Business Overview and History
Cara Therapeutics, Inc. (NASDAQ:CARA) is a development-stage biopharmaceutical company that has been at the forefront of a new treatment paradigm to improve the lives of patients suffering from chronic pruritus. The company’s journey has been marked by both successes and challenges, as it navigates the complexities of the healthcare industry and explores strategic alternatives to maximize shareholder value.
Cara Therapeutics was incorporated and commenced operations in 2004, with its primary activities focused on developing its lead product and product candidates, including conducting preclinical studies and clinical trials of difelikefalin-based product candidates and raising capital. The company’s efforts have been centered around advancing its proprietary compound, difelikefalin, which is a selective, predominantly peripherally acting, non-scheduled kappa opioid receptor agonist that acts on the peripheral neurons responsible for sensing pruritus.
To date, Cara Therapeutics 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 earned a total of $138.3 million in clinical development or regulatory milestone payments, clinical compound and commercial compound sales from certain license agreements, collaborative revenue from its share of the profit generated by KORSUVA injection sales, and royalty revenue.
In August 2021, the company received FDA approval for KORSUVA difelikefalin injection, or KORSUVA injection, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. The commercial launch of KORSUVA injection began in the United States in April 2022, and the company began recording the associated profit-sharing revenues in the second quarter of 2022. Additionally, 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 chronic kidney disease in adult hemodialysis patients.
However, the commercial success of KORSUVA injection has been limited, as the company reported that in the second quarter of 2024, CSL Vifor, the company’s partner for the commercialization of KORSUVA injection in the United States, recorded negative net sales 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, the company recorded a negative profit share amount for that quarter.
In January 2024, the company announced a prioritization of its pipeline to focus its resources on the late-stage clinical program evaluating oral difelikefalin in chronic pruritus associated with notalgia paresthetica (NP) and terminate its Phase 3 clinical program evaluating oral difelikefalin in pruritus associated with advanced chronic kidney disease. This strategic decision was made in an effort to streamline the company’s operations and conserve cash.
However, in June 2024, the company announced that it was discontinuing the clinical program in NP following the outcome from the dose-finding Part A of the KOURAGE-1 study, in which oral difelikefalin did not demonstrate a meaningful clinical benefit at any dose compared to placebo. This decision was not related to any safety or medical issues, or negative regulatory feedback related to the NP program.
Given the setbacks in its clinical development programs, Cara Therapeutics announced in June 2024 that it is undertaking a comprehensive exploration of strategic alternatives focused on maximizing shareholder value. The company has engaged Piper Sandler & Co. to act as its financial advisor for this process, and there can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions.
Financial Performance and Liquidity
Cara Therapeutics has incurred significant operating and net losses since its inception. For the year ended December 31, 2023, the company reported a net loss of $118.5 million, compared to a net loss of $85.5 million for the year ended December 31, 2022, and a net loss of $88.4 million for the year ended December 31, 2021.
The company’s revenue has primarily been generated from its collaborative revenue from the profit-sharing arrangement with CSL Vifor for the sales of KORSUVA injection in the United States, commercial supply revenue from the sale of KORSUVA injection to CSL Vifor, and royalty revenue from the sales of Kapruvia in Europe. However, the company’s revenue has been declining, with total revenue of $20.97 million for the year ended December 31, 2023, compared to $41.87 million for the year ended December 31, 2022, and $23.03 million for the year ended December 31, 2021.
For the most recent quarter ended September 30, 2024, the company reported revenue of $2.556 million, a net loss of $12.476 million, and negative operating and free cash flows of $13.984 million. The decrease in revenue and cash flows was primarily due to negative net sales recorded by CSL Vifor for KORSUVA injection in the second quarter of 2024, which resulted in a negative profit share amount for the company.
As of September 30, 2024, the company had $42.04 million in unrestricted cash and cash equivalents and marketable securities, and an accumulated deficit of $747.93 million. The company’s cash runway is expected to extend into 2026, following the implementation of its streamlined operating plan and workforce reductions.
The company’s financial position as of September 30, 2024, shows a debt-to-equity ratio of 4.83, a current ratio of 4.77, and a quick ratio of 4.71. These ratios indicate that while the company has a relatively high level of debt compared to equity, it maintains a strong short-term liquidity position.
In the fourth quarter of 2023, Cara Therapeutics entered into a royalty purchase and sale agreement with HCR, pursuant to which it sold its future royalties and milestone payments from the ex-US sales of KORSUVA/Kapruvia to HCR in exchange for upfront payments. This agreement has provided additional liquidity to the company but may impact future revenue streams.
Regulatory and Operational Challenges
Cara Therapeutics has faced several regulatory and operational challenges throughout its history. In December 2023, the company announced the outcome from the dose-finding Part A of the KIND-1 study evaluating the efficacy and safety of oral difelikefalin in moderate-to-severe pruritus associated with atopic dermatitis, which resulted in the company’s decision to discontinue the clinical program in atopic dermatitis.
The company has also struggled to maintain compliance with the continued listing standards of the Nasdaq Capital Market. On February 1, 2024, the company received a letter from Nasdaq notifying it that the closing bid price for its common stock was below $1 for the previous 30 consecutive business day periods. The company was provided an initial period of 180 calendar days, or until July 30, 2024, to regain compliance with Nasdaq’s bid price requirement. On July 31, 2024, Nasdaq granted the company an additional 180 calendar days, or until January 27, 2025, to regain compliance with the minimum closing bid price requirement.
Additionally, as of September 30, 2024, the company was not in compliance with Nasdaq’s Shareholders Equity Requirement and did not meet the Alternative Standards. If the company continues to not be in compliance or if it fails to meet other Nasdaq continuing listing requirements, its common stock may be subject to delisting, and the company may become subject to delisting proceedings.
Product Portfolio and Market Performance
Cara Therapeutics has two main product segments: its commercial product KORSUVA injection and its former clinical-stage product candidate oral difelikefalin.
KORSUVA injection, approved by the FDA in August 2021, is indicated for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. The product has also been approved in various international markets under the brand name Kapruvia. However, the commercial performance of KORSUVA injection has been disappointing. The unfavorable CMS reimbursement changes for KORSUVA injection after the expiration of the Transition Drug Add-on Payment Adjustment in April 2024 have resulted in a lack of sequential revenue growth for the product since its launch. As a result, Cara Therapeutics expects no meaningful revenue contribution from KORSUVA injection going forward.
Oral difelikefalin was the company’s lead clinical-stage product candidate, being developed for the treatment of pruritus in various indications. However, following the discontinuation of the notalgia paresthetica (NP) program in June 2024, Cara Therapeutics has shifted away from further development of oral difelikefalin. This decision has led to a significant reduction in the company’s workforce and a substantial decrease in research and development expenses.
Exploration of Strategic Alternatives
In June 2024, Cara Therapeutics announced that it is undertaking a comprehensive exploration of strategic alternatives focused on maximizing shareholder value. The company has engaged Piper Sandler & Co. to act as its financial advisor for this process. The company has not set a timetable for the completion of this strategic review process, and there can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions.
The value to stockholders in the event of a strategic transaction or dissolution may depend on the extent to which the company will be able to successfully satisfy its existing contractual obligations to third parties and regulatory commitments on favorable terms, which may include the outcome of its negotiations to reduce or terminate such commitments.
Risks and Uncertainties
Cara Therapeutics faces a number of risks and uncertainties that could adversely affect its business and financial condition. These include the potential delisting of its common stock from the Nasdaq Capital Market, the company’s ability to raise additional financing, and the successful development and commercialization of any future product candidates, should the company resume development activities.
Additionally, the company is subject to stringent and evolving data privacy and security laws, regulations, and standards, both in the United States and internationally, which could lead to regulatory investigations or actions, litigation, fines, and penalties, and disrupt the company’s business operations.
The company’s ability to protect its proprietary rights and intellectual property is also critical to its success, as it faces significant competition from other pharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations.
Industry Trends and Market Outlook
The pruritus treatment market, in which Cara Therapeutics operates, is expected to grow at a compound annual growth rate (CAGR) of 5.2% from 2021 to 2028. This growth is primarily driven by the increasing prevalence of chronic skin conditions and rising awareness about available treatment options. However, Cara Therapeutics’ ability to capitalize on this market growth remains uncertain given its current strategic review process and the challenges faced with its product portfolio.
Conclusion
Cara Therapeutics has navigated a challenging path in its pursuit of improving the lives of patients suffering from chronic pruritus. The company’s recent setbacks in its clinical development programs and the exploration of strategic alternatives to maximize shareholder value underscore the significant uncertainties and risks it faces.
As the company continues to evaluate its options, it will need to carefully balance its efforts to satisfy its existing obligations, protect its intellectual property, and potentially resume the development of new product candidates, all while addressing the financial and operational challenges that have hindered its progress. The outcome of the strategic review process and the company’s ability to overcome the obstacles that have stood in its way will be crucial in determining its future direction and potential for recovery in the biopharmaceutical industry.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.