CARA THERAPEUTICS, INC. Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "objective," "ongoing," "plan," "predict," "project," "potential," "should," "will," or "would," and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.
The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:
? the timing of our regulatory submissions for KORSUVATM (CR845/difelikefalin)
injection in chronic kidney disease associated pruritus, or CKD-aP;
the success and timing of our clinical trials and reporting of our results from
these trials, including our clinical trial programs for KORSUVA
? (CR845/difelikefalin) injection in CKD-aP, and for Oral KORSUVA
(CR845/difelikefalin) in CKD-aP, chronic liver disease associated pruritus, or
CLD-aP, and pruritus associated with atopic dermatitis, or AD;
? our plans to develop and commercialize KORSUVA (CR845/difelikefalin) injection,
Oral KORSUVA (CR845/difelikefalin) and any future product candidates;
the potential results of ongoing and planned preclinical studies and clinical
? trials and future regulatory and development milestones for our product
candidates;
the size and growth of the potential markets for pruritus management, including
? CKD-aP in hemodialysis and non-dialysis markets, CLD-aP and AD markets as well
as post-operative care markets;
the potential regulatory development pathway for KORSUVA (CR845/difelikefalin)
? injection in CKD-aP and CR845/difelikefalin injection in acute post-operative
setting;
? the rate and degree of market acceptance of any approved products;
? our ability to obtain and maintain regulatory approval of our product
candidates, and the labeling under any approval we may obtain;
? the anticipated commercial launch of our lead product candidate, KORSUVA
(CR845/difelikefalin) injection;
? the anticipated use of Enteris's Peptelligence® technology to develop,
manufacture and commercialize Oral KORSUVA (CR845/difelikefalin);
the potential of future scheduling of KORSUVA (CR845/difelikefalin) injection
? by theUnited States Drug Enforcement Administration , or DEA, if regulatory approval is received; 32 Table of Contents the performance of our current and future collaborators and licensees,
including
?
or CKDP, as well as sub-licensees, including Kissei Pharmaceutical Co. Ltd., or
Kissei, and our ability to maintain such collaborations;
? our ability to establish additional collaborations for our product candidates;
? the continued service of our key scientific or management personnel;
? our ability to establish commercialization and marketing capabilities;
? regulatory developments in
? our ability to obtain and maintain coverage and adequate reimbursement from
third-party payers for any approved products;
? our planned use of our cash and cash equivalents and marketable securities and
the clinical milestones we expect to fund with such proceeds;
? the accuracy of our estimates regarding expenses, future revenues and capital
requirements;
? our ability to obtain funding for our operations;
our ability to obtain and maintain intellectual property protection for our
? product candidates and our ability to operate our business without infringing
on the intellectual property rights of others;
? the success of competing drugs that are or may become available;
? the performance of third-party manufacturers and clinical research
organizations, or CROs; and
? the potential effects of the recent COVID-19 pandemic on our business,
operations and clinical development and regulatory timelines and plans.
You should refer to Part II Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with: (i) the Condensed
Financial Statements and related notes thereto which are included in this
Quarterly Report on Form 10-Q; and (ii) our Annual Report on Form 10-K for
the year ended
33
Table of Contents
Introduction
We are a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities designed to alleviate pruritus by selectively targeting peripheral kappa opioid receptors, or KORs. We are developing a novel and proprietary class of product candidates, led by KORSUVA (CR845/difelikefalin), a first-in-class KOR agonist that targets KORs located in the peripheral nervous system and on immune cells. In our KALMTM-1 and KALM-2 Phase 3 trials and two Phase 2 trials, KORSUVA (CR845/difelikefalin) injection (intravenous formulation) has demonstrated statistically significant reductions in itch intensity and concomitant improvement in pruritus-related quality of life measures in hemodialysis patients with moderate-to-severe CKD-aP. We have partnered with VFMCRP, a joint venture betweenVifor Pharma Group and Fresenius Medical Care, to commercialize KORSUVA (CR845/difelikefalin) injection in dialysis patients with CKD-aP worldwide, excludingthe United States ,Japan (Maruishi/sub-licensee Kissei), andSouth Korea (CKDP). We retain all rights inthe United States and will promote KORSUVA (CR845/difelikefalin) injection, if approved, with VFMCRP inU.S. Fresenius Medical Care North America , or FMCNA, dialysis clinics under a profit share agreement. CR845/difelikefalin has also demonstrated statistically significant pain reduction in clinical trials in patients with moderate-to-severe acute pain in the post-operative setting, without inducing many of the undesirable side effects typically associated with currently available opioid pain therapeutics. We retain rights to all KORSUVA/CR845 formulations and indications worldwide, excluding KORSUVA (CR845/difelikefalin) injection in dialysis patients with CKD-aP under our agreement with VFMCRP for certain ex-U.S. territories and our other license agreements for CR845/difelikefalin inJapan (Maruishi/sub-licensee Kissei) andSouth Korea (CKDP).
The
We were incorporated and commenced operations in 2004, and our primary
activities to date have been organizing and staffing our company, developing our
product candidates, including conducting preclinical studies and clinical trials
of CR845/difelikefalin-based product candidates and raising capital. To date, we
have financed our operations primarily through sales of our equity and debt
securities and payments from license agreements. We have no products currently
available for sale, and substantially all of our revenue to date has been
revenue from license agreements, although we have received nominal amounts of
revenue under research grants and the sale of clinical compound.
The extent of the impact of the COVID-19 pandemic on our business, operations
and clinical development and regulatory timelines and plans remains uncertain,
and will depend on certain developments, including the duration and spread of
the outbreak and its impact on our clinical trial enrollment, trial sites,
partners, CROs, third-party manufacturers, and other third parties with whom we
do business, as well as its impact on regulatory authorities and our key
scientific and management personnel. For example, COVID-19 has affected the
enrollment for our Phase 2 clinical trial of Oral KORSUVA (CR845/difelikefalin)
for moderate-to-severe pruritus in patients with AD, and it may also affect the
screening and enrollment for our Phase 2 clinical trial of Oral KORSUVA
(CR845/difelikefalin) for the treatment of pruritus in patients with hepatic
impairment due to primary biliary cholangitis, or PBC. In addition, as a result
of COVID-19, our third-party manufacturer of KORSUVA (CR845/difelikefalin)
injection is operating at reduced capacity. We currently do not anticipate that
our clinical development or commercial timelines will be affected as a result of
any delays in enrollment or reduced third-party manufacturing capacity, however,
the ultimate impact of COVID-19 remains uncertain.
To the extent possible, we are conducting business as usual, with necessary or
advisable modifications to employee travel and employee work locations. We will
continue to actively monitor the rapidly evolving situation related to COVID-19
and may take further actions that alter our operations, including those that may
be required by federal, state or local authorities, or that we determine are in
the best interests of our employees, partners and other third-parties with whom
we do business. At this point, the extent to which the COVID-19 pandemic may
affect our business, operations and clinical development and regulatory
timelines and plans, including the resulting impact on our expenditures and
capital needs, remains uncertain.
34
Table of Contents
Our Product Candidate
Our product candidate, CR845/difelikefalin, is a new chemical entity, which is designed to selectively stimulate kappa, rather than mu, and delta opioid receptors. CR845/difelikefalin has been designed with specific chemical characteristics to restrict its entry into the CNS and further limit its mechanism of action to KORs in the peripheral nervous system and on immune cells. Activation of kappa receptors in the CNS is known to result in some undesirable effects, including dysphoria. Since CR845/difelikefalin modulates kappa receptor signals peripherally without any significant activation of opioid receptors in the CNS, it is generally not expected to produce the CNS-related side effects of mu opioid agonists (such as addiction and respiratory depression) or centrally-active kappa opioid agonists (such as dysphoria and hallucinations). CR845/difelikefalin has been administered to more than 3,000 human subjects in Phase 1, Phase 2 and Phase 3 clinical trials as an I.V. infusion, bolus intravenous injection or oral capsule or tablet, and thus far has been observed to be generally well tolerated in multiple clinical trials. Based on the non-clinical and clinical studies we have completed to date, we believe that CR845/difelikefalin, if approved, would be attractive to both patients and physicians as a treatment for moderate-to-severe pruritus associated with certain diseases such as CKD, CLD and dermatological conditions such as AD as well as moderate-to-severe pain due to the following attributes:
? novel, peripherally-acting, KOR agonist mechanism of action;
? evidence of efficacy in completed clinical trials of pruritus and pain;
? potential for reducing mu opioid use and opioid-related adverse events, or AEs,
such as nausea and vomiting;
? potential for reduction of post-operative nausea and vomiting, or PONV;
? avoidance of mu opioid-related CNS side effects, such as respiratory depression
and euphoria;
? lower potential for addiction or abuse liability;
avoidance of interactions with other drugs because CR845/difelikefalin is not
? metabolized in the liver and does not interact with liver enzymes responsible
for the metabolism of most commonly used classes of drugs; and
availability in injectable form for the treatment of pruritus in CKD patients
? undergoing hemodialysis in the hospital and dialysis center settings as well as
for pain and/or PONV treatment in the acute care setting and oral form for
treatment of pruritus or chronic pain conditions in the outpatient setting.
35
Table of Contents
Our current product candidate pipeline is summarized in the table below:
Program Product Candidate Primary Indication Status Commercialization Rights Pruritus KORSUVA Pruritus CKD - • KALM-2
(Global) Phase 3 Cara (
(CR845/difelikefalin) Hemodialysis pivotal trial completed; Maruishi (Japan); CKDP
Injection top-line data reported (South Korea); VFMCRP
• KALM-1: pivotal trial (Worldwide, other than
completed; top-line data United States, Japan and
reported South Korea)
• Phase 3 safety trials
ongoing
• Breakthrough Therapy
Designation granted by
FDA in June 2017
Oral KORSUVA Pruritus CKD • Phase 2 trial Cara (Worldwide, other
(CR845/difelikefalin) (Stage III - V) completed;
top-line data than
reported Korea); Maruishi
(Japan); CKDP (South
Korea)
Oral KORSUVA Pruritus CLD -PBC • Phase 2efficacy trial Cara (Worldwide, other
(CR845/difelikefalin) ongoing than South Korea); CKDP
(South Korea)
Oral KORSUVA Pruritus AD • Phase 2efficacy trial Cara (Worldwide, other
(CR845/difelikefalin) ongoing than South Korea); CKDP
(South Korea)
Post-Op CR845/difelikefalin Acute • Adaptive Phase 2/3 Cara (Worldwide, other
Setting Injection Post-Operative trial completed; top-line than Japan and South
Pain/PONV data reported Korea); Maruishi
(Japan); CKDP (South
Korea)
KORSUVA (CR845/Difelikefalin) Injection for Treatment of Chronic Kidney Disease-Associated Pruritus (CKD-aP)
CKD-aP is an intractable systemic itch condition with high prevalence for which there are no approved therapeutics inthe United States orEurope . Based on the results from our efficacy and safety trials highlighted below, we expect to submit the New Drug Application, or NDA, to the FDA for KORSUVA (CR845/difelikefalin) injection in the second half of 2020, and expect our partner, VFMCRP, to submit a Marketing Authorisation Application, or MAA, to theEuropean Medicines Agency , or EMA, shortly thereafter. InApril 2020 , we announced positive top-line results from our KALM-2 pivotal Phase 3 trial of KORSUVA (CR845/difelikefalin) injection in hemodialysis patients with moderate-to-severe CKD-aP. The trial met the primary and key secondary endpoints after 12 weeks of treatment. This trial is completing the 52-week open label extension phase. The study met the primary efficacy endpoint with 54% of the patients receiving 0.5 mcg/ kg of KORSUVA (CR845/difelikefalin) injection versus 42% of patients receiving placebo achieving at least a three-point improvement from baseline with respect to the weekly mean of the daily 24-hour worst itching intensity numeric rating scale, or NRS, score at week 12 (p= 0.02). The study also met the key secondary endpoint with 41% of patients receiving KORSUVA (CR845/difelikefalin) injection achieving a four-point or greater improvement from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 12 versus 28% for patients receiving placebo (p= 0.01). In this trial, KORSUVA (CR845/difelikefalin) injection was generally well-tolerated with a safety profile consistent with that seen in KALM-1 and the KORSUVA clinical program in patients with CKD-aP. Overall, the incidence of adverse effects, or AEs, and serious AEs were similar across both KORSUVA (CR845/difelikefalin) injection and placebo groups. The most common treatment emergent AEs reported in greater than 5% of patients were diarrhea (8.1% KORSUVA vs 5.5% placebo), falling (6.8% KORSUVA vs 5.1% placebo), vomiting (6.4% KORSUVA vs 5.9% placebo), nausea (6.4% KORSUVA vs 4.2% placebo) and dizziness (5.5% KORSUVA vs 5.1% placebo). 36 Table of Contents
InMay 2019 , we announced positive results from the double blinded phase of our KALM-1 pivotal Phase 3 efficacy trial (KALM-1) of KORSUVA (CR845/difelikefalin) injection for the treatment of CKD-aP in patients undergoing hemodialysis. The trial met the primary and all secondary endpoints after 12 weeks of treatment. This trial is completing the 52-week open label extension phase. The study met the primary efficacy endpoint with 51% of the patients receiving 0.5 mcg/ kg of KORSUVA (CR845/difelikefalin) injection versus 28% of patients receiving placebo achieving at least a three-point improvement from baseline with respect to the weekly mean of the daily 24-hour worst itching intensity NRS score at week 12 (p= 0.000019). The study also met all secondary endpoints, including assessment of itch-related quality of life changes measured using self-assessmentSkindex -10 (patients receiving KORSUVA experienced 43% improvement versus patients receiving placebo, p= 0.0004) and 5-D Itch scales (patients receiving KORSUVA experienced 35% improvement versus patients receiving placebo, p= 0.0009). In addition, 39% of patients receiving KORSUVA (CR845/difelikefalin) injection achieved a four-point or greater improvement from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 12 versus 18% for patients receiving placebo (p= 0.000032), another key secondary endpoint. In this trial, KORSUVA (CR845/difelikefalin) injection was generally well-tolerated with a safety profile consistent with that seen in earlier trials. Overall, the incidence of AEs and serious AEs were similar across both KORSUVA (CR845/difelikefalin) injection and placebo groups. The most common treatment emergent AEs reported in greater than 5% of patients were diarrhea (9.5% KORSUVA vs 3.7% placebo), dizziness (6.9% KORSUVA vs 1.1% placebo), vomiting (5.3% KORSUVA vs 3.2% placebo) and nasopharyngitis (3.2% KORSUVA vs 5.3% placebo). In the second quarter of 2017, we initiated a 52-week Phase 3 safety trial that was expected to enroll up to 300 hemodialysis patients with CKD-aP, including those who have completed prior Phase 2 trials of KORSUVA (CR845/difelikefalin) injection as well as patients who have not been previously exposed to CR845/difelikefalin. This open-label trial is evaluating the long-term safety of KORSUVA (CR845/difelikefalin) injection at the dose of 0.5mcg/kg. The study is now fully enrolled at 288 patients. In the second quarter of 2019, we initiated an additional open label Phase 3 safety trial of KORSUVA (CR845/difelikefalin) injection that is expected to enroll up to 250 hemodialysis patients with CKD-aP. This trial is designed to evaluate primarily safety as well as effectiveness of 0.5 mcg/kg dose of KORSUVA (CR845/difelikefalin) injection for up to 12 weeks treatment in hemodialysis patients with CKD-aP. Currently, more than 1,500 total patient exposures have been achieved, including all ongoing safety trials, with more than 600 patients completing at least six months of treatment and more than 300 patients completing one year of treatment.
Oral KORSUVA (CR845/Difelikefalin) for Treatment of Chronic Kidney Disease-Associated Pruritus (CKD-aP)
InDecember 2019 , we announced top-line data from our Phase 2 trial of Oral KORSUVA (CR845/difelikefalin) for the treatment of pruritus in stage III - V (moderate-to-severe) CKD patients. The Phase 2, multicenter, randomized, double-blind, placebo-controlled 12-week trial is designed to evaluate the safety and efficacy of three tablet strengths (0.25 mg, 0.5 mg and 1 mg, once daily administration) of Oral KORSUVA (CR845/difelikefalin) versus placebo in approximately 240 stage III - V (moderate to severe) CKD patients with moderate-to-severe pruritus. The primary efficacy endpoint was the change from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 12 of the treatment period. Secondary endpoints include change from baseline in itch-related quality of life scores at the end of week 12, as assessed by the totalSkindex -10 and 5-D itch scores, as well as the proportion of patients achieving an improvement from baseline ?3 points with respect to the weekly mean of the daily 24-hour worst itching NRS score at week 12. Patients treated with the 1.0 mg tablet strength of Oral KORSUVA (CR845/difelikefalin) achieved the primary endpoint of statistically significant reduction in weekly mean of the daily worst itching NRS scores vs. placebo after the 12-week treatment period (-4.4 KORSUVA vs. -3.3 placebo, p=0.018). The treatment was statistically significant after two weeks of treatment and sustained through the 12-week treatment period. Regarding secondary endpoints, the proportion of patients on 1.0 mg tablet strength achieving a 3 point or greater improvement from baseline in the weekly mean of the daily worst itching NRS score at week 12 was 72% vs. 58% for placebo but did not achieve statistical 37 Table of Contents significance. Furthermore, patients on 1.0 mg tablet strength showed positive improvements vs. placebo in itch quality of life endpoints as measured using self-assessmentSkindex -10 and 5-D Itch scales but did not achieve statistical significance. Oral KORSUVA (CR845/difelikefalin) was generally well-tolerated with a safety profile consistent with that seen in earlier KORSUVA clinical trials. Overall, the incidence of treatment AEs were similar across KORSUVA and placebo groups. The most common AEs reported in >5% of patients in the 1.0 mg KORSUVA group vs. placebo were dizziness (7.5% KORSUVA vs. 0% placebo), fall (6% KORSUVA vs. 0% placebo), diarrhea (6% KORSUVA vs. 1.5% placebo) and constipation (6% KORSUVA vs. 3% placebo).
We plan to conduct an End of Phase 2 Meeting with the FDA in the second half of 2020, with the aim of initiating a Phase 3 program for Oral KORSUVA (CR845/difelikefalin) for the treatment of pruritus in stage III - V (moderate-to-severe) CKD.
Oral KORSUVA (CR845/Difelikefalin) for Treatment of Chronic Liver Disease-Associated Pruritus
Pruritus is a common and serious symptom in patients with CLD, especially those with chronic cholestatic disease. Pruritus has a prevalence of up to 70% in patients with PBC. Severe pruritus can have debilitating effects and can lead to a significant reduction in a patient's quality of life. Although the pathogenesis of CLD-aP remains poorly understood, it is likely multifactorial including evidence for an imbalance in the endogenous opioid system driven by higher mu receptor activation (pruritic) versus kappa receptor activation (antipruritic). Consequently, the use of selective kappa-opioid receptor agonists has been suggested for the treatment of pruritus in patients with CLD. InJune 2019 , we announced the initiation of a Phase 2 trial of Oral KORSUVA (CR845/difelikefalin) for the treatment of pruritus in patients with hepatic impairment due to PBC. The Phase 2 multicenter, randomized, double-blind, placebo-controlled 16-week trial is designed to evaluate the safety and efficacy of 1 mg tablet of Oral KORSUVA (CR845/difelikefalin) taken twice daily or BID versus placebo in approximately 60 patients with PBC and moderate-to-severe pruritus. The primary efficacy endpoint is the change from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 16 of the treatment period. Secondary endpoints include change from baseline in itch-related quality of life scores at the end of week 16 as assessed by theSkindex -10 and 5-D itch scales, as well as the assessment of proportion of patients achieving an improvement from baseline of ?3 points with respect to the weekly mean of the daily 24-hour worst itching NRS score at week 16. We continue to screen patients in this ongoing Phase 2 trial of Oral KORSUVA (CR845/difelikefalin) and aim to have top-line data in 2020, subject to any delays related to the COVID-19 pandemic. In the fourth quarter of 2017, we submitted an investigational new drug application, or IND, to the FDA for Oral KORSUVA (CR845/difelikefalin) for the symptomatic relief of CLD-aP and initiated a Phase 1 safety and PK clinical trial of Oral KORSUVA (CR845/difelikefalin) in patients with CLD in the first quarter of 2018. The open-label study was designed to evaluate the safety and PK profile of repeated doses of Oral KORSUVA (CR845/difelikefalin) taken twice daily in up to 60 patients with CLD and up to 12 matched healthy control subjects. Oral KORSUVA (CR845/difelikefalin) was evaluated over an eight-day treatment period in patients with CLD based on their Child-Pugh classification (i.e., Class A, B and C). The study is now complete. The PK parameters were dose-proportional in patients with mild-to-moderate CLD and Oral KORSUVA (CR845/difelikefalin) was generally well tolerated with no unexpected safety signals reported.
Oral KORSUVA (CR845/difelikefalin) for Treatment of Moderate-to-Severe Pruritus Associated with Atopic Dermatitis (AD)
InJuly 2019 , we initiated a Phase 2 randomized, double-blind, placebo-controlled trial that is designed to evaluate the efficacy and safety of Oral KORSUVA (CR845/difelikefalin) for moderate-to-severe pruritus in approximately 240 adult subjects with AD. Subjects will be randomized to three tablet strengths of Oral KORSUVA (CR845/difelikefalin): 0.25 mg, 0.5 mg and 1 mg twice daily versus placebo for 12 weeks followed by a 4-week active extension phase. The primary efficacy endpoint is the change from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 12 of the treatment period. Secondary endpoints include change from baseline in itch-related quality of life scores at the end of week 12 as assessed by the totalSkindex -10 and 5-D itch scales, and itch related Sleep Quality 38
Table of Contents
Assessment. Safety endpoints used to evaluate the overall safety and tolerability of Oral KORSUVA (CR845/difelikefalin) will also be included.
InJanuary 2020 , we expanded this Phase 2 trial to include approximately 320 adult AD patients with moderate-to-severe pruritus and incorporated an interim conditional power assessment into the design, to be conducted after approximately 50% of the targeted patient number complete the designated 12-week treatment period. Based on current sample size and ongoing enrollment rates, we expect to complete the interim statistical analysis in the second quarter of 2020 and aim to report the top-line results from this trial in 2020, subject to any delays related to the COVID-19 pandemic.
Intravenous CR845/Difelikefalin for Treatment of Acute Postoperative Pain
We have also investigated CR845/difelikefalin for the treatment of pain in an acute care setting. CR845/difelikefalin is designed to provide pain relief without stimulating mu opioid receptors and therefore potentially without mu opioid-related side effects, such as nausea, vomiting, respiratory depression and euphoria. InJune 2018 , we reported positive top-line date from the adaptive Phase 2/3 study of CR845/difelikefalin in patients undergoing abdominal surgery. CR845 injection achieved statistical significance for the primary endpoint of pain relief as measured by Area Under the Curve, or AUC, over 24 hours (AUC 0-24) post-surgery with the 1.0 mcg/kg dose versus placebo (p=0.032). The 0.5 mcg/kg dose did not achieve statistical significance over the 0-24 hour period (p=0.076). In addition, improvement in pain AUC was statistically significant for both the 0.5 and 1.0 mcg/kg doses over 0 to 6 hours (p=0.041, p=0.001) and 0 to 12 hours (p=0.035, p=0.004) periods and also statistically significant for the 1.0 mcg/kg dose over the 0 to 18-hour period (p=0.013) post-surgery. At 6 and 24 hours after baseline dose post-surgery, there were statistically significant improvements in PONV impact scores with both doses of CR845 injection compared to placebo: 0.5 mcg/kg (6 hrs.: p=0.0072, 24 hrs.: p<0.006) and 1.0 mcg/kg (6 hrs.: p<0.0001, 24 hrs.: p<0.0001). There were statistically significant differences between placebo and both doses of CR845 with respect to the total use of anti-emetic medication over the first 24 hours post-surgery (0.5 mcg/kg: p=0.0003; 1.0 mcg/kg: p< 0.0001). There was a 73% reduction in the incidence of patient-reported vomiting in the group receiving the 1.0 mcg/kg dose versus placebo (p=0.029). Although the 0.5 mcg/kg also showed reduction in vomiting, it did not reach statistical significance. Both doses of CR845 exhibited numerical trends toward reduced use of rescue analgesic medication compared to placebo, but did not achieve statistical significance. There was no significant effect, compared to placebo, on patient's global assessment of medication for either dose of CR845 over the 24-hour period. Common adverse effects reported in the placebo and both CR845 groups were generally low and similar in incidence, and included nausea, constipation, vomiting, flatulence, headache and dyspepsia.
The next steps for the acute post-operative program will be determined after we have completed detailed analysis of the data and consulted with the FDA regarding the regulatory path forward for PONV.
Human Abuse Liability Trial of CR845/Difelikefalin Injection
In the fourth quarter of 2014, we successfully completed a Human Abuse
Liability, or HAL, trial of CR845/difelikefalin injection. The results from this
HAL trial indicate that I.V. CR845/difelikefalin (5 mcg/kg or 15 mcg/kg)
demonstrates statistically significant lower "drug liking" scores as measured by
VAS Emax (p <0.0001) when compared to I.V. pentazocine (0.5 mg/kg), an approved
Schedule I.V. opioid receptor agonist. I.V. CR845 also demonstrated highly
statistically significant lower "feeling high," "overall liking," and "take drug
again" scores (p <0.0001) as compared to pentazocine. Additionally,
CR845/difelikefalin injection showed no "drug liking" dose response as both
doses of CR845/difelikefalin injection exhibited similar responses and were not
different from placebo injection. Those scores represent standard subjective
measures recommended by the FDA to assess a drug's abuse liability. We believe
that the totality of the results from the HAL trial are supportive of the
potential for CR845/difelikefalin to be the first non-scheduled or low (Schedule
V) scheduled peripheral kappa opioid for pruritus or additional indications.
39
Table of Contents
Respiratory Safety Phase 1 Trial of CR845/Difelikefalin Injection
InApril 2017 , we announced summary results from our quantitative Phase 1 trial evaluating respiratory safety of CR845/difelikefalin injection. Respiratory depression remains the most life-threatening side effect of traditional, centrally acting, opioid analgesics, the most commonly used drug class for current treatment of postoperative pain inthe United States . The Phase 1 trial was a randomized, double-blind, placebo-controlled, three-way crossover trial of two doses of CR845/difelikefalin injection (1.0 mcg/kg and 5.0 mcg/kg) versus placebo on three measures of respiratory drive in 15 healthy volunteers. The primary safety endpoints were: a >10 mmHg sustained (>30 seconds duration) increase in end-tidal CO2, or ETCO2, above baseline or to >50 mmHg, and a sustained reduction in oxygen saturation, or SpO2, to <92%. There were no statistically significant differences in any respiratory measures observed between groups throughout the four-hour observation period post-dosing and no individual subject met the threshold for a respiratory safety event. Additionally, all treatment-emergent adverse events were previously reported with CR845/difelikefalin administration and were mild, resolving without intervention.
Collaboration and License Agreements
InMay 2018 , we entered into a license agreement, or the VFMCRP Agreement, with VFMCRP, a joint venture betweenVifor Pharma Group and Fresenius Medical Care, under which we granted VFMCRP a license to seek regulatory approval to commercialize, import, export, use, distribute, offer for sale, promote, sell and otherwise commercialize KORSUVA (CR845/difelikefalin) injection for all therapeutic uses to prevent, inhibit or treat itch associated with pruritus in hemodialysis and peritoneal-dialysis patients worldwide (excludingthe United States ,Japan andSouth Korea ). We retain full development and commercialization rights for KORSUVA injection for the treatment of CKD-aP in dialysis patients in theU.S. except in the dialysis clinics ofFresenius Medical Care North America , or FMCNA, where we and VFMCRP will promote KORSUVA injection under a profit-sharing arrangement. We are eligible to receive from VFMCRP regulatory and commercial milestone payments in the aggregate of up to$470 million , consisting of up to$30 million in regulatory milestones and up to$440 million in tiered commercial milestones, all of which are sales-related. We are also eligible to receive tiered double-digit royalty payments based on annual net sales, as defined, of KORSUVA (CR845/difelikefalin) injection in the licensed territories. Inthe United States , we and VFMCRP will promote KORSUVA (CR845/difelikefalin) injection in the dialysis clinics of FMCNA under a profit-sharing arrangement (subject to the terms and conditions of the VFMCRP Agreement) based on net FMCNA clinic sales recorded by us.
InApril 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 CR845/difelikefalin inJapan in the acute pain and uremic pruritus fields. Maruishi has a right of first negotiation for any other indications for which we develop CR845/difelikefalin and, under certain conditions, Maruishi may substitute another pruritus indication for the uremic pruritus indication originally included in its license from us. If we abandon development of CR845/difelikefalin and begin development of another kappa opioid receptor agonist that is covered by the claims of the patents we licensed to Maruishi, such other agonist will automatically be included in the license to Maruishi. Maruishi is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin inJapan . We are required to use commercially reasonable efforts, at our expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin inthe United States . Under the terms of the Maruishi Agreement, we are eligible to receive up to an aggregate of$10.5 million in clinical development and regulatory milestones, of which$2.5 million (before contractual foreign currency exchange adjustments) has already been received. We are also eligible to receive a one-time sales milestone ofone billion Yen when a certain sales level is attained. We also receive a mid-double-digit percentage of all non-royalty payments 40
Table of Contents
received by Maruishi from its sublicensees, if any. We are also eligible to receive 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. The Maruishi Agreement continues until terminated.
Chong Kun Dang Pharmaceutical Corporation
InApril 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 CR845/difelikefalin inSouth Korea . CKDP is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin inSouth Korea . We are required to use commercially reasonable efforts, at our expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin inthe United States . Under the terms of the CKDP Agreement, we are eligible to receive up to an aggregate of$3.8 million in development and regulatory milestones, of which$1.5 million (before South Korean withholding tax) has already been received. 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.
Manufacturing and License Agreements
InAugust 2019 , we entered into 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, excludingJapan andSouth 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. 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 have the right, but not the obligation, to terminate our obligation to pay any royalties under the Enteris License Agreement in exchange for a lump sum payment in cash, or the Royalty Buyout. Subject to certain conditions, we may elect to pay 50% of the lump sum due under the Royalty Buyout in shares of our common stock. 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.Patheon UK Limited
In
41
Table of Contents
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.
The MSA has an initial term ending December 31, 2023 , and will automatically
renew after the initial term for successive terms of two years each if there is
a Product Agreement in effect, unless either party gives notice of its intention
to terminate the MSA at least 18 months prior to the end of the then current
term.
Also in July 2019 , we entered into two related Product Agreements under the MSA,
one with each of Patheon and Patheon Manufacturing Services LLC , or Patheon
Greenville , to govern the terms and conditions of the manufacture of commercial
supplies of CR845/difelikefalin injection, our lead product candidate. Pursuant
to the Product Agreements, Patheon and Patheon Greenville will manufacture
commercial supplies of CR845/difelikefalin injection at the Monza, Italy and
Greenville, North Carolina manufacturing sites, respectively, from active
pharmaceutical ingredient 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.
Components of Operating Results
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. Substantially all of our revenue recognized to date has consisted of upfront payments under license agreements with VFMCRP, Maruishi and CKDP, and milestone and sub-license payments under license agreements with CKDP and Maruishi for CR845/difelikefalin, some or all of which was deferred upon receipt, as well as license agreements for CR665, our first-generation drug program for which development efforts have ceased and clinical compound sales from certain license agreements. To date, we have earned a total of$5.4 million in clinical development or regulatory milestone payments and clinical compound sales from certain license agreements. We have not yet received any milestone payments under the VFMCRP Agreement or royalties under any of our collaborations.
Research and Development (R&D)
Our R&D expenses relate primarily to the development of CR845/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, 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 are central to our business model. Product candidates in later
stages of clinical development generally have higher development costs than
those in earlier stages of clinical development, primarily due to the increased
size and duration of later-stage clinical trials. Based on our current
development plans, we presently expect that our R&D expenses for 2020 will
increase over those for 2019. However, it is difficult to determine with
certainty the duration and completion costs of our current or future nonclinical
programs and clinical trials of our 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. We may never succeed in
achieving regulatory approval for any of our product candidates.
42
Table of Contents
The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors including, but not limited to:
? per patient trial costs;
? 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;
? potential additional safety monitoring or other studies requested by regulatory
agencies;
? the duration of patient follow-up; and
? the efficacy and safety profile of the product candidate.
In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate's commercial potential.
General and Administrative
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, legal, business development, information technology and human resources 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 general and administrative expenses for 2020 will increase as compared to 2019 to support our continued R&D activities and potential commercialization of our product candidates. These expenses will likely include costs related to the hiring of additional personnel, fees to outside consultants, lawyers, accountants and investor relations firms. In addition, if I.V. CR845/difelikefalin, Oral CR845/difelikefalin or any future product candidate obtains regulatory approval for marketing, we expect to incur expenses associated with building a sales and marketing team.
Other Income, net
Other income, net consists of interest and dividend income earned on our cash, cash equivalents, marketable securities and restricted cash, 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. Benefit from Income Taxes The benefit from income taxes relates 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 withinConnecticut to exchange their unused R&D tax credits for a cash amount equal to 65% of the value of the exchanged credits. 43 Table of Contents Results of Operations
Comparison of the Three Months Ended
Revenue
Three Months Ended
March 31,
2020 2019 % change
Dollar amounts in thousands
License and milestone fees revenue $ 8,021
89% Clinical compound revenue 72 140 -49% Total revenue $ 8,093$ 4,382 85%
License and milestone fees revenue
License and milestone fees revenue of
Clinical compound revenue
Clinical compound revenue of
Research and Development Expense
Three Months Ended
March 31,
2020 2019 % change
Dollar amounts in thousands
Direct clinical trial costs $ 25,738 $ 17,741 45%Consultant services in support of clinical trials 1,275 1,258 1% Stock-based compensation 1,623 1,082 50% Depreciation and amortization 27 28 -2% Other R&D operating expenses 4,873
3,499 39%
Total R&D expense $ 33,536 $ 23,608 42%
For the three months ended March 31, 2020 compared to the three months ended
March 31, 2019 , the net increase in direct clinical trial costs and related
consultant costs primarily resulted from increases totaling $13.7 million ,
mainly from activities related to the KALM-2 Phase 3 efficacy trial and up to 12
week Phase 3 safety trial of KORSUVA (CR845/difelikefalin) injection in CKD
patients undergoing hemodialysis, the Phase 2 efficacy trial for pruritus
associated with AD and costs associated with supportive Phase 1 studies. There
was also an increase of $0.7 million in drug manufacturing costs. Those costs
were partially offset by a decrease of $6.2 million , mainly from the KALM-1
Phase 3 efficacy trial and the 52-week open-label extension study of KORSUVA
(CR845/difelikefalin) injection in CKD patients undergoing hemodialysis, the
Phase 2 efficacy trial of Oral CR845 in CKD-aP patients and costs associated
with a supportive Phase 1 study. The increase in stock-based compensation
expense was primarily the result of additional stock option grants to new and
existing employees. The increase in other R&D operating expenses primarily
resulted from an increase in payroll and related costs, conferences and travel
and related costs.
44
Table of Contents
The following table summarizes our R&D expenses by programs for the three months
ended
Three Months Ended
March 31,
2020 2019 % change
Dollar amounts in thousands
External research and development expenses:
I.V. CR845 - Pruritus $ 18,990 $ 13,890 37%
I.V. CR845 - Pain 31 199 -84%
Oral CR845 - Pruritus 7,971 4,899 63%
Oral CR845 - Pain 10 10 0%Internal research and development expenses 6,534 4,610 42% Total research and development expenses $ 33,536 $
23,608 42%
General and Administrative Expenses
Three Months Ended
March 31,
2020 2019 % change
Dollar amounts in thousandsProfessional fees and public/investor relations $ 1,131 $
929 22%
Stock-based compensation 1,223 1,152 6%
Depreciation and amortization 21 22 -5%
Other G&A operating expenses 2,183 1,805 21%
Total G&A expense $ 4,558 $ 3,908 17%
For the three months ended March 31, 2020 compared to the three months ended
March 31, 2019 , the increase in professional fees and public/investor relations
expenses was primarily the result of increased accounting and legal fees. The
increase in stock-based compensation expense was primarily the result of
additional stock option and restricted stock unit grants to employees and
members of our Board of Directors, partially offset by a reduction in
stock-based compensation expense as a result of the resignation of our former
Chief Financial Officer in December 2019 . The increase in other G&A operating
expenses was primarily the result of increases in insurance costs, franchise
taxes and payroll and related costs, partially offset by a decrease in travel
and related costs.
Other Income, Net
Three Months Ended
March 31,
2020 2019 % change
Dollar amounts in thousands
Other income, net $ 957 $ 1,089 -12%
During the three months ended March 31, 2020 compared to the three months ended
March 31, 2019 , the decrease in other income, net was primarily due to a
decrease in net accretion income partially offset by an increase in interest
income resulting from a higher average balance of our portfolio of investments
in the 2020 period.
Benefit from Income Taxes
For the three months ended March 31, 2020 and 2019, pre-tax losses were $29.0
million and $22.0 million , respectively, and we recognized a benefit from income
taxes of $122 thousand and $85 thousand , respectively.
45
Table of Contents
The benefit from income taxes relates to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program, as discussed above. We recognized a full valuation allowance against deferred tax assets atMarch 31, 2020 andDecember 31, 2019 .
Liquidity and Capital Resources
Sources of Liquidity
Since our inception and throughMarch 31, 2020 , we have raised an aggregate of approximately$623.2 million to fund our operations, including (1) net proceeds of$446.3 million from the sale of shares of our common stock in five public offerings, including our initial public offering; (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 approximately$89.0 million under our license agreements, primarily with VFMCRP, Maruishi, CKDP and an earlier product candidate for which development efforts ceased in 2007; and (4) net proceeds of$14.6 million from the purchase of our common stock in relation to the license agreement with VFMCRP (see Note 10 of Notes to Condensed Financial Statements, Collaboration and Licensing Agreements, in this Quarterly Report on Form 10-Q). In order to fund our future operations, including our planned clinical trials, we filed the Shelf Registration Statement (File No. 333-230333), which provides for aggregate offerings of up to$300.0 million of common stock, preferred stock, debt securities, warrants or any combination thereof and was declared effective onApril 4, 2019 . The securities registered under the Shelf Registration Statement include unsold securities that had been registered under our previous Registration Statement on Form S-3 (File No. 333-216657) that was declared effective onMarch 24, 2017 . To date, we have offered and sold an aggregate of approximately$145.5 million of securities under this Shelf Registration Statement. We believe that our Shelf Registration Statement provides us with the flexibility to raise additional capital to finance our operations as needed. 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. As ofMarch 31, 2020 , we had$179.8 million in unrestricted cash and cash equivalents and available-for-sale marketable securities. We believe our current unrestricted cash and cash equivalents and available-for-sale marketable securities will be sufficient to fund our currently anticipated operating expenses and capital expenditures into the second half of 2021, without giving effect to any potential milestone payments we may receive under our licensing and collaboration agreements with VFMCRP, Maruishi and CKDP. Our anticipated operating expenses include contractually committed costs as well as non-contractually committed clinical trial costs for trials that may be delayed or not initiated and other non-committed controllable costs. Under the VFMCRP Agreement, we are eligible to receive regulatory and commercial milestone payments in the aggregate of up to$470.0 million , consisting of up to$30.0 million in regulatory milestones and up to$440.0 million in tiered commercial milestones, all of which are sales-related. We are also eligible to receive tiered double-digit royalty payments based on annual net sales, as defined in the VFMCRP Agreement, of CR845/difelikefalin injection in the Licensed Territories. As ofMarch 31, 2020 , we have not received any milestone payments under the VFMCRP Agreement. 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 CR845/difelikefalin inJapan , if any, and share in any sub-license fees. As ofMarch 31, 2020 , we have received milestone payments of$2.5 million before contractual foreign currency exchange adjustments under the Maruishi Agreement. 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 46
Table of Contents
containing CR845/difelikefalin in
Our ability to earn these payments and their timing is dependent upon the outcome of I.V. and Oral CR845/difelikefalin development activities and, potentially, commercialization. However, our receipt of any further such amounts is uncertain at this time and we may never receive any more of these amounts.
Funding Requirements
Our primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical R&D services and clinical costs. In the past, we have also previously used capital for laboratory and related supplies.
Since inception, we have incurred significant operating and net losses. Our net losses were$28.9 million and$22.0 million for the three months endedMarch 31, 2020 and 2019, respectively. As ofMarch 31, 2020 , we had an accumulated deficit of$429.6 million . We expect to continue to incur significant expenses and operating and net losses in the near future. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, the receipt of additional milestone payments, if any, under our licensing and collaborations with VFMCRP, Maruishi and CKDP, the receipt of payments under any future collaborations and/or licensing agreements we may enter into, and our expenditures on other R&D activities.
We anticipate that our expenses will increase as we:
? continue the development of KORSUVA (CR845/difelikefalin) injection for CKD-aP
in dialysis patients;
? continue the development of Oral KORSUVA (CR845/difelikefalin) for CKD-aP and
other diseases associated with pruritus, such as CLD-aP and AD;
? explore the potential to further develop I.V. CR845/difelikefalin in the
post-operative setting;
? conduct R&D of any potential future product candidates;
? seek regulatory approvals for I.V. CR845/difelikefalin and any product
candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure and scale up
? external manufacturing capabilities to commercialize any products for which we
may obtain regulatory approval;
? maintain, expand and protect our global intellectual property portfolio;
? hire additional clinical, quality control and scientific personnel; and
add operational, financial and management information systems and personnel,
? including personnel to support our drug development and potential future
commercialization efforts.
The successful development of any of our product candidates 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 I.V. CR845/difelikefalin, Oral CR845/difelikefalin or our other current and future programs. We are also unable to predict when, if ever, we will generate any further material net cash inflows from CR845/difelikefalin. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:
? successful enrollment in, and completion of clinical trials;
47
Table of Contents
? receipt of marketing approvals from applicable regulatory authorities;
? establishing commercial manufacturing capabilities or making arrangements with
third-party manufacturers;
? obtaining and maintaining patent and trade secret protection and regulatory
exclusivity for our product candidates;
? launching commercial sales of the products, if and when approved, whether alone
or in collaboration with others;
? achieving meaningful penetration in the markets which we seek to serve; and
obtaining adequate coverage or reimbursement by third parties, such as
? commercial payers and government healthcare programs, including Medicare and
Medicaid.
A change in the outcome of any of these variables with respect to the development of I.V. CR845/difelikefalin, Oral CR845/difelikefalin or any of our 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 the recent COVID-19 pandemic, introducing additional uncertainty. Because our product candidates are still in clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of all our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements, including our existing licensing and collaboration agreements with VFMCRP, Maruishi and CKDP. We will require additional capital beyond our current balances of cash and cash equivalents and available-for-sale marketable securities and anticipated amounts as described above, and this additional capital may not be available when needed, on reasonable terms, or at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic. In particular, because we do not have sufficient financial resources to meet all of our development objectives, especially the completion of our planned development of I.V. and Oral CR845/difelikefalin for the treatment of pruritus, we will need to raise additional capital. If we are not able to do so, we could be required to postpone, scale back or eliminate some, or all, of these objectives. 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 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. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Outlook
Based on timing expectations and projected costs for our current clinical development plans, which include completing our Phase 3 trials of KORSUVA (CR845/difelikefalin) injection in hemodialysis patients suffering from moderate-to-severe CKD-aP to enable the submission of a new drug application, conducting supportive Phase 1 trials and Phase 2 trials of Oral KORSUVA (CR845/difelikefalin) in patients with pruritus associated with CKD, CLD and AD, we expect that our existing cash and cash equivalents and available-for-sale marketable securities as ofMarch 31, 2020 will be sufficient for us to fund our currently anticipated operating expenses and capital expenditures into the 48
Table of Contents
second half of 2021, without giving effect to any potential milestone payments we may receive under our collaboration agreements with VFMCRP, Maruishi and CKDP. Our anticipated operating expenses include contractually committed costs as well as non-contractually committed clinical trial costs for trials that may be delayed or not initiated and other non-committed controllable costs. Because the process of testing product candidates in clinical trials is costly and the timing of progress in these trials is uncertain, 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.
Cash Flows
The following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities for the three months endedMarch 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 Dollar amounts in thousands Net cash used in operating activities$ (38,303) $ (27,526) Net cash provided by investing activities 36,959 26,399 Net cash provided by financing activities 75 234
Net decrease in cash, cash equivalents and restricted cash
Net cash used in operating activities
Net cash used in operating activities for the three months endedMarch 31, 2020 consisted primarily of a net loss of$28.9 million , a$5.0 million cash outflow from net non-cash charges and a$4.3 million cash outflow from net changes in operating assets and liabilities. Net non-cash charges primarily consisted of a decrease of$8.0 million in deferred revenue associated with our VFMCRP Agreement, partially offset by stock-based compensation expense of$2.8 million . The change in operating assets and liabilities primarily consisted of a cash outflow of$2.3 million from a decrease in accounts payable and accrued expenses and a cash outflow of$1.8 million from an increase in prepaid expenses, primarily related to an increase in prepaid clinical costs. Net cash used in operating activities for the three months endedMarch 31, 2019 consisted primarily of a net loss of$22.0 million , a$3.3 million cash outflow from net changes in operating assets and liabilities and a$2.3 million cash outflow from net non-cash charges. The net change in operating assets and liabilities primarily consisted of a cash outflow of$2.6 million from an increase in prepaid expense, primarily related to an increase in prepaid clinical costs, a cash outflow of$0.3 million from a decrease in accounts payable and accrued expenses, and a cash outflow of$0.2 million from operating lease liability relating to lease payments made for the Stamford Lease as a result of our adoption of ASC 842: Leases. Net non-cash charges primarily consisted of a decrease of$4.2 million in deferred revenue associated with our VFMCRP Agreement and$0.5 million related to accretion of available-for-sale securities, partially offset by stock-based compensation expense of$2.2 million .
Net cash provided by investing activities
Net cash provided by investing activities was$37.0 million for the three months endedMarch 31, 2020 , which primarily included cash inflows of$58.0 million from maturities and redemptions of available-for-sale marketable securities, partially offset by cash outflows of$21.0 million for the purchases of available-for-sale marketable securities. Net cash provided by investing activities was$26.4 million for the three months endedMarch 31, 2019 , which primarily included cash inflows of$79.3 million from maturities of available-for-sale marketable securities, partially offset by cash outflows of$52.9 million for the purchase of available-for-sale marketable securities. 49 Table of Contents
Net cash provided by financing activities
Net cash provided by financing activities for the three months ended
Significant Contractual Obligations and Commitments
Contractual obligations and commitments as ofMarch 31, 2020 consisted of an operating lease obligation in connection with our operating facility inStamford, Connecticut , the Enteris License Agreement we entered into inAugust 2019 , and the MSA we entered into with Patheon inJuly 2019 . However, we have no material non-cancelable purchase commitments with these contract manufacturers or service providers, as we have generally contracted on a cancelable purchase order basis. Furthermore, milestone payments potentially owed by us in connection with the Enteris License Agreement relate to milestone events that may or may not be achieved.
See Note 15 of Notes to Condensed Financial Statements, Commitments and Contingencies, in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 2 of Notes to Condensed Financial Statements, Basis of Presentation, in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We did not have during the periods presented in our condensed financial
statements included in this report, and we do not currently have, any
off-balance sheet arrangements, as defined under
Discussion of Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires us to use judgment in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in our condensed financial statements and accompanying notes. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require difficult, subjective and complex judgments by management in order to make estimates about the effect of matters that are inherently uncertain. During the three months endedMarch 31, 2020 , there were no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year endedDecember 31, 2019 .
© Edgar Online, source
