Tvardi Therapeutics, Inc. (TVRD) Q2 2023 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to Cara Therapeutics' Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you I would now like to hand the call over to Matt Murphy, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon. After market closed today, Cara issued a news release announcing the company's financial and operating results for the second quarter of 2023. Copies of this news release and the associated SEC filings 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 June 30, 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 Officer; Dr. Joana Goncalves, our Chief Medical Officer; and Scott Terrillion, our General Counsel and Head of Government Affairs. I'd like to start by giving a quick overview of what I'll address today. First, I will give an update on the KORSUVA injection launch in the U.S., including clinic-level data to provide visibility into underlying demand trends across the different segments of the dialysis market. I will also briefly touch on the proposed calendar year 2024 ESRD PPS rule, which CMS published in late June. Next, I will review the Kapruvia launch progress in countries around the world. Then I will discuss our wholly owned pipeline and the progress of our 3 late-stage programs for oral difelikefalin. Finally, Ryan will provide a financial update, after which we will open up the call to Q&A. With that, let me discuss the KORSUVA injection launch in the U.S. For the second quarter of 2023, net sales for KORSUVA were $11.4 million, translating into $5.4 million of profit recorded as revenue to Cara. Wholesaler shipments to dialysis clinics totaled approximately 67,000 vials, a 46% increase from the prior quarter. 67% of these vials were shipped to FMC clinics, with the remainder split between DaVita and the other DOs. This increase in vial shipments suggests a continued drawdown of inventory at FMC and an acceleration in demand across all DOs. Ongoing anecdotal feedback on KORSUVA from both providers and patients remains highly positive, highlighting that KORSUVA addresses a significant unmet need. At FMC, orders grew by more than 50% quarter-to-quarter, reaching 45,000 vials. By the end of the second quarter, over 700 FMC clinics, or 27%, had placed reorders. That's up from 18% at the end of the first quarter. More importantly, 1,300 clinics, or 50%, had dosed at least 1 patient. That's up from 42% at the end of the first quarter. Note, this is a correction. Based on numbers provided to us by FMC, we reported on our first quarter call that 1,500 clinics had dosed at least 1 patient. The growth in the number of FMC clinics reordering as well as clinics dosing a patient suggests continued drawdown of inventory at the clinic level. If this trend continues at the current rate, we believe that the majority of FMC clinics will have depleted their inventory and will be in reorder mode this year. At DaVita, we are seeing continued steady growth in demand. Orders grew by 43% quarter-to-quarter to 11,000 vials. Over 400 clinics, or 15%, had ordered KORSUVA at the end of the second quarter. That's up 11% at the end of first quarter. Reorder rates remained very encouraging, with 73% of clinics 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, KORSUVA utilization continues its momentum. Orders grew by 28% quarter-to-quarter to 11,000 vials. At the end of the second quarter, 17% of clinics in this market segment had placed orders. That's up from 13% at the end of the first quarter. In addition, 68% of these clinics placed repeat orders, and that's up 66% at the end of the first quarter. USRC remains the largest buyer of KORSUVA in the MDO and IDO segment. 73% of USRC clinics had ordered KORSUVA by the end of the second quarter. And 80% of these clinics have placed repeat orders. While KORSUVA continues to make meaningful progress in the U.S., a majority of the market remains untapped, and there is significant room for growth. Our partner, CSL Vifor, is fully committed to driving KORSUVA's uptake in this unique ecosystem with the goal of maximizing its commercial potential in the long term. Now I will briefly touch on the ESRD PPS proposed rule for calendar year 2024. This rule, once it is final, will determine the framework for KORSUVA's reimbursement after its TDAPA period. In late June, CMS proposed a new add-on payment adjustment for certain new renal dialysis drugs after the TDAPA period ends. The post-TDAPA payment adjustment applies to all dialysis treatments for a period of 3 years immediately following the expiration of the drug's TDAPA period. The proposed methodology calculates the add-on payment for each treatment based on the prevailing ASP and the drug's utilization during the most recent 12-month period. CMS also proposed a risk-sharing arrangement with ESRD facilities calculated at a 35% discount to the prevailing ASP to account for any declines in other drug expenditures. We are pleased that CMS proposed additional funding that is not budget-neutral for innovative TDAPA-designated drugs that fall into an existing functional category. We are also glad that the new funding starts immediately after the expiration of the TDAPA period and gets adjusted annually by the market basket update. However, there are certain limitations to the proposed methodology, which we plan to pointedly address with CMS in the coming months. Specifically, the add-on payment applies to all dialysis treatments and does not follow the patient. In addition, a 35% discount to the prevailing ASP does not take into account first-in-class drugs like KORSUVA that don't have a therapeutic substitute. Since the proposed post-TDAPA reimbursement methodology makes a drug's uptake during its TDAPA period a key factor in future reimbursement rate setting, we plan to also address the question around appropriate utilization data with CMS near term. More specifically, we will be laying out a case for additional TDAPA time. We will furthermore press for changes to the proposed methodology to account for innovative, first-in-class products that target a minority of ESRD patients. We will continue to work closely with CMS and provide information to highlight the best solution for broad and equitable patient access to innovative drugs like KORSUVA in the final rule, which is expected later this year. Next, on the international front. The rollout of Kapruvia in Europe is progressing well. In the second quarter, Kapruvia generated $1.2 million in net sales, translating into $123,000 of royalty revenue to us. Launches have begun in 7 EU countries, with more lined up in the coming months. CSL Vifor continues to report positive feedback from patients and providers, in line with the testimonials we have received in the U.S. We are pleased with the recommendation by England's National Institute for Health and Care Excellence, or NICE, for Kapruvia for the treatment of moderate to severe chronic kidney disease associated pruritus in adult patients on hemodialysis. In Japan, we continue to expect a regulatory decision in the second half of this year. As a reminder, approval in Japan would trigger a $2 million milestone payment to Cara. We are pleased with the progress around the world and believe the success of the ex-U.S. launch to date underscores the significant unmet need for an effective antipruritic treatment for hemodialysis patients. Last but not least, let me touch on the development progress of our innovative, wholly owned pipeline. Enrollment in our Phase III programs in pruritus associated with atopic dermatitis and advanced chronic kidney disease is progressing well. 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 of 2025. We continue to expect top line results for our KICK program in advanced chronic kidney disease in 2024. Our Phase II/III COURAGE trial in notalgia paresthetica commenced in the first quarter of 2023 and is tracking to the internal readout of Part A in the second half of 2024. We expect top line results for the KOURAGE program in the first half of 2026. We strongly believe that oral difelikefalin is the centerpiece of our strategy of becoming the leader in the treatment of chronic pruritus and the key to unlocking the long-term value of Cara. And we remain committed to driving progress of our pipeline and building our unique nephrology and medical dermatology franchises with oral difelikefalin. To summarize, we are pleased with the continued progress of the U.S. KORSUVA launch, as evidenced by the acceleration in file shipments and reorder rates across the dialysis landscape. Following CMS' proposal for a post-TDAPA add-on payment, we are engaging with CMS to discuss potential modifications to the proposed methodology as well as an extension of KORSUVA's TDAPA time. We hope to see meaningful changes reflected in the calendar year 2024 final rule later this year. Internationally, we continue to receive positive feedback from the rollout of Kapruvia, and we are optimistic about the growth trajectory as more countries come online. We also continue to execute on the most significant long-term value driver of our company, our differentiated innovative pipeline. Our 3 late-stage programs with oral difelikefalin have potential for tremendous value creation and set us apart as a leader in chronic pruritus. We remain laser-focused on advancing these programs in order to maximize the potential of difelikefalin within our 2 exciting therapeutic franchises. I would now like to turn it over to Ryan for additional details on our second quarter financial results. Over to you, Ryan.

Thank you, Chris. Total revenue was $6.9 million for the 3 months ended June 30, 2023, compared to $23 million for the same period in 2022. Now, revenue this quarter consisted of $5.4 million of collaborative revenue related to our profit from CSL Vifor net sales of KORSUVA injection, $1.4 million of commercial supply revenue and $123,000 of royalty revenue representing our royalties from net sales of Kapruvia. Now, revenue in the same period last year included a $15 million milestone payment for the approval of Kapruvia by the European Commission, as well as $8 million of collaborative revenue related to our profit from CSL Vifor sales of KORSUVA. Cost of goods sold during the 3 months ended June 30, 2023, was $1.4 million and relates to our commercial supply shipments of KORSUVA injection to CSL Vifor. There was no cost of sales during the 3 months ended June 30, 2022, as there was no commercial supply revenue from CSL Vifor. R&D expenses were $30.3 million for the 3 months ended June 30, 2023, compared to $19.9 million in the same period of 2022. The increase in R&D expenses is primarily due to the increased clinical trial spend related to our 3 late-stage clinical programs, partially offset by a decrease in stock-based comp. G&A expenses were relatively flat at $7.5 million for the 3 months ended June 30, 2023, compared to $7.6 million in the same period of 2022. Cash, cash equivalents and marketable securities at June 30, 2023, totaled $101.7 million compared to $123.4 million at March 30, 2023. The decrease of $21.7 million this quarter was primarily due to cash used in operating activities. We expect that our current unrestricted cash, cash equivalents and available for sale marketable securities are sufficient to fund our currently anticipated operating plan for at least the next 12 months. This guidance assumes all the spend related to our 3 late-stage clinical development programs and KORSUVA revenue profit share contribution. We continue to work to extend our runway past the guidance by focusing on non-dilutive funding sources. Now back to you, Chris.

Thanks, Ryan. I want to again emphasize our confidence in the commercial potential of KORSUVA, Kapruvia in Europe, as well as the tremendous upside of our pipeline for oral difelikefalin. We continue to believe that our long-term strategy will make Cara the leader in the treatment of chronic pruritus and will deliver meaningful value to our shareholders. With that, Ryan, Jo, Scott and I will be happy to take your questions. Operator, you can please open the line for Q&A.

[Operator Instructions]. Our first question comes from the line of Dennis Ding of Jefferies.

Congratulations on the progress in the second quarter. Two questions for me. Maybe -- how do you guys think about the trajectory in the second half and the state of the launch curve? I mean, outside of the -- outside of depleting inventory, what else needs to happen for the trajectory to really inflect in the back half of the year? And then my second question is around the CMS draft documents. Maybe remind us what you are looking for or pushing for in the final ruling in the Fall? And will it be considered a big win for Cara?

Yes. Thanks, Dennis. Nice hearing from you. So the first question, expectations for the remainder of the year. While we and our commercial partner, CSL Vifor, are not providing forward-looking guidance at this time, here's what I will say. We're certainly very encouraged with the accelerating trends in our key metrics, namely, vials being ordered by clinics that increased 46% versus the prior quarter. In addition, I mentioned in my prepared remarks, we're also seeing more and more clinics dosing patients, specifically at the 2 LDOs we're at FMC, Dennis, we're at 1,300 clinics dosing. That's roughly a 50% penetration. And at DaVita, we're about 410 clinics now dosing, but importantly, that's up over 40% versus the prior quarter. And most importantly, IV KORSUVA is really holding up in the clinic, and the feedback from both patients and providers has been highly positive. The reorder rates, meaning once the clinic starts dosing patients, there is significant buy-in to the product, as over 70% of these clinics continue and consistently place additional orders. And I'll just conclude with this, Dennis. Although we're kind of early in third quarter, I can tell you that the growth we see coming out of the second quarter, we are seeing it continue in the early part of the third quarter. And our commercial partner, CSL Vifor continues to be highly motivated, and their promotional efforts continue in full force. That's what I'll say about the second half of this year and our expectations. On CMS, let me introduce Scott, who heads up our government relations in addition to being our General Counsel. He has led the efforts with CMS over the last couple of years. So Scott, maybe you could address what we're doing with CMS.

Sure. Thanks, Chris. Yes, as Chris said in his remarks, with regard to the rule, we're pleased that there was new money added. That is great, and that's a very meaningful movement forward. In our interactions with CMS -- and it's not just us, the broader community is also taking up very similar issues with CMS. There's 3 things with regard to the proposed rule that we're going to be looking for. One is having the money follow the patient. That's particularly important with a product like KORSUVA, where it is going to be used in a minority of patients. We want to make sure that the funding and the reimbursement is tied to their clinical decision directly to make sure that patients get access to the product. The second thing we're going to be talking about is the 35% discount. Again, we do agree that some sort of set off for savings for drugs that are not going to be used in the bundle as a result of a new drug ought to be offset in some way. That's good fiscal policy, makes a lot of sense. However, with the drug like KORSUVA, where there isn't any money in the bundle, there isn't any money being spent to treat these patients or manage a condition before KORSUVA, we think it's important that the set off is rational and it's tied to the actual savings. And with KORSUVA, there's not going to be anything there. The third thing we're going to be looking for is for clarity after the third year because again, a drug like KORSUVA, there is no money in the bundle and what happens afterwards. So we're going to be seeking clarity on that. The other thing that we're going to be pushing CMS on and having a discussion about is making sure that there is a TDAPA period for KORSUVA that allows the community to use the product in the same and knowing what the reimbursement and funding mechanism after the TDAPA period ends. Right now, the product is being used in a context where there isn't any -- the thought is there would be no money added. So we're going to be trying to get the extra TDAPA period to try to make sure that there's good data that appropriately lines up to the patient access.

Our next question comes from the line of Annabel Samimy of Stifel.

So I had a few actually. Just -- while we're talking about CMS, I guess a couple of things. I guess, first, can you maybe -- so I guess we understand the [indiscernible] got an extra year of TDAPA payment. I was just wondering if you can outline what similarities or differences you might have had with Parsabiv, given that's pretty much the only other drug that's gone through this and how they got that additional year. And then if KORSUVA stays within the bundle the way that they've described, with this structure, do you envision incentives for dialysis providers to not use the drug and just collect the payments as they might have done for Parsabiv. So I just wanted to understand the dynamic that we might see post-TDAPA. And then I might have another follow-up.

All right Annabel, I think let me unpack. The first one is around extending our TDAPA period and the rationale why and why that is the same or different than Parsabiv. Let me give that to Scott, and I may have a couple of words after.

Yes, sure. So with regard to Parsabiv, it's -- it's not a great analog in one sense, because the Parsabiv, obviously, there was an oral generic that was used afterwards. But there is one similarity with regard to why it would make sense and be consistent. And with Parsabiv, CMS was looking to get accurate information to understand how much we might add to the bundle. And that's the same argument we're going to make. That at the end of the day, we don't believe that the utilization and the uptake is going to be accurate in an environment where there would be new money added at the end of the TDAPA period. So we think the precedent there with that regard, which is get better data is consistent with Parsabiv.

Yes. And Annabel, I think on your second question, hopefully, I got it right. Basically, if I understood the question right, the proposed methodology from CMS could suggest a reverse incentive, meaning that some of the dialysis organizations would be incentivized just to pocket the additional money and not use KORSUVA. I'll say a couple of things. I mean one is -- it's certainly -- they could do that. Our belief is that that will not happen. Dialysis organizations are very much used to working in the capitated environment, meaning they're going to lose some money in some patients and make some money on others. So we remain pretty confident that the appropriate patients will continue to have access to KORSUVA. And listen, we all have the same North Star around patients being at the center. And our kind of what we could control here at Cara and what we're really focused on is making sure that there is adequate and accurate funding so patients are going to have access to this drug. That's what Scott alluded to in his earlier comments, and that's really our focus.

I guess also, just to be clear, the payment also is recalculated every year, correct? So if utilization is down, that's going to go down.

Well, technically, based on their proposal, that could happen, correct. But it would be calculated on an annual basis.

Okay. And then just to switch gears for a bit. Would you say that the reorder for DaVita, their independent dialysis provider is 70%. Is that about where you would expect reorder rates to be in a normalized environment for say, Fresenius when the [indiscernible] wash out?

Yes, I would. I mean we've seen it pretty consistent in that 70%. I mean, DaVita's actually this month -- or this quarter was -- or second quarter, sorry, was 73%. It's interesting if you look at USRC, which is the largest of the MDOs. They're about an 80% reorder. But I think we feel pretty comfortable that they're going to be in the range in that 70% reorder rate. We've seen that pretty consistently. Really since the launch. And I've been really pleased. And Annabel, we've talked before, I've been incredibly pleased with that reorder rate. We don't get patient-level data. We do look at reorder rates as a proxy for, call it, a really good patient experience. And we see this consistent month-to-month reordering by clinics that have started dosing patients.

Okay. Great. And if I could just squeeze in one more. I did notice that you expected Fresenius to be reordering by the end of the year. Is that a change from your expectation of seeing normalized inventories by midyear?

No. I would say we've always expected -- I mean we're looking at the growth trends on the quarter-to-quarter basis, and we saw a 48% increase in the number of clinics now exhausting their initial stock from Q3 and reordering. That's roughly 720 clinics. If you see that growth continue, we would expect the majority of these clinics to have exhausted their inventory and reorder. And again, with the 70-plus percent reorder rate that we would fully expect from percentage once they kind of normalize with that. I mean it really forms a nice growth annuity as more and more patients kind of get this product. So we haven't come off of that. We're just kind of analyzing our growth rate and seeing if this continues, we feel pretty good about the majority of these clinics in the second half of the year exhausting their stock.

Our next question comes from the line of Joseph Stringer of Needham & Company.

Now that you're a couple of quarters into the launch, how are you thinking about potential monetization of the IV KORSUVA revenue stream? And what are some of the puts and takes that go into that decision?

Joey, so if you are referring to the ex-U.S. royalty revenue, I think we haven't really been terribly specific about what we plan to do from a financing perspective on the nondilutive front. I mean, maybe, Ryan, do you want to say a couple of words on that?

Yes, Joe, was that your question? Was it related to ex-U.S.? Or were you talking about the U.S. revenue stream?

If you could comment on both, that would be helpful.

Yes. I will -- let me take one off the table. On the U.S., that wasn't our focus. We're -- from a U.S. perspective, and we get 46% of net sales essentially. And we're really in the initial quarters of this launch. And we feel there's pretty significant upside. Now, we'll have to see how CMS works itself out over the next couple of months. But where our focus has been from a financing side -- Ryan, maybe you could comment on the ex-U.S.

So I think we are in a good position where we do actually have an asset that is generating cash, and this is ex-U.S. We've discussed in Chris' prepared remarks how well Europe is doing and how both CSL and ourselves are very excited about the potential for Europe going forward. So we are looking at opportunities to potentially monetize that. We also discussed the potential approval of Japan in the second half of the year. That's also another potential cash-generating asset. So we've got a lot of options, and we're hopeful that we can execute on those.

Our next question comes from the line of Sumant Kulkarni of Canaccord Genuity.

I have a few here. So at what point will you or your partner have a better handle on steady-state utilization of KORSUVA IV? So you get the best possible reimbursement rates post-TDAPA. Or how long do you think you would take to get to that rate?

So Sumant, it's a tough question because really, we're working with 1 payer, essentially, right? CMS is the dominant payer in this ecosystem in dialysis. And understanding the funding is going to be really critical that will determine the future trajectory of this drug. And the final rule will be sometime later this year, we're in the 60-day comment period. I think Scott summed it up nice, Sumant. I mean, we found the proposed rule, there's some positives there, right? I mean they are adding additional funding. And that's certainly a positive. We're certainly moving the needle with CMS to provide access to innovation and properly fund it. But we do have some serious concerns around the reimbursement methodology that Scott very clearly outlined that would have an impact on funding and potentially could be a headwind for us. So I would say, Sumant, it's a little too early to talk about the trajectory until we fully understand -- fully understand the CMS final rule and what that could mean from a funding standpoint long term. I mean, one thing that's really crystal clear to us is that there is a significant unmet need. And this drug is very effective, and it actually makes a big difference in patients' lives. So as I said before, patients at the center of everything we do. I know I can speak for my partner there in CSL Vifor with regard to KORSUVA. And our focus during this comment period is really on addressing some of these reimbursement concerns around the proposed rule that they outlined, but also, importantly, as Scott said, requesting an extension of the TDAPA period. Because we do know TDAPA's had -- has challenged some of the uptake with some physicians is, listen, I mean, their experience is with Parsabiv. And they're a little nervous that if they start patients on KORSUVA, they may have to stop them if funding is not available. So we're really focused on -- on this over these next, I would say, 60 days until CMS publishes their final rule.

Got it. And then given the relative difficulty of figuring out an optimal utilization rate, what do you think an optimal number of years of extension of TDAPA would you be asking for? And when would you expect to get more clarity on that, given CMS is already running a process?

Sure. Let me give that to Scott to talk about our plan with the extension.

Yes. Again, we think we have a strong argument that we should get a new TDAPA period, which is essentially 2 years. Because we need to have an amount of time where they can get the full ability to manage the utilization and get the right patient access based on what the funding is going to be. With regard to when we would hear -- we expect there's not a specific rule for how that would happen, but we would expect to hear and we would ask to hear in the November final rule, what the plan was.

[Operator Instructions]. Our next question comes from the line of David Amsellem of Piper Sandler.

So I apologize if I missed any color here. But as you think about the cash runway and the upcoming clinical milestones, can you talk about how you're thinking about oral DFK strategically in terms of whether this is something you'd look to monetize in some way or keep it and commercialize it. I'm just trying to get a better sense of how you're thinking about the asset, just given the cash runway and resource constraints.

David, this is Ryan. I'll start out and kind of give some color on our investment in oral difelikefalin, and then I'll pass it over to Chris to talk more about the long-term strategy for it. So the good news is that we can fully fund difelikefalin in these 3 late-stage programs, and that's critical. And that's what we actually are working on here at Cara. Obviously, CSL is running the launch for KORSUVA. But where we are spending our money, our investment is on these 3 programs. So in the guidance I gave you, those 3 programs, atopic dermatitis, chronic kidney disease and notalgia paresthetica are fully funded. I'll pass it to Chris now to talk about how we think about it.

Yes, David. I mean, we still remain very focused on developing these 2 franchises. From a commercialization standpoint, we've been very public in saying we would certainly look and we would look for ex-U.S. partners. We do not have an intention right now of commercializing ex-U.S. And I would remind you -- and I know you know this, that we own the rights to oral difelikefalin outright. So we would certainly look outside the U.S. for a partner in the U.S. Our intention is to stand up a commercial organization to maximize the potential of these products and do it alone.

Okay. That's helpful. If I may sneak in one more, this is unrelated on Europe. Just remind us what pricing for the drug is. Obviously, it varies market to market. But how should we think about pricing in Europe in the big markets, at least relative to the U.S.?

Yes. I mean -- so David, you're right. I mean, it varies market to market. What I can tell you in Germany, for example, the price per vial, I believe, is around EUR 48 per vial. So kind of 1/3 of what we have in the U.S., it's probably a good way to think about it. I think where we're really encouraged in Europe is the patient population. The EU5 predominantly is not that dissimilar to the U.S. And we're seeing -- Ryan alluded to it earlier, we're seeing pretty good uptake or very good uptake actually since we launched in Germany in the fourth quarter last year in terms of both growth and patient and sales. So we're actually really encouraged what we're seeing. Reimbursement is very different. Again, you don't have a TDAPA sort of system or a cliff, so to speak, on TDAPA. And CSL has got a very good commercial footprint, executing really nicely.

[Operator Instructions]. Again, that's Our next question comes from the line of Jason Gerberry of Bank of America Securities.

This is Chi on for Jason. I guess, regarding the comment about you expect to hear back from CMS on any update or change in the proposal in the final ruling sometime this Fall/Winter. Can you remind us, sort of like if you do get the -- if you do or do not get the additional TDAPA. Can you help us understand, say, if you do not get the additional TDAPA, how do you think about consensus estimate doubling the sales in 2024 versus 2023? What I'm trying to get at is if the reimbursement mechanism is such that the -- CMS will look at the prior year utilizations, up by 35% here, -- I'm just trying to understand, do you dialysis standards just simply have to give up other treatments in order to make way for volume? I'm just trying to get a sense of sort of the disconnect between what consensus is forecasting versus the CMS proposal. And so to the extent that you can provide that color, that would be great. And then I have a follow-up after that.

Sure, Chi. I won't comment on consensus necessarily, but I think your analysis on how this works within a capitated system is correct. If nothing's changed, the onus is on the dialysis facilities to fund the product and actually compensate for it by looking at other avenues within that bundled rate. So what we expect and what I'd say what we're doing is obviously working with CMS now in this comment period. And Scott mentioned earlier around voicing our concerns with the reimbursement methodology. We have some concerns around how they're going to calculate the additional funding. But let's be clear, there is going to be additional funding added to the bundle in their proposed rule. And when we kind of understand where CMS is going to land with that as well as the extra TDAPA period that Scott mentioned, we'll have a better sense of the trajectory of this drug, based on the ability of dialysis facilities to resource it. And that will be critical. And that will determine kind of the future of this drug. And again, we're encouraged -- I would say we're confident that we have a strong case for additional TDAPA time that Scott mentioned. We're certainly not going to handicap that at this point. I mean, we are working closely with CMS or at least providing comments to them, and we'll engage with them during this period of time.

So maybe help me understand here. So you have a 60-day comment period, and then you have this proposal coming out sometime in October, November. Is that sort of like a 2-way dialogue between you and CMS, or is it sort of more like you submit the comment, and you won't hear about anything until October, November time frame. Just help us think about sort of the level of visibility you have between now and when the final proposal comes out?

Sure. Let me give it to Scott.

Yes. So we'll be providing -- as you said, we'll be providing comments during the 60-day period. We will engage with CMS to provide more information. We would not expect to get anything back from them before the rule. They're in a comment period. They have rules they have to follow. We wouldn't expect there'd be any information back directly to us or certainly publicly before that November rule came out.

Okay. Maybe just one last one for me. Can you talk about -- remind us sort of the connection between the manufacturing supply revenue on KORSUVA and the -- the revenue recognitions of IV KORSUVA. It looks like -- it looks -- the manufacturing supply revenue looks a little light this quarter. And the sequential increase in the revenue. So is it just the nature of lumpiness? Or does it like sort of like -- is there any way a leading indicator of how much IV KORSUVA, Vifor will order from Cara?

Chi, this is Ryan. Thanks for your question. I would start by saying that they're really disconnected in the short term. The commercial supply revenue is basically us shipping vials to Vifor based on the release from quality, because we're basically -- we're acting as the -- manufacturing CRO for Vifor. And as we get vials released from quality, we ship them immediately to Vifor under a PO. So there's no connection to short-term demand. And as you know, the IV KORSUVA revenue is based on shipments from Vifor to the wholesalers, and that's how we recognize revenue. So you're correct in the sense that the shipment of commercial supply revenue was down from the prior quarter, but that was simply based on the QA releases we get from our provider.

Thank you. I would now like to turn the conference back to Christopher Posner for closing remarks. Sir?

Thank you, Latif. Well, thanks, everyone, for joining us today, and I just wish everybody a great afternoon. With that, I'll end the call.

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