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spk01: Good afternoon. My name is Shannon, and I will be your conference facilitator. I would like to welcome everyone to the Carer Therapeutics third quarter 2022 financial results and update conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number 11 on your telephone keypad. Please be advised that this call is being recorded. I'll now like to introduce Matt Murphy, CARA's Manager of Investor Relations. Mr. Murphy, you may begin your call.
spk07: Thank you, operator, and good afternoon. Just after market closed today, CARA issued a news release announcing the company's results for the third quarter of 2022. Copies of this news release and SEC filings can be found in the investor section of our website at www.caratherapeutics.com. Before we begin, I would like to 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 they are subject to various risks and uncertainties. Actual results may differ materially due to various factors, and CARA is under no duty to update these statements publicly. Investors should read the risk factors set forth in CARES 10-K for the year ended December 31st, 2021, and the 10-Q for the quarter ended September 30th, 2022, and any subsequent reports filed with the SEC. With that said, I'd like to turn the call over to Chris Posner, CARES Chief Executive Officer. Chris?
spk08: Thanks, Matt, and good afternoon, everyone. The third quarter was about traction for CARES. where strong execution on our strategy has started to propel us on the road to accelerated growth for years to come. We believe our goal to become the world leader in pruritus has a unique long-term value proposition. Our clear focus is to provide potential solutions to this underserved condition affecting millions across many disease areas. As we gain strategic momentum, this focus is a differentiating factor. The third quarter showed that the pieces are in place for near-term and long-term success of our strategy. Demand for Corsuva injection is accelerating as we anticipated. We are quickly expanding internationally with the launch of Corsuva and Capruvia in countries around the world. And our rapidly advancing oral difelikephalin pipeline presents the opportunity to build sizable franchises in nephrology and dermatology. We are pleased with the launch progress for Kursuv injection in the third quarter. Net sales for Kursuv injection were $16.2 million. Kara's profit-sharing revenue was $7.4 million. And demand jumped 100-fold to over 180,000 vials shipped from wholesalers to clinics. Product demand is the key to Corsuva's injections momentum and how it builds towards a successful franchise. The significant quarter-to-quarter acceleration in demand is the result of continued strong execution from the CSL V4 and Fresenius field forces. It also reflects the underlying strong value proposition of Corsuva injection for the appropriate dialysis patients. As we outlined last quarter, large dialysis organizations are the key drivers of long-term sustainable demand. And in the third quarter, most of the demand acceleration did come from the LDOs, primarily from Fresenius. For some extra color, almost all Fresenius medical care clinics placed an order by the end of the quarter, and we are closely monitoring reorder rates to understand the number of patient starts in all clinics. DaVita's up product has been more gradual, which we expected based on similar prior launches in this space. Nevertheless, there is positive momentum. We have seen more than half of the DaVita clinics who have previously ordered Corsuba reorder. Moreover, we are seeing continued growth at midsize and independent dialysis organizations with high penetration and solid reorder rates. Positive anecdotal market feedback keeps rolling in across our stakeholder groups. Patients, caregivers, medical providers, and our launch partner, CSLv4, have relayed very encouraging comments on the clinical benefit from course of injection. Driving all of this is the continued strong market engagement. In the third quarter, CSLv4 launched a comprehensive CKD pruritus awareness program in conjunction with the National Kidney Foundation that includes a CKD associated pruritus webpage, infographics, fact sheets, patient testimonials, and a Facebook live event. This is on the heels of the CKD associated pruritus awareness programs with the American Kidney Fund and the American Association of Kidney Patients, which were launched in the second quarter. In early October, CSLV4 conducted a large symposium at the 2022 American Nephrology Nurses Association fall meeting. And recently, CSLV4 had a significant presence at the American Society of Nephrology annual meeting with multiple initiatives targeting patients and providers, including a new patient campaign. Overall, after the second full quarter into the US launch, we see significant progress and momentum driven by the acceleration of product demand. This is the essence of any successful product launch. We are still early in this launch and we continue to expect demand and wholesaler shipments to normalize over the coming quarters with some potential quarterly variability in the process. Keeping the big picture in view, the Korsuv injection launch is on its way. and we are very pleased with how it's progressing. Internationally, CARA has made significant strides in making Corsuva available globally. In the EU, the Capruvia launch has started with Germany leading the rollout across the continent. Germany has also updated its clinical guidelines to include Capruvia as a first-line option for the treatment of pruritus and chronic kidney disease. We are pleased with this positive development at the start of the launch. Capruvia's launch has also commenced in Austria. We expect the majority of the EU countries to launch in 2023. Now, our product was also approved in 3Q under the name Corsuva in Canada and Capruvia in Singapore and Switzerland, and we expect approval in the last access consortium country, Australia, in the coming months. In Japan, Our partner, Marawishi Pharmaceutical, recently announced filing for approval with the PMDA. We expect a decision on this application in the second half of 2023. Moving on to our pipeline. We are making great progress in our strategic priority of expanding the utility of oral difelocephalin. We are enrolling patients in our ongoing Phase III clinical trials in pruritus associated with advanced chronic kidney disease and atopic dermatitis. We continue to expect reporting top-line data for the CKD program in the second half of 2024, and we are still on target for the internal readout of Part A of the Phase III AD study in the second half of 2023. We recently presented exciting additional data for oral diphellocephalin in notalgia peristatica. The late breaker presentation at the EADV Congress in Milan highlighted difelocephalin's rapid onset of action, which occurred as early as day one, and its sustained effect throughout the active extension phase to week 12. We have a meeting scheduled with the FDA this quarter to discuss the steps to a pivotal clinical trial program in NP, and we look forward to providing an update on the program in the future when appropriate. Finally, onto our 16-week proof of concept trial in pruritus associated with PBC. Given the continued slow enrollment, we made a strategic decision to discontinue the study and unblind the data. The small number of patients limits the interpretability of the data. However, efficacy was trending in the right direction and there were no new safety signals. It is important to note that the data do not preclude us from pursuing this indication at a later date. With the potential of NP advancing toward a pivotal program, at this time we are focusing our resources on building our dermatology franchise and expanding our nephrology franchise. We have significant opportunities in both therapeutic areas, and we are pleased with the progress we have made to date. In conclusion, we believe that this quarter has shown that we are continuing to build momentum. We are gaining traction in our strategy to drive long-term growth for CARA and create value for our shareholders. This was evident three ways this quarter. Product demand is accelerating for course of injection. We are rapidly moving toward becoming a world leader in pruritus, and we are laser-focused on maximizing the potential of oral diphellocephalin in nephrology and dermatology. Now, I'd like to introduce Ryan Maynard, our new chief financial officer for his first quarterly earnings call with CARA. Ryan will provide details on our third quarter results, and we'll all be available for your questions after that. Over to you, Ryan. Thank you, Chris.
spk12: I'm happy to be a part of this amazing team at this very exciting time in CARA's growth story. Now on to the Q3 results. As a reminder, the full financial results for the third quarter of 2022 can be found in our press release issued today after the market closed. Total revenue was $10.8 million for the three months ended September 30, 2022, compared to $20.3 million for the same period in 2021. Revenue this quarter consisted of $7.4 million of collaboration revenue related to the profit-sharing revenue from CSL v4 sale of Corsuva injection to third parties and 3.4 million of commercial supply revenue. Revenue of 20.3 million in the comparable period of 2021 related to certain milestone payments associated with the regulatory approval of Corsuva injection. Cost of goods sold during the three months ended September 30th, 2022 was 3.1 million and relates to our commercial supply shipments in the quarter to CSL v4. R&D expenses were $24.7 million for the three months ended September 30, 2022, compared to $15.5 million in the same period of 2021. The increase in R&D expenses is due to the combination of the increased clinical trial spend related to our two Phase III clinical programs and the recognition of a $5 million milestone payment due to Interis. G&A expenses were $6.9 million for the three months ended September 30, 2022, compared to $5.9 million in the same period of 2021. The higher G&A expenses for the three months ended September 30, 2022, were primarily due to increased headcount-related costs as we look to build out the key function to support CARA's growth. Cash, cash equivalents, and marketable securities at September 30, 2022 totaled $179.5 million compared to $236.8 million at December 31, 2021. The decrease in balance primarily resulted from $57.3 million of cash used in operating activities. Finally, 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 first half of 2024. This runway guidance now assumes a Corsuba revenue profit share contribution going forward consistent with the levels we have reported for this quarter. I'd like to point out that this is not our forecast for forward-looking Corsuba revenue, but rather a conservative runway outlook. I will now turn the call back over to Chris.
spk08: Thanks, Ryan. And with that, Ryan, Joe, and I will be happy to take your questions. Shannon, you can now open up the call for questions.
spk01: Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sumant Kokani with Canaccord Genuity. Your line is now open.
spk03: Good afternoon. Thanks for taking my questions. I have a couple. The first one is a clarification on the 184K or so vials that were shipped in the third quarter. Is that a U.S.-only number? If it's worldwide, what would the U.S.-only fraction be? And my second question is on atopic dermatitis. When you get the internal readout for Kind 1 Part A in the second half of 2023, what do you expect to communicate to the street on that?
spk08: Hey, Suman, it's Chris. On your first question, the 184,000 vials is U.S. only. So it's shipments from the wholesalers to the dialysis clinics in the U.S. On the second question on AD, let me turn that to Joe.
spk05: Hi, Suman. So for atopic dermatitis, two things we'll be sharing. One will be the sample size, and the second will be the dose selected going into Part B and the second pivotal study.
spk03: Thanks. I'll hop back into the queue.
spk01: Thank you. Our next question comes from the line of Joseph Stringer with Needham & Company. Your line is now open.
spk09: Hi. Thanks for taking our questions. Two from us. One on sort of margins here, looks like the 3Q22 margins came in very similar to what the 2Q margins were. Just curious if you think this was, again, in line with expectations and you expect this to continue going forward. And then the second question is on the addition of the Fresenius Salesforce. Were all of those, the impact of that, Is that where all those that Salesforce added in 3Q or are there some additional impact from that coming online in the fourth quarter and beyond?
spk08: Yeah. Hey, Joey. It's Chris. Let me answer the last question and then I'll turn it to Ryan. He could talk about the margins real quick. On your last question, the percentage of real Salesforce really came online in the beginning of the third quarter. So this is reflective. The numbers I mentioned are reflective of the first-century sales force in the third quarter. And then on margins, Ryan, do you want to?
spk12: Yeah, so this is Ryan. You are correct, and the margins are very consistent this quarter from last, and I would expect that that would continue going forward.
spk09: Great. Thanks for taking our questions.
spk01: Thank you. Our next question comes from the line of Daniel Wally with JP Morgan. Your line is now open.
spk04: Hi, guys. Thanks for taking your question. Just a clarifying question. How much of the $7.4 million revenue is driven by the 184,000 vials representing crew user demand versus stocking? Given prior remarks that the 4Q demand should represent the biggest change from what was observed in TQ and net user demand, and looking at the reported numbers today, how should we think about fourth quarter revenue? And then last is, should we expect full-year guidance to be provided for 2023?
spk08: Hey, Daniel, it's Chris. Let me give question one and three to Ryan. Three is the guidance, Ryan.
spk12: Yeah, so Daniel, thanks for your question. This is Ryan. So it's important to note that that $7.4 million of revenue is shipments from V4 to wholesalers. So that is not the $180,000 that you're talking about, which is wholesalers to clinics. So that's the important first piece. As far as full year guidance for revenue for Corsuva, we're not yet at the stage. We're at the early innings. We're in the second quarter of, well, we're reporting on the second quarter of launch, and we're not going to give full year Corsuva revenue guidance, but we did as you see, give guidance on our runway, which I thought was important to come off of the very conservative guidance we gave in Q2, which is to include zero course of revenue. So I thought that was going to be prudent and helpful. And I'll turn it back to Chris for the second question.
spk08: Yeah, and Daniel, you know, I said in the quarterly, the 2Q quarterly call, my focus, our focus is really on demand, on demand generation. That's true kind of in any launch I've ever been a part of. That's going to be the focus in 4Q. We're really pleased with the acceleration in Q3 in demand that primarily came from Fresenius, as I mentioned, but also we saw a good acceleration in the MDOs, IDOs, and, again, a gradual pickup in DaVita. So in the fourth quarter, our eyes are going to be on demand as well, and we're going to look closely to see how the product's getting pulled through at Fresenius and continued uptake at DaVita, and I would fully expect this acceleration to continue.
spk04: Thank you.
spk01: Thank you. Our next question comes from the line of Jason Gerberry with Bank of America. Your line is now open.
spk02: Hi, this is Chi for Jason. Thanks for taking the questions. I have two. First one on the growth to net. I'm curious if you can comment on growth to net. on IV Corsuva, trying to make sense of the 184,000 vials shipped from wholesalers to dialysis centers. I understand that that's not where the sales are recognized, but am I roughly right? If I think about it, $150, this price per vial, if you account for gross to net, is it around $20 million shipped? Am I roughly in the ballpark? If you can comment on that, that would be helpful. The second question is on your penetration in the VITA centers appreciate all the colors that you provide that, you know, you have a lot of orders from, you have orders from primarily for seniors order, almost all of them, or almost all the centers they order in 3Q. So if you can give a little flavor on sort of your penetration and the VITA, what proportion of these centers ordered are equal super in 3Q and And with, how do you see that, you know, what would be the main driver to get additional IV Crossover and DaVita dialysis centers? That would be helpful.
spk08: Thank you. Yeah, certainly, Chi. Let me pass on the gross to net to Ryan, and I'll come back and address the DaVita.
spk12: Hey, Chi. Ryan here again. So, I understand it takes a little bit of clarification. So, the gross to net that we report, and all that we will report is shipments from V4 to wholesalers. And so we're not going to get into the gross to net related to the 180,000 vials that were shipped to the dialysis organizations. So the math that you are attempting to do, you can't do based on what we've reported. So I hope that's helpful.
spk08: Yeah, and Chi, on DaVita, you know, I mentioned in my prepare remarks that that we have seen a major acceleration in customer ramp-up, and that was primarily in the Percentius clinics, but also we saw strong acceleration across the other providers, including DaVita. Specific to DaVita, you know, they tend to adopt new products and bring in new products and protocols more gradually, but we expect that ramp-up to continually gain steam, and we've seen an increase in the number of DaVita clinics ordering, and as I mentioned, fully expect this to continue. I'd also point out, you know, that Corsuba is on formulary at DaVita, and they do have protocols in place. And I'd also point out the CSLV4, even though they have a very unique and special relationship with Forcentius, they also have a very strong relationship with DaVita, selling them their portfolio of dialysis products. And they even mentioned on their call, CSLV4's call, they actually just signed a recent deal on an erythropoietin for treatment of anemia. with DaVita. So, you know, net-net, we're really confident that DaVita is going to continue to gradually adopt this product and bring it in for their patients.
spk02: Great. Thank you.
spk08: You're welcome.
spk01: Thank you. Our next question comes from the line of Chris Howerton with Jefferies. Your line is now open.
spk11: Hi, y'all. First question for me, this is AJ, by the way, is just a clarification on the DaVita versus Fresenia sales. Is there a difference between that you've observed between the vials shipped to DaVita versus Fresenius at this time?
spk08: Yeah, AJ, I mentioned that the third quarter, the bulk of the demand really was in the Fresenius clinics with also kind of acceleration in the MDOs, IDOs, and to a lesser extent, DaVita. So that's kind of the double click on demand, if you will, in the third quarter. Gotcha. AJ, I think you cut off. There you go.
spk11: Oh, okay. Sorry about that.
spk08: That's all right.
spk11: And then I have one more after this is on the commercial supply revenue. So how should we be thinking about the long-term steady state of inventory? You know, will it draw down over time or, you know, kind of equalize? Yeah, how should we think about that?
spk12: Sure. Hi, AJ. Ryan here again. So, yeah, it is definitely lumpy. I recognize that. But keep in mind that this is an agreement between us and V4 that is focused solely on the manufacturing of the product and shipping it to V4. So the timing of which relates mainly to how it moves through the batch and the manufacturing and less with demand. So I'm not going to comment on how it's being manufactured. And I understand it's lumpy, but you can probably expect a little lumpiness going forward.
spk11: Okay, that helps with expectations. And then my last question is, are there any additional efforts by CARA and not just CSLV4 to promote the awareness and advocacy program?
spk08: Yeah, AJ, I mean, CSLV4 is our commercial partner. So, you know, we're not expending dollars to launch this product. This is on CSLV4 and Quite frankly, they are an exceptional partner with exceptional market intimacy in nephrology. And you can see the results. They're doing a really good job as we move two quarters into launch. And remember, AJ, and you and I have talked before, we're building a market, and there's nobody better to build a market than somebody with that intimate know-how in the nephrology dialysis space than CSOV4. And then we added on Obviously, the Fresenius Salesforce, that's a contract between CSLV4 and Fresenius. So we're actually incredibly pleased with the dedication of CSLV4 and Fresenius to building this market, and we're really starting to see the results two quarters in.
spk11: Okay. Maybe more directly, would you consider advertising?
spk08: CSLV4 is doing the advertising.
spk11: Gotcha. All right. Thanks, all.
spk08: Yep.
spk01: Thank you. Our next question comes from the line of Stacy Lee with C4. Your line is now open.
spk06: Hi, this is Stacy calling in for Annabelle. Congrats on the great quarter. And then just two questions on our end. Realizing that you book revenues when you ship to wholesalers and then vials sold is when dialysis providers order from the wholesalers, is there a point when these two figures will square up? And then secondly, at what point will we have more clarity on the proposal that CMS made regarding the post-ADAPA period for innovative drugs? You know, what are the next steps that need to occur in the timeline before we see a change in the mechanism there?
spk08: Yeah. Hey, Stacey. So, in terms of Kind of the trade inventory and demand, I would expect to see some variability still. Ryan likes to say lumpiness over the next few quarters, and that's pretty typical in any launch. I would expect that to start to normalize as we head into 2023. Can't give an exact date, but I would expect that to settle down and kind of more equate in 2023. CMS, it's a great question. You know, CMS came out with their final rule last week or two weeks ago, and they did not address the comments in the RFI in the final rule. What they did do, though, is they acknowledged the comments and indicated they're going to consider them as they consider possible future rulemaking to address post-ADAPA reimbursement for innovative drugs. So, you know, what we expect is to hear something probably more in the final rule for 2024, which would be this time kind of next year. That's our expectation. That's what we expected even with this rulemaking cycle. I'd also say, Stacy, as well, you know, we, CARA, CSLV4, and other key stakeholders will continue to be in contact with CMS and and doing lobbying efforts, et cetera. And I feel very strongly that CMS really has an open mind here. They understand that it's important that there is resolution before Corsuva comes out of this Tdapa period in 2024. So we are really hopeful that more clarity will come as part of the 2024 rulemaking cycle.
spk06: Amazing. That was really helpful. Thank you, guys.
spk01: Thanks, Stacey. Thank you. Our next question. comes from the line of David Amselin with Piper Sandler. Your line is open.
spk10: Hey, thanks. So just a couple. So just a clarification question. Will 4Q revenues sort of look more like an approximation of demand, or is it going to be, is there going to be some real inventory in there, just given that we're still in the early stages of the launch? So I just wanted to get a sense for you know, what 4Q may or may not look like vis-a-vis inventory. I think that would be helpful. And then secondly, you mentioned earlier, Chris, about DaVita and how uptake tends to be ordering a new product in general tends to be more gradual, if you will. So just wanted to get a sense from you as to, you know, why that is. You know, why is DaVita's uptake tend to be slower. Is it anything specific to Corsuba? Is it just sort of a general standard operating procedure? That would be helpful. Thanks.
spk08: Yeah, David, nice to hear from you. So your first question around expectations for 4Q, obviously we're not going to give forward-looking guidance, but I would still expect there to be, again, Ryan's word, lumpiness in terms of trade inventory and demand. What I'm looking at is a continued ramp up in demand. That's what's critical. And as I just mentioned to the previous question from Stacy, is that I would expect that to start to normalize sometime next year. And that's pretty typical when you're building a market and people are taking on product. Your last question on DaVita. Yeah, you know, David, it is a gradual adoption. We saw it with Parziviv. And in terms of rationale, I mean, just that organization tends to bring on a product more gradually to get experience, adjust their algorithms appropriately. It's not specific to Coursiva. Also, be clear, DaVita doesn't have a sales force like Fresenius as well. So that's another important lever in terms of more rapid uptake that we're seeing at Fresenius. Yes. I would also, you know, point out, though, which is significant, is that we are seeing, you know, a good pickup in DaVita, right? We are seeing clinics coming on board week to week, and we are seeing those that are coming on board actually having a very strong reorder rate. So we actually feel really good about where we are and meeting our expectations from the DaVita organization, and we're really excited about kind of the quarters to come.
spk01: Great. Thank you.
spk08: You're welcome.
spk01: Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touchstone telephone. Our next question is a follow-up from Sumant Kulkarni with Canaccord Genuity. Your line is now open.
spk03: Thanks so much for the follow-up. This question is independent of the rulemaking process where we have some timelines to look forward to, but what is the latest thought process on how this quarter's wilds are trending relative to setting a good utilization rate when Tdapa ends? If this is still a premature question, how many quarters do you think we need to see Wiles for to get a better run rate on this variable that's key for reimbursability post-Jadapa?
spk08: Yes, Sumant, again, a super question on the CMS in terms of how they look at utilization. I mean, listen, we're building a market. We're two quarters in. And really, if you think about it, the LDOs really just came on board in the third quarter, namely with a strong acceleration of percentage. You know, I would fully expect utilization, you know, obviously to continue to ramp up. And as we near the end of Tdapa, I think we're going to have a really good, you know, really good sense of what sort of patient population we have on Corsuva that will help CMS in terms of their estimation of potential funding, either through, you know, kind of the rulemaking cycle, potential add-on payment, or within the bundle itself. You know, and, you know, Suman, I'll just conclude, too, you know, they typically look at the full two years of utilization, and we saw with PARSA-BIB, I think it was really important, there was an additional year added on to DAPA to get a good steady-state two years of utilization data to calculate the funding.
spk01: Got it. Thank you.
spk08: You got it.
spk01: Thank you. I'm currently showing no further questions at this time. I'll now turn the call back over to the CARA team for closing remarks.
spk08: Yeah, thank you, Shannon, and really thank you, everyone, for joining our quarterly call. We're really excited about where we are as a company in terms of adding both short-term and long-term value, and we'll continue to focus on execution with our partner, with IV Corsuva, and under Joe's leadership, continue to execute our clinical trial programs. So with that, I'll conclude the call. Thank you.
spk01: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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