Good afternoon and welcome to Cara Therapeutics First Quarter 2020 Financial Results Conference Call. All participants are in a listen-only mode. There will be a question-and-answer session at the end. Please be advised that this call is being recorded at Cara's request. I would now like to turn the call over to the Cara team. Please proceed.

Good afternoon. This is Jack Hildick-Smith with Stern Investor Relations and welcome to Cara Therapeutics' first quarter 2020 financial results and update conference call. The news release became available just after 4:00 P.M. today and can be found on our website at www.caratherapeutics.com. You may also listen to a live webcast and replay of today's call on the Investors section of the website. Before we begin, let me remind you that statements made on today's call regarding matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of these forward-looking statements include statements concerning the expected timing of the data readouts from the company's ongoing clinical trials, the potential results of ongoing clinical trials, timing of future regulatory and development milestones for the company's product candidates, including the company's projected timeline for the submission of its first NDA, the potential for the company's product candidates to be alternatives in the therapeutic areas investigated, and the company's expected cash reach. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Risks are described more fully in Cara Therapeutics' filings with the Securities and Exchange Commission including the risk factors section of the company's annual report on Form 10-K for the year ended December 31st, 2019 and its other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements made in today's call speak only as of the date on which they were made. Care Therapeutics undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made. Participating on today's call are Dr. Derek Chalmers Cara President and CEO; and Mr. Rick Makara VP and Head of Accounting. I'll now turn the call over to Dr. Chalmers.

Thank you, Jack. Good afternoon everybody and thanks for joining us today. So, our first quarter and recent progress in many ways culminated in positive topline data from our KALM-2 to global Phase 3 trial of KORSUVA injection in hemodialysis patients which we announced a few weeks ago. We were and continue to be very pleased to observe a robust sustained antipruritic effect of KORSUVA Injection in these patients that was consistent with what we observed in our first U.S. Phase 3 trial our KALM-1 trial. With positive results from both our Phase 3 efficacy trials in hand and a large safety database ready to go, we're now focused on preparing our NDA and we indeed remain on track to submit that in the second half of this year. Before we go on, I'd like to commend the entire Cara team for delivering this data set on time during such a challenging period. As the COVID-19 pandemic has evolved, our team has continued to demonstrate great flexibility and dedication in order to advance our clinical development programs and our commercial preparations in keeping with our original time lines. As a result of the pandemic, we have implemented several clinical and operational measures to prioritize, the health and safety of patients our employees and study investigators and to minimize potential disruptions to our ongoing studies. These include such measures, as adopting SOPs for remote monitoring visits. And remote source document verification, for our clinical trials. I will note that, like many other companies the rate of enrollment in our ongoing clinical studies, has been affected somewhat, in response to the pandemic. However, almost all of our study sites remain open and are enrolling patients. And we are fortunate. Our projected clinical time lines remain, on track. And of course, we will…

Thanks, Derek. As a reminder, the full financial results for the first quarter 2020 can be found in our press release issued today at the market closed. For the first quarter of 2020 we reported a net loss of $28.9 million or $0.62 per basic and diluted share compared to a net loss of $22 million or $0.56 per basic and diluted share for the same quarter of 2019. In the first quarter of 2020, we recognized revenue of $8 million related to the Vifor collaboration agreement compared to $4.2 million during the same quarter in 2019. Revenue from the sale of clinical compound was approximately $100,000 in the first quarter of both 2020 and 2019. For the first quarter of 2020, we reported R&D expenses of $33.5 million compared to $23.6 million in the same period of 2019. The higher R&D expenses in 2020 were primarily due to a net increase in clinical trial costs, increases in stock compensation expense, payroll and related costs, conferences and travel and related costs. G&A expenses were $4.6 million during the first quarter of 2020 compared to $3.9 million in the same period of 2019. The increase in 2020 was primarily due to increases in legal and accounting fees, stock compensation expense, insurance costs, franchise taxes and payroll and related costs. Those increases were partially offset by a decrease in travel and related costs. Other income was $1 million in the first quarter of 2020 compared to $1.1 million in the same period of 2019. As of March 31, 2020, our cash, cash equivalents and marketable securities totaled $179.8 million compared to $218.2 million as of December 31, 2019. The decrease in the balance of cash and cash equivalents and marketable securities, primarily resulted from $38.3 million of cash used in operations, partially offset by $100,000 received from the exercising stock options. Turning to our financial guidance. Based on projected costs for our clinical development plans and timing expectations, we expect that our current cash, cash equivalents and marketable securities as of March 31, 2020 will be sufficient to fund our operations into the second half of 2020, 2021, not accounting for any potential milestone payments under the existing collaborations. I'll now turn the call back over to the operator for Q&A.

[Operator Instructions] Our first question comes from Jason Gerberry of Bank of America. Your line is open.

Hey, guys. Good evening and thank you for taking my questions. First question for me just given the COVID dynamics and where you are with your atopic derm and your PBC studies, is either study from a top line perspective at greater risk of getting pushed into 2021? Just any color you can provide and that would be helpful. And then second question is pertains to IV KORSUVA, and I'm ultimately wondering, how you model and think about patient adherence to therapy with this treatment? And as you think about the RCT and the open-label extension studies, how you think about the proportion of patients, who will be lifetime chronic therapy those that will potentially drop off or get shorter duration therapy? Ultimately how do you get at average days of therapy per patient? Just curious, how you think about that variable in the model. Thanks.

Yeah. Thanks, Jason. On the first of those on the COVID effect, so as I said, we have noticed a slowing in enrollment in post the AD trial and the PBC trial. And in both trials, we are actively moving to enable novel clinical sites that can help make up for some of that. So, so far in terms of time lines, we're not going to alter those. As I said, the interim comes when we're a 50% through on the AD, 50% through the entire targeted patient population there, and we're going to have that interim in the next, I don't know, what six weeks to the end of this quarter. So, we're on track for that. And based on that interim, as you know, that's an interim that's somewhat more adaptive than we've used in the past, and that we will have the ability to increase sample size on a targeted dose there specifically. So, with the new sites coming on board there, and where we are in enrolment, which is it's slowed, but it's not certainly not zero here in our current sites that we think we can still see top line data later in the year. But clearly, we'll adjust to that. PBC is the same way. We're trying to add novel sites there. That's been hindered a little due to the present environment. But states are opening up and that should help -- that should help to get these sites up and running. So at the minute, we're still on track to see that data this year. And then on the IV KORSUVA for patient adherence, I think we've discussed this before in terms of how the patients view this symptom. There have been numerous studies on this with very large patient samples. And consistently…

And Derek, just as a follow-up, because in the Phase 3, we've seen more shorter term exposure. But is it your sense that the open-label extension should mirror maybe the discontinuation we've seen in the shorter-term RCT trials and that maybe a good indicator for the proportion of patients who will go on and be adherent to a chronic therapy regimen?

Yes. And that is a possible indicator. That's true. We've certainly seen there are large percentage of patients from the RCT portion have moved into the open-label. So there's a motivation there to go on and take the medication, which is always a good sign that people would like to continue that. And the discontinuation rate, I do not have that in front of me in terms of the safety extensions, but I don't recall that being significantly different than what we've seen in the RCT portion of that, which is also a good sign that patients want to maintain their medication for that treatment. So, very high percentage moved out of the RCT in to open labels on both those safety extension. And I should say, we're winding down all of those safety trials right now and concluding those. So those are wrapping up. And again, getting back to the COVID influence, I think it was a combination of good planning from our clinical group, kind of, presciently putting in these SOPs to deal with closing down these databases. And a little bit of good fortune that we were wrapping up many of these trials, just as the pandemic was taking off. But we are in good shape for getting all that data from all the safety trials.

Got it. Great. Thank you.

Thanks, Jason.

Our next question comes from David Amsellem of Piper Sandler. Your line is open.

Thanks. So I just had a couple of questions. So I wanted to get your latest thoughts on how you're thinking about pricing and particularly wanted to get your thoughts on pricing of Oral KORSUVA here. Just refresh us on how you're thinking about and what kind of analogues you're using? And then this is somewhat related to price, but to the extent that you have a real signal in atopic dermatitis and you try to access that market. How do you think about how that influences your view on the price of the product? And how do you think about step-throughs in terms of what patients are going to go on first and what they could be forced through before they can access the agent?

Thanks, David. Yes. So, on pricing, we're still, obviously, a little early. Could be thinking about price points. There's going to be a number of variables to consider there as we go out and develop the oral and these somewhat different markets. Of course, I know you're well aware of our KORSUVA injection, we're part of the ESRD bundling reimbursement. And, as you know, there we're going to have our two years TDAPA ASP. And then, we're actively engaged, our group is actively engaged with CMS to create some sort of path, some clarity regarding post TDAPA reimbursement there. So that's ongoing and we're quite confident we have good engagement there and we think we'll get some answer as to how that's going to proceed. On the oral, of course, the vast majority of pre-dialysis patients are commercial insurance and certainly in AD. Those are going to be commercial insurance. So that's a slightly different piece there. And as you know, this is the first-in-class. Hopefully, we'll be the first label for treating moderate to severe pruritus with an oral medication here. So I think a reasonable analog might be other long-term symptomatic treatment. And again, I think, a differentiated pain drug might be a reasonable analog to look at there. Although, there still is an argument, its a large unmet need would be a first-in-class and that usually demands a premium pricing, but highly differentiated, non-abusable or less-abusable pain drugs that are out there in the $8,000, $10,000, $12,000 per year on launch. There hasn't been many recently not maybe the bottom end of that bookmark. And then at the top end a highly differentiated oral dermatological medication might be a test and that's getting you in the high-teens 20,000 annually. So that's the conversation. Just don't have enough information, yet to think about in great detail, but those might be the kind of bookends we'd be thinking of. In terms of the AD market and I think you and I have discussed this, a couple of times there, I mean, I think that's sorely missing, an oral medication to treat the primary symptom. And as you know on atopic derm the vast majority of that population is mild to moderate and those mild to moderate patients are really not candidates for biologics there both from a patient perspective and from a payer perspective and paying for that. So I think the only step through and it's one way to look at it, but it may be a combination here is probably topical corticosteroids and the mild to moderate population there. And then of course that becomes a practicality to applying that twice daily and then there's a long-term issue with that also. So I'd imagine that may be the only thing we see ahead of this. And then this easily usable oral medication twice a day to really systemically reduce pruritus would be the next line therapy we'd imagine.

Okay. That's helpful. And regarding AD just a quick follow-up. Do you intend to commercialize that yourself? Or is that something you look to find a partner for?

Yes. So you're really looking for kind of glass ball projections here David right? We're out a few years there. So I think our thought is we can easily handle -- we can accommodate launching the IV product into the dialysis population. That's something as you know that is manageable. And we think we've got a good partner in Vifor Fresenius that will help us with that launch and we think that's something that we can accommodate. And we think it's a very attractive product. Of course, when we move to the larger pruritus market and as you know there were some 20 million or so scripts broadly in the U.S. annually across all patient populations. That's a bigger nut for the small square the Cara as the crack right now. So at that point, most likely, we'd look for a strategic partnership when we get there someone with an established sales force would be appealing and that's some very attractive structures that have been employed and how those commercial relationships have been set up. So I think it's most likely when we get there we look for some, sort of, strategic arrangements. That really depends where we are in terms of revenues from our launch IV product and how we feel about that. But most likely we'll look for some strategic alliance on the larger oral market.

All right. Thanks, Derek.

Thank you, David.

Our next question comes from Chris Howerton of Jefferies. Your line is open.

Great. Thank you. Hey, Derek. So I think for me it was just a really quick question. So in the past you've described the aspirations certainly for Oral KORSUVA to just get a broad antipruritic label. So just curious, again, if you could walk us through potential approvals in single indications and how does that translate to a broad just antipruritic label?

Yes. Thanks Chris. Yes. Look as I said at the beginning here, we think we've got a mechanism with this drug where we're not focused on one specific pruritogen and one specific site again that may be elevated in a specific clinical population. It's been widely accepted for many decades that Peripheral Kappa receptors when activated can diminish C-fiber activity, sensory fiber activity very, very effectively. And so, as that's the final conveyor of the signal from the epidermis and the dermis then we should have a mechanism that should be broadly applicable. Now there's some good evidence for that. Obviously we think and the evidence bears that were highly effective in CKD-associated pruritus. There's good evidence from the Japanese drug that's on the market there. They can treat liver disease-associated pruritus. And obviously those have different profiles in terms of elevated cytokines within those patients. So that's evidence that perhaps we're thinking the right way. And then we kind of looked at it the way that people in the past have looked at the pain medication regulatory approach. And not I should say there in specific guidance at this point for pruritus. But in pain as you know to get that broader label, you would satisfy the division that you have activity across these various subtypes of pain from inflammatory to neuropathic to visceral. And we thought about it the same way here and our clinical development group has done a great job and strategically thinking about this and which patient subgroups would be useful to add to that argument. And right now we have end organ disease pruritus with CKD and CLD. We're clearly moving into dermatological if you like local inflammatory pruritus with atopic and we may look at some other subgroups that provide some information in…

Okay. And I apologize, I should know this, but I just wanted to -- are you expecting an advisory committee for the IV formulation of KORSUVA?

Well that's I have no information that at this point not something that they'll decide upon review. The module is a novel chemical entity. There might be a higher likelihood for that. But we have no information at this one.

Okay.

Thanks, Chris.

Yes. Thanks, Derek. Appreciate you taking the questions.

Appreciate it. Thank you.

Our next question comes from Annabel Samimy of Stifel. Your line is open.

This is Avatar Jones [ph] on for Annabel tonight. Two questions regarding KALM-2. Firstly, have you had an opportunity to pull out any of the additional secondary endpoints such as the completer response? And secondly, have any of the KALM-2 patients rolled into the open-label or extension studies? And if so, what percent did you see there? Thank you.

Thank you, Avatar. It's Derek here. The answers here are pretty short. We haven't actually done any additional analysis on that. And this is a course of dedicated but smaller force. We've moved on to close. And as I mentioned some of these safety databases, we really need to get done and our team to get done for our NDA submission. So we haven't yet done extensive sub-analysis and all the other secondary endpoints other than and we mentioned that's on the KALM-2, but we did look in terms of the quality of life secondary piece, we did look at the individual domains and there and confirmed that we did indeed have statistically significant reductions in the pruritus related domains on both those quality of life scales. So that's reassuring and ties in with what we've seen on the primaries. But we haven't had a great deal of time to get through all of that. We will be projecting -- presenting that data later in the year, the nephrology meeting in the fall. So there will be additional sub-analysis as presented -- that's presented there. What was your second question Avatar?

The second was on KALM-2 patients rolling into an open-label, what percentage of patients there had rolled into label?

Yes. No it was high in both KALM-1 and KALM-2 is a high percentage of patients. I don't have the precise number in front of me, but it was a high percentage that rolled forward into that open label studies. And both of those studies are ramping up right now.

Okay. And if I could squeeze one more in there. Just a little -- could you provide a little color on your preparations for commercialization with IV KORSUVA in the dialysis population?

Yes. So yes, that's something we've been working on for a while actually. So as I said on the call, we've already established. We're expanding actually our national MSL group here at Cara under the guidance of our CMO, Jo Goncalves. And we're working to broaden our KOL universe increased awareness of CKD-associated pruritus. They've been working hard. They're establishing regional and national advisory boards, their sponsoring strategic education opportunities and putting CME symposia. In fact, we had one recently at the NKF's Spring Clinical Meeting in March. And we -- as you know we're improving and increasing our KORSUVA publication footprint. We published KALM-1 in New England Journal at the end of last year and you'll see continuous publications throughout this year and preparation for launch. Our MSL team has established going has been active on the commercial preparation say broadly we've already initiated things like state licensing processing and application. We have established manufacturing agreements with major CMOs. We've got commercial scale manufacturing enabled. We are currently screening and hiring senior commercial hires and sales marketing market access. So, all of this is underway and constantly developing in preparation for our 2020-2021 launch.

Excellent. Thanks guys.

Thanks.

Our next question comes from Alan Carr of Needham & Company. Your line is open.

Hi, thanks for taking the questions. I have couple of them. Your latest thoughts on Phase III strategy for the oral formulation CKD number of trials and that sort of thing and maybe the size if that's changed any from previous speculations? And then also around your ex-U.S. partnerships, as you've got one in Korea or Japan and then over in Europe what is your expectations in terms of revenue stream from the milestone payments from them in the near-term? I think it's -- if I'm wrong I think it's small single-digit from the two Asian ones, but you have some regulatory milestones for Vifor Fresenius. One thing those are tied to a submission or if they're around approval?

Thanks Alan. Yes, so -- well, let me take the second first as probably more less speculative easier to deal with the factor. So, yes, in terms of wrapping your stream from the various partnerships, first of all, all of them are designed. So we see appropriate royalties which are obviously tiered by sales, but they're all double-digit -- starting in reasonable double-digits. And all of them other than the Korean also has commercial milestones still enter them. You're right, in terms of regulatory milestone the completion of the NDA, there are also a set of milestones. We've said publicly before for Fresenius, that's €30 million related to regulatory and there's approximately another several million in milestones related to our agreement in Japan with Maruishi and with CKD in South Korea. So, that's kind of the revenue stream there in the near term. With Vifor Fresenius we have approximately $440 million in commercial milestones on top of the royalty there on ex-U.S. sales. So, that's also significant. And there is a commercial milestone associated with the Maruishi agreement also. So, those are all structured--

Is the regulatory milestone the $30 million is that one or is that multiple milestones? And is it just approval or is it more--

Yes. No, that's really approval in the U.S. and approval in Europe. That's the €30 million on Vifor Fresenius. And then on the Phase III oral, yes, I mean really the same answer as we had last time the great position we're in with our Phase II data in hand is that we now have a set of empirical data that we can model to make sure we size that Phase III oral trial appropriately. And we discussed this last time. The unusual aspect of the Phase 2 oral data was a higher placebo response. Certainly, higher than we've seen in the IV trials and hemodialysis patients. And our thoughts there were a couple and we think we can make amendments to the design that can address those couple of thoughts. One was the earlier stage patients, they may have more liver pruritus. So we can have longer run out periods be more careful make sure their pruritus is consistent. We can certainly build out into a design Phase 3 design. And we're going to move from a 3:1 randomization 3.1:1 so that alone should help in terms of placebo response. And then we're not going to use any size. And as you know, a reasonable number of this actually use in the Phase 2 oral trial had previous experience with KORSUVA either from the KALM-1 trial or the Phase 2 IV trial. And so we think there might be some expectation by as built in there. So using de novo site is an obvious solution. And there are a few other things we're going to take into consideration to try and help with that placebo response. But nevertheless, taking that empirical data and modeling, if you like a worst-case scenario, which is the beautiful thing about running stage development programs as we have data – real data to model on. So we can take that variability we saw there, and Phase 2 simply model that app for a Phase 3 study and assume the worst-case scenario, but hope for the best. And as you know, we like to check our assumptions on these larger trials very large trial we've ran for the last three years. We've incorporated an interim assessment at 50% completion and that really is a terrific indicator of whether your assumptions are correct. In fact, in all three of the latest of those interim assessments we have the primary endpoint. And so we – that's how we're going to deal with it. And size-wise, I think I've said that, before it really depends on so conservative, we want to be on our prior assumptions, but at a reasonable conservatively, I mean, I don't have the numbers right in front, but I do recall thesis in the 200 million to 250 million, so it's a very reasonable sample size per group to get a very good powering on that trial. So we're in a great position to design that trial appropriately.

Are you thinking one or two? I think before you – you thought there might be two Phase 3s. Is that –

Well, I'm thinking one, but it really depends on what the FDA is thinking. So I think there's a case to be made for one here, but obviously that's a decision we'd have to have in consultation with the FDA. As you know, we have many, many exposures in CKD patients. And so there maybe a case, but that's a conversation for the FDA and an FDA decision on that.

Okay. Thanks for taking my questions.

All right, Alan. Thank you.

Our next question comes from Esther Hong of Janney. Your line is open.

Hi. Thanks for taking my questions. So with IV KORSUVA potentially launching 2021 followed later by other potential approvals for Oral KORSUVA. Can you talk about patent protection other types of protection? Right now, it looks like current patent expires through 2027. And so that gives between six to seven years of current patent protection. So, it sounds like applications have been filed. Can you speak about those the status of those? Have any of those been granted? Are they close to being granted? Any update there? Thanks.

Yeah. Thanks, Esther. Yes. Now you're correct, we have composition of matter that do run through 2027, but recall with that extension on those. So with Hatch-Waxman on that, we go to 2032 which we'll get is our fill 10 years on the market if you like, both with IV and I would suspect with oral for our first label there, which would probably be a year, behind the IV. But you're also correct, we have multiple other applications. So we've built several fences around us IP estate-related to usage. And there are also patents related to specific formulations, as part of that they run into the 20, 30s mid to late. And so, we've built as much protection around that, as we can. But we will get the benefit of Hatch-Waxman. So we'll get our full 10 years on the IV and the oral.

Great. Thank you.

Thank you, Esther.

There are no further questions. I like to turn the call back over to the Cara team. Derek Chalmers Great. Thank you, Michelle. So thank you everybody. Thanks for participating, in today's call. I also want to thank the whole Cara team, our study investigators, all of the patients who continue to participate in our clinical trials. And we certainly look forward to updating you again very, very soon. So be safe and healthy everybody. Thank you for calling in today. Take care.

Ladies and gentlemen, this concludes today's call. Thank you again for your participation. You may now disconnect. Have a great day.