Good afternoon and welcome to Cara Therapeutics' Second Quarter 2020 Financial Results Conference Call. All participants are now in 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' second 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 most filed quarterly report on Form 10-Q 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 this afternoon. So, in the second quarter, we have made significant advancements in our development programs for both KORSUVA Injection and Oral KORSUVA across a range of pruritic indications. In April, we were pleased to report positive topline data from the KALM-2 trial, our second pivotal Phase 3 trial of KORSUVA Injection for chronic kidney disease associated pruritus or CKD-AP in hemodialysis patients. The robust antipruritic efficacy of KORSUVA Injection in this study was consistent with that observed in our first Phase 3 KALM-1 trial and we remain on track to submit our NDA in the fourth quarter of this year. We're also making good progress and advancing the development of Oral KORSUVA across a number of patient populations where pruritis continues to be a significant unmet need Recently, in Q2, we completed a planned interim statistical analysis of our KARE Phase 2 dose ranging trial of Oral KORSUVA for the treatment of moderate to severe pruritus in atopic dermatitis patients. The sample size adjustment post analysis of approximately 28% will allow us to maintain the pre specified desired statistical powering of that study, and we project to complete enrollment in the fourth quarter of this year. Due to the ongoing COVID-19 pandemic and in accordance with the FDA's updated guidance for conducting clinical trials, we have implemented numerous clinical and operational measures to prioritize the health and safety of patients, of our employees, and study investigators and minimize potential disruptions to our ongoing clinical studies. Although we experienced some COVID-related closure of certain clinical sites for ongoing Phase 2 studies in Q2, due to the entire Cara team's continued dedication and very hard work, we've now completed all clinical trials and closed all databases for our NDA submission…

Thank you, Derek. As a reminder, the full financial results for the second quarter of 2020 can be in our press release that was issued today after the market closed. For the second quarter of 2020, we reported net loss of $25.1 million $0.54 per basic and diluted share compared to a net loss of $23 million or $0.58 per basic and diluted share for the same quarter of 2019. In the second quarter of 2020, we recognize revenue of $4.5 million related to Vifor Fresenius of the license agreement compared to $5.2 million during the same quarter in 2019. Also in the second quarter of 2020, we recognized approximately $600,000 of license and milestone revenue related to a milestone payment received from CKD Pharmaceutical Corp. Additionally, we recognized approximately $500,000 of clinical compound revenue in the sales of clinical compound in the second quarter of 2022 to Maruishi and Vifor. There were no sales or clinical compound or milestone revenue for the three months ending June 30th, 2019. For the second quarter of 2020, we reported R&D expense of $26.1 million compared to $24.4 million in the same period of 2019. The higher and higher R&D expense in 2020 were primarily due to increases in stock-based compensation expense, payroll and related costs, and cost of clinical compound sales, partially offset by a net decrease in clinical trial cost, conferences, and travel and related costs. G&A expenses were $5.4 million during the second quarter of 2020 compared to 5 million in the same period of 2019. The increase in 2020 was primarily due to increases in consultant's costs, legal fees, insurance costs, partially offset by a decrease in stock-based compensation expense. Other income was approximately $600,000 in the second quarter of 2020 compared to approximate $900,000 in the same period of 2019; the decrease is due to lower interest income on our investments in marketable securities. As of June 30th, 2020, cash, cash equivalents, and marketable securities totaled $153 million compared to $218.2 million as of December 31st, 2019. The decrease primarily resulted from cash used in operations, slightly offset by proceeds from the exercise of stock options. Turning to our financial guidance, based on projected costs for our clinical development plans, we expect that our cash, cash equivalents, and marketable securities as of June 30th, 2020, will be sufficient to fund our operations into the second half of 2021 not accounting for any potential milestone payments under existing collaboration. Now, I'll turn call back over to the operator for Q&A.

Jimmy, you want to pick up on the Q&A. Jimmy? Jack, can you direct the Q&A from your line?

Apologies for the wait. Now, for the Q&A session. [Operator Instructions] Our first question comes from Chris Howerton with Jefferies. Your line is now open.

Great. Thanks for taking the questions. Appreciate it. So, I guess, first, just kind of thinking about financials moving forward, how should we expect the G&A line to change kind of going into potential approval and NDA submission and obviously, commercial preparations? As a corollary to that, what have you disclosed about potential milestones for approval with your agreement with Fresenius? And then the third question for me is I'm not sure if we discussed this in the past, Derek, and I apologize If I'm just forgetting but with respect to the sample size readjustment for the atopic dermatitis trial, what specifically do you think was different in terms of your initial empowering assumptions versus what you actually observed within the trial? Thanks again.

Hi, Chris. That was expertly done to get three questions in there. So, let me start with that -- let me start on the financials and the milestone related question. So, we've talked about this before and it's certainly out there and publicly available, this $30 million and approval milestones associated with the Vifor Fresenius agreement and as Rick highlighted again, of course, those are not incorporated into our one-way projection based on current finances. What is incorporated in there in terms of runway projection is projected commercial costs and of course, [MSA] [ph] costs going through into 2021. So, those are already in there. I mean, we don't, as you know, guide quarter-to-quarter on changes in particular financial subgroups, but what I can tell you is the majority of that commercial cost is going to be incurred at approval. So, all of that budgeting is there, Chris, all the way up to approval and we wouldn't fully activate a salesforce until we have the label approval. On the AD side -- on the sample size adjustment here, it was -- with -- it’s a new classification, if you like, as you know, we've dominantly been generating data in CKD-associated pruritus and this is our first patient group we could categorize as dermatological inflammatory. And so we made some assumptions based on a sample size, but of course, we made them from a different patient category in CKD. So, the sample size increase here was not to be unexpected. That's one of the reasons as you know; we employ this strategy and basically all of our large clinical trials to mitigate the risk of a new mess here. So, the other aspect of that sample size re-estimation is, for the first time we've looked at two endpoints simultaneously, one of which, of course, is the regulatory approval endpoint, [that’s the four point] [ph] point responder. So, that's the higher threshold if you like, endpoint. So and looking at both of those is perhaps not surprising that we see a slight adjustment in sample size. And we should say at the end of the day, if this ends up being 1 dose versus placebo sample size adjustment, we're still at a sample size of there'll be approximately 125 per group, which is less than that we've used in our Phase 3 studies in CKD associated pruritus. So, we think that augurs well in terms of the size of that effect, it remains to be determined of course when we get the topline data, but that sample size adjustment is in line with what we'd expect for patient reported outcome, such as, such as pruritus.

Right. Yes. Okay. And what was -- there was -- what was the maximum size that you could have increased to was more than you did, right?

Yes, yes. It could have gone up much higher with that. I think -- total patient population could have been close to 500 on a trial. So, we definitely didn't get the maximum upsizing advice from the IDMC.

Okay. All right. Well, very good. Well, thank you for taking the questions and I'll hop back in the queue.

Thanks Chris. Thanks for dialing in.

Thank you. And our next question comes from David Amsellem with Piper Sandler. Your line is now open.

Hello and thanks. So, just a couple first. Derek, can you just give us your updated thoughts on pricing for IV KORSUVA and maybe help us in your thought process regarding what analogs, comparators, et cetera might make sense here. So, that's number one. And then secondly, I had a question about the PBC program. So to the extent that you do show proof-of-concept in that program, do you expect that a pivotal study would factor in a wider population of liver disease patients? Or do you expect that the FDA will have you remain on the narrower PBC pathway in terms of indication? Thanks.

Thanks, David. Those are good questions. So I think we've had this kind of general discussion before on the pricing analogs, if you like, for KORSUVA injection, of course, that remains to be determined. It's still very early. We certainly need to have a label, first of all, before we get to the details of that. But that -- I think I've said in the past, I think, there's some relevant comparators there that if you like, serious symptom treatment, take the drug, and it might be analogous to something like a highly differentiated pain drug. In terms of price point, of course, it's going to be part of the TDAPA system related to the ESRD bundle payment. And there we don't really have a lot -- as you're well aware, a lot of examples to look at in terms of available price point, there is one drug that's run through the TDAPA system, and that's Amgen’s Parsabiv which is about to end its TDAPA period this year. That drug priced in the high teens approximately 17,000 annually and as you're well aware, of course, that was really an intravenous formulation of a calcimimetic for which there are other alternatives available. So that might be one price point that's certainly been out there and being paid by CMS. Interestingly enough, in the latest update to the ESRD bundle legislation, which was published in July, CMS is proposing to provide additional monies to pay for Parsabiv post-TDAPA. And if you work that out, based on the per session increasing and reimbursement there looks like it's approximately $800 million annually. So that's good news and the first time we've actually seen some data related to where CMS may go and post-TDAPA funding. But I think we said in the past, somewhere between…

Thanks. That's all I have. I’ll back in line.

[indiscernible]

No, that's great. Thanks.

Thank you. Our next question comes from Annabel Samimy with Stifel. Your line is now open.

Hi, all. Thanks for taking my question. So I see that you're not going to have the 3 -- Phase 3 -- I'm sorry, the post Phase 2 meeting with FDA about the Phase 3 program for pre-dialysis until first quarter 2021, but you're in advanced going to start your safety studies. So can you just describe that what exactly do they think the safety study is going to entail for this specific program? How much are you going to be able to draw from IV? And as a second question, when it comes to the discussions with FDA with regard to the endpoints that you're looking at, can you just confirm for IV KORSUVA that those are the secondary endpoints are not regulatory endpoints, but rather more to characterize clinical benefits for the label? Will FDA be looking at those on a pool basis, where are you going to be presenting them on a pool basis, any color there would be great? Thank you.

Thanks, Annabel. So yes, so the end of Phase 2 meeting for Oral KORSUVA, we will be requesting that meeting next quarter. But there's a timeline associated with getting that scheduling from the FDA. So we do expect that to happen most likely in Q1. So in order to get ahead of that timeline, if you like to get that NDA submission, when we want to get that NDA submission, and clearly one of the bottlenecks in these programs is the one year exposure data. So our plan is to start that open label safety trial as quickly as we can next quarter even ahead of that meeting where we really don't need any definition or further feedback on endpoints where we're looking for safety exposures, and the appropriate patient population. So that's the idea of that sequencing, get ahead of the timeline, start the long-term exposures early and then clarify what we need to clarify with the FDA at the subsequent meeting. We also wanted to make sure CMC reviews an important component for that end of Phase 2 meeting. And that timeline allows us to ensure that we have completed, essentially all the analytical and specification reviews, we need to the Phase 3 standards to make sure we can have a successful end of Phase 2 meeting. So that's part of that timeline as well. And what was your other question -- oh, yes. So the other part of that, of course, yes, is that we already essentially have safety exposures from our hemodialysis patient population. So obviously, that will be part of our end of Phase 2 discussion as to use in those patients as part of our overall exposure numbers since essentially we're looking at the end stage versus earlier stage for the Oral KORSUVA program. So that will be part of the discussion and theoretically it has certainly been the case with other applications where there's a change in formulation, but within the same patient population, it may be possible that we could conduct that registration program with one pivotal trials, not certain. Again, it's an item for discussion with the FDA, but certainly something we think is possible and worth raising based on the precedent we see it there from other previous programs. So that will be something we'll be looking at. And then your final question, Annabel was on endpoints for the oral?

Yes.

Yes. So the endpoints for the oral, as you know, we conducted our Phase 2 trial or dose range in trial using our most sensitive endpoints to find the optimal dose and that's the continuous endpoint of NRS measuring itch difference from baseline included for secondary there, which was the three-point responder, which -- and as patient population we've defined by psychometric analysis is as the level for clinical meaningfulness for CKD patients experiencing moderate to severe psoriasis. So that will be the proposed registration endpoint the three-point responder endpoint for the oral.

Okay, sorry, I actually meant for KALM-2, but let me just put that aside for a minute. I just wanted to follow-up on something you said for the safety studies for this pre-dialysis population. Given that hemodialysis patients are essentially -- the drug is essentially cleared for them. Do you think there might be any different metrics that they're looking at in this pre-dialysis population given they have compromised kidney function?

No, we've run the PK analysis and some detail across each of these predefined pre-dialysis stages for CKD. We know precisely how is excreted and these various stages. Hence, the ones daily administration suffices for CKD pre-dialysis patients whereas, and as you know, just to reiterate for everyone who is forgotten here, of course, could serve as a created almost exclusively via the kidney. And whereas when we move away from these, dialysis and pre-dialysis CKD patients to normal, if you like kidney functioning patients such as an entire session we offer that those in paradigm to BID so they get their drug twice daily. So we have that modeled, across the various populations and we know exactly how it's excluded. We know what it takes to get to steady state and each of those populations and that's helped define the dose and paradigm you see in these various Phase2 studies.

Okay. Got it. Thank you.

Thanks, Annabel.

Thank you. Our next question comes from Jason Gerberry with Bank of America. Your line is now open.

Hey, good evening, and thanks for taking my questions. Derek, can you tell us a little bit about how you think about the pivot to going commercial next year in terms of when you'll start to incur some of the commercialization costs versus, bringing folks on a contingency basis? Would you expect, we really won't start to see that spend incurred until, and, of course, who was approved? And then, you know, I appreciate the commentary on the cash runway. Can you talk about are there any alternative financing measures on the table mindful that your next sort of natural catalysts would presumably be the Phase 2b data? So this sort of wondering how you're sort of thinking about managing some of these puts and takes in terms of the capital or runway? Thanks.

Yes. Thanks, Jason. Thanks for those questions. So, in terms of preparations, pre commercial activities they've been underway for quite some time at the company. So we've established -- actually we're expanding our national MSL team, who are working to broaden our KOL universe, increase awareness of CKD-AP they've been establishing regional national advisory boards. The usual sponsor in our strategic education opportunities, including CME symposia at the appropriate meetings and actually NKF group’s adopted well to the current environment. And those have been virtual essentially since Q2. And we've been increasing our publication footprint to support you know, dissemination of information out there for nephrologists. So all that's been underway for quite some time leading back into early last year, we've also established our commercial manufacturing capabilities with our CMO that's in place and ready to roll. And we recently completed our first senior commercial hire. So we're not moving down into the larger numbers required for sales force, as I said earlier, until we get all the way to approve on this, but we're filling in the senior management positions and all that's included in the projections that we've talked about today. We've initiated, you know, licensing applications through for all of the stage, we already have approval on CT. And we continue with these, cross functional plans to make sure we're ready for launch but the biggest uptake in terms of band and that commercial, of course, comes with the introduction of the sales force, and as I said earlier, that's not going to come until approval. So that's a 2021 event. So until that point, this is a relatively modest. And you're going to see here going forward through into 2021. In terms of finance, and as you know, we've been, I think, quite opportunistic and going to the capital markets, usually, it's been catalyst driven follow on offerings where we see a response in our -- in our valuation, and we've gone to the capital markets for that, if we have a good balance sheet at the minute going forward, but we are always looking for opportunities, Jason. And if it's appropriate, and there's an agreement that can propel us to where we need to be across our various programs, either involve in territory, or with a new partner, perhaps, where appropriate, we are certainly looking at those opportunities. So we're open to those. There are possibilities there and we're just going to look for the most valuable mechanism and means to make sure we have the appropriate balance sheet when this -- when this stroke is up for launching.

Okay. And if I can squeeze a follow-up in the mechanics of getting your to adapt add-on payment status. How much time kind of post approval do you think? And to what extent you might think there could be a lag factor in terms of getting here to adapt past payment status approved?

Yes. That is relatively quick, but it could add, it could be a case of a quarter in terms of extra timeline that may be necessary to make sure we have that, all tied up and ready to go. So that could turn into an additional period.

Got it. Thanks.

Thanks, Jason.

Thank you. Our next question comes from Alan Carr with Needham & Company. Your line is now open.

Thanks for taking my questions. Tell us bit more about the safety trial, the overall safety challenge. Can you give us a sense of the size of that? And then, actually, can you also elaborate a bit on what's gating for that in the Phase 2 meeting -- the oral formulation in CKD? Thank you.

Great. Thanks, Alan. Let me take the second one first, because I think it kind of mentioned this, and I'm in response to David. But you know, of course, in Phase 2, we want to clarify our clinical plan, make sure that the FDA is in agreement with endpoints and design and so on. But a big part of that meaning of course, is CMC related. And at this point, we want to make sure we have appropriate analyticals specification analysis for our oral formulations but meet Phase 3 through a commercial level. So that's what we're running through at the minute. That's really the gating factor. And that's as we have to manufacturer at scale for those. And that whole process has been transferred from our biotech partner, which is Enteris over to our CMO. So that process is well underway, but that it's important that we have that complete prior to the meeting. So that's -- that's the main element we need to get. And that fits in nicely with the timeline. I've indicated here, we're applying end of the Phase 2 next quarter, based on the schedule and timeline we know what the FDA, we should have everything complete in time for that -- for that Q1 and Phase 2 meeting. And then on your first question, I wish I had more detail to tell you that something that's underway in our clinical team in terms of the design of that open-label safety trial is likely to be 200 to 250 patients, I would imagine to make sure we can get that -- the numbers where the need to be for the long term exposure there and considering potential dropout rates, but I don't -- there is no final design element ready for me to really at this point. But we will certainly disclose that when we start the study.

Okay. Thanks for taking my questions.

Thanks, Alan.

Thank you. [Operator Instructions] Our next question comes from Ben Jim [ph] with Canaccord. Your line is now open.

Hi. Thanks for taking my questions. Derek, for atopic dermatitis and liver, how often are the enrolled patients physically checking into the clinic? And are you seeing a difference in enrollment hesitancy or pace between the two trials? And then my second question along the lines of new hires, can you update us on the search for new CFO? Thanks.

Yes, thanks, Ben. So, I mentioned this in the prepared remarks that we have seen some effects in terms of the COVID-19 environment on enrollment, at both the AD and the PBC related Phase 2 for both of those files, there's been issues with opening up new sites or indeed losing some sites, particularly end of Q1 and Q2. But for AD, we've actually seen a very nice rebound in terms of enrollment rates. And we have opened up novel face in Q2 which have brought additional patients to that trial. So that enrollment level in AD has recovered very nicely almost to pre-COVID level. So that's done rather well. The PBC enrollment has suffered from our inability to open some accu-air sites, which we know are going to supply, significant numbers of patients. As you know, that's an often indication. So it has been challenging to bring those in. So, that has suffered a little bit and that we couldn't open those sites, additional sites due to the COVID environment that's improving that. And we hope to add those later in the year. Hence, the guidance that we see that data been delayed in terms of top line to the first half of 2021. So there has been some effect, but we're still seeing patients enrolled. And actually, in the case of atopic, we're seeing very healthy enrollment rates, and really, these patients come back to the clinic really just to renew their tablets supply. So they come back, I believe it's every two weeks to get that tablet supply and maybe take some clinical measurement to that point. So that's how that is designed. On the other question, yes, on the CFO front, we do have an active search underway. We've been screening candidates for quite a while. And I hope to have some news for you on that front in the coming -- in the coming quarter.

Very helpful. Thanks for taking my questions.

All right, Ben. Thanks for dialing in.

Thank you. And I'm showing up for the questions in the queue. At this time, I'd like to turn the call back to Derek Chalmers for any closing remarks. All right. Thank you, Jimmy. And thank you everybody for participating in today's call. I'd also like to thank the Cara team, our study investigators and all of the patients who continue to participate in our clinical trials. And we certainly look forward to updating you all again very, very soon. So stay safe, stay healthy. Thank you very much for dialing-in. Take care.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may now disconnect.