Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read “Cautionary Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of material factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless the context otherwise requires, Cara uses the term “CSL Vifor” to refer to CSL Vifor and its affiliated entities, including where applicable, the joint venture between CSL Vifor and Fresenius Medical Care with which Cara is a party to two collaborations for the commercialization of KORSUVA (difelikefalin) injection.
Overview
Introduction
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).
Merger Agreement with Tvardi
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, Merger Sub and Tvardi entered into 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. Substantially concurrent with the completion of the Merger, we will be renamed “Tvardi Therapeutics, Inc.” and expect to trade on The Nasdaq Capital Market under the symbol “TVRD.”
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At the effective time of the Merger, Cara stockholders will continue to own and hold their then existing shares of Cara common stock. All outstanding and unexercised options to purchase shares of Cara common stock and Cara restricted stock units will be accelerated, the restricted stock units will be net settled, and the options will remain outstanding in accordance with their terms, except that the post-termination exercise period shall not exceed 90 days.
Immediately following the Merger, Cara’s pre-Merger equity holders are expected to hold approximately 15.25% of the shares of common stock, the pre-Merger equity holders of Tvardi are expected to hold approximately 72.21% of the shares of common stock and the holders of Tvardi’s convertible notes are expected to hold approximately 12.54% of the shares of common stock, in each case, on a fully diluted basis, and subject to certain assumptions, including based on the final exchange ratio and final amount of conversion shares from Tvardi’s convertible notes.
If, for any reason, the Merger does not close, our Board of Directors may elect to, among other things, continue our business, attempt to continue to sell or otherwise dispose of our various assets, or dissolve and liquidate our assets. Additionally, if the Merger does not close, we will not issue shares of our common stock to the equity holders of Tvardi as merger consideration and Tvardi’s convertible notes will not be converted into shares of our common stock. Under certain circumstances, we may be obligated to pay Tvardi or Tvardi may be obligated to pay us a termination fee of $2.25 million or reimburse certain expenses up to $750,000. If we decide to dissolve and liquidate our assets, we would be required to pay all of our debts and contractual obligations, and to set aside certain reserves for potential future claims.
Asset Disposition
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.
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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.
Corporate Update
On June 7, 2024, Cara filed a Certificate of Amendment to its Certificate of Incorporation, or the Certificate, with the Secretary of State of the State of Delaware which was approved by Cara’s stockholders at its Annual Meeting of Stockholders on June 4, 2024. The Certificate increased the authorized number of shares of Cara’s common stock from 100,000,000 shares to 200,000,000 shares (before giving effect to the Reverse Stock Split, as described below). The additional shares of common stock authorized by the Certificate have rights identical to Cara’s currently outstanding common stock and any issuance of common stock pursuant to the Certificate would not affect the rights of the holders of Cara’s currently outstanding common stock, except for effects incidental to increasing the number of shares of Cara’s common stock outstanding, such as dilution of the earnings per share and voting rights of current holders of its common stock.
On November 13, 2024, Cara’s Board of Directors approved an amendment to our Amended and Restated Bylaws, effective immediately, to reduce the quorum requirement for stockholder meetings from a majority of the outstanding shares entitled to vote to one-third of the voting power of the issued and outstanding shares entitled to vote.
Cara’s stockholders approved, at its 2024 Annual Meeting of Stockholders on June 4, 2024, a series of alternate amendments to the Certificate, to effect a reverse stock split of Cara’s common stock and corresponding proportionate reduction in the total number of authorized shares of Cara’s common stock, where Cara’s Board had the discretion to select the reverse stock split ratio from within a range between and including one-for-four and one-for-twelve. On December 19, 2024, Cara’s Board approved a one-for-twelve (12) reverse stock split, or the Reverse Stock Split, and corresponding reduction in the total number of authorized shares from 200,000,000 to 16,666,667, or the Authorized Shares Reduction. On December 30, 2024, Cara filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split and Authorized Shares Reduction, and Cara’s common stock began trading on the Nasdaq Capital Market on a post-split basis as of December 31, 2024. All share and per share amounts in this Annual Report on Form 10-K have been retroactively adjusted to give effect to the Reverse Stock Split.
NASDAQ Continued Listing Rules
On February 1, 2024, Cara received a letter from the Staff notifying Cara that, for the previous 30 consecutive business day period prior to the date of the letter, the closing bid price for Cara’s common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) Cara was provided an initial period of 180 calendar days, or until July 30, 2024, to regain compliance with Nasdaq’s bid price requirement. On July 31, 2024, Cara received the Extension Notice from the Staff granting Cara an additional 180 calendar days, or until January 27, 2025, to regain compliance with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under the Minimum Bid Price Requirement. Effective as of August 1, 2024, the listing of Cara’s common stock was transferred from the Nasdaq Global Market to the Nasdaq Capital Market.
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As part of Cara’s plans to regain compliance with the Minimum Bid Price Requirement following the initial notification letter, a series of alternate amendments to effect (i) a reverse stock split and (ii) a reduction in the total number of authorized shares of the Cara’s common stock was approved by Cara’s stockholders at the Company’s 2024 Annual Meeting of Stockholders held on June 4, 2024. On December 19, 2024, Cara’s Board approved the Reverse Stock Split and Authorized Shares Reduction. On December 30, 2024, Cara filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split and Authorized Shares Reduction, and Cara’s common stock began trading on the Nasdaq Capital Market on a post-split basis as of December 31, 2024.
On January 16, 2025, Cara received a letter from the Staff notifying the company that Cara had regained compliance with the minimum bid price requirement. The closing bid price of the Company’s common stock was at or above $1.00 per share for ten consecutive business days, and Nasdaq considers the matter closed.
As a result of the Reverse Stock Split, every 12 shares of Cara’s pre-reverse split common stock were combined and reclassified as one share of common stock. The proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as the result of payment for fractional shares. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have held a fractional share of common stock received a cash payment in lieu thereof. The par value and other terms of our common stock were not affected by the Reverse Stock Split.
All share and per share information have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and restricted stock units outstanding at December 31, 2024, which resulted in a proportional decrease in the number of shares of Cara’s common stock reserved for issuance upon exercise or vesting of such stock options and restricted stock units, and in the case of stock options, a proportional increase in the exercise price of all such stock options.
Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to comply with the Stockholders’ Equity Requirement, or the Alternative Standards. On November 19, 2024, Cara received a letter from the Staff notifying the company that Cara was not in compliance with the Stockholders’ Equity Requirement because Cara’s stockholders’ equity of $707,000, as reported in Cara’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, was below the required minimum of $2.5 million and Cara did not meet the Alternative Standards. As of December 31, 2024, Cara had negative shareholders’ equity of $4.6 million and therefore is not in compliance with the Stockholders’ Equity Requirement and, as of December 31, 2024, Cara did not meet the Alternative Standards. If Cara continues to not be in compliance or if Cara fails to meet other Nasdaq continuing listing requirements, Cara’s common stock may be subject to delisting, and Cara may become subject to delisting proceedings.
As requested by Nasdaq, Cara subsequently submitted the Compliance Plan. On January 14, 2025, based on the Compliance Plan, which contemplates the closing of the proposed Merger between Cara and Tvardi, Nasdaq granted Cara an extension until May 19, 2025 to regain compliance with the Stockholders’ Equity Requirement.
The Merger will constitute a “change of control” for purposes of Nasdaq’s listing rules and will require that the combined company comply with all applicable criteria for initial listing on the Nasdaq Capital Market, including a higher bid price requirement and higher Stockholders’ Equity Requirement. The parties intend to satisfy each of the applicable listing criteria upon completion of the proposed Merger such that the combined company will remain listed on the Nasdaq Capital Market.
While Cara is making every effort to regain compliance prior to the extended deadline, there can be no assurance that Cara will be able to regain compliance within the extension period, by consummation of the Merger or otherwise, or will otherwise be in compliance with other Nasdaq listing criteria, including remaining in compliance with the minimum bid price requirement.
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Assignment of Our Corporate Office Lease
On September 26, 2024, Cara entered into a Consent to Lease Assignment and Amendment to Lease with the Landlord and an Assignment and Assumption of Lease Agreement, or the Assignment Agreements, in which our corporate lease, leasehold improvements, and other property and equipment from our corporate office were transferred to a third party on November 1, 2024 (see Note 19 of Notes to Consolidated Financial Statements, Commitments and Contingencies – Assignment of New Lease, in this Annual Report on Form 10-K).
KORSUVA (difelikefalin) injection – Our Commercial Stage Product
We have 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 FDA for the treatment of moderate-to-severe pruritus associated with advanced CKD in adults undergoing hemodialysis. In December 2021, CMS granted 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 we 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 ESRD 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, we recorded associated collaborative revenue of $2.1 million, $12.4 million and $16.6 million, respectively. However, we have recorded an expense in other G&A expense for approximately $1.6 million for the year ended December 31, 2024 as a result of the negative profit share amount in the second and fourth quarters of 2024. As a result of the final CY 2024 rule, we expect 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 (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 30, 2023 and 2022, we recorded royalty revenue of approximately $415,000 and $72,000, respectively, which represented our royalties on net sales of Kapruvia and KORSUVA injection.
During the fourth quarter of 2023, we entered into the Original HCR Agreement with HCR, pursuant to which 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 us. As a result, there was no royalty revenue recorded for the year ended December 31, 2024. However, we 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, we 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).
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We have 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, we earned a $1.4 million milestone payment per the terms of the licensing agreement during the year ended December 31, 2023.
During the fourth quarter of 2023, we entered into the Original HCR Agreement where we sold our future royalties and milestones for KORSUVA in Japan to HCR. For the year ended December 31, 2024, we 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, we 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 our sales of royalties and milestones for KORSUVA/Kapruvia, we expect no meaningful revenue contribution from KORSUVA/Kapruvia royalties and milestones in the foreseeable future.
KORSUVA Injection U.S. Commercialization
In April 2022, our 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 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.
Collaboration and License Agreements
Agreements with CSL Vifor
We are party to two separate license agreements with CSL Vifor. In October 2020, we 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.
We 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 our common stock at a price of $204.11 per share, which represented a premium over a pre-determined average closing price of our 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 we sold an aggregate of 273,533 shares of our common stock at a price of $182.76 per share, which represented a 20% premium to the 30-day trailing average price of our common stock. In addition, pursuant to this agreement, we are 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, we do not expect to achieve these sales-based milestones.
Pursuant to the agreement for commercialization of KORSUVA in the United States, we are 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, we pay 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, we 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, we received a non-refundable, non-creditable $50.0 million upfront payment for the purchase of an aggregate of 97,902 shares of our common stock at a price of $204.29 per share, which represented a premium over a pre-determined average closing price of our common stock.
As a result of the European Commission’s regulatory approval of Kapruvia in April 2022, we received a $15.0 million regulatory milestone payment from CSL Vifor, which was recorded as license and milestone fees revenue for the year ended December 31, 2022. After U.S. regulatory approval of KORSUVA injection in August 2021, we received a $15.0 million regulatory milestone payment.
We are 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. We are 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, we entered into the Original HCR Agreement pursuant to which we sold our future royalties and milestone payments under this agreement to HCR (see “Royalty Purchase and Sale Agreement” below).
Maruishi Pharmaceutical Co., Ltd., or Maruishi
In April 2013, we entered into a license agreement with Maruishi, or the Maruishi Agreement, under which we 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 we develop difelikefalin and, under certain conditions, Maruishi may substitute another pruritus indication for the uremic pruritus indication originally included in its license from us. 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. We are required to use commercially reasonable efforts, at our 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, we received a non-refundable and non-creditable upfront license fee of $15.0 million and are 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, we 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, we 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
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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, we earned a $1.4 million milestone payment per the terms of the licensing agreement for the year ended December 31, 2023. In November 2023, we entered into an active pharmaceutical ingredient, or API, supply agreement with Maruishi for difelikefalin.
To date, we have received $6.5 million (before contractual foreign currency exchange adjustments) of clinical development and regulatory milestones from Maruishi. We are also eligible to receive a one-time sales milestone of one billion Yen when a certain sales level is attained. We also receive 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 us 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, we entered into the Original HCR Agreement pursuant to which we sold our future royalties and milestone payments under the Maruishi Agreement to HCR (see “Royalty Purchase and Sale Agreement” below). 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, we entered into a license agreement with CKDP, or the CKDP Agreement, under which we 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. We are required to use commercially reasonable efforts, at our expense, to develop, obtain regulatory approval for and commercialize difelikefalin in the United States.
Under the terms of the CKDP Agreement, we received a non-refundable and non-creditable $0.6 million upfront payment and are eligible to receive up to an aggregate of $3.8 million in development and regulatory milestones (before South Korean withholding taxes). To date, we have received $2.3 million (before South Korean withholding tax) of development and regulatory milestones. We are 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 us 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 us royalties on any product. Either we 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. We 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 our company. Cara expects to assign the 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, we 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 us, in the amounts as set forth in purchase orders to be provided by us. We will be required to purchase our requirements of API for each year of the term of the agreement, based on internal forecasts.
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The API Commercial Supply Agreement will continue until the fifth anniversary of the approval by the FDA of the NDA for KORSUVA injection, unless the API Commercial Supply Agreement is earlier 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, we 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 us 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, we paid an upfront fee equal to $8.0 million, consisting of $4.0 million in cash and $4.0 million in shares of our common stock pursuant to the Enteris Purchase Agreement described below.
We are 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, we had the right, but not the obligation, to terminate our obligation to pay any royalties under the Royalty Buyout. We did not exercise our 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 us in relation to the Enteris License Agreement. During the year ended December 31, 2022, we 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 us if we or any of our affiliates formally challenge the validity of any licensed patent rights or assists a third party in doing so. We 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, we announced our 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, we 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 us for the drug products specified by us from time to time. Pursuant to the MSA, we have agreed to order from Patheon at least a certain percentage of our commercial requirements for a product under a related Product Agreement. Each Product Agreement that we may enter into from time to time will be governed by the terms of the MSA, unless expressly modified in such Product Agreement.
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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.
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. We may terminate a Product Agreement (a) upon 90 days’ prior written notice if any governmental agency takes any action that prevents us from selling the relevant product in the relevant territory, (b) upon six months’ prior written notice if we do not intend to order manufacturing services due to a product’s discontinuance in the market, or (c) upon 90 days’ prior written notice if we determine 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 we assign 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, we forecast 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 our 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, we entered into two related Product Agreements under the MSA, one with each of Patheon and Patheon Greenville, to govern the terms and conditions of the manufacture of commercial supplies of difelikefalin injection. 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 us. 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, we entered into an agreement with Patheon to reimburse Patheon approximately $1.7 million for forecasted manufacturing commitments that were 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.
Royalty Purchase and Sale Agreement
During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub, entered into the Original HCR Agreement, pursuant to which Cara Royalty Sub sold to HCR certain of its rights to receive the Royalties, due and payable to Cara Royalty Sub (as our assignee) under our agreements with Maruishi and CSL Vifor, collectively the Covered License Agreements, in exchange for up to $40.0 million. We have retained all of our 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, we 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. An additional $2.5 million milestone payment is due to Cara Royalty Sub in the first quarter of 2025 for the achievement of a 2024 sales milestone of KORSUVA in Japan and is included within other receivables on our Consolidated Balance Sheet as of December 31, 2024.
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
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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.
Components of Operating Results
The following discussion sets forth certain components of our Consolidated Statements of Comprehensive Loss as well as factors that impact those items or could impact those items in the future.
Revenue
To date, we have generated revenue primarily from (1) collaborative revenue from our share of the profit generated by KORSUVA injection sales in the United States; (2) commercial supply revenue from our sales of commercial product to CSL Vifor, which is subsequently sold to wholesalers; (3) the receipt of upfront license fees and milestone payments; (4) royalty revenue in conjunction with sales of Kapruvia in Europe through September 30, 2023; and (5) clinical compound sales from certain license agreements. We are eligible to receive sales-based milestones in the future in accordance with certain licensing agreements.
Beginning in the fourth quarter of 2023, the revenue received under our agreements with CSL Vifor and Maruishi for royalty and sales-based milestone payments received in conjunction with ex-U.S. sales of KORSUVA/Kapruvia were recorded as other revenue and considered non-cash until we have fulfilled our obligations under the Original HCR Agreement (see “Royalty Purchase and Sale Agreement” above).
To date, we have earned a total of $139.6 million in clinical development or regulatory milestone payments, clinical compound and commercial compound sales from certain license agreements, collaborative revenue from our share of the profit generated by KORSUVA injection sales, and royalty revenue (which ceased upon entry into the Original HCR Agreement during the fourth quarter of 2023).
Revenue from sales of KORSUVA injection in future periods is subject to uncertainties and will depend on several factors, including the success of our and our commercial partners’ commercialization efforts in the United States, the number of new patients adopting or switching to KORSUVA injection, patient retention and sustained demand, the number of physicians prescribing KORSUVA injection, the rate of monthly prescriptions, reimbursement from third-party payors including the U.S. government, the conversion of patients from our clinical trials to commercial customers, and market trends. More specifically, in December 2021, CMS granted TDAPA to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022, for a minimum of 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 will commence on April 1, 2024. The anticipated unfavorable CMS reimbursement codified in the final CY2024 rule 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, we recorded associated collaborative revenue of $2.1 million, $12.4 million and $16.6 million, respectively. However, we have recorded an expense in other G&A expense for approximately $1.6 million for the year ended December 31, 2024 as a result of the negative profit share amount in the second and fourth quarters of 2024. As a result of the final CY 2024 rule, we expect no meaningful revenue contribution from KORSUVA injection following the TDAPA period expiration.
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.
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As of December 31, 2024, Vifor International owned 616,397, or 13.5%, of our common stock. CSL Vifor and its affiliates are all considered related parties as of December 31, 2024, 2023 and 2022 (see Note 21 of Notes to Consolidated Financial Statements, Related Party Transactions, in this Annual Report on Form 10-K).
Cost of Goods Sold (COGS)
COGS includes costs related to sales of our commercial product, KORSUVA injection, to CSL Vifor. Costs related to the sales of KORSUVA injection are generally recognized upon receipt of shipment by CSL Vifor. Our COGS for KORSUVA injection include the cost of producing commercial product that correspond with commercial supply revenue, such as third-party supply and overhead costs, as well as certain period costs related to freight, packaging, stability, and quality testing. The related COGS for CSL Vifor associated with the net profit share arrangement as well as the marketing and distribution fee for the applicable period reduces our profit share revenue for the period.
For the years ended December 31, 2024 and 2023, we recorded commercial supply revenue of $0.6 million and $5.8 million, respectively, with associated COGS of $0.6 million and $6.2 million, respectively. For the year ended December 31, 2022, we recorded commercial supply revenue of $10.2 million, with associated COGS of $7.3 million. In January 2022, we recorded commercial supply revenue of $2.3 million, with no associated COGS as all inventory costs were incurred prior to receipt of regulatory approval of KORSUVA injection and, accordingly, were expensed as incurred. For the remainder of 2022, we recorded commercial supply revenue of $7.9 million, with associated COGS of $7.3 million as these inventory costs were incurred subsequent to the receipt of regulatory approval of KORSUVA injection and, accordingly, were capitalized as inventory. We expect our COGS to be reflective of future KORSUVA injection sales.
Research and Development (R&D)
Our R&D expenses relate primarily to the development of oral difelikefalin. R&D expenses consist of expenses incurred in performing R&D activities, including compensation and benefits for full-time R&D employees, clinical trial and related clinical manufacturing expenses, third-party formulation expenses or milestone payments, fees paid to CROs and other consultants, stock-based compensation for R&D employees and consultants, and other outside expenses. Our R&D expenses also included expenses related to preclinical activities for our earlier stage programs in prior periods and may include such expenses in the future.
R&D costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in R&D activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Most of our R&D costs have been external costs, which we track on a program-by-program basis. Our internal R&D costs are primarily compensation expenses for our full-time R&D employees. We do not track internal R&D costs on a program-by-program basis.
R&D activities have been central to our business model. Based on our announcement that we discontinued our NP program, we presently expect that our R&D expenses will significantly decrease in the future as we focus on the Merger or exploring other strategic alternatives to maximize shareholder value if the Merger is not consummated. However, it is difficult to determine with certainty the duration and completion costs in connection with the discontinuation of our studies in NP or future nonclinical and clinical studies of our current or any future product candidates, should we resume the development of any future product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval, should we resume the development of any future product candidates. We may never succeed in achieving regulatory approval for oral difelikefalin or any future product candidates, should we resume the development of oral difelikefalin or any future product candidates.
The duration, costs and timing of clinical trials and development of future product candidates, should we resume the development of any future product candidates, will depend on a variety of factors including, but not limited to:
● per patient trial costs;
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● the number of patients that participate in the trials;
● the number of sites included in the trials;
● the countries in which the trial is conducted;
● the length of time required to enroll eligible patients;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● the duration of patient follow-up; and
● the efficacy and safety profile of the product candidate.
In addition, the probability of success for future product candidates, should we resume the development of any future product candidates, will depend on numerous factors, including competition, manufacturing capability and commercial viability. In the future, should we resume the development of any future product candidates, we will determine which, if any, other programs to pursue and how much to fund each program in response to the scientific and clinical success of future product candidates, as well as an assessment of our future product candidates’ commercial potential.
General and Administrative (G&A)
G&A expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, legal, business development, information technology, or IT, human resources, project management, alliance management, and procurement functions. Other costs include facility costs not otherwise included in R&D expenses, legal fees, insurance costs, investor relations costs, patent costs and fees for accounting and consulting services.
We anticipate that our G&A expenses will decrease in the future as a result of our workforce reductions during the year ended December 31, 2024. However, G&A expenses will continue to include costs related to remaining personnel, fees to outside consultants, lawyers, and accountants, as well as costs associated with the proposed Merger or any other potential strategic alternatives, which could offset the decreases from workforce reductions. In addition, if any future product candidate obtains regulatory approval for marketing, should we resume the development of any future product candidates, we may incur expenses associated with building sales and marketing, commercial operations, and market access teams.
Our license agreements with CSL Vifor provide full U.S. commercialization rights of KORSUVA injection to CSL Vifor under profit-sharing arrangements. Under these profit-sharing arrangements, in consideration of CSL Vifor’s conduct of the marketing, promotion, selling and distribution of KORSUVA injection in the United States, we pay a marketing and distribution fee to CSL Vifor based on the level of annual net sales. This fee as well as CSL Vifor’s COGS are deducted from product sales in calculating the net profits that are subject to the profit-sharing arrangement (see Note 13 of Notes to Consolidated Financial Statements, Collaboration and Licensing Arrangements, in this Annual Report on Form 10-K).
Restructuring
In January 2024, we announced a workforce reduction of up to 50% of our employees in order to reduce our operating expenses and focus our efforts on development of oral difelikefalin in chronic pruritus associated with NP. On
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June 14, 2024, our Board of Directors approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value after we announced our decision to discontinue the clinical program in NP on June 12, 2024. Our 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. Our decision was not related to any safety or medical issues, or negative regulatory feedback related to our NP program. In connection with the streamlined operating plan, our Board of Directors also approved a second reduction in our workforce by approximately 70%, which we substantially completed by June 30, 2024. As of the date of this filing, we have ten employees that are currently working for us.
Restructuring expenses consist of pre-tax severance and employee-related costs for those involuntary terminations associated with the discontinuation of our oral programs in atopic dermatitis and chronic kidney disease in December 2023 and January 2024, respectively, the discontinuation of our oral program in NP in June 2024, and the related workforce reductions in 2024 (see Note 19 of Notes to Consolidated Financial Statements, Commitments and Contingencies – Restructuring Actions, in this Annual Report on Form 10-K).
Other Income, Net
Other income, net consists of interest and dividend income earned on our cash, cash equivalents, and marketable securities, realized gains and losses on the sale of marketable securities and property and equipment, as well as accretion of discounts/amortization of premiums on purchases of marketable securities. In the event we record a credit loss expense on our available-for-sale debt securities, those expenses would be offset against other income.
Impairment of Long-Lived Assets
We periodically analyze the recorded values of our long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. In these cases, we record an impairment charge during the period in which any impairment of our long-lived assets is determined, negatively affecting our results of operations. This impairment charge is recognized separately on the Consolidated Statement of Comprehensive Loss for the year ended December 31, 2024.
Inventory Write-Down
We periodically analyze our inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value and write down such inventories as appropriate. In addition, our product is subject to strict quality control and monitoring which we perform throughout the manufacturing process. If certain batches or units of product no longer meet quality specifications or become obsolete due to expiration, we record a charge to write down such unmarketable inventory to its estimated realizable value. This inventory write-down charge is recognized separately on the Consolidated Statement of Comprehensive Loss for the year ended December 31, 2024.
Non-cash Interest Expense on Liability Related to Sales of Future Royalties and Milestones
Non-cash interest expense on liability related to sales of future royalties and milestone payments, which are received in conjunction with ex-U.S. sales of KORSUVA/Kapruvia under our agreements with CSL Vifor and Maruishi, consists of imputed interest on the carrying value of the liability and the amortization of the related issuance costs resulting from the Original HCR Agreement (see “Royalty Purchase and Sale Agreement” above). This non-cash interest expense is recognized separately on the Consolidated Statement of Comprehensive Loss for the years ended December 31, 2024 and 2023.
Income Taxes
Historically, our benefit from income taxes related to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program, which permits qualified small businesses engaged in R&D activities
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within Connecticut to exchange their unused R&D tax credits for a cash amount equal to 65% of the value of the exchanged credits.
We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when we determine it is more likely than not that some or all of the tax benefits will not be realized.
There were no material uncertain tax positions taken as of December 31, 2024, 2023 and 2022. We do not have any interest or penalties accrued related to tax positions as we do not have any unrecognized tax benefits. In the event we determine that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of interest expense.
The Inflation Reduction Act of 2022 included tax legislation that became effective early in 2023. Significant legislation for corporate taxpayers includes a corporate alternative minimum tax of 15.0% for companies with $1.0 billion or more in average net financial statement profits over the three previous years, as well as a 1.0% indirect excise tax on the repurchase of shares by a publicly traded company. We do not expect this legislation to have an effect on our tax provision.
Further, beginning in our tax year ending December 31, 2022, as a result of the TCJA, current R&D expenditures incurred in the United States must be capitalized for tax purposes, and amortized over a period of five years (fifteen years in the case of R&D performed outside the United States). As such, the deferred tax asset for intangible assets will materially increase in lieu of NOL carryforwards, offset by a change in valuation allowance.
Results of Operations
Comparison of the years ended December 31, 2024, 2023 and 2022
Revenue
Year Ended December 31,
Dollar amounts in thousands
% change % change
License and milestone fees — (100) % 910 (94) % 15,000
Clinical compound revenue 84 (49) % 165 N/A —
Collaborative Revenue
We recognized collaborative revenue of $2.1 million, $12.9 million and $16.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. This change in collaborative revenue for all periods was primarily related to our share of the profit from CSL Vifor’s sales of KORSUVA injection to third parties in the United States, which commercially launched in April 2022. The amount included in the year ended December 31, 2024 included negative profit share from negative net sales recorded 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. The negative profit share of $1.6 million was recorded as expense in other G&A expenses. Collaborative revenue for the year ended December 31, 2023 also included $0.5 million that we earned in conjunction with the regulatory approval of KORSUVA injection in Japan for a milestone payment we earned in September 2023
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from Maruishi that was allocated to the R&D services performance obligation under the Maruishi Agreement (see Notes 13 and 14 of Notes to Consolidated Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Annual Report on Form 10-K).
Commercial Supply Revenue
We recognized commercial supply revenue of $0.6 million, $5.8 million, and $10.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. These changes in commercial supply revenue for all periods were related to our sales of KORSUVA injection to CSL Vifor, which commercially launched in April 2022.
License and milestone fee revenue
There was no license and milestone fees revenue for the year ended December 31, 2024. We recognized license and milestone fees revenue of $0.9 million for the year ended December 31, 2023, in conjunction with the regulatory approval of KORSUVA injection in Japan for a milestone payment we earned in September 2023 from Maruishi that was allocated to the license and milestone fee performance obligation under the Maruishi Agreement (see Notes 13 and 14 of Notes to Consolidated Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Annual Report on Form 10-K).
We recognized license and milestone fees revenue of $15.0 million for the year ended December 31, 2022, in conjunction with the regulatory milestone payment earned from CSL Vifor for the approval of Kapruvia by the European Commission in April 2022 (see Notes 13 and 14 of Notes to Consolidated Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Annual Report on Form 10-K).
Royalty revenue
We recognized royalty revenue of approximately $0.4 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively, which were related to our royalties on the net sales of Kapruvia in Europe prior to October 1, 2023. Beginning on October 1, 2023, royalty revenue will no longer be recognized until we have fulfilled our obligations under the Original HCR Agreement (see “Royalty Purchase and Sale Agreement” above). As a result, there was no royalty revenue for the year ended December 31, 2024.
Clinical compound revenue
We recognized clinical compound revenue of approximately $0.1 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively, which were related to sales of clinical compound to Maruishi. There was no clinical compound revenue for the year ended December 31, 2022 (see Note 14 of Notes to Consolidated Financial Statements, Revenue Recognition, in this Annual Report on Form 10-K).
Other revenue
We recognized non-cash revenue of approximately $4.3 million and $0.7 million for the years ended December 31, 2024 and 2023, which represent royalty payments earned in conjunction with ex-U.S. sales of KORSUVA/Kapruvia under our agreements with CSL Vifor and Maruishi, which were sold to HCR under the Original HCR Agreement. There was no non-cash revenue recognized during the year ended December 31, 2022.
Cost of Goods Sold (COGS)
Year Ended December 31,
Dollar amounts in thousands
% change % change
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During the years ended December 31, 2024, 2023 and 2022, we recorded COGS of $0.6 million, $6.2 million and $7.3 million, respectively, which was related to our commercial supply revenue for KORSUVA injection sales to CSL Vifor. The decrease in 2024 is related to our commercial supply revenue decrease as described above.
As commercialization of KORSUVA began in April 2022, no associated COGS was recorded for commercial supply revenue of $2.3 million in January 2022 as all inventory costs were incurred prior to receipt of regulatory approval of KORSUVA injection, and accordingly, were expensed as incurred (see Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies – Inventory, net and Cost of Goods Sold (COGS), in this Annual Report on Form 10-K).
Research and Development (R&D) Expense
Year Ended December 31,
Dollar amounts in thousands
% change % change
For the year ended December 31, 2024 compared to the year ended December 31, 2023, the $48.6 million decrease in direct clinical trial costs and consultant services in support of clinical trials was primarily due to decreases related to the discontinuation of our oral difelikefalin atopic dermatitis program due to the clinical trial results announced in December 2023, the discontinuation of our oral difelikefalin program in advanced chronic kidney disease in January 2024, decreases related to our former oral difelikefalin NP program which was discontinued due to the clinical trial results announced in June 2024, and decreases in supportive studies and other general costs associated with oral difelikefalin. The decrease in stock compensation expense is primarily related to the reductions in workforce during the year ended December 31, 2024, partially offset by non-cash expense associated with the vesting of performance-based restricted stock units upon the achievement of vesting milestones of these awards in March 2024. The decrease in other R&D operating expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to decreases in payroll and related costs, travel costs and other related conference costs. Other R&D operating expenses for the year ended December 31, 2023 also included $1.7 million related to the agreement with Patheon for forecasted manufacturing commitments that were no longer needed due to the reduced demand expectations of KORSUVA in the United States.
For the year ended December 31, 2023 compared to the year ended December 31, 2022, the $18.8 million increase in direct clinical trial costs was primarily due to the increases in clinical trial spend related to our three late-stage oral difelikefalin programs in 2023. These increases were partially offset by decreases related to the Phase 2 clinical trial for chronic pruritus associated with NP, costs associated with supportive Phase 1 oral difelikefalin studies, and other general costs associated with our oral difelikefalin programs. In December 2023, we announced that we discontinued the atopic dermatitis program due to clinical trial results and in January 2024, we announced the discontinuation of the advanced chronic kidney disease program to focus on NP only. The decrease in stock compensation expense is primarily related to lower grant date fair values for new option grants during the year ended December 31, 2023, and lower stock compensation expense related to time-based restricted stock units that vested in February 2023. Other R&D operating expenses for the year ended December 31, 2023 included $1.7 million related to the agreement with Patheon for forecasted manufacturing commitments that are no longer needed due to the reduced demand expectations of KORSUVA in the United States, as well as increased payroll-related costs as compared to the prior period. Other R&D operating expenses for the year ended December 31, 2022 included the recognition of the $5.0 million milestone payment due to Enteris.
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The following table summarizes our R&D expenses by product candidate for the years ended December 31, 2024, 2023 and 2022:
Year Ended December 31,
Dollar amounts in thousands
% change % change
External research and development expenses:
KORSUVA (difelikefalin) injection - Pruritus $ — N/A $ — (100) % $ 6,692
1 Includes a milestone payment of $5.0 million to Enteris for the year ended December 31, 2022.
General and Administrative (G&A) Expense
Year Ended December 31,
Dollar amounts in thousands
% change % change
For the year ended December 31, 2024 compared to the year ended December 31, 2023, the increase in professional fees and public/investor relations was primarily due to increases in legal costs related to our announced merger with Tvardi. Stock-based compensation was relatively flat in 2024 compared to 2023. The decrease in other G&A operating expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to decreases in payroll and related costs, franchise taxes, travel costs and other related conference costs, partially offset by our negative profit share amounts recorded for CSL Vifor’s negative net sales for the second and fourth quarters of 2024, and Patheon minimum manufacturing orders of $0.6 million in 2024.
For the year ended December 31, 2023 compared to the year ended December 31, 2022, the decrease in stock-based compensation expense was primarily related to higher expenses recorded during the year ended December 31, 2022 for the modification of our former CEO’s equity awards, and certain performance-based restricted stock units that vested during the year ended December 31, 2022.
Restructuring Expenses
Year Ended December 31,
Dollar amounts in thousands
% change % change
Restructuring expenses $ 5,565 N/A $ — N/A $ —
For the year ended December 31, 2024, restructuring expenses were $5.6 million which were related to our strategic prioritization of NP in January 2024, the subsequent discontinuation of our NP program in June 2024, our exploration of strategic alternatives to maximize shareholder value, and the associated workforce reductions during the year. There were no restructuring expenses recorded during the years ended December 31, 2023 and 2022.
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Other Income, Net
Year Ended December 31,
Dollar amounts in thousands
% change % change
For the year ended December 31, 2024 compared to the year ended December 31, 2023, the decrease in other income, net was primarily due to a decrease in interest income resulting from a lower balance in our portfolio of investments in 2024 as compared to 2023, partially offset by an increase in accretion income from our available-for-sale marketable securities in the 2024 period as compared to the prior period.
For the year ended December 31, 2023 compared to the year ended December 31, 2022, the increase in other income, net was primarily due to an increase in interest income resulting from a higher yield on our portfolio of investments during the year ended December 31, 2023 and an increase in accretion income from our available-for-sale marketable securities.
Impairment of Long-Lived Assets
Year Ended December 31,
Dollar amounts in thousands
% change % change
Impairment of long-lived assets $ 4,274 N/A $ — N/A $ —
For the year ended December 31, 2024, we recognized a $4.3 million full impairment charge on our right of use asset after determining that none of the carrying value was recoverable as a result of the assignment of our corporate lease in September 2024. There were no impairments of long-lived assets recognized during the years ended December 31, 2023 and 2022 (see Note 19 of Notes to Consolidated Financial Statements, Commitments and Contingencies – Assignment of New Lease, in this Annual Report on Form 10-K).
Inventory Write-Down
Year Ended December 31,
Dollar amounts in thousands
% change % change
Inventory write-down $ 2,963 N/A $ — N/A $ —
For the year ended December 31, 2024, we wrote down approximately $3.0 million of commercial supply inventory due to obsolescence (see Note 5 of Notes to Consolidated Financial Statements, Inventory, net, in this Annual Report on Form 10-K).
Non-cash Interest Expense on Liability Related to the Sales of Future Royalties and Milestones
Year Ended December 31,
Dollar amounts in thousands
% change % change
We recognized $8.5 million and $0.6 million of non-cash interest expense on the liability related to sales of future royalties and milestones for the years ended December 31, 2024 and 2023, respectively, which represented imputed interest on the carrying value of the liability to HCR and the amortization of the related issuance costs associated with
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the Original HCR Agreement. There was no non-cash interest expense on liability recognized during the year ended December 31, 2022 as the Original HCR Agreement was entered into in November 2023 (see “Royalty Purchase and Sale Agreement” above).
Benefit from Income Taxes
In the fourth quarter of 2024, we decided to exchange our R&D tax credit incurred during the year ended December 31, 2023. We opted not to exchange our R&D tax credit incurred during the year ended December 31, 2024, and were not eligible to exchange our R&D tax credit for cash during the year ended December 31, 2022. Therefore, there was a benefit from income taxes of $0.4 million for the year ended December 31, 2024, and no benefit from income taxes for each of the years ended December 31, 2023 and 2022.
We recognized a full valuation allowance against deferred tax assets at December 31, 2024, 2023 and 2022. The tax benefit related to the exercise of stock options is recognized as a deferred tax asset that is offset by a corresponding valuation allowance. As such, our effective tax rate for the years ended December 31, 2024, 2023 and 2022 is 0.56%, 0% and 0%, respectively.
Cash Requirements, Liquidity, and Capital Resources
Short-Term and Long-Term Cash Requirements
Our primary uses of capital have been third-party clinical R&D services, clinical costs related to the oral difelikefalin program, and compensation and related expenses. As of December 31, 2024, we have no commitments for capital expenditures in either the short-term or long-term.
Based on the Enteris License Agreement that we entered into in August 2019, we are obligated to pay (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. As these milestone payments may or may not be achieved, and royalties may or may not be owed depending on our future commercial success, there were no future potential payments that are considered short-term or long-term cash requirements as of December 31, 2024. We did not make any milestone payments to Enteris during the years ended December 31, 2024 and 2023. During the year ended December 31, 2022, we made a milestone payment of $5.0 million to Enteris. See Note 19 of Notes to Consolidated Financial Statements, Commitments and Contingencies, in this Annual Report on Form 10-K for details about our Enteris License Agreement.
During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub, entered into the Original HCR Agreement with HCR pursuant to which Cara Royalty Sub sold to HCR certain of its rights to the Royalties, due and payable to Cara Royalty Sub (as our assignee) under our agreements with CSL Vifor and Maruishi, in exchange for up to $40.0 million. We have retained all of our rights, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin. These future payments to HCR are not considered short-term or long-term cash requirements as of December 31, 2024, since the amounts and timing of royalty and milestone payments received under the agreements with CSL Vifor and Maruishi could change in the future as they are subject to CSL Vifor’s and Maruishi’s commercialization efforts (see “Royalty Purchase and Sale Agreement” above).
We do not have any other requirements or off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
Since inception, we have incurred significant operating and net losses. We incurred net losses of $70.9 million, $118.5 million and $85.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $755.6 million. Our financial results may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, should we resume the development of any future product candidates, and the future sales of KORSUVA.
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We anticipate that our expenses will be focused on:
● the exploration of strategic alternatives to maximize shareholder value.
Should we resume the development of any future product candidate, the successful development of any future product candidate is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any future product candidate, should we resume the development of future product candidates. We are also unable to predict when, if ever, we will generate any further material net cash inflows from difelikefalin or any other future product candidate. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:
A change in the outcome of any of these variables with respect to the development of oral difelikefalin or any of our future product candidates, should we resume the development of oral difelikefalin or any future product candidates, would significantly change the costs and timing associated with the development of that product candidate. Further, the timing of any of the above may be impacted by global economic conditions and significant global events, should we resume the development of oral difelikefalin or any future product candidate, introducing additional uncertainty.
We currently are exploring strategic alternatives to maximize shareholder value, and in December 2024 we announced entrance into the Merger Agreement with Tvardi. If the Merger is not consummated, should we resume development of our product candidate or any future product candidates, we would require additional capital beyond our current balances of cash and cash equivalents and anticipated amounts as described above, and this additional capital may not be available when needed, on reasonable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and continuing disruptions to and volatility in the credit and equity markets in the United States and worldwide, including impacts from global health crises, geopolitical tensions, such as the ongoing conflicts between Russia and Ukraine, conflict in the Middle East, and increasing tensions between China and Taiwan, and government actions implemented as a result of the foregoing, fluctuations in inflation, rising interest rates, uncertainty and liquidity concerns in the broader financial services industry, and a potential recession in the United States. To the extent that we raise additional capital through the future sale of equity or convertible debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include
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liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.
Sources of Liquidity
Since our inception to date, we have raised an aggregate of $943.8 million to fund our operations, including (1) net proceeds of $447.4 million from the sale of shares of our common stock in five public offerings, including our initial public offering and shares issued under our open market sales agreement in 2023; (2) proceeds of $73.3 million from the sale of shares of our convertible preferred stock and from debt financings prior to our initial public offering; (3) payments of $258.8 million under our license and supply agreements (including commercial supply sales and royalty payments), primarily with CSL Vifor, Maruishi, CKDP, and an earlier product candidate for which development efforts ceased in 2007; (4) our share of the profit generated by KORSUVA injection sales of $29.8 million; (5) net proceeds of $98.0 million from the purchase of our common stock in relation to the license agreements with CSL Vifor; and (6) net proceeds of $36.5 million from the sale of future ex U.S. royalties and milestones to HCR under our agreements with CSL Vifor and Maruishi (see Note 13 of Notes to Consolidated Financial Statements, Collaboration and Licensing Agreements, in this Annual Report on Form 10-K).
On June 14, 2024, our Board of Directors approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value after we announced our 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 on June 12, 2024. 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 with Tvardi and Merger Sub, pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub will merge with and into Tvardi, with Tvardi continuing as the surviving company and a wholly-owned subsidiary of Cara. This process includes substantial uncertainties, including whether we are able to implement any potential strategic alternatives, in a timely manner or at all, whether we realize all or any of the anticipated benefits of any such transaction and whether any such transactions would generate value for stockholders.
On December 17, 2024, following a comprehensive review of strategic alternatives, we entered into the Merger Agreement with Tvardi for the Merger. The Merger was unanimously approved by our Board of Directors, and our Board of Directors resolved to recommend approval of the Merger Agreement to our stockholders. The closing of the Merger is subject to approval by our and Tvardi’s stockholders, as well as other customary closing conditions. Substantially concurrent with the completion of the Merger, we will be renamed “Tvardi Therapeutics, Inc.” and expect to trade on The Nasdaq Capital Market under the symbol “TVRD” (see Merger Agreement with Tvardi and Asset Disposition above).
Also on December 17, 2024, in connection with the Merger Agreement, we and Cara Royalty Sub entered into the APA with Vifor Fresenius Medical Care Renal Pharma Ltd., pursuant to which, at the consummation of the Merger Agreement, we and Cara Royalty Sub will enter into the Asset Disposition with CSL Vifor, for a purchase price of $0.9 million (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 have entered into a letter agreement with us to amend and replace the Original HCR Agreement (see Merger Agreement with Tvardi and Asset Disposition above).
During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub, entered into the Original HCR Agreement with HCR pursuant to which Cara Royalty Sub sold to HCR certain of its rights to receive the Royalties, due and payable to Cara Royalty Sub (as our assignee) under the Covered License Agreements, in exchange for up to $40.0 million. We have retained all of our rights, 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 Royalty Sub received an initial payment of $17.5 million less certain transaction costs in November 2023. In December 2023, we received an additional $20.0 million, less certain
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advisory fees, upon satisfying the milestone event for pricing for Kapruvia® (difelikefalin) in Germany being approved above a certain threshold amount per dose. An additional $2.5 million milestone payment is due to Cara Royalty Sub in the first quarter of 2025 for the achievement of a 2024 sales milestone of KORSUVA in Japan and is included within other receivables on our Consolidated Balance Sheet as of December 31, 2024.
In order to fund our future operations, including our planned clinical trials at the time, on March 1, 2022, we filed a universal shelf registration statement, or the Shelf Registration Statement, which provided for aggregate offerings of up to $300.0 million of common stock, preferred stock, debt securities, warrants or any combination thereof. The Shelf Registration Statement was declared effective by the Securities and Exchange Commission on May 11, 2022. The securities registered under the Shelf Registration Statement include $154.5 million of unsold securities that had been registered under our previous Registration Statement on Form S-3 (File No. 333-230333) that was declared effective on April 4, 2019. On March 6, 2024, the date we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, we became subject to the offering limits in General Instruction I.B.6 of Form S-3. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell shares of our common stock under our Shelf Registration Statement with a value of more than one-third of our public float in any 12-month period, so long as our public float is less than $75.0 million. We have not offered and sold any shares of our common stock pursuant to General Instruction I.B.6 to Form S-3 during the prior 12 calendar month period that ends on and includes the date hereof.
On March 1, 2022, we entered into an open market sales agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $80.0 million in an at-the-market offering pursuant to the Shelf Registration Statement. Jefferies is acting as the sole sales agent for any sales made under the Sales Agreement for a 3% commission on gross proceeds. In June 2024, we filed an amendment to the prospectus dated May 11, 2022 for the at-the-market offering, or the ATM Prospectus, to update the amount of shares of our common stock we are eligible to sell under General Instruction I.B.6 of Form S-3, as described above, and pursuant to the Sales Agreement. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell shares of our common stock pursuant to the ATM Prospectus, as amended, with a value of more than one-third of our public float in any 12-month period, so long as our public float is less than $75.0 million. If our public float increases above $75.0 million such that we may sell additional amounts under the Sales Agreement and the ATM Prospectus, we will file another amendment to the ATM Prospectus prior to making additional sales in excess of the limitations of General Instruction I.B.6 of Form S-3. The common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. During the year ended December 31, 2023, 32,240 shares were sold under the Sales Agreement and the Company received net proceeds of $1.1 million. During the years ended December 31, 2024 and 2022, no shares were sold under the Sales Agreement. In recognition of the decision by our Board of Directors to approve a streamlined operating plan exploring strategic alternatives, as described elsewhere in this report, we currently do not have any intention to sell shares pursuant to the Sales Agreement.
We may offer additional securities under our Shelf Registration Statement from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders.
Under our agreement with CSL Vifor for the commercialization of KORSUVA injection, we are eligible to receive commercial milestone payments in the aggregate of up to $240.0 million from CSL Vifor upon the achievement of certain sales-based milestones. In October 2021, we received a $50.0 million milestone payment from CSL Vifor as a result of the regulatory approval of KORSUVA injection in August 2021. To date, we have received $50.0 million of regulatory milestones from CSL Vifor under this agreement.
Under a separate agreement with CSL Vifor, we are eligible to receive commercial milestone payments in the aggregate of up to $440.0 million, all of which are sales related. We are also eligible to receive tiered double-digit royalty payments based on annual net sales of difelikefalin injection in the licensed territories. In June 2022, we received a $15.0 million milestone payment from CSL Vifor as a result of the regulatory approval of Kapruvia by the European Commission in April 2022. In October 2021, we received a $15.0 million milestone payment from CSL Vifor as a result of the regulatory approval of KORSUVA injection in August 2021. To date, we have received $30.0 million of regulatory milestones from CSL Vifor. During the fourth quarter of 2023, we entered into the Original HCR Agreement
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where we sold our future royalties and milestone payments under this agreement to HCR (see “Royalty Purchase and Sale Agreement” above).
Under the Maruishi Agreement, we are also potentially eligible to earn up to an aggregate of $6.0 million in clinical development milestones and $4.5 million in regulatory milestones, before any foreign exchange adjustment, as well as tiered royalties, with percentages ranging from the low double digits to the low twenties, based on net sales of products containing difelikefalin in Japan, if any, and share in any sub-license fees. In May 2021, we received a $2.0 million milestone payment ($1.9 million after contractual foreign currency exchange adjustments) for Maruishi’s first initiation of a Phase 3 trial for uremic pruritus in Japan in January 2021. 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, we earned a $2.0 million milestone payment ($1.4 million after contractual foreign currency exchange adjustments) per the terms of the licensing agreement. To date, we have received $6.5 million (before contractual foreign currency exchange adjustments) of clinical development and regulatory milestone from Maruishi. During the fourth quarter of 2023, we entered into the Original HCR Agreement where we sold our future royalties and milestone payments to HCR (see “Royalty Purchase and Sale Agreement” above).
Under the CKDP Agreement, we are potentially eligible to earn up to an aggregate of $2.3 million in clinical development milestones and $1.5 million in regulatory milestones, before South Korean withholding tax, as well as tiered royalties with percentages ranging from the high single digits to the high teens, based on net sales of products containing difelikefalin in South Korea, if any, and share in any sub-license fees. To date, $2.3 million (before South Korean withholding tax) of development and regulatory milestones have been received under the CKDP Agreement.
In December 2021, CMS granted TDAPA designation to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022, for a minimum of two years. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on 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 adjustment will be applied to all ESRD PPS payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection will commence on April 1, 2024. The unfavorable CMS reimbursement codified in the final CY2024 rule has resulted in a lack of sequential revenue growth for KORSUVA injection since its launch. As a result, we expect no meaningful revenue contribution from KORSUVA injection post its TDAPA expiration.
Our ability to earn these milestone and royalty payments and their timing is dependent upon successful commercialization of KORSUVA injection/Kapruvia, and successful future repayments made to HCR using CSL Vifor and Maruishi milestones and royalties under the Original HCR Agreement. However, our receipt of any further such amounts is uncertain at this time, and we may never receive any more of these amounts.
Outlook
As a result of the discontinuation of our clinical NP program, our workforce reductions in 2024, and our exploration of strategic alternatives to maximize shareholder value, including the Merger, we expect that our current unrestricted cash and cash equivalents will be sufficient to fund our currently anticipated operating plan for at least the next 12 months. Our anticipated operating expenses include contractually committed costs based on our Board of Directors’ new strategic plan. It is possible that the assumptions upon which we have based this estimate may prove to be wrong, and we could use our capital resources sooner than we presently expect.
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Cash Flows
The following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities for the years ended December 31, 2024, 2023 and 2022:
Year Ended December 31,
Dollar amounts in thousands
Net cash used in operating activities $ (60,917) $ (92,078) $ (78,730)
Net cash (used in) provided by financing activities (3,604) 38,151 311
Net cash used in operating activities
Net cash used in operating activities for the year ended December 31, 2024 consisted primarily of a net loss of $70.9 million and a $15.1 million cash outflow from net changes in operating assets and liabilities, partially offset by a $25.1 million cash inflow from net non-cash charges. The change in operating assets and liabilities primarily consisted of a decrease in accounts payable and accrued expenses of $21.4 million for payments made throughout 2024, and a cash outflow of $4.4 million relating to operating lease liabilities associated with the termination of our corporate lease, partially offset by a decrease in prepaid expenses of $7.6 million, primarily related to prepaid clinical costs, a decrease in accounts receivable, net – related party of $2.4 million as a result of payments received from CSL Vifor and negative profit share for fourth quarter of 2024, and lease incentives of $2.1 million from our corporate office lease being received in 2024. Net non-cash charges primarily consisted of stock-based compensation expense of $8.9 million, non-cash interest expense related to the Original HCR Agreement of $8.5 million, a $4.3 million impairment of long-lived assets, and $3.0 million of inventory write-downs during the 2024 period.
Net cash used in operating activities for the year ended December 31, 2023 consisted primarily of a net loss of $118.5 million, partially offset by a $16.3 million cash inflow from net non-cash charges and a $10.2 million cash inflow from net changes in operating assets and liabilities. Net non-cash charges primarily consisted of stock-based compensation expense of $13.7 million, and the noncash lease expense of $2.1 million relating to our current and former Stamford operating leases. The change in operating assets and liabilities primarily consisted of cash inflows from a decrease in prepaid expenses of $8.1 million, primarily related to prepaid clinical costs, an increase in accounts payable and accrued expenses of $3.3 million due to increased expenses in the period, and an $0.8 million reimbursement of a lease incentive under our new lease agreement that we entered into in May 2023, partially offset by a cash outflow of $1.9 million relating to operating lease liabilities associated with former lease agreements for our former operating facility in Stamford, Connecticut.
Net cash used in operating activities for the year ended December 31, 2022 consisted primarily of a net loss of $85.5 million and a $12.9 million cash outflow from net changes in operating assets and liabilities, partially offset by a $19.7 million cash inflow from net non-cash charges. The change in operating assets and liabilities primarily consisted of an increase in prepaid expenses of $13.7 million, primarily related to an increase in prepaid clinical costs, an increase of $3.3 million in accounts receivable, net – related party primarily relating to amounts due from CSL Vifor from our share of the profit generated by KORSUVA injection sales and for commercial supply of KORSUVA injection to CSL Vifor, and a cash outflow of $1.8 million relating to operating lease liabilities associated with our lease agreements for our operating facility in Stamford, Connecticut, partially offset by cash inflows of $5.7 million from an increase in accounts payable and accrued expenses. Net non-cash charges primarily consisted of stock-based compensation expense of $17.7 million, and the amortization expense component of lease expense of $1.4 million relating to our Stamford operating leases.
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Net cash provided by investing activities
Net cash provided by investing activities was $48.7 million for the year ended December 31, 2024, which primarily included cash inflows of $82.0 million from maturities of available-for-sale marketable securities, partially offset by cash outflows of $32.2 million for the purchases of available-for-sale marketable securities and $1.0 million for the purchases of property and equipment.
Net cash provided by investing activities was $43.5 million for the year ended December 31, 2023, which primarily included cash inflows of $159.4 million from maturities and redemptions of available-for-sale marketable securities, partially offset by cash outflows of $113.6 million for the purchases of available-for-sale marketable securities and $2.4 million for the purchases of property and equipment.
Net cash provided by investing activities was $128.7 million for the year ended December 31, 2022, which primarily included cash inflows of $224.4 million from maturities and redemptions of available-for-sale marketable securities, partially offset by cash outflows of $95.7 million for the purchases of available-for-sale marketable securities.
Net cash provided by financing activities
Net cash used in financing activities for the year ended December 31, 2024 consisted of payments made to HCR under the royalty purchase and sale agreement of approximately $3.6 million.
Net cash provided by financing activities for the year ended December 31, 2023 consisted of net proceeds of $36.5 million from the Original HCR Agreement, net proceeds of $1.1 million from the sales of common stock under our open market sales agreement, and proceeds of $0.6 million received from the exercise of stock options.
Net cash provided by financing activities for the year ended December 31, 2022 consisted of $0.3 million received from the exercise of stock options.
Critical Accounting Estimates
The preparation of our consolidated financial statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of financial condition and results of operations require us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments, and assumptions. We periodically review our estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies, in this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.
We define our critical accounting estimates as those subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply U.S. GAAP.
Liabilities Related to the Sales of Royalties/Milestones and Non-Cash Interest Expense
We recognized a liability related to the sales of future ex-U.S. royalties and milestones under our agreements with Maruishi and CSL Vifor under ASC 470-10: Debt and ASC 835-30: Interest – Imputation of Interest. The initial funds received by us in November 2023, the first milestone received by us in December 2023, and the second milestone earned by us for 2024 net sales in Japan, pursuant to the terms of the Original HCR Agreement, were recorded as a liability and will be accreted under the effective interest method up to the estimated amount of future royalties and milestone payments to be made under the Original HCR Agreement. The issuance costs were recorded as a direct deduction to the
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carrying amount of the liability and will be amortized under the effective interest method over the estimated period the liability will be repaid, solely using future royalty and milestone payments from CSL Vifor and Maruishi.
We estimated the total amount of future royalty revenue and milestone payments to be generated over the life of the Original HCR Agreement based on historical experience and estimates and projections of future activities from CSL Vifor and Maruishi. Since the liability involves judgment due to the estimation uncertainty in determining the future sales of the arrangement, we determined that the valuation of the liability related to the sales of future royalties, net, to be a critical accounting estimate. The future royalties and milestone payments used in the valuation of the liability are subject to estimation and uncertainty as we are dependent on CSL Vifor and Maruishi for timely and accurate information regarding future projections. A significant increase or decrease in these estimates could materially impact the liability balance and the related non-cash interest expense. If the timing of the receipt of royalty payments or milestones is materially different from the original estimates, we will prospectively adjust the effective interest and the related amortization of the liability and related issuance costs. Since the inception of this liability in 2023, our estimates were not materially different from actual amounts and timing of royalty revenue and milestone payments.
Accounting Pronouncements Recently Adopted; Recent Accounting Pronouncements Not Yet Adopted
We do not expect that any recently issued accounting pronouncements will have a material effect on our financial statements. Refer to Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies, in this Annual Report on Form 10-K, for a full description of accounting pronouncements recently adopted, and issued but not yet adopted, if applicable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
Historically, we have invested substantially all of our cash reserves in a variety of available-for-sale marketable securities, including investment-grade debt instruments, principally corporate bonds, commercial paper, municipal bonds and direct obligations of the U.S. government and U.S. government-sponsored entities, and in cash equivalents. See Note 3 of Notes to Consolidated Financial Statements, Available-for-Sale Marketable Securities, in this Annual Report on Form 10-K for details about our available-for-sale marketable securities.
As of December 31, 2024, we had no available-for-sale marketable securities. As of December 31, 2023, we had invested $49.0 million of our cash reserves in such marketable securities. Those marketable securities included $49.0 million of investment grade debt instruments with a yield of approximately 4.41% and maturities through November 2024.
Historically, we have maintained an investment portfolio in accordance with our investment policy, which includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The primary objectives of our investment policy are to preserve principal, maintain proper liquidity and to meet operating needs. Our investments are subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of our investments, including having no available-for-sale marketable securities as of December 31, 2024, and relatively short duration when we have maintained those investments, we do not believe we are materially exposed to changes in interest rates related to our investments. As a result, we do not currently use interest rate derivative instruments to manage exposure to interest rate changes.
Duration is a sensitivity measure that can be used to approximate the change in the fair value of a security that will result from a change in interest rates. Applying the duration model, a hypothetical 100 basis point, or 1%, increase in interest rates as of December 31, 2023, would have resulted in an immaterial decrease in the fair values of our portfolio of marketable securities. There were no available-for-sale marketable securities as of December 31, 2024.
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Credit Quality Risk
Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Nonetheless, deterioration of the credit quality of an investment security subsequent to purchase may subject us to the risk of not being able to recover the full principal value of the security. As of December 31, 2024, we did not have any available-for-sale marketable securities. As of December 31, 2023, the aggregate unrealized losses on our available-for-sale marketable securities were $0.3 million. For the years end December 31, 2024, 2023 and 2022, we did not record any charges to credit loss expense for our available-for-sale securities. Refer to Notes 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies – Concentration of Credit Risk and Marketable Securities, andNote 3 of Notes to Consolidated Financial Statements, Available-for-Sale Marketable Securities, in this Annual Report on Form 10-K for further discussion and applicable tabular presentations.
As of December 31, 2024 and 2023, we had accounts receivable, net – related party from CSL Vifor of $0.4 million and $2.8 million, respectively, which primarily related to royalty payments earned from CSL Vifor for the 2024 period, and profit-sharing revenue from sales of KORSUVA injection in the United States by CSL Vifor, our commercial supply of KORSUVA injection to CSL Vifor, and royalty payments earned from CSL Vifor in the 2023 period. We also had a receivable for $1.0 million and $0.4 million for Japan royalties/milestones owed to us from Maruishi which was included within other receivables as of December 31, 2024 and 2023, respectively. We also had a receivable for $2.5 million for the second milestone financing we earned from HCR based on 2024 net sales in Japan which was also included within other receivables as of December 31, 2024. We believe that credit risks associated with CSL Vifor, Maruishi and HCR are not significant. We review the need for an allowance for credit losses for any receivable based on various factors including payment history and historical bad debt experience. We had an insignificant allowance for credit losses as of December 31, 2024 and 2023. Refer to Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies – Concentration of Credit Risk and Accounts Receivable, Net – Related Party.
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Item 8. Financial Statements and Supplementary Data.
Cara Therapeutics, Inc.
INDEX TO FINANCIAL STATEMENTS
PAGE
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 113
Financial Statements:
Consolidated Balance Sheets 115
Consolidated Statements of Comprehensive Loss 116
Consolidated Statements of Stockholders’ Equity 117
Consolidated Statements of Cash Flows 118
Notes to Consolidated Financial Statements 119
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cara Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cara Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Valuation of Liability related to the Sales of Future Royalties and Milestones, Net
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2006.
Stamford, Connecticut
March 11, 2025
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CARA THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)
Assets
Current assets:
Marketable securities — 48,983
Accounts receivable, net - related party 407 2,765
Income tax receivable — 697
Restricted cash — 408
Operating lease right-of-use assets — 4,864
Property and equipment, net — 3,322
Restricted cash, non-current — 1,500
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses $ 3,972 $ 25,592
Operating lease liabilities, non-current — 6,088
Commitments and contingencies (Note 19) — —
Stockholders’ equity:
Accumulated other comprehensive loss — (260)
Total liabilities and stockholders’ equity $ 43,827 $ 125,844
See Notes to Consolidated Financial Statements.
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CARA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(amounts in thousands, except share and per share data)
Year Ended December 31,
Revenue:
License and milestone fees — 910 15,000
Royalty revenue — 415 72
Clinical compound revenue 84 165 —
Other revenue 4,327 699 —
Operating expenses:
Restructuring 5,565 — —
Impairment of long-lived assets (4,274) — —
Inventory write-down (2,963) — —
Benefit from income taxes 398 — —
Net loss per share:
Weighted average shares:
Other comprehensive income (loss), net of tax of $0:
See Notes to Consolidated Financial Statements.
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CARA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands, except share and per share data)
Accumulated
Additional Other Total
Common Stock Paid-In Accumulated Comprehensive Stockholders’
Shares Amount Capital Deficit Income (Loss) Equity
Stock-based compensation expense — — 14,345 — — 14,345
Net loss — — — (85,474) — (85,474)
Other comprehensive loss — — — — (1,314) (1,314)
Stock-based compensation expense — — 12,710 — — 12,710
Shares issued upon exercise of stock options 7,768 1 559 — — 560
Other comprehensive income — — — — 1,412 1,412
Stock-based compensation expense — — 6,709 — — 6,709
Net loss — — — (70,867) — (70,867)
Other comprehensive income — — — — 260 260
See Notes to Consolidated Financial Statements.
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CARA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Operating activities
Impairment of long-lived assets 4,274 — —
Inventory write-down 2,963 — —
Depreciation and amortization 192 259 248
Changes in operating assets and liabilities:
Accounts receivable, net - related party 2,358 495 (3,260)
Income tax receivable 697 — —
Other receivables (1,034) (59) (41)
Operating lease liabilities (4,363) (1,918) (1,755)
Reimbursement of lease incentive 2,094 807 —
Other — (108) —
Investing activities
Purchases of property and equipment (1,046) (2,375) (43)
Financing activities
Payments to royalty purchase and sale agreement (3,604) — —
Proceeds from the exercise of stock options — 560 311
Net cash (used in) provided by financing activities (3,604) 38,151 311
Noncash investing and financing activities
Receivable for additional HCR financing earned $ 2,500 $ — $ —
Transfer of property and equipment per lease assignment $ (3,417) $ — $ —
Accrual for leasehold improvements $ — $ 778 $ —
See Notes to Consolidated Financial Statements.
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CARA THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
1. Business
Cara Therapeutics, Inc., or the Company, is a biopharmaceutical corporation formed on July 2, 2004. The Company has been focused on leading a new treatment paradigm to improve the lives of patients suffering from chronic pruritus. The Company’s 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.
On June 14, 2024, the Board of Directors of the Company approved a streamlined operating plan exploring strategic alternatives focused on maximizing shareholder value after the Company announced its decision to discontinue the clinical program in notalgia paresthetica, or NP, on June 12, 2024. The Company’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 Company’s decision was not related to any safety or medical issues, or negative regulatory feedback related to the Company’s NP program. In connection with the streamlined operating plan, the Board of Directors also approved a second reduction in the Company’s workforce by approximately 70%, which the Company substantially completed in June 2024 (see Note 19, Commitments and Contingencies – Restructuring Actions).
After a comprehensive review by the Company’s Board of Directors of strategic alternatives, including identifying and reviewing potential candidates for a strategic transaction, on December 17, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Tvardi Therapeutics, Inc., or Tvardi, pursuant to which a wholly-owned subsidiary of the Company will merge with and into Tvardi, with Tvardi surviving as a wholly-owned subsidiary of the Company, or the Merger. The Merger was unanimously approved by the Company’s Board of Directors, and the Company’s Board of Directors resolved to recommend approval of the Merger Agreement to the Company’s stockholders. The closing of the Merger is subject to approval by the Company’s and Tvardi’s stockholders, as well as other customary closing conditions. Substantially concurrent with the completion of the Merger, the Company will be renamed “Tvardi Therapeutics, Inc.” and expects to trade on The Nasdaq Capital Market under the symbol “TVRD” (see Note 22, Merger Agreement and Asset Sale).
Also on December 17, 2024, in connection with the Merger Agreement, the Company and its wholly-owned subsidiary, Cara Royalty Sub, LLC, or Cara Royalty Sub, entered into an Asset Purchase Agreement, or APA, with Vifor Fresenius Medical Care Renal Pharma Ltd., pursuant to which, at the consummation of the Merger Agreement, the Company and Cara Royalty Sub will sell to CSL Vifor certain assets and rights for the development, manufacture and commercialization of difelikefalin as well as certain associated liabilities, or the Asset Disposition, for a purchase price of $900 (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 the Company to amend and replace the HCR Agreement (as defined below) (see Note 22, Merger Agreement and Asset Sale).
In August 2021, the Company received U.S. Food and Drug Administration, or FDA, approval for KORSUVA®(difelikefalin) injection, or KORSUVA injection, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. Commercial launch of KORSUVA injection began in the United States in April 2022 and the Company began recording the associated profit-sharing revenues in the second quarter of 2022.
In April 2022, the European Commission granted marketing authorization to difelikefalin injection under the brand name Kapruvia® (difelikefalin), or Kapruvia, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adult hemodialysis patients. The marketing authorization approved Kapruvia for use in all member
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CARA THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
states of the European Union, or EU, as well as Iceland, Liechtenstein, and Norway. Kapruvia was also approved in the United Kingdom in April 2022. Commercial launches in Austria, Germany, Sweden, France, the Netherlands, Finland, and Norway have commenced. In August 2022, as part of the Access Consortium, difelikefalin injection was approved in Switzerland under the brand name Kapruvia, as well as Singapore and Canada under the brand name KORSUVA. Commercial launch in Switzerland has also commenced. In November 2022, difelikefalin injection was approved in the last Access Consortium country, Australia, under the brand name KORSUVA. Difelikefalin injection was also approved in the United Arab Emirates, Kuwait, Israel, Japan, and Saudi Arabia under the brand name KORSUVA in January 2023, May 2023, June 2023, September 2023, and January 2024, respectively. In the fourth quarter of 2023, the Company entered into a Purchase and Sale Agreement, or the HCR Agreement, with HCRX Investments Holdco, L.P. and Healthcare Royalty Partners IV, L.P., or collectively HCR, pursuant to which 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 the Company (see Note 10, Royalty Purchase and Sale Agreement).
In 2018, the Company entered into a licensing and collaboration agreement with a joint venture between Vifor Pharma Group and Fresenius Medical Care Renal Pharmaceutical Ltd., or Vifor Fresenius Medical Care Renal Pharma Ltd., that provides full commercialization rights of Kapruvia, and where applicable KORSUVA, to Vifor Fresenius Medical Care Renal Pharma Ltd. worldwide (excluding the United States, Japan, and South Korea). In 2020, the Company entered into a second licensing and collaboration agreement, along with stock purchase agreements, with Vifor (International) Ltd., or Vifor International, that provides full commercialization rights of KORSUVA injection to Vifor International in dialysis clinics in the United States under a profit-sharing arrangement (see Note 13, Collaboration and Licensing Agreements).
In May 2022, Vifor International assigned its rights and obligations under the license agreement and a supply agreement, as permitted under the agreements, to Vifor Fresenius Medical Care Renal Pharma Ltd. The Company’s rights and obligations under these agreements were unaffected by this assignment, and the assignment did not affect the Company’s economic rights under the agreements with Vifor International.
In August 2022, Vifor Pharma Group (which includes Vifor International) was acquired by CSL Limited and subsequently renamed CSL Vifor as part of the acquisition. The acquisition of Vifor Pharma Group did not affect any of the Company’s rights and obligations pursuant to these agreements.
The Company also has a license agreement with Maruishi Pharmaceutical Co. Ltd., or Maruishi, under which the Company granted Maruishi an exclusive license to develop, manufacture, and commercialize drug products containing difelikefalin for acute pain and/or uremic pruritus 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, the Company earned a $1,449 milestone payment per the terms of the licensing agreement (see Note 13, Collaboration and Licensing Agreements and Note 14, Revenue Recognition). In the fourth quarter of 2023, the Company entered into the HCR Agreement pursuant to which HCR will receive current and future royalty and milestone payments for KORSUVA (Japan) up to certain capped amounts in exchange for certain payments made to the Company (see Note 10, Royalty Purchase and Sale Agreement).
As of December 31, 2024, the Company has raised aggregate net proceeds of approximately $520,700 from several rounds of equity financing, including its initial public offering, or IPO, which closed in February 2014 and four follow-on public offerings of common stock, which closed in July 2019, July 2018, April 2017 and August 2015, respectively, the issuance of common stock pursuant to its open market sales agreement with Jefferies LLC as sales agent in 2023, and the issuance of convertible preferred stock and debt prior to the IPO. The Company has also earned approximately $289,900 under its license and supply agreements for difelikefalin, primarily with CSL Vifor, Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, and an earlier product candidate for which development efforts ceased in 2007. Under the terms of the HCR Agreement, the Company received net proceeds of $36,474 for the sale of
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CARA THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
future ex-U.S. royalties and milestones under Vifor Agreement No. 2 (as defined below) and the Maruishi Agreement in November and December 2023. The Company has also received aggregate net proceeds of approximately $98,000 from the issuance and sale of the Company’s common stock to Vifor International in connection with the Company’s license agreement with CSL Vifor.
As of December 31, 2024, the Company had unrestricted cash and cash equivalents of $37,903 and an accumulated deficit of $755,612. The Company has incurred substantial net losses and negative cash flows from operating activities in nearly every fiscal period since inception and expects this trend to continue for the foreseeable future. The Company recognized net losses of $70,867, $118,513, and $85,474 for the years ended December 31, 2024, 2023 and 2022, respectively. The Company had net cash used in operating activities of $60,917, $92,078, and $78,730 for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company is subject to risks and uncertainties including, the possible delisting of its common stock from the Nasdaq Capital Market, ability to raise additional financing, and should it resume development of its product candidate or future product candidates, risks and uncertainties common to other life science companies including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology and compliance with FDA and other government regulations. Should the Company resume development of its product candidate or any future product candidate, even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company would generate additional recurring product revenue or achieve profitability.
Nasdaq Continued Listing Rules
On February 1, 2024, the Company received a letter from The Nasdaq Stock Market, or Nasdaq, notifying it that, for the previous 30 consecutive business day periods prior to the date of the letter, the closing bid price for the Company’s common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until July 30, 2024, to regain compliance with Nasdaq’s bid price requirement. On July 31, 2024, the Company received a notice, or the Extension Notice, from the Listing Qualifications Department of Nasdaq informing it that Nasdaq granted the Company an additional 180 calendar days, or until January 27, 2025, to regain compliance with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2), or the Rule. In connection with the Extension Notice, the listing of the Company’s common stock was transferred from the Nasdaq Global Market to the Nasdaq Capital Market, effective as of August 1, 2024. The Extension Notice had no other immediate effect on the listing of the Company’s common stock.
As part of the Company’s plans to regain compliance with the bid price requirement following the initial notification letter, a series of alternate amendments to effect (i) a reverse stock split and (ii) a reduction in the total number of authorized shares of the Company’s common stock was approved by the Company’s stockholders at the Company’s 2024 Annual Meeting of Stockholders held on June 4, 2024.
On December 19, 2024, the Company’s Board of Directors approved a 1-for-12 reverse stock split of its issued and outstanding common stock, or the Reverse Stock Split, and corresponding reduction in the total number of authorized shares of common stock. On December 30, 2024, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split, and the Company’s common stock began trading on the Nasdaq Capital Market on a post-split basis as of December 31, 2024 (see Note 23, Subsequent Events).
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CARA THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share data)
As a result of the Reverse Stock Split, every 12 shares of the Company’s pre-reverse split common stock were combined and reclassified as one share of common stock. The proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as the result of payment for fractional shares. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have held a fractional share of common stock received a cash payment in lieu thereof. The par value and other terms of the Company’s common stock were not affected by the Reverse Stock Split.