CARA THERAPEUTICS, INC._DECEMBER 31, 2024

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024

COMMISSION FILE NUMBER: 001-36279

CARA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 406-3700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered

Common Stock, par value $0.001 per share CARA The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻No⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻No⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Smaller Reporting Company ☒

Non-accelerated filer ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Yes ☐ No ⌧

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). Yes ☐ No ⌧

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧

The aggregate market value of the registrant’s Common Stock (the only common equity of the registrant) held by non-affiliates, based on the closing sales price of the stock on the Nasdaq Stock Market for the last business day of the registrant’s most recently completed second fiscal quarter, was $12,141,593. For purposes of this calculation, shares of common stock held by directors and officers and their affiliated entities at June 30, 2024 were excluded. Exclusion of shares held by any person should not be construed to indicate that the person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that the person is controlled by or under common control with the registrant.

The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of March 6, 2025 was 4,573,606.

Documents Incorporated By Reference

None

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CARA THERAPEUTICS, INC.

2024 ANNUAL REPORT ON FORM 10-K

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PAGE

PART I

Item 1. Business. 5

Item 1A. Risk Factors. 26

Item 1B. Unresolved Staff Comments. 80

Item 1C. Cybersecurity. 80

Item 2. Properties. 81

Item 3. Legal Proceedings. 81

Item 4. Mine Safety Disclosures. 82

PART II

Item 6. [Reserved] 84

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 110

Item 8. Financial Statements and Supplementary Data. 112

Item 9A. Controls and Procedures. 167

Item 9B. Other Information. 167

PART III

Item 10. Directors, Executive Officers and Corporate Governance. 168

Item 11. Executive Compensation. 177

Item 14. Principal Accounting Fees and Services. 193

PART IV

Item 15. Exhibit and Financial Statement Schedules. 193

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PART I

In this Annual Report on Form 10-K, unless the context otherwise dictates, the terms “we,” “us,” “Cara,” the “Company” and “our” refer to Cara Therapeutics, Inc.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections of this Annual Report on Form 10-K titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by the words “aim”, “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “will,” or “would,” and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:

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● our ability to regain compliance with the Nasdaq listing requirements;

● regulatory developments in the United States and foreign countries;

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● our ability to obtain funding for our operations;

You should refer to Part I Item 1A. “Risk Factors” of this Annual Report on Form 10-K for a discussion of material factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Risk Factors Summary

Investing in our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as more fully described below. The principal factors and uncertainties that make investing in our common stock risky include, among others:

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Item 1. Business.

Overview

Cara is a biopharmaceutical company that has been focused on leading a new treatment paradigm to improve the lives of patients suffering from chronic pruritus. Cara has developed an IV formulation of difelikefalin, which is approved for the treatment of moderate-to-severe pruritus associated with advanced chronic kidney disease in adults undergoing hemodialysis in the United States, the European Union, or EU, and multiple other countries. The IV formulation is out-licensed worldwide.

On June 14, 2024, Cara’s Board of Directors approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value after Cara announced its decision to discontinue the clinical program in notalgia paresthetica, or NP, on June 12, 2024. Cara’s decision to discontinue the clinical program in NP followed the outcome from the dose-finding Part A of the KOURAGE-1 study evaluating the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in adult patients with NP in which oral difelikefalin did not demonstrate a meaningful clinical benefit at any dose compared to placebo. The decision was not related to any safety or medical issues, or negative regulatory feedback related to the NP program. In connection with the streamlined operating plan, Cara’s Board of Directors also approved a second reduction in Cara’s workforce by approximately 70%, which was substantially completed by June 30, 2024 (see Note 19 of Notes to Consolidated Financial Statements, Commitments and Contingencies – Restructuring Actions, in this Annual Report on Form 10-K.)

On December 30, 2024, Cara effected a one-for-twelve (12) reverse stock split and corresponding proportionate reduction in the total number of authorized shares of Cara’s common stock. All share and per share amounts in this Annual Report on Form 10-K, unless otherwise noted, reflect the reverse stock split (see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Corporate Update).

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Strategic Alternatives

After a comprehensive review by Cara’s Board of Directors of strategic alternatives, including identifying and reviewing potential candidates for a strategic transaction, on December 17, 2024, Cara, CT Convergence Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Cara, or Merger Sub, and Tvardi entered into an Agreement and Plan of Merger and Reorganization, as may be amended from time to time, or the Merger Agreement, pursuant to which Merger Sub will merge with and into Tvardi, with Tvardi surviving as a wholly owned subsidiary of Cara. The closing of the Merger is subject to approval by Cara’s and Tvardi’s stockholders, as well as other customary closing conditions, including the effectiveness of a registration statement that we have filed with the SEC, and Nasdaq’s approval of the listing of the shares of Cara common stock to be issued in connection with the transaction. Additionally, as a condition of the closing of the Merger, Tvardi must have received satisfactory evidence that the Asset Disposition (as defined below) will be consummated substantially concurrently with the closing of the Merger. If the Merger is completed, the business of Tvardi will continue as the business of the combined company.

On December 17, 2024, Cara and its subsidiary, Cara Royalty Sub, LLC (Cara Royalty Sub, and together with Cara, each, a Seller and together, the Sellers), entered into an Asset Purchase Agreement (APA) with Vifor Fresenius Medical Care Renal Pharma, Ltd., a majority-owned, indirect subsidiary of CSL Limited (CSL Vifor), pursuant to which, at the consummation of the transaction, Sellers will sell to CSL Vifor and CSL Vifor will acquire from Sellers certain assets and rights for the development, manufacture and commercialization of difelikefalin as well as certain associated liabilities (Asset Disposition) for a purchase price of $900,000 (subject to certain adjustments with respect to inventory). Pursuant to the APA, in connection with the consummation of the Asset Disposition, CSL Vifor and HCR (as defined below) have entered into a letter agreement with Cara providing that CSL Vifor and HCR will, subject to the satisfaction of conditions to closing under the APA, enter into an amended and restated purchase agreement to amend and replace the existing Purchase and Sale Agreement, dated as of November 1, 2023 (as amended, Original HCR Agreement), by and among Cara Royalty Sub, HCRX Investments HoldCo, L.P. (HCRX) and HealthCare Royalty Partners IV, L.P. (HCR IV and together with HCRX, HCR). Upon entering into the amended and restated purchase agreement, effective as of the closing of the Asset Disposition: (i) CSL Vifor will be obligated to make certain payments to HCR from and after the date thereof relating to certain revenue and/or royalties from difelikefalin, (ii) each of the Contribution Agreement, the License Agreement and the Pledge Agreement (each as defined in the Original HCR Agreement) shall be terminated, and (iii) Sellers shall have no further payment or other obligations to HCR under the Original HCR Agreement. Additionally, pursuant to the APA, at the consummation of the Asset Disposition, Cara has agreed to pay CSL Vifor $3.0 million to compensate CSL Vifor for the estimated incremental future expenses to be incurred by CSL Vifor as a result of the transfer of the assets to be acquired and the liabilities to be assumed by it in connection with the Asset Disposition. The Asset Disposition is subject to certain conditions to closing, including either (i) the consummation of the Merger concurrently with the Asset Disposition or (ii) the receipt of the requisite stockholder approval needed to approve the Asset Disposition in the event that the Merger is terminated.

Cara’s future operations are highly dependent on the success of the Merger and the Asset Disposition, and there can be no assurances that the Merger and Asset Disposition will be successfully consummated. There can be no assurance that any transaction, including the Merger and the Asset Disposition. will be completed on terms favorable to Cara and its stockholders. If these transactions are unsuccessful, Cara’s Board of Directors may decide to pursue a dissolution and liquidation of Cara.

Corporate History

Cara was incorporated and commenced operations in 2004, and its primary activities to date have been organizing and staffing the company, developing its lead product and product candidates, including conducting preclinical studies and clinical trials of difelikefalin-based product candidates and raising capital. To date, Cara has financed its operations primarily through sales of its equity and debt securities, sales of its royalties from ex-U.S. sales of its commercial product, and payments from license agreements.

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Cara’s Product Portfolio

Product Indication Status Next Milestone Commercialization Rights

*Cara is party to two collaborations for the commercialization of KORSUVA (difelikefalin) injection/Kapruvia with a joint venture between CSL Vifor and Fresenius Medical Care. In this Annual Report, unless the context otherwise requires, “CSL Vifor” refers to CSL Vifor and its affiliated entities, including, where applicable, the joint venture.

KORSUVA (difelikefalin) injection – Cara’s Commercial Stage Product

Overview

Cara has out-licensed to CSL Vifor the commercialization of KORSUVA injection/Kapruvia in dialysis patients with moderate-to-severe pruritus associated with chronic kidney disease, or advanced CKD-aP, worldwide, excluding Japan (licensed to Maruishi/sub-licensee Kissei), and South Korea (licensed to CKDP).

On August 23, 2021, KORSUVA injection was approved by the U.S. Food and Drug Administration, or FDA, for the treatment of moderate-to-severe pruritus associated with advanced CKD in adults undergoing hemodialysis. In December 2021, Centers for Medicare & Medicaid Services, or CMS, granted Transition Drug Add-on Payment Adjustment, or TDAPA, to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022 for two years. The commercial launch of KORSUVA injection commenced in April 2022 and Cara began recording the associated profit-sharing revenues in the second quarter of 2022. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on payment as proposed in the draft CY 2024 rule. Under the final rule, TDAPA drugs in existing functional categories will receive a post-TDAPA add-on payment set at 65 percent of the total trailing 12-months expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA add-on payment will be applied to all End Stage Renal Disease, or ESRD, Prospective Payment System, or PPS, payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection commenced on April 1, 2024. The unfavorable CMS reimbursement codified in the final CY2024 rule has resulted in a lack of sequential revenues growth for KORSUVA injection since its launch.

For the year ended December 31, 2024, CSL Vifor recorded net sales of KORSUVA injection in the United States of approximately $2.1 million, which included negative net sales reported by CSL Vifor for the second and fourth quarters of 2024 primarily due to higher rebates and chargebacks due to price decreases on KORSUVA injection related to the expiration of TDAPA in April 2024. For the years ended December 31, 2023 and 2022, CSL Vifor recorded net sales of KORSUVA injection in the United States of approximately $26.5 million and $35.0 million, respectively. For the years ended December 31, 2024, 2023 and 2022, Cara recorded associated collaborative revenue of $2.1 million, $12.4 million and $16.6 million, respectively. However, Cara has recorded an expense in other general and administrative, or G&A, expense for approximately $1.6 million for the year ended December 31, 2024 as a result of the negative profit share amounts in the second and fourth quarters of 2024. As a result of the final CY 2024 rule, Cara expects no meaningful revenue contribution from KORSUVA injection following the TDAPA period expiration.

In April 2022, the European Commission granted a marketing authorization to difelikefalin injection under the brand name Kapruvia for the treatment of moderate-to-severe pruritus associated with advanced CKD in adult hemodialysis patients. The marketing authorization approves Kapruvia for use in all member states of the EU, as well as Iceland, Liechtenstein, and Norway. Difelikefalin injection was also approved in the UK (04/2022) and Switzerland

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(08/2022) under the brand name Kapruvia as well as Singapore (08/2022), Canada (08/2022), Australia (11/2022), UAE (01/2023), Kuwait (05/2023), Israel (06/2023), Japan (09/2023), and Saudi Arabia (01/2024) under the brand name KORSUVA injection. For the years ended December 31, 2023 and 2022, Cara recorded royalty revenue of approximately $415,000 and $72,000, respectively, which represented its royalties on net sales of Kapruvia and KORSUVA injection.

Pursuant to the Original HCR Agreement, HCR will receive current and future royalty and milestone payments for Kapruvia and KORSUVA (ex-U.S. only) up to certain capped amounts in exchange for certain payments made to Cara. As a result, there was no royalty revenue recorded for the year ended December 31, 2024. However, Cara recorded other revenue of approximately $4.3 million for the year ended December 31, 2024, of which approximately $1.5 million related to CSL Vifor royalties to be paid to HCR under this agreement. For the period of October 1, 2023 through December 31, 2023, Cara also recorded other revenue of $699,000, of which approximately $284,000 related to CSL Vifor royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

Cara has out-licensed to Maruishi and its sub-licensee Kissei the commercialization of KORSUVA injection in Japan. In September 2023, Maruishi received manufacturing and marketing approval from Japan’s Ministry of Health, Labour and Welfare for KORSUVA IV Injection Syringe for the treatment of pruritus in hemodialysis patients. In conjunction with the approval, Cara earned a $1.4 million milestone payment per the terms of the licensing agreement during the year ended December 31, 2023.

Pursuant to the Original HCR Agreement, Cara sold its future royalties and milestones for KORSUVA in Japan to HCR. For the year ended December 31, 2024, Cara recorded other revenue of approximately $4.3 million, of which approximately $2.8 million related to Maruishi royalties to be paid to HCR under this agreement. For the period of October 1, 2023 through December 31, 2023, Cara also recorded other revenue of $699,000, of which approximately $415,000 related to Maruishi royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

As a result of Cara’s sales of the royalties and milestones for KORSUVA/Kapruvia, Cara expects no meaningful revenue contribution from KORSUVA/Kapruvia royalties and milestones in the foreseeable future.

KORSUVA Injection U.S. Commercialization

In April 2022, Cara’s partner CSL Vifor initiated the commercialization of KORSUVA injection in the United States. The launch was initially driven by independent and mid-size dialysis organizations coupled with product stocking at the wholesaler level. In the third quarter of 2022, large dialysis organizations, or LDOs, came on-line driving a significant quarter-to-quarter increase in order volume from the wholesaler. This stocking at the clinic level, particularly from Fresenius Medical Care, or FMC, resulted in significant subsequent quarterly revenue fluctuations. In the third quarter of 2023, FMC decided to reallocate all remaining clinic level inventory within its network of clinics resulting in limited revenues in the fourth quarter of 2023 and the year ended December 31, 2024.

KORSUVA Injection and Kapruvia Revenue and Other Metrics

Cara generates revenue from its commercial products KORSUVA injection and Kapruvia primarily through its collaboration agreements with CSL Vifor:

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During the fourth quarter of 2023, Cara entered into the Original HCR Agreement where Cara sold its current and future royalties and milestone payments for Kapruvia and KORSUVA injection to HCR. For the years ended December 31, 2024 and 2023, Cara recorded other revenue of approximately $4.3 million and $699,000, respectively, of which approximately $1.5 million and $284,000, respectively, related to CSL Vifor royalties to be paid to HCR under this agreement and approximately $2.8 million and $415,000, respectively, related to Maruishi royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

Cara is also eligible for sales-based or regulatory milestone payments, which could be earned in the future in accordance with certain licensing agreements and would be subject to the Original HCR Agreement for ex-U.S. milestone payments. For the year ended December 31, 2024, Cara did not record any sales-based or regulatory milestone revenue. For the year ended December 31, 2023, Cara earned regulatory milestone revenue of $1.4 million related to the manufacturing and marketing approval in Japan under the Maruishi Agreement, but did not record any sales-based milestone revenue. For the year ended December 31, 2022, Cara earned regulatory milestone revenue of $15.0 million from CSL Vifor for the approval of Kapruvia by the European Commission in April 2022, but did not record any sales-based milestone revenue.

Additional metrics that Cara has reported in the past:

Difelikefalin Development in Pruritus

Difelikefalin, Cara’s selective, predominantly peripherally acting, non-scheduled Kappa opioid receptor agonist, acts on the peripheral neurons responsible for sensing pruritus. Given this unique mechanism of action, difelikefalin is thought to work broadly independent of the origin of itch. To date, Cara has studied difelikefalin for pruritus associated with systemic, inflammatory, and neuropathic diseases. The IV formulation is approved in the United States, EU and other countries around the world for the treatment of advanced CKD-aP in adults undergoing hemodialysis. Cara studied the oral formulation at multiple dosage strengths in moderate-to-severe pruritus associated with NP with positive efficacy signals across all completed mono therapy studies. In Cara’s NP program, oral difelikefalin was generally well tolerated with all adverse events in difelikefalin-treated patients reported as mild or moderate in severity.

On June 12, 2024, Cara announced its decision to discontinue the clinical program in NP following the outcome from the dose-finding Part A of the KOURAGE-1 study evaluating the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in adult patients with NP. Oral difelikefalin did not demonstrate a meaningful clinical benefit at any dose compared to placebo. The decision was not related to any safety or medical issues, or negative regulatory feedback related to the NP program.

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On June 14, 2024, Cara’s Board of Directors approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value based on the decision to discontinue the NP program.

Royalty Purchase and Sale Agreement

Pursuant to the Original HCR Agreement, Cara Royalty Sub sold to HCR certain of its rights to receive future royalties and milestone payments, or the Royalties, due and payable to Cara Royalty Sub (as Cara’s assignee) under its agreements with Maruishi and CSL Vifor, collectively the Covered License Agreements, in exchange for up to $40.0 million. Cara has retained all of its right, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin.

Under the terms of the Original HCR Agreement, Cara received an initial payment of $17.5 million less certain transaction costs in November 2023. In December 2023, Cara received an additional $20.0 million less certain advisory fees, upon satisfying the milestone event for pricing of Kapruvia® (difelikefalin) in Germany being approved above a certain threshold amount per dose. The terms of the Original HCR Agreement also provided for an additional $2.5 million milestone payment to Cara Royalty Sub upon the achievement of a 2024 sales milestone of KORSUVA in Japan. Cara achieved this milestone in the fourth quarter of 2024. This milestone payment is due in the first quarter of 2025.

The Original HCR Agreement will automatically expire, and the payment of Royalties to HCR will cease, when HCR has received payments of Royalties equal to two times the aggregate amount of payments made by HCR under the Original HCR Agreement if achieved on or prior to December 31, 2029, or 2.8 times the aggregate amount of payments made by HCR under the Original HCR Agreement, if not achieved on or prior to December 31, 2029. In the event of a change of control, Cara Royalty Sub will pay to HCR an amount equal to 2.8 times the aggregate amount of payments made by HCR less the total net amounts paid by Cara Royalty Sub to HCR as of the effective date of control. In certain situations, Cara Royalty Sub would not be obligated to pay the change of control payment to HCR. After the Original HCR Agreement expires, all rights to receive the Royalties return to Cara Royalty Sub.

Collaboration and License Agreements

Agreements with CSL Vifor

Cara is party to two separate license agreements with CSL Vifor. In October 2020, Cara granted CSL Vifor an exclusive license solely in the United States to use, distribute, offer for sale, promote, sell, and otherwise commercialize KORSUVA (difelikefalin) injection for all therapeutic uses relating to the inhibition, prevention or treatment of itch associated with pruritus in hemodialysis and peritoneal dialysis patients in the United States.

Cara received an upfront payment of $100.0 million and an additional payment of $50.0 million for the purchase of an aggregate of 244,963 shares of Cara common stock at a price of $204.11 per share, which represented a premium over a pre-determined average closing price of the common stock. The U.S. regulatory approval of KORSUVA injection in August 2021 triggered an additional $50.0 million equity purchase by CSL Vifor in October 2021, in which Cara sold an aggregate of 273,533 shares of Cara common stock at a price of $182.76 per share, which represented a 20% premium to the 30-day trailing average price of the common stock. In addition, pursuant to this agreement, Cara is eligible to receive payments of up to $240.0 million upon the achievement of certain sales-based milestones. However, based on the limited commercial success of KORSUVA injection, Cara does not expect to achieve these sales-based milestones.

Pursuant to the agreement for commercialization of KORSUVA in the United States, Cara is generally entitled to 60% of the net profits from sales of KORSUVA injection in the United States and CSL Vifor is entitled to 40% of such net profits (excluding sales to Fresenius Medical Center dialysis clinics, compensation for which is governed by a separate agreement), subject to potential temporary adjustment in future years based on certain conditions. Under this agreement, in consideration of CSL Vifor’s conduct of the marketing, promotion, selling and distribution of KORSUVA injection in the United States, Cara pays a marketing and distribution fee to CSL Vifor based on the level of annual net sales. This fee as well as CSL Vifor’s cost of goods sold, or COGS, are deducted from net sales in calculating the net profits that are subject to the profit-sharing arrangement under the agreement.

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Under a separate agreement with CSL Vifor, in May 2018, Cara granted CSL Vifor a license to seek regulatory approval to commercialize, import, export, use, distribute, offer for sale, promote, sell and otherwise commercialize KORSUVA (difelikefalin) injection for all therapeutic uses to prevent, inhibit or treat itch associated with pruritus in hemodialysis and peritoneal-dialysis patients worldwide (excluding the United States, Japan and South Korea). Under the agreement, CSL Vifor also has the right to promote KORSUVA injection in the United States in the dialysis clinics of Fresenius Medical Care North America, or FMCNA, under a profit-sharing arrangement.

Upon entry into this agreement, Cara received a non-refundable, non-creditable $50.0 million upfront payment for the purchase of an aggregate of 97,902 shares of Cara common stock at a price of $204.29 per share, which represented a premium over a pre-determined average closing price of the common stock.

As a result of the European Commission’s regulatory approval of Kapruvia in April 2022, Cara received a $15.0 million regulatory milestone payment from CSL Vifor. After U.S. regulatory approval of KORSUVA injection in August 2021, Cara received a $15.0 million regulatory milestone payment.

Cara is eligible to receive from CSL Vifor commercial milestone payments in the aggregate of up to $440.0 million, all of which milestones are sales related. Cara is also eligible to receive tiered double-digit royalty payments based on annual net sales, as defined, of KORSUVA (difelikefalin) injection in the licensed territories. In the United States, CSL Vifor will promote KORSUVA (difelikefalin) injection in the dialysis clinics of FMCNA under a profit-sharing arrangement (subject to the terms and conditions of this agreement) based on net FMCNA clinic sales) and Vifor Fresenius Medical Care Renal Pharma Ltd. is entitled to 50% of such net profits, subject to potential adjustments in a calendar year based on certain conditions. During the fourth quarter of 2023, Cara entered into the Original HCR Agreement pursuant to which it sold its future royalties and milestone payments under this agreement to HCR (see “Royalty Purchase and Sale Agreement” above).

Maruishi Pharmaceutical Co., Ltd., or Maruishi

In April 2013, Cara entered into a license agreement with Maruishi, or the Maruishi Agreement, under which it granted Maruishi an exclusive license to develop, manufacture and commercialize drug products containing difelikefalin in Japan in the acute pain and uremic pruritus fields. Maruishi has a right of first negotiation for any other indications for which Cara develops difelikefalin and, under certain conditions, Maruishi may substitute another pruritus indication for the uremic pruritus indication originally included in its license from Cara. Maruishi’s right of first negotiation has expired for the indication of chronic pruritus associated with NP. Maruishi is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize difelikefalin in Japan. Cara is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize difelikefalin in the United States.

In January 2022, Maruishi and its sublicensee Kissei confirmed the primary endpoint was achieved in a Japanese Phase 3 clinical study (double-blind, placebo-controlled period) of difelikefalin injection for the treatment of pruritus in hemodialysis patients. In the Phase 3 study, 178 patients were administered difelikefalin or placebo for 6 weeks followed by an open-label extension period of difelikefalin administration for 52 weeks. The primary endpoint, change in itch NRS score, and the secondary endpoint, change in itching scores of Shiratori severity criteria, were significantly improved from baseline compared to the placebo group. Difelikefalin was well-tolerated.

Under the terms of the Maruishi Agreement, Cara received a non-refundable and non-creditable upfront license fee of $15.0 million and is eligible to receive up to an aggregate of $10.5 million in clinical development and regulatory milestones (before contractual foreign currency exchange adjustments). In January 2021, Cara met the milestone criteria, as set forth in the Maruishi Agreement, for Maruishi’s first initiation of a Phase 3 trial for uremic pruritus in Japan. As a result, Cara received the $2.0 million milestone payment ($1.9 million after contractual foreign currency exchange adjustments) in May 2021.

In September 2022, Maruishi submitted a New Drug Application in Japan for approval of difelikefalin injection for the treatment of pruritus in hemodialysis patients. In September 2023, Maruishi received manufacturing and marketing approval from Japan’s Ministry of Health, Labour and Welfare for KORSUVA IV Injection Syringe for the

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treatment of pruritus in hemodialysis patients. In conjunction with the approval, Cara earned a $1.4 million milestone payment per the terms of the licensing agreement. In November 2023, Cara entered into an active pharmaceutical ingredient, or API, supply agreement with Maruishi for difelikefalin.

To date, Cara has received $6.5 million (before contractual foreign currency exchange adjustments) of clinical development and regulatory milestones from Maruishi. Cara is also eligible to receive a one-time sales milestone of one billion Yen when a certain sales level is attained. Cara also receives a mid-double-digit percentage of all non-royalty payments received by Maruishi from its sublicensees, if any, and tiered royalties based on net sales, if any, with minimum royalty rates in the low double digits and maximum royalty rates in the low twenties. Maruishi’s obligation to pay Cara royalties continues, on a product-by-product basis, until the expiration of the last-to-expire licensed patent covering such product or the later expiration of any market exclusivity period. During the fourth quarter of 2023, Cara entered into the Original HCR Agreement pursuant to which it sold its future royalties and milestone payments under the Maruishi Agreement to HCR (see “Royalty Purchase and Sale Agreement” above). Cara expects to assign the Maruishi Agreement to CSL Vifor in connection with the Merger and Asset Disposition.

Chong Kun Dang Pharmaceutical Corporation, or CKDP

In April 2012, Cara entered into a license agreement with CKDP, or the CKDP Agreement, under which it granted CKDP an exclusive license to develop, manufacture and commercialize drug products containing difelikefalin in South Korea. CKDP is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize difelikefalin in South Korea. Cara is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize difelikefalin in the United States.

Under the terms of the CKDP Agreement, Cara received a non-refundable and non-creditable $0.6 million upfront payment and is eligible to receive up to an aggregate of $3.8 million in development and regulatory milestones (before South Korean withholding taxes). To date, Cara has received $2.3 million (before South Korean withholding tax) of development and regulatory milestones. Cara is also eligible to receive a mid-double-digit percentage of all non-royalty payments received by CKDP from its sublicensees, if any, and tiered royalties ranging from the high single digits to the high teens based on net sales, if any. CKDP’s obligation to pay Cara royalties continues, on a product-by-product basis, until the expiration of the last-to-expire licensed patent covering such product or the later expiration of any market exclusivity period.

The CKDP Agreement continues until CKDP no longer has any obligation to pay Cara royalties on any product. Either Cara or CKDP may terminate the CKDP Agreement for the other party’s breach of the CKDP Agreement or bankruptcy. CKDP may terminate the CKDP Agreement if any of the licensed patent rights is invalid, unenforceable, is narrowed in scope or is deemed unpatentable, except as a result of a challenge by CKDP, or a third party commercializes a product containing a compound identical to difelikefalin without infringing any of the licensed patent rights in South Korea. Cara may terminate the CKDP Agreement if CKDP challenges the licensed patent rights or if a third party in South Korea owns an issued patent that claims difelikefalin and CKDP’s sale of products would infringe that patent. In addition, in connection with the CKDP Agreement, CKDP made a $0.4 million equity investment in Cara. Cara expects to assign CKDP Agreement to CSL Vifor in connection with the Merger and Asset Disposition.

Manufacturing and License Agreements

Polypeptide Laboratories S.A., or PPL

In July 2021, Cara entered into an API Commercial Supply Agreement with Polypeptide Laboratories S.A., or PPL, that defines each party’s responsibilities with respect to PPL’s manufacture and supply of API for the difelikefalin injection product candidate. Under the API Commercial Supply Agreement, PPL shall manufacture API at its facility for sale and supply to Cara, in the amounts as set forth in purchase orders to be provided by Cara. Cara will be required to purchase its requirements of API for each year of the term of the agreement, based on internal forecasts.

The API Commercial Supply Agreement will continue until the fifth anniversary of the approval by the FDA of the New Drug Application for KORSUVA injection, unless the API Commercial Supply Agreement is earlier

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terminated, and will automatically be extended for successive five-year periods unless either party gives notice to the other party of its intention to terminate. Cara expects to assign the API Commercial Supply Agreement to CSL Vifor in connection with the Merger and Asset Disposition.

Enteris Biopharma, Inc., or Enteris

In August 2019, Cara entered into a non-exclusive license agreement with Enteris Biopharma, Inc. (Enteris), or the Enteris License Agreement. Pursuant to the Enteris License Agreement, Enteris granted to Cara a non-exclusive, royalty-bearing license, including the right to grant sublicenses, under certain proprietary technology and patent rights related to or covering formulations for oral delivery of peptide active pharmaceutical ingredients with functional excipients to enhance permeability and/or solubility, known as Enteris’s Peptelligence® technology, to develop, manufacture and commercialize products using such technology worldwide, excluding Japan and South Korea.

As consideration for the licensed rights under the Enteris License Agreement, Cara paid an upfront fee equal to $8.0 million, consisting of $4.0 million in cash and $4.0 million in shares of Cara common stock.

Cara is also obligated, pursuant to the Enteris License Agreement, to pay Enteris (1) milestone payments upon the achievement of certain development, regulatory and commercial milestones and (2) low-single digit royalty percentages on net sales of licensed products, subject to reductions in specified circumstances. Until the second anniversary of the entry into the Enteris License Agreement, Cara had the right, but not the obligation, to terminate its obligation to pay any royalties under the Royalty Buyout. Cara did not exercise its Royalty Buyout right and such right expired in August 2021. During the years ended December 31, 2024 and 2023, no milestone payments or royalties were paid to Enteris by Cara in relation to the Enteris License Agreement. During the year ended December 31, 2022, Cara paid $5.0 million to Enteris for milestones earned in relation to the Enteris License Agreement, which were recorded in R&D expense for 2022.

The Enteris License Agreement will expire on a country-by-country, licensed product-by-licensed product basis upon the later of (1) the expiration (or invalidation) of all valid claims in licensed patent rights that cover such product in such country, (2) the end of the calendar quarter in which generic competition (as defined in the Enteris License Agreement) occurs for such product in such country and (3) ten years from the first commercial sale of such product.

Either party may terminate the Enteris License Agreement upon written notice if the other party has failed to remedy a material breach within 60 days (or 30 days in the case of a material breach of a payment obligation). Enteris may terminate the Enteris License Agreement upon 30 days’ written notice to Cara if Cara or any of its affiliates formally challenge the validity of any licensed patent rights or assists a third party in doing so. Cara may terminate the Enteris License Agreement for any reason or no reason (a) prior to receipt of first regulatory approval for a licensed product in the United States for any indication upon 30 days’ prior written notice to Enteris or (b) on or after receipt of first regulatory approval for a licensed product in the United States for any indication upon 60 days’ prior written notice to Enteris. In June 2024, Cara announced its decision to discontinue the clinical program in NP following the outcome from the dose-finding Part A of the KOURAGE-1 study evaluating the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in adult patients with NP.

Patheon UK Limited, or Patheon

In July 2019, Cara entered into a Master Services Agreement, or MSA, with Patheon UK Limited, or Patheon. The MSA governs the general terms under which Patheon, or one of its affiliates, will provide non-exclusive manufacturing services to Cara for the drug products specified by Cara from time to time. Pursuant to the MSA, Cara have agreed to order from Patheon at least a certain percentage of its commercial requirements for a product under a related Product Agreement. Each Product Agreement that Cara may enter into from time to time will be governed by the terms of the MSA, unless expressly modified in such Product Agreement.

The MSA had an initial term ending December 31, 2024, which automatically renewed after the initial term for successive terms of two years until December 31, 2026.

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Either party may terminate the MSA or a Product Agreement upon written notice if the other party (1) has failed to remedy a material breach within a specified time or (2) is declared insolvent or bankrupt, voluntarily files a petition of bankruptcy or assigns such agreement for the benefit of creditors. Cara may terminate a Product Agreement (a) upon 90 days’ prior written notice if any governmental agency takes any action that prevents Cara from selling the relevant product in the relevant territory, (b) upon six months’ prior written notice if Cara does not intend to order manufacturing services due to a product’s discontinuance in the market, or (c) upon 90 days’ prior written notice if Cara determines that the manufacture or supply of a product likely infringes third-party rights. Patheon may terminate the MSA or a Product Agreement (i) upon six months’ prior written notice if Cara assigns such agreement to an assignee that is unacceptable to Patheon for certain reasons, or (ii) upon 30 days’ prior written notice if, after the first year of commercial sales, Cara forecasts zero volume for 12 months.

The MSA contains, among other provisions, customary representations and warranties by the parties, a grant to Patheon of certain limited license rights to Cara’s intellectual property in connection with Patheon’s performance of the services under the MSA, certain indemnification rights in favor of both parties, limitations of liability and customary confidentiality provisions.

Also in July 2019, Cara entered into two related Product Agreements under the MSA, one with each of Patheon and Patheon Manufacturing Services LLC, or Patheon Greenville, to govern the terms and conditions of the manufacture of commercial supplies of difelikefalin injection, Cara’s lead product candidate. Pursuant to the Product Agreements, Patheon and Patheon Greenville will manufacture commercial supplies of difelikefalin injection at the Monza, Italy and Greenville, North Carolina manufacturing sites, respectively, from API supplied by Cara. Patheon and Patheon Greenville will be responsible for supplying the other required raw materials and packaging components, and will also provide supportive manufacturing services such as quality control testing for raw materials, packaging components and finished product.

In December 2023, Cara entered into an agreement with Patheon to reimburse Patheon approximately $1.7 million for forecasted manufacturing commitments that are no longer needed due to the reduced demand expectations of KORSUVA in the United States, all of which had been paid as of December 31, 2024. Cara expects to assign the MSA to CSL Vifor in connection with the Merger and Asset Disposition.

Intellectual Property

We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the composition of matter of our product candidate, its methods of use, related technology and other inventions that are important to our business. As more fully described below, patent applications have been filed covering compositions and novel formulations of these compositions, as well as methods of using difelikefalin and related compounds. We own the patent portfolio of eighteen issued U.S. patents covering KOR agonists, sixteen of which cover composition of matter of difelikefalin and its uses; six of these include composition of matter claims directed to difelikefalin, and ten patents include claims to its uses. All of these U.S. patents covering difelikefalin and its uses are expected to expire no earlier than November 12, 2027. Additionally, three U.S. patents have been granted with claims to difelikefalin-like dimer compounds and their uses. We have filed patent applications in the United States and internationally claiming novel oral formulations of difelikefalin. Three U.S. patents with claims to oral formulations of difelikefalin that are not currently under development have been granted and are expected to expire no earlier than September 13, 2039. Related U.S. and foreign applications, if granted, would also be expected to expire no earlier than September 13, 2039. We also rely on trade secrets and careful monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, maintain our licenses to use intellectual property owned by third parties, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable patents and other proprietary rights of third parties. We also rely on know-how, and continuing technological innovation to develop, strengthen, and maintain our proprietary position in the field of chronic pruritus.

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A third party may hold intellectual property, including patent rights, which are important or necessary to the development of our products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. If we were not able to obtain a license or were not able to obtain a license on commercially reasonable terms, our business could be harmed, possibly materially.

The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be modified after issuance by later judicial decisions. Consequently, we do not know whether our product candidates will be adequately protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.

Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for up to 18 months, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of our entitlement to the inventions covered by pending patent applications. Moreover, although unlikely, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office, or USPTO, to determine priority of invention, or in post-grant challenge proceedings in the USPTO, or a foreign patent office such as oppositions, inter-partes review, post grant review, or a derivation proceeding, that challenge our entitlement to an invention or the patentability of one or more claims in our patent applications or issued patents. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.

The patent portfolios for our most advanced programs are summarized below.

Difelikefalin

Our synthetic peptide amide kappa opioid agonist patent portfolio is wholly owned by us. The portfolio includes eighteen issued U.S. patents (U.S. Patent Nos. 7,402,564; 7,713,937; 7,727,963; 7,842,662; 8,217,007; 8,236,766; 8,486,894; 8,536,131; 8,906,859; 8,951,970; 9,321,810; 9,334,305; 9,359,399; 10,017,536; 10,138,270; 10,793,596; 10,913,769 and 11,033,629) with claims to compositions of a wide range of synthetic peptide amide kappa opioid agonists, including difelikefalin and related molecules, as well as formulations containing and methods of using these compounds. These patents claiming difelikefalin compositions are due to expire November 12, 2027. U.S. Patent Nos. 11,033,629, 11,684,674 and 11,986,509 with claims to oral formulations of difelikefalin that are not currently under development are each due to expire September 13, 2039.

We have listed twelve of the patents claiming difelikefalin acetate and/or its uses in the Orange Book, a listing of patents relating to approved drug products maintained by the FDA. Difelikefalin acetate has been awarded a five-year data exclusivity from the approval date, i.e. until August 23, 2026, prohibiting the FDA from accepting an application for approval of a difelikefalin product from a generic manufacturer until after the exclusivity period expires. In addition, we have also submitted an application for a patent term extension of one of our difelikefalin U.S. patents, which if granted for the additional full five-year extension requested, would extend the patent term to November 12, 2032.

Foreign applications relating to difelikefalin and related molecules, as well as formulations containing and methods of using these compounds, were filed in more than 40 foreign countries. National patents have been granted in 27 European countries, as well as in Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan, Malaysia, Mexico, New Zealand, Russian Federation, Singapore, South Africa and South Korea. These granted foreign patents with claims to difelikefalin are due to expire no earlier than November 12, 2027. We have applied for supplementary patent certificates, or SPCs, for the basic product patent in Europe, including the five major European markets (France, Spain, Italy, Germany, and the UK). In the five major European markets, the SPC has been granted in France, Spain and Italy, (extending the patent term to November 12, 2032) and are pending in Germany and the UK. We have also applied for a patent term extension in Japan, which is pending.

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We also own pending U.S. continuation and foreign patent applications with claims to oral formulations containing difelikefalin and medium chain fatty acid glycerides as absorption enhancers that are not currently under development in Australia, Brazil, Canada, China, Europe, Japan, Hong Kong, Israel, India, South Korea, Malaysia, Mexico, New Zealand, Philippines, Russian Federation, Saudi Arabi, UAE, and South Africa. If granted, these patents would expire no earlier than September 13, 2039.

In addition, we own pending U.S. and foreign patent applications with claims to oral formulations containing difelikefalin and oligosaccharides not currently under development in Australia, Brazil, Canada, China, Europe, Japan, Hong Kong, Israel, India, South Korea, Malaysia, Mexico, New Zealand, Philippines, Russian Federation, Saudi Arabi, UAE, and South Africa. If granted, these patents would expire no earlier than March 18, 2041.

Other Cara Patents and Patent Applications

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a PCT application or a non-provisional patent application. The term of a patent in the United States can be adjusted and extended due to the failure of the USPTO following certain statutory and regulation deadlines for progressing prosecution and issuing a patent.

In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for a portion of the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other non-United States jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our pharmaceutical products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. Although we intend to seek patent term extensions to any of our issued patents in any jurisdiction where these are available there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions.

Cara Trademark Applications and Registrations

We rely on our U.S. and foreign trademarks for authentication of our current and future products and for protection against counterfeits. In the United States, trademarks may be reserved under an “Intent to Use” designation but may only be registered upon a showing of actual use in the stream of commerce. Many countries permit registration without such a showing of actual use. However, such registrations become vulnerable to cancellation after a designated period of non-use. For example, a trademark registered in EU States may be cancelled for non-use after five years from the date of registration. Trademark registrations can in principle last for as long as the owner uses the trademark and pays the maintenance fees due at regular intervals (every ten years in most jurisdictions after complying with filing requirements for confirmations of use and paying the designated fees during the first ten years from the registration date).

We own the registered trademark “KORSUVA” in the United States and in fourteen foreign countries (Australia, Brazil, Canada, China, India, Israel, Japan, Kuwait, Mexico, New Zealand, Norway, South Korea, Switzerland, and the UK). In addition, we own three registered Japanese trademarks for Katakana versions of “KORSUVA” as may be pronounced in the Japanese language: “KORSUVA” Katakana version 1: “ko-ru-su-ba” コルスバ;Katakana version 2: “ko-ru-su-o-ba” コルスーバ;andKatakana version 3 “ko-o-su-ba” コースバ.

Additionally, we own the U.S. trademark application for “KAPRUVIA” currently pending under an “Intent to Use” designation, as well as the “KAPRUVIA” trademark registered in all twenty-seven EU States (Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain

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and Sweden) and fourteen additional countries: Albania, Australia, China, Iceland, Israel, Monaco, New Zealand, North Macedonia, Norway, Russian Federation, Serbia, Switzerland, Turkey and the UK.

We rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able to adequately protect our trade secrets to prevent harm to our business. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development, or R&D, or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Cara believes that its technology, knowledge, experience and scientific resources provide it with competitive advantages, Cara faces potential competition from many different sources, including large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, and medical technology companies. Any product candidates that Cara successfully develops and commercializes will compete with existing therapies and new therapies that may become available in the future.

Cara believes the key competitive factors that will affect the development and commercial success of its product are its safety, efficacy and tolerability profile, reliability, convenience of dosing, price and reimbursement from government and third-party payers. Cara’s commercial opportunity could be reduced or eliminated if its competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that Cara may develop. Cara’s competitors also may obtain FDA or other regulatory approval for their products more rapidly than Cara may obtain approval for its, which could result in its competitors establishing a strong market position before Cara is able to enter the market. In addition, Cara’s ability to compete may be affected in many cases by insurers or other third-party payers seeking to encourage the use of generic products. Generic products currently on the market are often tried off-label for the indication that Cara is pursuing, and additional products are expected to become available on a generic basis over the coming years. Cara expects that its product will be priced at a significant premium over generic products.

Manufacturing

Cara does not have any manufacturing facilities. Cara currently relies, and expects to continue to rely, on third parties for the commercial manufacture for KORSUVA injection. Cara has negotiated long-term commitments with at least one primary supplier for its primary manufacturing and distribution functions. Cara has entered into a commercial manufacturing agreement with Patheon for KORSUVA injection, a commercial supply agreement with PPL to produce API, and a commercial packaging agreement with PCI Pharma Services. During 2023, Cara negotiated to reduce its commitment based on much lower-than-expected demand going forward for KORSUVA injection in the United States.

Cara’s product candidate is a small peptide and is manufactured in reliable and reproducible synthetic processes from available starting materials. The chemistry is amenable to scale up and does not require any special equipment or technology in the manufacturing process.

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Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

FDA Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

● submission to the FDA of an NDA;

● satisfactory completion of an FDA advisory committee review, if applicable;

● FDA review and approval of the NDA.

Preclinical Studies. Preclinical studies include laboratory evaluation of drug substance chemistry, toxicity and drug product formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Manufacture of drug substance, drug product and the labeling and distribution of clinical supplies must all comply with cGMP standards. Some preclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA,

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unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials. Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with cGCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of its effectiveness. In Phase 2, the drug typically is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. In Phase 3, the drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Marketing Approval. Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee.

Under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is

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manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA may refer an application for a novel drug to an external advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to mitigate any identified or suspected serious risks and ensure safe use of the drug. The REMS plan could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured, referred to as a Pre-Approval Inspection. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with cGCP.

The testing and approval process for an NDA requires substantial time, effort and financial resources, and each may take several years to complete. Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval of an NDA on a timely basis, or at all.

After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms under a REMS which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Post-Approval Requirements. Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion, reporting of adverse experiences with the product, and compliance with any post-approval requirements imposed as a condition of approval, such as Phase 4 clinical trials and surveillance to assess safety and effectiveness after commercialization. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual program user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic announced and unannounced inspections by the FDA and these state

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agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

● fines, warning letters or holds on post-approval clinical trials;

● injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Although physicians, in the practice of medicine, may prescribe approved drugs for unapproved indications, pharmaceutical companies are required to promote their drug products only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA does restrict manufacturer’s communications on the subject of off-label use of their products.

In addition, the distribution of prescription pharmaceutical products is subject to the Drug Supply Chain Security Act and state laws that limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

Fraud and Abuse, Data Privacy and Security and Transparency Laws and Regulations

In addition to FDA restrictions on marketing of pharmaceutical products, federal and state health care regulatory laws restrict business practices in the biopharmaceutical industry. These laws include, among other things, anti-kickback and false claims laws and regulations, physician payment transparency laws and regulations, as well as data privacy and security laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been

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interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act (collectively, the “Health Care Reform Law”), to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Health Care Reform Law provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Federal false claims laws, including the federal civil False Claims Act prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. The federal civil False Claims Act has been used to assert liability on the basis of kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price, improper use of Medicare provider or supplier numbers when detailing a provider of services, improper promotion of off-label uses not expressly approved by FDA in a drug’s label, and allegations as to misrepresentations with respect to the services rendered. Additionally, the civil monetary penalties statute, which, among other things, imposes fines against any person or entity who is determined to have presented, or caused to be presented, claims to a federal healthcare program that the person knows, or should know, is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services relating to healthcare matters. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

In addition, Cara is or may become subject to data privacy and security regulations by both the U.S. federal government and the state governments in which Cara conducts its business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, imposes specified requirements on certain types of individuals and entities subject to the law, known as covered entities, such as certain healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that process individually identifiable health information on their behalf, relating to the privacy, security and transmission of individually identifiable health information as well as their covered subcontractors. Among other things, HITECH makes security standards and certain privacy standards directly applicable to the business associates of covered entities that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable health information. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, Cara is or may become subject to U.S. state laws (such as the California Consumer Privacy Act of 2018 (“CCPA”) and foreign laws (such as the EU’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of UK law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”) that govern data privacy, security and protection. Many of these laws

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differ from each other in significant ways and may not have the same effect, both of which complicate compliance efforts to the extent Cara is or may become subject to these laws.

Additionally, federal transparency laws, including the federal Physician Payments Sunshine Act created under Section 6002 of the Health Care Reform Law and its implementing regulations, require that manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made or distributed to physicians (defined to include doctors of medicine, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at their request or designation. Additionally, applicable manufacturers and applicable group purchasing organizations are required to report annually to CMS certain ownership and investment interests held by physicians (as defined above) and their immediate family members.

There are also an increasing number of analogous state laws that require manufacturers to file reports with states on pricing and marketing information, such as tracking and reporting of gifts, compensations, other remuneration and items of value provided to healthcare professionals and healthcare entities. For example, several states have enacted legislation requiring pharmaceutical companies to, among other things, establish and implement commercial compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities and/or register their sales representatives. Certain state laws also regulate manufacturers’ use of prescriber-identifiable data. These laws may affect Cara’s sales, marketing and other promotional activities by imposing administrative and compliance burdens. In addition, given the lack of clarity with respect to these laws and their implementation, Cara’s reporting actions could be subject to the penalty provisions of the pertinent state and federal authorities.

If Cara’s operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to Cara, Cara may be subject to penalties, including significant criminal, civil and administrative penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if Cara becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of its operations, any of which could adversely affect its ability to operate its business and its results of operations. To the extent that any of Cara’s products are sold in a foreign country, Cara may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

Coverage and Reimbursement Generally

The commercial success of KORSUVA injection and Cara’s ability to commercialize any approved product candidate successfully will depend in part on the extent to which governmental payer programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payers provide coverage for and establish adequate reimbursement levels. In the United States, private health insurers and other third-party payers often provide reimbursement for products and services based on the level at which the government provides reimbursement through the Medicare or Medicaid programs for such products and services.

Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payers to reimburse all or part of the associated healthcare costs. Sales of KORSUVA injection will therefore depend substantially, both domestically and abroad, on the extent to which the costs of Cara’s products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers and other third-party payers. Further, assuming coverage is approved, the resulting reimbursement payment rates might not be adequate. KORSUVA injection is expected to be designated as a component of the government’s bundled reimbursement for ESRD treatment.

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Cara’s U.S. commercial partner, CSL Vifor, submitted the payment reimbursement application for TDAPA and HCPCS to CMS in September 2021. In December 2021, CMS granted TDAPA to KORSUVA injection in the anti-pruritic functional category. TDAPA applied to KORSUVA injection beginning April 1, 2022 for two years. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on payment as proposed in the draft CY 2024 rule. Under the final rule, TDAPA drugs in existing functional categories will receive a post-TDAPA add-on payment set at 65 percent of the total trailing 12-months expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA add-on payment will be applied to all ESRD PPS payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection commenced on April 1, 2024.

Third-party payers are increasingly imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products, including pharmaceuticals. For example, federal and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions and limitations influence the purchase of healthcare services and products. Third-party payers may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. Additionally, third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. Therefore, Cara may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA approvals. KORSUVA injection may not be considered medically necessary or cost-effective. Moreover, a payer’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved, and one payer’s determination to provide coverage for a product does not assure that other payers will also provide coverage. Adequate third-party reimbursement may not be available to enable Cara to maintain price levels sufficient to realize an appropriate return on its investment in drug development. Even if favorable coverage and reimbursement status is attained for one or more products for which Cara receives regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for Cara’s products and product candidates or exclusion of its products and product candidates from coverage. The cost containment measures that healthcare payers and providers are instituting and any healthcare reform could significantly reduce Cara’s revenues from the sale of KORSUVA injection.

Healthcare Regulatory Developments

In the United States and some foreign jurisdictions, the legislative landscape with respect to healthcare continues to evolve. There have been a number of legislative and regulatory changes to the healthcare system that could affect Cara’s ability to sell its products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, the Health Care Reform Law was passed in March 2010 and includes provisions that have substantially changed healthcare financing by both governmental and private insurers.

There have been executive, judicial and Congressional challenges and amendments to certain aspects of the Health Care Reform Law. For example, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Health Care Reform Law marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the Health Care Reform Law will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Trump administration will impact the Health Care Reform Law and Cara’s business.

In addition, other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted. In August 2011, President Obama signed into law the Budget Control Act of 2011, as amended, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to

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Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government programs. These reductions include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year starting in 2013 and, due to subsequent legislative amendments, will remain in effect until 2032, unless additional Congressional action is taken. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

In the United States, the EU, and other potentially significant markets for Cara’s product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be. Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU will put additional pressure on product pricing, reimbursement and utilization, which may adversely affect Cara’s future product sales and results of operations. For example, there have been several recent U.S. Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. In addition, the IRA, among other things, (1) directs the U.S. Department of Health and Human Services, or HHS, to negotiate the price of certain high-expenditure, single-source drugs covered under Medicare that have been on the market for at least seven years, or the Medicare Drug Price Negotiation Program, and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in fiscal year 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional products covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. Further, on December 7, 2023, an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act was announced. On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, to encourage importation from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida’s Section 804 Importation Program (SIP) proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs. These pressures can arise from rules and practices of managed care groups, judicial decisions and laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical coverage and reimbursement policies and pricing in general.

These and other healthcare reform initiatives may result in additional reductions in Medicare payments and other healthcare funding, which could have a material adverse effect on Cara’s financial operations. Cara expects that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the recent U.S. Presidential and Congressional elections, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could further limit the prices Cara is able to charge, or the amounts of reimbursement available, for KORSUVA injection or any other product candidate that may be approved.

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Foreign Regulation

In order to market any product outside of the United States, Cara would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Individual countries govern, among other things, clinical trials, marketing authorization, commercial sales and distribution of Cara’s products. For example, in the EU, Cara must obtain authorization of a clinical trial application, or CTA, through the Clinical Trials Registration process in each member state in which Cara intends to conduct a clinical trial. Whether or not Cara obtains FDA marketing approval for a product, Cara would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before Cara can commence marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and varying administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory outcome in others.

Employees and Human Capital

In connection with its decision to discontinue the clinical program in NP in June 2024 and the approval of a streamlined operating plan exploring strategic alternatives, Cara’s Board of Directors approved a reduction in the Cara workforce, which was substantially completed by June 30, 2024. As of March 6, 2025, Cara had ten employees, all of whom are located in the United States. None of Cara’s employees are represented by a labor union or covered by a collective bargaining agreement. Cara considers its relationship with its employees to be good.

Cara’s human capital resources objectives include, as applicable, retaining and incentivizing its existing employees, advisors, and consultants. The principal purposes of Cara’s equity and cash incentive plans are to retain and reward personnel through stock-based and cash-based compensation awards, in order to increase stockholder value and the success of Cara by motivating such individuals to perform to the best of their abilities and achieve Cara’s objectives.

Website Access to Reports

Cara’s website is www.caratherapeutics.com. Cara is subject to the informational requirements of the Exchange Act and file or furnish reports, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, proxy statements and other information with the SEC. Cara makes copies of these reports and other information available free of charge through its website (under the heading “SEC Filings”) as soon as reasonably practicable after Cara files or furnishes them with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information contained on the websites referenced herein is not incorporated by reference into this Annual Report on Form 10-K, and the website addresses are provided only as inactive textual references.

Item 1A. Risk Factors

In addition to other information contained in this Annual Report on Form 10-K, the following risks should be considered in evaluating our business and future prospects and an investment in our common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks and uncertainties develops into actual events, our business, financial condition, results of operations and cash flows could be materially adversely affected. In that case, the price of our common stock could decline and you may lose all or part of your investment.

Risks Related to the Merger with Tvardi

The Merger may not be completed on the terms or timeline currently contemplated, or at all.

The consummation of the Merger is subject to numerous conditions, including (1) the effectiveness of the registration statement on Form S-4 filed in connection with the Merger, or the Registration Statement, (2) the approval

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by Cara’s stockholders of the required stockholder proposals set forth in the proxy statement/prospectus included in the Registration Statement, (3) the requisite approval by Tvardi’s stockholders, and (4) other customary closing conditions and there can be no assurance that the Merger will be consummated.

If the Merger is not completed for any reason, the price of Cara’s common stock may decline to the extent that the market price of Cara’s common stock reflects or previously reflected positive market assumptions that the Merger would be completed and the related benefits would be realized. In addition, Cara and Tvardi have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory, printing and financial services fees related to the Merger. These expenses must be paid regardless of whether the Merger is consummated.

The exchange ratio will not be adjusted based on the market price of Cara common stock, so the consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

Each outstanding share of Tvardi common stock (after giving effect to the conversion of preferred stock and excluding shares held by stockholders who have exercised and perfected appraisal rights and excluding shares held as treasury stock by Cara or held or owned by Cara, Merger Sub or any subsidiary of Cara or Tvardi), will be converted into the right to receive a number of shares of Cara common stock based on an exchange ratio. The exchange ratio will not change based on changes in the trading price of Cara common stock. Therefore, if before the completion of the Merger, the market price of Cara common stock increases from the market price on the date of the Merger Agreement, Tvardi stockholders could then receive merger consideration with substantially higher value for their shares of Tvardi common stock than the parties had negotiated when they established the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Immediately following the Merger, the pre-Merger equity holders of Cara are expected to hold approximately 15.25% of the shares of Cara common stock, the pre-Merger equity holders of Tvardi are expected to hold approximately 72.21% of the shares of Cara common stock, and the holders of the Convertible Notes are expected to hold approximately 12.54% of the shares of Cara common stock, in each case, on a fully diluted basis (subject to further adjustment as further described below), subject to certain adjustments, including based upon Cara net cash at the closing of the Merger. The calculation of Cara’s net cash at closing of the Merger includes, among other things, a credit or reduction for cash proceeds that Cara receives or pays from the Asset Disposition. The Net Cash Condition means that Cara’s net cash must be no less than $18.0 million in order for Tvardi to be required to complete the Merger.

Cara’s net cash may be less than $22.875 million at the closing of the Merger, which would result in Cara’s stockholders owning a smaller percentage of the combined company and, if Cara’s net cash is less than $18.0 million as of June 30, 2025, could even result in the termination of the Merger Agreement.

For purposes of the Merger Agreement, net cash is subject to certain reductions, including, without limitation, for payments made in connection with the sale, transfer, license, assignment or other divestiture of its intellectual property and other assets and technology in existence on the date of the Merger Agreement on or about the anticipated closing of the Merger, accounts payable, accrued expenses (except those related to the Merger), current liabilities payable in cash, unpaid expenses related to the Merger and certain other unpaid obligations. In the event the amount of Cara’s cash is smaller or such reductions are greater than anticipated, Cara stockholders could hold a significantly smaller portion of the combined company.

Failure to complete the Merger may result in Cara or Tvardi paying a termination fee to the other party and could harm the common stock price of Cara.

If the Merger is not completed, each of Cara and Tvardi is subject to the following risks:

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● the price of Cara’s common stock may decline and remain volatile; or

● Cara may be forced to cease its operations, dissolve and liquidate its assets.

In addition, if the Merger Agreement is terminated and the Cara Board or Tvardi Board determines to seek another business combination, there can be no assurance that either Cara or Tvardi will be able to find a partner willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger or any partner at all.

If the conditions to the closing of the Merger are not met, the Merger may not occur.

Even if the required stockholder proposals set forth in the proxy statement/prospectus included in the Registration Statement are approved by the stockholders of Cara, specified conditions must be satisfied or waived to complete the Merger. Cara and Tvardi cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and Cara and Tvardi each may lose some or all the intended benefits of the Merger.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and/or other causes.

In general, either Cara or Tvardi can refuse to complete the Merger if there is a Tvardi Material Adverse Effect (as defined in the Merger Agreement) or a Cara Material Adverse Effect (as defined in the Merger Agreement), as applicable, between December 17, 2024, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Cara or Tvardi, including:

● changes in financial, banking or securities markets;

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● the taking of any action required to be taken by the Merger Agreement.

If a material adverse change occurs with respect to either party or both parties and Cara and Tvardi still complete the Merger, the stock price of the combined company following the closing of the Merger may suffer and may reduce the value of the Merger to the stockholders of Cara, Tvardi or both.

Some executive officers and directors of Cara have interests in the Merger that are different from the respective stockholders of Cara and that may influence them to support or approve the Merger without regard to the interests of the stockholders of Cara.

Some officers and directors of Cara are parties to arrangements that provide them with interests in the Merger that are different from the stockholders of Cara, including some or all of service as an officer or director of the combined company following the closing of the Merger, severance and retention benefits, the acceleration of equity award vesting and continued indemnification.

The market price of Cara common stock following the Merger may decline as a result of the Merger.

The market price of Cara common stock may decline as a result of the Merger for a number of reasons, including if:

Cara and Tvardi equity holders will have a materially reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing of the Merger as compared to their current ownership and voting interest in the respective companies.

Immediately following the Merger, the pre-Merger equity holders of Cara are expected to hold approximately 15.25% of the outstanding shares of Cara common stock, the pre-Merger equity holders of Tvardi are expected to hold approximately 72.21% of the outstanding shares of Cara common stock, and the holders of the Convertible Notes are expected to hold approximately 12.54% of the shares of Cara common stock, in each case, on a fully diluted basis (subject to further adjustment as further described below), subject to certain adjustments, including based upon Cara’s net cash at the closing of the Merger. The calculation of Cara’s net cash at the closing of the Merger includes, among other things, a credit or reduction for cash proceeds that Cara receives or pays from the Asset Disposition. The Net Cash Condition means that Cara’s net cash must be no less than $18.0 million in order for Tvardi to be required to complete the Merger.

Following the Closing, Sujal Shah will serve as Chairman and Imran Alibhai will serve as the Chief Executive Officer of Cara as the combined company. Additionally, following the closing, the combined company board of directors will consist of seven directors, and will be comprised of five members designated by Tvardi (Sujal Shah, Michael Wyzga, Wallace Hall, Shaheen Wirk and Imran Alibhai), one member to be designated by Cara prior to Closing and one vacancy, to be designated by Tvardi if prior to the closing of the Merger or by the combined company if following the consummation of the Merger.

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During the pendency of the Merger Agreement, Cara and Tvardi may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Cara and Tvardi to make acquisitions, subject to specified exceptions relating to fiduciary duties, or complete other mergers, sales of assets or other business combinations pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into specified extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party, subject to specified exceptions, even if any such transaction could be favorable to such party’s stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Cara and Tvardi from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances for Cara when the Cara Board determines in good faith, after consultation with its outside financial advisor and outside legal counsel, that an unsolicited competing proposal constitutes, or is reasonably likely to result in, a superior competing proposal and, after consultation with its outside legal counsel, that failure to take such action is reasonably likely to be inconsistent with the fiduciary duties of the Cara Board. Even in such circumstances, while the Cara Board may change its recommendation to Cara stockholders, Cara will remain obligated to hold a stockholder vote on the Required Cara Closing Stockholder Matters and may not terminate the Merger Agreement in order to enter into an agreement with respect to a Superior Offer. In addition, if Cara or Tvardi terminate the Merger Agreement under specified circumstances, including terminating because of a decision of the Cara Board to recommend a superior competing proposal, Cara may be required to pay Tvardi a termination fee of $2.25 million and/or up to $750,000 in expense reimbursements or Tvardi may be required to pay Cara a termination fee of $2.25 million, and/or up to $750,000 in expense reimbursements. This termination fee may discourage third parties from submitting competing proposals to Cara or its stockholders and may cause the Cara Board or the Tvardi Board, as the case may be, to be less inclined to recommend a competing proposal.

Because the lack of a public market for Tvardi’s common stock makes it difficult to evaluate the fairness of the Merger, the stockholders of Tvardi may receive consideration in the Merger that is less than the fair market value of Tvardi’s common stock or Cara may pay more than the fair market value of Tvardi’s common stock.

The outstanding common stock of Tvardi is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Tvardi’s common stock. Because the percentage of Cara equity to be issued to Tvardi stockholders was determined based on negotiations between the parties, it is possible that the value of the Cara common stock to be received by Tvardi stockholders will be less than the fair market value of Tvardi’s common stock, or Cara may pay more than the aggregate fair market value for Tvardi’s common stock.

The Piper Sandler Opinion delivered by Piper Sandler to the Cara Board prior to the entry into the Merger Agreement does not reflect changes in circumstances that may occur after the date thereof.

The Cara Board has not obtained an updated opinion either as of the date of the Annual Report on Form 10-K or as of any other date subsequent to the date of the Piper Sandler Opinion from Piper Sandler, Cara’s financial advisor. Changes in circumstances, including without limitation the operations and prospects of Cara or Tvardi, stock prices, general market and economic conditions and other factors, some or all of which may be beyond the control of Cara and Tvardi, are not reflected in the Piper Sandler Opinion. The Piper Sandler Opinion does not speak as of any date other than the date thereof.

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The combined company may become involved in securities litigation that could divert management’s attention and harm the combined company’s business and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action or stockholder derivative litigation often follows certain significant business transactions, such as the sale of a business division or announcement of a merger. The combined company may become involved in this type of litigation in the future in connection with the Merger and the other Contemplated Transactions. As of the date of this Annual Report on Form 10-K, Cara has received five demand letters from purported stockholders relating to the Merger and the other Contemplated Transactions and the disclosures contained in the proxy statement/prospectus related to the Contemplated Transactions. Responding to these demands and litigation often is expensive and diverts management’s attention and resources, which could adversely affect the combined company’s business.

Cara or Tvardi may waive one or more of the conditions to the Merger without recirculation of the proxy statement/prospectus or resoliciting stockholder approval.

Conditions to Cara’s or Tvardi’s obligations to complete the Merger may be waived, in whole or in part, to the extent permitted by law, in certain circumstances unilaterally or by agreement of Cara and Tvardi. In the event of a waiver of a condition, the Cara Board will evaluate the materiality of any such waiver to determine whether amendment of the proxy statement/prospectus and resolicitation of stockholder approval is necessary.

In the event that the Cara Board, in its own reasonable discretion, determines any such waiver is not significant enough to require recirculation of this proxy statement/prospectus and re-solicitation of its stockholders, it will have the discretion to complete the Merger without seeking further stockholder approval, which decision may have a material adverse effect on the Cara stockholders. For example, if Cara and Tvardi agree to waive the requirement that the shares of Cara common stock to be issued in the Merger have been approved for listing (subject to official notice of issuance) on Nasdaq as of the closing of the Merger, and their respective boards of directors elect to proceed with the closing of the Merger, Nasdaq may notify the combined company of its determination to delist the company’s securities based upon the failure to satisfy the initial inclusion criteria in the Nasdaq application. The combined company may appeal the determination to a hearings panel but such appeal will not stay the suspension and delisting action and Nasdaq may notify the combined company that its common stock will be immediately suspended from trading and delisted.

In addition, in order to meet the initial listing requirements of Nasdaq, Cara may release Tvardi stockholders from their Lock-Up Agreements and waive the requirement that such Lock-Up Agreements be in full force and effect immediately following the Effective Time. Such release would increase the number of shares that may be sold in the public market immediately after the Merger and any such sales could cause the combined company’s stock price to decline.

Transfers of the combined company’s securities utilizing Rule 144 of the Securities Act may be limited.

A significant portion of the combined company’s securities will be restricted from immediate resale. Holders should be aware that transfers of Cara’s securities pursuant to Rule 144 under the Securities Act (Rule 144) may be limited as Rule 144 is not available, subject to certain exceptions, for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have previously been a shell company. Cara’s winddown of its historical operations, the suspension of development activities and the proposed Merger will make Cara subject to the SEC requirements applicable to reporting shell company business combinations. Cara anticipates that following the consummation of the proposed transaction, the combined company will no longer be a shell company. As a result, Cara anticipates that holders will not be able to sell their restricted combined company securities pursuant to Rule 144 without registration until one year after the combined company files the Current Report on Form 8-K following the closing that includes the required Form 10 type information that reflects that the combined company is no longer a shell company.

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Cara’s winddown of its historical operations, the sale of assets, the suspension of development activities and the proposed Merger, resulting in the conversion of Tvardi into a public company, will make Cara subject to the SEC requirements applicable to reporting shell company business combinations. As a result, the combined company will be subject to more stringent reporting requirements, offering limitations and resale restrictions.

According to SEC guidance, the requirements applicable to reporting shell company business combinations apply to any company that sells or otherwise disposes of its historical assets or operations in connection with or as part of a plan to combine with a non-shell private company in order to convert the private company into a public one. Cara has suspended its development activities and, as such, Cara’s plan to merge with Tvardi, resulting in the conversion of Tvardi into a public company, will be subject to the SEC requirements applicable to reporting shell company business combinations, which are as follows:

The foregoing SEC requirements will increase the combined company’s time and cost of raising capital, offering stock under equity plans, and complying with securities laws. Furthermore, such requirements will add burdensome restrictions on the resale of the combined company common stock by affiliates of Tvardi and any holders of “restricted” or “control” securities of the combined company.

Nasdaq may delist the combined company’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject the combined company to additional trading restrictions.

Currently, Cara’s common stock is publicly traded on The Nasdaq Capital Market. In connection with the proposed Merger, Tvardi will file an initial listing application with Nasdaq pursuant to Nasdaq’s “reverse merger” rules. The combined company will be required to meet the initial listing requirements for its securities to be listed on Nasdaq.

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If Cara and Tvardi fail to meet the Nasdaq listing requirements and their respective boards choose to close the merger without Nasdaq’s approval, then Nasdaq may notify the combined company of its determination to delist the company’s securities based upon the failure to satisfy the criteria in the Nasdaq application. For more information, refer to the section titled “Risk Factors Related to the Merger—Cara or Tvardi may waive one or more of the conditions to the Merger without recirculation of the proxy statement/prospectus or resoliciting stockholder approval”.

We cannot assure you that the combined company will be able to meet those initial listing requirements. Even if the combined company’s securities are so listed, the combined company may be unable to maintain the listing of its securities in the future. In order to continue listing its securities on Nasdaq following the proposed Merger, the combined company will be required to maintain certain financial, distribution and stock price levels. If Nasdaq delists the combined company’s securities from trading on its exchange at closing of the Merger (or thereafter) and the combined company is not able to list its securities on another national securities exchange or regain compliance with Nasdaq, the combined company’s securities could be quoted on an over-the-counter market. If this were to occur, the combined company could face significant material adverse consequences, including:

● a limited availability of market quotations for its securities;

● reduced liquidity for its securities;

● a limited amount of news and analyst coverage; and

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts states from regulating the sale of certain securities, which are referred to as “covered securities.” Since Cara’s common stock is listed on Nasdaq, they are covered securities. Although states are preempted from regulating the sale of covered securities, the federal statute does allow states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then states can regulate or bar the sale of covered securities in a particular case. If Cara was no longer listed on Nasdaq, its securities would not be covered securities and it would be subject to regulation in each state in which it offers its securities, including in connection with the Merger.

The financial projections considered by the Cara Board in evaluating the Merger and used by Piper Sandler at the direction of Cara in rendering its Opinion and performing its related financial analyses, reflect numerous variables, estimates and assumptions and are inherently uncertain.

In connection with the Cara Board’s evaluation of the Merger, Cara’s management prepared certain short-term unaudited prospective internal financial projections with respect to Cara that were provided to the Cara Board in connection with its evaluation of the Merger and to Piper Sandler in connection with its financial analysis and Opinion. The financial projections reflect numerous variables, estimates, forecasts and assumptions and these variables, estimates, forecasts and assumptions may prove to be wrong.

Risks Related to Cara’s Strategic Alternative Process and Potential Strategic Transaction

Failure to complete, or delays in completing, the Merger with Tvardi could materially and adversely affect Cara’s results of operations, business, financial results and/or stock price.

In June 2024, Cara announced that it was undertaking a comprehensive exploration of strategic alternatives focused on maximizing stockholder value. After a comprehensive review of strategic alternatives, including identifying and reviewing potential candidates for the merger, on December 17, 2024, Cara entered into the Merger Agreement. The closing is subject to approval by the Cara stockholders and Tvardi stockholders as well as other customary closing

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conditions, including the effectiveness of a registration statement filed with the SEC in connection with the transaction. If the Merger is completed, the business of Tvardi will continue as the business of the combined company. Any failure to satisfy a required condition to closing may prevent, delay or otherwise materially and adversely affect the completion of the transaction, which could materially and adversely affect Cara’s results of operations, business, financial results and/or stock price. Cara cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that the Merger will be successfully consummated or that Cara will be able to successfully consummate the proposed merger as currently contemplated under the Merger Agreement or at all.

Cara’s efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, Cara’s business, which may materially adversely affect Cara’s results of operations and Cara’s business. Uncertainty as to whether the Merger will be completed may affect Cara’s ability to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles during and following the transaction. A substantial amount of Cara management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from Cara’s day-to-day operations. Uncertainty as to Cara’s future could adversely affect Cara’s business and Cara’s relationship with collaborators, suppliers, vendors, regulators and other business partners. For example, vendors, collaborators and other counterparties may defer decisions about working with Cara or seek to change existing business relationships with Cara. Changes to, or termination of, existing business relationships could adversely affect Cara’s results of operations and financial condition, as well as the market price of Cara’s common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Risks related to the failure to consummate, or delay in consummating, the Merger with Tvardi include, but are not limited to, the following:

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The occurrence of any of these events individually or in combination could materially and adversely affect Cara’s results of operations, business, and Cara’s stock price.

Cara cannot be sure if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by Cara stockholders and Tvardi stockholders. Cara cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If Cara is unable to satisfy certain closing conditions or if other mutual closing conditions are not satisfied, Tvardi will not be obligated to complete the Merger.

Under certain circumstances, Cara would be required to pay Tvardi a termination fee of $2.25 million. Additionally, if the Merger Agreement is terminated by Cara or Tvardi due to Cara stockholders voting on and failing to approve certain proposals, Cara will be required to reimburse Tvardi for Merger-related expenses up to $750,000. The expense reimbursement, to the extent paid, will be credited against any termination fee payable by Cara in the transaction. Even if a termination fee is not payable in connection with a termination of the Merger Agreement, Cara will have incurred significant fees and expenses, which must be paid whether or not the Merger is completed. If the Merger is not completed, the Cara Board, in discharging its fiduciary obligations to Cara stockholders, would evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to Cara stockholders as the Merger, including a liquidation and dissolution. Any future sale or Merger, financing or other transaction, including a liquidation or dissolution, may be subject to further stockholder approval. Cara may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect on Cara’s business. Until the Merger is completed, the Merger Agreement restricts Tvardi and Cara from taking specified actions without the consent of the other party, and requires Cara to operate in the ordinary course of business consistent with past practice. These restrictions may prevent Tvardi and Cara from making appropriate changes to Cara respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger. Further, if Cara’s net cash at closing is lower than anticipated, either because expenses exceed current estimates or due to delays prior to closing, then the pre-Merger Cara stockholders will own less of the combined company pursuant to the exchange ratio adjustment set forth in the Merger Agreement. Any delay in completing the Merger may materially and adversely affect the timing and benefits that are expected to be achieved from the Merger.

If Cara does not successfully consummate the Merger or another strategic transaction, Cara’s Board may decide to pursue a dissolution and liquidation of Cara. In such an event, the amount of cash available for distribution to Cara’s stockholders will depend significantly on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which Cara can give you no assurance.

There can be no assurance that the Merger will be completed. If the Merger is not completed, the Cara Board may decide to pursue a dissolution and liquidation of Cara. In such an event, the amount of cash available for distribution to Cara stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Cara continues to fund its operations while pursuing the Merger. In addition, if Cara’s Board were to approve and recommend, and Cara stockholders were to approve, a dissolution and liquidation, Cara would be required under Delaware corporate law to pay Cara’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Cara’s commitments and contingent liabilities may include obligations under Cara’s employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the company, litigation against Cara, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities, As a result of this requirement, a portion of Cara’s assets would need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain.

In addition, Cara may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, Cara’s Board, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Cara’s common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the

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company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Cara stockholders.

The value to stockholders in the event of a strategic transaction or dissolution may depend on the extent to which Cara will be able to successfully satisfy its existing contractual obligations to third parties and regulatory commitments on favorable terms, which may include the outcome of Cara’s negotiations to reduce or terminate such commitments.

Cara is currently subject to certain contractual and regulatory obligations and commitments. In connection with its comprehensive exploration of strategic alternatives, Cara may seek to negotiate with third parties in order to reduce or eliminate such obligations and commitments. For example, on December 17, 2024, Cara and its subsidiary, Cara Royalty Sub, LLC (Cara Royalty Sub, and together with Cara, each, a Seller and together, the Sellers), entered into the APA with CSL Vifor, pursuant to which, at the consummation of the transaction, Sellers will sell to CSL Vifor and CSL Vifor will acquire from Sellers certain assets and rights for the development, manufacture and commercialization of difelikefalin as well as certain associated liabilities, or the Asset Disposition. Pursuant to the APA, in connection with the consummation of the Asset Disposition, CSL Vifor and HCR have entered into a letter agreement with Cara providing that CSL Vifor and HCR will, subject to the satisfaction of conditions to closing under the APA, enter into an amended and restated purchase agreement to amend and replace the Original HCR Agreement, by and among Cara Royalty Sub, HCRX Investments HoldCo, L.P. and HCR. Upon entering into the amended and restated purchase agreement, effective as of the closing of the Asset Disposition: (i) CSL Vifor will be obligated to make certain payments to HCR from and after the date thereof relating to certain revenue and/or royalties from difelikefalin, (ii) each of the Contribution Agreement, the License Agreement and the Pledge Agreement (each as defined in the Original HCR Agreement) shall be terminated, and (iii) Sellers shall have no further payment or other obligations to HCR under the Original HCR Agreement. Additionally, pursuant to the APA, at the consummation of the Asset Disposition, Cara has agreed to pay CSL Vifor $3.0 million to compensate CSL Vifor for the estimated incremental future expenses to be incurred by CSL Vifor as a result of the transfer of the assets to be acquired and the liabilities to be assumed by it in connection with the Asset Disposition.

The Asset Disposition is subject to certain conditions to closing, including either (i) the consummation of the Merger concurrently with the Asset Disposition or (ii) the receipt of the requisite stockholder approval needed to approve the Asset Disposition in the event that the Merger is terminated. The APA provides for certain termination rights of Sellers and CSL Vifor, including the right of either CSL Vifor or Cara to terminate the APA if (a) there is a permanent and nonappealable prohibition on the consummation of the Asset Disposition, (b) the Asset Disposition has not occurred by June 30, 2025 (which date shall be automatically extended in one-month increments until October 30, 2025 in certain instances if the Merger is not closed by June 30, 2025) or (c) if a meeting of Cara’s stockholders has been held for the stockholders to consider and vote upon the APA and the Asset Disposition and the stockholders have not voted in favor of adopting the APA and approving the Asset Disposition at such stockholder meeting. Either party may also terminate the APA if the other party breaches its obligations under the APA in certain instances and subject to customary cure protections. The APA contains representations, warranties, and covenants of the parties, including, among others, a covenant that requires (i) Sellers to operate their business in the ordinary course during the period between the execution of the APA and consummation of the Asset Disposition and to not engage in certain kinds of activities or transactions during such period (subject to either prior consent of CSL Vifor or customary limited exceptions), (ii) the parties to use their reasonable best efforts to complete certain transition steps in connection with the consummation of the Asset Disposition, and (iii) Sellers to use their commercially reasonable efforts to obtain any needed consents and provide any needed notices in connection with the Asset Disposition. Cara currently has license agreements with Maruishi Pharmaceutical Co., Ltd. (Maruishi), and Chong Kun Dang Pharmaceutical Corporation (CKDP), for the intravenous and oral formulations of difelikefalin, and manufacturing agreements with Polypeptide Laboratories S.A. (PPL) and Patheon UK Limited (Patheon) for the difelikefalin injection. Cara expects to assign these agreements with each of Maruishi, CKDP, PPL and Patheon to CSL Vifor in connection with the Merger and Asset Disposition.

TVRD US Equity

TVRD · 10-K · period ended 2024-12-31

Item 1. Business.

Item 1A. Risk Factors

TVRD US Equity☆

TVRD · 10-K · period ended 2024-12-31

Item 1. Business.

Item 1A. Risk Factors

TVRD US Equity