Tvardi Therapeutics, Inc. (TVRD) Q1 2023 Earnings Report, Transcript and Summary

Good afternoon. My name is Lateef, and I will be your conference facilitator. I would like to welcome everyone to the Cara Therapeutics First Quarter Financial Results and Update Conference Call. [Operator Instructions] Please be advised that this call is being recorded. I would now like to introduce Matt Murphy, Cara's Manager of Investor Relations. Mr. Murphy, you may begin your call.

Thank you, operator, and good afternoon. Just after market close today, Cara issued a news release announcing the Company's financial and operating results for the first quarter 2023. Copies of this news release and the associated SEC filing can be found in the Investors section of our website at www.caratherapeutics.com. Before we begin, let me remind you that during the course of this conference call, we will be making certain forward-looking statements about Cara and our programs based on management's current plans and expectations. These statements are being made under the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties. Actual results may differ materially due to various factors, and Cara undertakes no obligation to update or revise these statements publicly as a result of new information or future results or developments. Investors should read the risk factors set forth in Cara's 10-K for the year ended December 31, 2022, and any subsequent reports filed with the SEC, including its Form 10-Q for the quarter ended March 31, 2023. With that said, I'd like to turn the call over to Chris Posner, Cara's Chief Executive Officer. Chris?

Thanks, Matt. Good afternoon, everyone and thank you for joining our call. With me today are Ryan Maynard, our Chief Financial; and Dr. Joana Goncalves, our Chief Medical Officer. I would like to start by giving a quick overview of what I will address today. For the update on the KORSUVA injection launch in the U.S., I will provide additional metrics that we are tracking to give better insight into the progress of demand and uptake. These will help to give some clarity and show the opportunity within the different customers and segments of the market. I will also review the launch progress in countries around the world. In addition, I will highlight our robust clinical sales pipeline and the advancement of our high value development programs for oral difelikefalin. I am pleased with the progress to date and can confirm that we continue to track to our previously communicated timelines. After that Ryan will provide you with a financial update, and then we will open up the call to Q&A. I will begin with the launch of KORSUVA injection in the U.S. For the first quarter of 2023, net sales for KORSUVA were $5.7 million, translating into $2.8 million of profit recorded as revenue to us. Wholesaler shipments to dialysis clinics more than doubled quarter-over-quarter and reached 46,000 vials. 64% of these vials were shipped to Fresenius or FMC clinics, with the remainder split between DaVita and the other dialysis organizations. This increase in vial shipments suggests a meaningful acceleration in demand. Anecdotal feedback on KORSUVA from both providers and patients continues to be highly positive, supporting this expansion in breadth and depth in its utilization. At FMC, orders more than tripled quarter-to-quarter, reaching 30,000 vials. By the end of the first quarter, 500 FMC clinics or 18% had placed reorders, up from 7% of clinics at the end of Q4. More importantly, 1,500 clinics, or 56% of FMC clinics had dosed at least one patient, up from 29% of clinics at the end of Q4. Total patient demand remains difficult to assess without specific information about the levels of inventory remaining at individual clinics. However, we continue to see significant growth in the number of FMC clinics exhausting their third quarter 2022 bolus inventory and expect that the majority of the FMC clinics will be in a reorder mode in the second half of this year. At DaVita, demand growth continues to be steady. At the end of first quarter, 300 clinics, or 11% of DaVita clinics had ordered KORSUVA, that’s up from 7% of clinics at the end of Q4. Reorder rates among these clinics remained very encouraging, with 70% placing repeat orders. Given the on demand approach at DaVita clinics for ordering KORSUVA, the growth in clinic orders represents a good proxy for the growth in patient demand. At midsize and independent DOs [ph], KORSUVA continues to perform well. At the end of the first quarter, 13% of these clinics had placed orders, and that's up from 11% at the end of Q4. In addition, 66% of these clinics have placed repeat orders. Now the strongest performance today amongst this group has been at USRC, and that's the largest of the midsize DOs. Roughly 66% of clinics have ordered KORSUVA and 72% of these clinics have placed repeat orders. Stepping back and looking at the big picture, KORSUVA's overall market penetration leaves significant room for growth, with a vast majority of the market still untapped. To get there, CSL Vifor continues to make progress building the market, navigating the idiosyncrasies of each segment across the entire deal landscape. This is reflected in key trends this quarter. Clinic orders doubled quarter-to-quarter. Almost 60% of FMC clinics are dosing a patient and each segment is seeing an increase in clinics ordering the product. We remain confident and our partner CSL Vifor remains fully dedicated to capturing the latent upside in this market and maximizing the commercial potential of KORSUVA in the long-term. Additionally, we are working in close collaboration with the kidney community to help CMS understand the need for a durable and appropriate reimbursement mechanism for TDAPA designated products post their TDAPA period. We remain confident that additional funding will be made available for TDAPA designated products, and we remain hopeful that a substantive and positive update will be released during this year's rulemaking cycle. Next, on the international front. The rollout of Kapruvia in Europe continues to gain momentum. In the first quarter, Kapruvia generated $1.2 million in net sales, translated into $125,000 of royalty revenues to us. Rollout has begun in four additional countries, France, Finland, the Netherlands and Switzerland, bringing the total number of launch countries to seven. The initial feedback from patients and providers has been very encouraging and in line with the patient testimonials we have received in the U.S. We continue to expect the additional countries in Europe and other countries around the world to come online throughout the next 12 to 18 months once reimbursement is secure. Also, a decision from the U.K National Institute for Health and Care Excellence or NICE, is expected imminently. In Japan, we continue to expect a regulatory decision in the second half of 2023. As a reminder, approval in Japan would trigger a $2 million milestone payment to Cara. Last but certainly not least, I'd like to briefly discuss our promising wholly owned oral pipeline. Fundamentally, Cara is a development company and we are committed to building our nephrology and medical dermatology franchises with oral difelikefalin. These efforts will drive us to our goal of being a differentiated company as the world leader in treating chronic pruritis in the long run. Enrollment in our Phase 3 programs in pruritis associated with advanced chronic kidney disease and in atopic dermatitis is progressing as expected. We anticipate the internal readout of Part A of our KIND 1 AD trial in the fourth quarter of this year with final top line results from this program in the first half 2025. We also continue to expect top line results for our KICK advanced chronic kidney disease program in the second half of 2024. Startup activities for our Phase 2/3 program in notalgia paresthetica kicked off in the first quarter of this year, and they are progressing well. The NP program is tracking to the internal readout of KOURAGE 1 Part A in the second half of 2024 and final topline results for the program in the first half of 2026. To summarize, we are continuing to work closely with CSL Vifor to accelerate the uptake of KORSUVA, and we remain confident that these efforts will drive near-term growth. Additionally, we remain optimistic regarding CMS's future decision on the post TDAPA funding mechanism and hope to see an update during this year's rulemaking cycle. Underscored by the highly positive feedback we are hearing from patients and providers around the world, we continue to believe in the long-term success of KORSUVA injection. More importantly, we see tremendous value creation for Cara with our three late stage programs with oral difelikefalin. We are fully committed to advancing these programs as rapidly as possible in order to maximize the potential difelikefalin within our two therapeutic franchises. We look forward to providing you with updates on our progress throughout this year. Now I'd like to turn the call over to Ryan for additional details on our first quarter financial results. Over to you, Ryan.

Thank you, Chris. Total revenue was $6.2 million for the 3 months ended March 31, 2023, compared to $4.8 million for the same period in 2022. Revenue this quarter consisted of $2.8 million of collaborative revenue related to our profit from CSL Vifor's net sales of KORSUVA injection to third parties and $3.2 million of commercial supply revenue. We also recognized a $125,000 of royalty revenue this quarter, representing our royalties from the net sales of Kapruvia in the first quarter of 2023. Cost of goods sold during the 3 months ended March 31, 2023 was $2.6 million and relates to our commercial supply shipments of KORSUVA injection to CSL Vifor. Research and development expenses were $24.3 million for the 3 months ended March 31, 2023, compared to $21.3 million in the same period of 2022. The increase in R&D expenses is primarily due to the increased clinical spend related to our three late stage clinical programs. General and administrative expenses were $6.9 million for the 3 months ended March 31, 2023, compared to $9.4 million in the same period of 2022. The reduction in G&A expense was due to a decrease in stock-based compensation in the first quarter of 2023 as compared to the same period in 2022. Stock-based compensation in 2022 included costs related to the modification of certain equity awards to our former CEO. Cash, cash equivalents and marketable securities at March 31, 2023 totaled $123.4 million, compared to $156.7 million at December 31, 2022. The decrease in the balance primarily resulted from cash used in our operating activities. We expect that our current unrestricted cash and cash equivalents and available-for-sale marketable securities are sufficient to fund our currently anticipated operating plan into the second half of 2024. This guidance assumes all the spend related to our three late stage clinical development programs, and KORSUVA revenue profit share contribution. Finally, I'd like to highlight for everyone that we are exploring certain non-diluted financing opportunities to extend our runway further. I will now turn the call back over to Chris.

Thanks, Ryan. I want to reiterate that we are laser focused on making the KORSUVA injection launch a success. And additionally, we remain confident in the massive potential of our pipeline behind oral difelikefalin. We have full confidence that our long-term strategy will help us achieve our goal of becoming the world leader in the treatment of chronic pruritis and ultimately delivering significant value to our shareholders. With that, Ryan, Joana, and I will be happy to take your questions. So Latif, let's open up the line for Q&A.

Operator Instructions] Our first question comes from the line of Joseph Stringer of Needham and Company. Please go ahead, Joseph.

Hi. Thanks for taking our questions. Just few from us. Do you have any visibility into the inventory in the clinics? Or is that something that's still opaque? And would you ever gain visibility into this? And then secondly, is it on the inventory levels of wholesalers? Can you remind us again, what that is? [Indiscernible] that the inventory levels at wholesalers, and you expect that to make to remain relatively constant as the launch progresses here. Thank you.

Hey, Joe, nice hearing you. Let me tackle both of those. So the first is around inventory at the Fresenius level. One of the things that we wanted to really focus on this quarter, and we and CSL, you knew we needed to provide additional metrics or key performance indicators to give more clarity on uptake demand and really opportunity in the market. And we felt it was particularly important with FMC and how its clinics were working through its existing inventory. So the metrics that we're providing around a penetration rate, that's what I mentioned roughly 1,500 clinics are actually dosing a patient at Fresenius. And that's the best insight we have to how product is being utilized at a clinic level. We don't have specific insight into how much inventory is still remaining. But that gives you a good sense of how many clinics are using the product and then you couple that with the second critical metric and that's reorder rates. And here, what's important there is that, that shows how many clinics that have dosed the patient now are becoming recurring customers and for Fresenius that metric is particularly important because they've exhausted their inventory, and that metric is actually 500 clinics. And that's up from roughly 200 clinics in the end of Q4. So we're really encouraged about the drawdown in inventory. And I think that the punchline there is that we believe by midyear the majority of FMC clinics will have exhausted their inventory and really be in that reorder mode. Into your second question, Joe, we run inventory at the wholesaler level, it was pretty standard. They -- I don't know the specific contract between CSL and their wholesalers, but it's not really that atypical versus other traditional markets. So, it could be a couple of weeks.

Great. Thanks for taking the questions.

Thank you. Please hold for our next question. Our next question comes from the line of Annabel Samimy of Stifel. Your question please, Annabel.

Hi, guys. Thanks for taking my questions and for the progress. I just want to drill down on your comment that you're considering efforts to accelerate uptake. Do you have any specific tools that you're working with to be able to do that with Fresenius before? Yes, that's the first question. I'll follow-up with some others.

Yes, Annabel, I mean, CSL Vifor is doing a really nice job of really working the entire top down bottom up stakeholder base. So, they have a series of tactics that they've employed from peer to peer programs to direct to patient initiatives. And I'd also mentioned that Fresenius right, I mean, the Fresenius sales force is actually engaged as well, and they've deployed their sales force to activate the clinics and really drive utilization. And the punch line there is that we're seeing increases in the number of clinics actually starting patients on therapy, and that's now 1,500 and that's up quite significantly versus Q4. And we're seeing a number of those clinics at Fresenius draw down that inventory and starting to kind of getting that reorder mode. So the things that CSL Vifor is doing is really starting to pay dividends as they're building this market.

Okay, got it. And if [indiscernible] if you give us this level of details, but when a clinic starts using, they get -- [indiscernible] start getting someone on board and they start using it, are you noticing any pattern once they start? Are they pretty sticky? And those are the ones that start reordering it? Or is it still a little bit touch and go there?

Well, we see across the board, Annabel, that there's really strong buy in once these clinics start using the product. And I say that, there's two metrics I look at anecdotally, we hear from the sales force and we hear actually from provider testimonials, as well as patient testimonials, that the products really performing nicely. But the key metric that we look at is around reorders. And the majority of clinics that start reorder the product on a continual basis, and it becomes a growth annuity, if you will. And that's really what we're seeing in the data and that's why we're encouraged.

Okay, great. So, yes, that's actually helpful. And I'm going to throw a question out there to Joe, just [indiscernible] about the development program. So on oral difelikefalin -- so NP or notalgia paresthetica has not been an indication with a tremendous amount of development. So what are your expectations for how rapid enrollment could be here essentially as the first treatment with no real competing programs?

Thanks, Annabel. I think we're very confident about the program. Certainly the New England Journal was very helpful for us. And as we in the operational phase and having looking at sites [ph] to come on these -- many sites are very interested in participating, which complete our Phase 2 study where it was really starting to kick this program off. It was not as well sort of received as it is now. So I think that's very helpful for sure. And as we've said before, dermatologists are the physicians who see these patients. So we remain encouraged and very confident about the timelines that we have put out for enrolling these patients.

Okay. And are these patients pretty concentrated among certain positions, or kind of scattered?

Not that we've seen to date. So, of course, this is a program, therefore be a little bit bigger than our Phase 2 study. So we are -- to having more sites on board and just to try and meet those timelines as well. So we're not concentrating in any particular area, but doing quite [indiscernible].

Okay, great. Thank you so much.

Thank you. Our next question comes from the line of David Amsellem of Piper Sandler. Your question please, David.

Thanks. So wanted to drill down on more on your comments on DaVita. And I think, Chris, in the past, you've said that DaVita tends to have a slower process in terms of activating accounts. So I'm just wondering if you could comment qualitatively on what you're seeing out of DaVita? Are you surprised that the number of clinics that have ordered is that 11%? And what is your partner doing to try to jumpstart that? That's number one. And then, secondly, can you just comment if you can on pricing across Europe and rest of world and relative to what we have in the United States? Thank you.

Yes. Hey, David. Let me tackle the last one. That's a briefer conversation. So in Europe, we have a public price in Germany that I may have mentioned in the Q4 print, hopefully, I did. And that price is €50 per vial. So by and large, it's about a third of the price of the vial in the U.S., which is 150 list price. So it gives you a sense, and that's why I can speak to publicly around Germany. And each country, obviously, will work with the -- their national bodies to secure a price and reimbursement as they come online. Your first question around DaVita, yes, I have alluded to before, I mean, they have a different way they adopt new products. They tend to take a more phased approach, where they try to gain real world experience in a more concentrated area of the country. And then they roll it out nationally. It's available nationally now, and you are starting to see a pickup in the number of clinics dosing of patients. I will say this, David, DaVita is a priority for us and our commercial partner. From my experience, it's really not that unusual for two different customers to do things a little differently. And certainly DaVita and Fresenius are doing things a little differently. DaVita doesn't have the luxury of an internal sales force. And one thing that we see with DaVita that's different than Fresenius is the ability to access the clinics. And that is a critical factor in driving utilization and educating renal nurses, educating the lab techs, educating dieticians and social workers are a critical piece of the puzzle. And DaVita, you mentioned, what's our partner doing? Well, they're doing a series of things, they have to be a bit more creative. And there's some lasting effects from the pandemic, given these access restrictions. So we've learned a lot around engaging via digital means, engaging at conferences, and that's exactly what CSL Vifor is doing. I think the significant point here is that, yes, they're a little behind Fresenius clearly, but we are seeing month-to-month pickups in a number of new clinics ordering. And I always come back to this, David that one of the most important things that is really encouraging to us and our partner is that once a clinic starts to utilize the product, given the patient testimonials and provider testimonials, that really generates significant reorders. And over 70% of DaVita clinics that are ordering, continue to reorder. So it's a really nice growth annuity.

Okay. That’s helpful. Thank you.

You got it.

Thank you. Our next question comes from the line of Jason Gerberry of Bank of America Securities. Your question please, Jason.

Hi. This is Chi on for Jason. Thanks for taking our questions. I guess first one on IV KORSUVA. You gave some metrics, 64% of the order came from Fresenius, the rest DaVita and other clinics. How does they trend compared to the past two quarters? You might have given some metrics around -- pardon me, if I missed the earlier. And regarding -- how we should think about the timing on when sales will converge with underlying demand? I think you talked about that inventory expected to be drawdown by midyear. But what -- what's your latest thoughts on when sales will converge with the underlying demand? And maybe like second one on oral KORSUVA. Can you to walk us through the scenario, what the internal readout, what are the outcome from the internal readout that we can expect with the AD trial in fourth quarter? Thanks.

Sure, Chi. Let me unpack that. Let me first beat to the evolution of demand orders. That was the first part of your question. Yes, we did mention this quarter 46,000 vials are ordered from the dialysis clinics, and roughly 65% or 64% were driven by Fresenius -- ordered by Fresenius. And you asked how that compares over the last two quarters? Given kind of what Fresenius did in Q3, Chi, as you're aware, they did a significant stocking order. So the primary driver of the Q3, I think there was 184,000 vials, that was pretty much all Fresenius, about 180,000 of that was Fresenius. And then in Q4, they're obviously starting to utilize that product. So the 21,000 vials used in Q4, I would say, probably about 40%, 45% was Fresenius and the rest was split between DaVita and the midsize and independent DOs. So our expectation moving forward is it would be probably more akin to what we're seeing in fourth quarter where Fresenius will be the key driver at least in 2023 in terms of vials order or demand. Your second question around the normalization of demand and sales. Yes, we mentioned that by midyear, we would expect the majority of FMC clinics to have kind of drawn down utilize their inventory and what I say be in reorder mode. So I would say probably as we get into the second half of the year, you'll start to see sales and demand sort of converge. And then the last part of your question, let me give that to Jo around the oral.

Hi, Chi. Thanks for the question. So, as a reminder, Part A is what we are currently enrolling. And we have 280 patients that we will be enrolling in this Part A. Just as a reminder, this is an appropriate number of patients that will give us the information to continue into Part B or KIND 2. And so what we will be specifically looking at is looking at the dose as well as the sample size. And we will look at all the data that we will take so specifically looking at efficacy and safety to be able to select the most favorable dose that demonstrates the best benefit risk profile. And we will be able to assess the sample size. So that's what we will be specifically focusing on and sharing for Part A.

If I can clarify, is that a go or no go decision baked in there, or just basically determining the dose selection and sample size heading into Part B.

Well, we are looking at exactly for the dose and the sample size, but we will be reviewing the data and assessing what the outcome of the data demonstrates and assessing whether to move forward or not, of course. Yes.

Okay, great. Thank you.

Thanks, Chi.

Thank you. [Operator Instructions] Our next question comes from the line of Sumant Kulkarni of Canaccord Genuity. Your question please, Sumant.

Definitely. Thanks for taking my question and all product details and some of the current market dynamics. Do you expect your partner to hit steady state operating margins on this product before TDAPA and how important would that be for that to happen so you could start realizing substantial collaboration revenue?

Sumant, maybe you could clarify -- you're asking me it was a little muffled my friend. So you're asking me to comment on the operating margins of CSL Vifor for this product?

So not specifically any quantitative, but how important would it be for the product to hit a steady state operating margin before TDAPA ends, I guess is the question.

I don't -- Ryan?

Maybe are you focused on utilization? Utilization is …

Not really. I mean, like, for example, if the product is in launch mode for a longer time than otherwise thought, wouldn't that impact the rate of collaboration revenue that you recognize, and that flows down to your bottom line? That’s what I was asking.

I got it. Yes. So he's asking about the profit split. Ryan, maybe you could. It's agnostic to that.

Yes, I think the guidance that I've given on how the profit split works, which is we get roughly 46% of every dollar. And the mix between Fresenius and DaVita, more Fresenius, more DaVita, fluctuates that percentage by maybe 1 or 2 points. So it's really not material. So it's going to be pretty steady from that point of view.

And, Sumant, I just commented, like on the marketing expense line on their controllable expenses from CSL Vifor, that doesn't necessarily impact that profit split.

Yes, it's pretty fixed, Sumant.

Right. That’s definitely absolute dollars, more than net profit split, but [indiscernible].

Thank you. At this time, I'd like to turn the call back to Christopher Posner, for closing remarks. Sir?

Thanks. Thanks, Latif. Yes, I just want to take a minute just to wrap things up. I said in my comments, if you look at the key performance indicators of the business, specifically with KORSUVA injection, we are encouraged. I mean, CSL Vifor continues to make progress building this market. It's really reflected in the key trends this quarter. Clinics or clinic orders doubled. 60% of the FMC clinics are dosing a patient. And each segment is really seeing increases in clinic order. So it's encouraging. And we're getting very positive feedback from both patient and physicians on the product. And that's really translating into very strong reorder rates. Again, very positive in terms of where we are. We continue to make really good progress. And Joe mentioned a little of that in our pipeline to our stated commitments. So net-net, we look really forward to continuing to update you on the progress of the KORSUVA launch and our pipeline as we progress. So with that, I'll end the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.