to address the unmet medical needs of patients suffering from chronic pruritus. The company's primary activities since inception have included organizing and staffing, developing its lead product and product candidates, conducting preclinical studies and clinical trials of difelikefalin-based product candidates, and raising capital.
The company's lead product candidate, difelikefalin, has been at the center of its efforts, with the intravenous (IV) formulation approved for the treatment of moderate-to-severe pruritus associated with advanced chronic kidney disease (CKD) in adults undergoing hemodialysis. In August 2021, Cara received U.S. Food and Drug Administration (FDA) approval for KORSUVA difelikefalin injection, or KORSUVA injection, for this indication. The commercial launch of KORSUVA injection began in the United States in April 2022, and Cara began recording the associated profit-sharing revenues in the second quarter of 2022.
On the international front, in April 2022, the European Commission granted marketing authorization to difelikefalin injection under the brand name Kapruvia for the treatment of moderate-to-severe pruritus associated with advanced chronic kidney disease in adult hemodialysis patients. Kapruvia was also approved in several other countries, including the United Kingdom, Switzerland, Singapore, Canada, Australia, and various Middle Eastern countries under the brand name KORSUVA injection.
Cara has financed its operations primarily through sales of its equity and debt securities, sales of its royalties from ex-U.S. sales of its commercial product, and payments from license agreements. The company has entered into significant licensing and collaboration agreements to commercialize its products globally. In 2018 and 2020, Cara entered into licensing and collaboration agreements with Vifor Fresenius Medical Care Renal Pharma Ltd. (now CSL Vifor) that provide full commercialization rights of Kapruvia, and where applicable KORSUVA, to CSL Vifor worldwide excluding the United States, Japan, and South Korea. Additionally, Cara has entered into license agreements with Maruishi Pharmaceutical Co. Ltd. and Chong Kun Dang Pharmaceutical Corp. for the development and commercialization of difelikefalin in Japan and South Korea, respectively.
Despite the successful regulatory approvals and commercial partnerships, Cara's financial performance has been hampered by the limited commercial success of KORSUVA injection. For the year ended December 31, 2024, CSL Vifor, Cara's commercial partner, recorded net sales of KORSUVA injection in the United States of approximately $2.1 million, which included negative net sales reported in the second and fourth quarters of 2024 primarily due to higher rebates and chargebacks related to the expiration of the Transition Drug Add-on Payment Adjustment (TDAPA) in April 2024. As a result, Cara recorded collaborative revenue of $2.1 million, $12.4 million, and $16.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The company's strategic pivot began in June 2024, when it announced the discontinuation of its clinical program in notalgia paresthetica (NP) following the outcome from the dose-finding Part A of the KOURAGE-1 study. Oral difelikefalin did not demonstrate a meaningful clinical benefit at any dose compared to placebo, leading Cara to shift its focus towards exploring strategic alternatives to maximize shareholder value.
Financial Overview
Cara Therapeutics' financial performance has been characterized by significant net losses in recent years, reflecting the company's focus on research and development (R&D) activities and the limited commercial success of KORSUVA injection. For the year ended December 31, 2024, the company reported a net loss of $70.9 million, compared to net losses of $118.5 million and $85.5 million for the years ended December 31, 2023 and 2022, respectively.
The company's cash and cash equivalents position as of December 31, 2024, was $37.9 million, compared to $51.8 million and $63.7 million as of December 31, 2023, and 2022, respectively. Cara's working capital, defined as current assets minus current liabilities, stood at $39.9 million as of December 31, 2024, compared to $90.6 million and $145.5 million as of December 31, 2023, and 2022, respectively.
Cara's research and development expenses decreased significantly in 2024, reflecting the discontinuation of its NP program. For the year ended December 31, 2024, R&D expenses were $32.8 million, compared to $108.5 million and $91.9 million for the years ended December 31, 2023, and 2022, respectively.
The company's general and administrative (G&A) expenses have remained relatively stable, totaling $26.5 million, $27.8 million, and $30.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.
For the most recent fiscal year (2024), Cara reported annual revenue of $7.14 million, a significant decrease from previous years. The annual net loss for 2024 was $70.87 million, with an annual operating cash flow of -$60.92 million and an annual free cash flow of -$94.45 million. The most recent quarter (Q4 2024) saw revenue of $2.56 million and a net loss of $12.48 million.
The year-over-year revenue growth was negative, primarily due to decreases in collaborative revenue from CSL Vifor's sales of KORSUVA injection in the United States. The negative net income and operating cash flow in Q4 2024 were due to CSL Vifor reporting negative net sales of KORSUVA injection, resulting in a negative profit share amount that Cara recorded as an expense.
Liquidity
Cara's financial ratios suggest a strong liquidity position, despite the company's recent operational challenges. As of December 31, 2024, the company reported:
- Debt/Equity ratio: 0.85 - Cash and cash equivalents: $37.9 million - Current ratio: 4.77 - Quick ratio: 4.71 - Cash ratio: 3.69
These ratios indicate that Cara has maintained a relatively strong short-term liquidity position, despite its ongoing operational challenges and strategic transition.
Strategic Transition and the Proposed Merger with Tvardi Therapeutics
In June 2024, Cara's Board of Directors approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value. This decision came after the company's discontinuation of the NP program, which was driven by the unsuccessful outcome of the KOURAGE-1 study. In connection with this strategic shift, Cara implemented a second reduction in its workforce by approximately 70%.
On December 17, 2024, Cara announced that it had entered into a definitive agreement to merge with Tvardi Therapeutics, a privately held, clinical-stage biopharmaceutical company developing novel treatments targeting STAT3 to treat fibrosis-driven diseases. The proposed merger is subject to approval by Cara's and Tvardi's shareholders, as well as other customary closing conditions.
The Merger Agreement stipulates that upon the completion of the transaction, Cara's pre-merger equity holders are expected to hold approximately 15.25% of the combined company's shares, while Tvardi's pre-merger equity holders and the holders of Tvardi's convertible notes are expected to hold approximately 72.21% and 12.54%, respectively, on a fully diluted basis and subject to certain adjustments.
Substantially concurrent with the completion of the merger, Cara will sell certain assets and rights related to difelikefalin to CSL Vifor in an asset disposition transaction. This move aligns with the company's strategic pivot and focus on maximizing shareholder value.
The transaction is seen as a transformative move for Cara, as it shifts the company's focus towards Tvardi's pipeline and its lead program in idiopathic pulmonary fibrosis, which is expected to report topline data in the second half of 2025. The combined entity is expected to have a stronger financial position, with Tvardi's recent $28 million private financing, coupled with Cara's anticipated cash balance, anticipated to fund the combined company into the second half of 2026.
Key Risks and Challenges
Cara Therapeutics faces several risks and challenges that investors should consider:
1. Uncertainty surrounding the completion of the proposed merger with Tvardi Therapeutics: The merger is subject to various closing conditions, including shareholder approvals, and there is no guarantee that the transaction will be successfully consummated.
2. Potential delisting from the Nasdaq Capital Market: As of December 31, 2024, Cara did not meet the Nasdaq Stockholders Equity Requirement and the alternative listing standards. While the company has been granted an extension until May 19, 2025, to regain compliance, there is no assurance that it will be able to do so, either before the merger or otherwise.
3. Reliance on commercial partners: Cara's financial performance is heavily dependent on the commercial success of KORSUVA injection and Kapruvia, which are being commercialized by its partners, CSL Vifor and Maruishi Pharmaceutical Co., Ltd. Any setbacks or changes in these partnerships could significantly impact Cara's revenues.
4. Limited pipeline diversification: Prior to the proposed merger, Cara's pipeline was primarily focused on difelikefalin, with the discontinuation of the NP program leaving the company with limited internal development activities.
5. Ongoing cash burn and need for additional financing: Cara has incurred significant net losses and has a limited cash position. The company's ability to fund its operations, including the proposed merger, is crucial, and any failure to secure additional financing could jeopardize its future.
6. Pricing and reimbursement challenges: The expiration of the Transition Drug Add-on Payment Adjustment (TDAPA) in April 2024 led to higher rebates and chargebacks, resulting in negative net sales for KORSUVA injection in certain quarters of 2024. This highlights the ongoing challenges in pricing and reimbursement for Cara's products.
Conclusion
Cara Therapeutics is at a critical juncture in its corporate history, navigating a strategic transition that could reshape its future. The proposed merger with Tvardi Therapeutics presents an opportunity for the company to diversify its pipeline and unlock potential shareholder value, but significant risks and uncertainties remain. The company's financial performance has been challenging, with declining revenues and ongoing losses, primarily due to the limited commercial success of KORSUVA injection and recent pricing and reimbursement changes.
The strategic pivot, including the discontinuation of the NP program and the significant workforce reduction, demonstrates Cara's commitment to exploring alternatives to maximize shareholder value. The proposed merger with Tvardi and the concurrent asset disposition to CSL Vifor represent a significant shift in Cara's business strategy and focus.
Investors should closely monitor Cara's progress in completing the merger, its ability to regain Nasdaq compliance, and the combined entity's ability to advance Tvardi's promising pipeline. The successful execution of this transformative transaction could be a pivotal moment for Cara Therapeutics as it seeks to redefine its role in the biopharmaceutical industry and address the challenges it has faced in recent years.