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 "aim," "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 Oral KORSUVA
? (CR845/difelikefalin) in CKD-aP, chronic liver disease associated pruritus, or
CLD-aP, pruritus associated with atopic dermatitis, or AD, and pruritus
associated with notalgia paresthetica, or NP;
? 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, AD, and NP 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
? 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; 31 Table of Contents the performance of our current and future collaborators and licensees,
including
? (International) Ltd., or Vifor,
and Chong Kun Dang Pharmaceutical Corp., 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 ongoing COVID-19 pandemic on our business,
operations and clinical development and regulatory timelines and plans.
You should refer to the "Risk Factors" section of our Annual Report on Form 10-K for the year endedDecember 31, 2020 for a discussion of material factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this 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
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Overview
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, and Vifor to commercialize KORSUVA (CR845/difelikefalin) injection in dialysis patients with CKD-aP in theU.S. under profit share agreements. We have partnered with VFMCRP to commercialize KORSUVA worldwide, excludingJapan (Maruishi/sub-licensee Kissei), andSouth Korea (CKDP). 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 agreements with VFMCRP and Vifor forU.S. and certain ex-U.S. territories inJapan (Maruishi/sub-licensee Kissei) andSouth Korea (CKDP). TheU.S. Food and Drug Administration , or FDA, has conditionally accepted KORSUVA as the trade name for CR845/difelikefalin injection. InDecember 2020 , we submitted a New Drug Application, or NDA, to the FDA for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe pruritus in hemodialysis patients. InFebruary 2021 , the FDA accepted the NDA for filing, and inMarch 2021 , the FDA granted Priority Review for the NDA with a Prescription Drug User Fee Act, or PDUFA, target action date ofAugust 23, 2021 . KORSUVA's safety and efficacy have not been fully evaluated by any regulatory authority. 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.
Recent Developments
COVID-19 Update
The extent of the impact of the ongoing 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,
subsequent waves and variances 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. The COVID-19 pandemic has affected
the initiation of certain trial sites and patient enrollment for certain of our
clinical trials, including our ongoing Phase 2 clinical trials of Oral KORSUVA
(CR845/difelikefalin) for NP and for the treatment of pruritus in patients with
hepatic impairment due to primary biliary cholangitis, or PBC, and the pandemic
may continue to affect these and other planned future trials. While we currently
do not expect any significant delays in our clinical development or commercial
timelines, the ultimate impact of the evolving COVID-19 pandemic remains
difficult to predict.
To the extent possible, we are conducting business as usual, with necessary or
advisable modifications to employee travel and employee work locations. We are
continuing 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
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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. The extent to which the ongoing and evolving 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.
FDA Acceptance and Priority Review of NDA Filing
InFebruary 2021 , the FDA accepted our NDA submitted inDecember 2020 for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe pruritus in hemodialysis patients. InMarch 2021 , the FDA granted Priority Review for the NDA. The PDUFA target action date for KORSUVA (CR845/difelikefalin) injection isAugust 23, 2021 . The FDA stated that currently it is not planning to hold an advisory committee meeting to discuss the application.
Marketing Authorization Application Submission
Our partner, VFMCRP, submitted a Marketing Authorization Application, or MAA, to theEuropean Medicines Agency , or EMA, inMarch 2021 , which was accepted for review by the EMA. If approved, KORSUVA (CR845/difelikefalin) injection would receive marketing authorization in all member states of theEuropean Union , or EU, as well as inIceland ,Liechtenstein , andNorway . The EMA's decision on the EU MAA is expected in the second quarter of 2022.
Overview of Our Product Candidates
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 systematic conditions such as CKD and CLD, dermatological conditions such as AD, and neurological conditions such as NP, 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
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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.
Our current product candidate pipeline is summarized in the table below:
Program Product Candidate Primary Indication Status Commercialization Rights
Pruritus KORSUVA Pruritus CKD - • NDA accepted by FDA in VFMCRP/Vifor (United
(CR845/difelikefalin) Hemodialysis February 2021and Priority States); Maruishi
Injection Review granted in March (Japan); CKDP (South
2021; PDUFA target action Korea); VFMCRP
date - August 23, 2021 (Worldwide, other than
• EMA MAA accepted in United States, Japan and
March 2021 South Korea)
• Phase 3 safety/efficacy
trials complete
Oral KORSUVA Pruritus NDD - CKD • Phase 2 trial completed; Cara (Worldwide, other
(CR845/difelikefalin) top-line data reported than Japan and South
Korea); Maruishi
(Japan); CKDP (South
Korea)
Oral KORSUVA Pruritus Atopic • Phase 2trial completed; Cara (Worldwide, other
(CR845/difelikefalin) Dermatitis (AD) top-line data reported than South Korea); CKDP
(South Korea)
Oral KORSUVA Pruritus CLD - • Phase 2efficacy trial Cara (Worldwide, other
(CR845/difelikefalin) Primary Biliary ongoing than South Korea); CKDP
Cholangitis (PBC) (South Korea)
Oral KORSUVA Notalgia • KOMFORTPhase 2 efficacy Cara (Worldwide, other
(CR845/difelikefalin) Paresthetica (NP) trial ongoing than South Korea); CKDP
(South Korea)
Post-Op CR845/difelikefalin Acute • Adaptive Phase 2/3 trial Cara (Worldwide, other
Setting Injection Post-Operative completed;
top-line data than
Pain/PONV 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 submitted an NDA to the FDA for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe pruritus in hemodialysis patients inDecember 2020 . InFebruary 2021 , the FDA accepted the NDA for filing, and inMarch 2021 , the FDA granted Priority Review for our NDA. The PDUFA target action date for KORSUVA (CR845/difelikefalin) injection isAugust 23, 2021 . Our partner, VFMCRP, submitted a MAA to the EMA inMarch 2021 , which was accepted for review by the EMA. If approved, KORSUVA (CR845/difelikefalin) injection would receive marketing authorization in all member states of the EU, as well as inIceland ,Liechtenstein , andNorway . The EMA's decision on the EU MAA is expected in the second quarter of 2022. 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. The open label extension phase of this trial is also complete. 35
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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 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). 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. The open label extension phase of this trial is also complete. 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).
Oral KORSUVA (CR845/Difelikefalin) for Treatment of Non-Dialysis Dependent (NDD) 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 NDD-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 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 36 Table of Contents 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). InApril 2021 , we held an End of Phase 2 Meeting with the FDA to discuss the results of the Phase 2 trial of Oral KORSUVA (CR845/difelikefalin) in NDD CKD-aP and the potential Phase 3 program. The FDA indicated the acceptability of Stage 5 pre-dialysis CKD patients as a viable patient population for a Phase 3 trial. The FDA also indicated the potential to use data from our previous trials of KORSUVA (CR845/difelikefalin) Injection in dialysis patients to support an approval based on a single Phase 3 clinical trial of Oral KORSUVA (CR845/difelikefalin) in the Stage 5 pre-dialysis population. We currently plan to initiate our Phase 3 program by year-end 2021. We also intend to continue discussions with the FDA on the potential inclusion of earlier stage CKD patients in the Phase 3 program.
Oral KORSUVA (CR845/difelikefalin) for Treatment of Moderate-to-Severe Pruritus Associated with Atopic Dermatitis (AD)
InApril 2021 , we announced top-line data from our Phase 2 KARE clinical trial. The KARE Phase 2 trial was a randomized, double-blind, placebo-controlled study designed to evaluate the efficacy and safety of Oral KORSUVA (CR845/difelikefalin) for moderate-to-severe pruritus in 401 adult subjects with AD. Patients were stratified across treatment groups by disease severity. KARE enrolled 64% of patients characterized as mild-to-moderate (BSA<10%) and 36% falling into the moderate-to-severe category (BSA>10%). Subjects were randomized to three tablet strengths of Oral KORSUVA (CR845/difelikefalin): 0.25 mg, 0.5 mg and 1 mg taken twice daily (BID) versus placebo for 12 weeks followed by 4 weeks of an active extension phase. A prespecified interim conditional power assessment was conducted after approximately 50% of the originally targeted patient number completed the designated 12-week treatment period. Based on the Independent Data Monitoring Committee's recommendation, the sample size for each of the 0.5 mg dose and placebo groups were increased by approximately 60%. KARE's primary efficacy endpoint was change from baseline in the weekly mean of the daily 24-hour Itch NRS score at week 12 of the treatment period for the intent to treat, or ITT, population. Although no dose group met this endpoint, a statistically significant improvement from baseline was evident as early as week 1 for the 1.0 mg dose group, which was sustained through 75% of the treatment period.
In a prespecified analysis, a statistically significant change in the primary efficacy endpoint was observed in the mild-to-moderate (BSA<10%) patient population (p=0.036, All doses vs placebo), which was evident at week 1 and sustained through the treatment period.
The key secondary endpoint for KARE was the assessment of the proportion of patients achieving an improvement from baseline of ?4 points with respect to the weekly mean of the daily 24-hour Itch NRS score at week 12 (4-point Responder Analysis). No dose group met this endpoint for the ITT population. Prespecified analysis by disease severity indicated a statistically significant improvement in the 4-point Responder Analysis in the mild-to-moderate (BSA<10%) patient population with 32% of KORSUVA-treated patients achieving a ?4 point reduction in NRS at Week 12 versus 19% in the placebo group (p=0.033, All doses vs placebo). A statistically significant improvement was also achieved for the 0.5 mg dose (p=0.046, 0.5 mg vs placebo).
Oral KORSUVA (CR845/difelikefalin) was generally well-tolerated across all doses. Overall, the incidence of treatment-emergent AEs was generally similar across Oral KORSUVA (CR845/difelikefalin) and placebo groups.
We intend to request an End of Phase 2 Meeting with the FDA to be held in the
second half of 2021 and, subject to discussions with the FDA, aim to initiate a
Phase 3 program by the end of the year.
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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 the second half of 2021. 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 Notalgia Paresthetica (NP)
InJanuary 2021 , 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 120 adult subjects with NP. Subjects will be randomized to receive Oral KORSUVA (CR845/difelikefalin) 2.0 mg twice daily versus placebo for eight weeks followed by a 4-week active extension period and follow up visit approximately 14 days after the last dose of the study. The primary efficacy endpoint is the change from baseline in the weekly mean of the daily 24-hour worst itching NRS score at week 8 of the treatment period. Secondary endpoints include improvement in itch-related quality of life assessed by the change from baseline to Week 8 and a change from baseline in itch-related sleep disturbance subscale measured by the itch medical outcomes study at week 8.
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 38
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(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.
We have completed an advisory meeting with the FDA regarding the potential regulatory path forward for PONV and we are currently evaluating potential next steps.
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.
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
InOctober 2020 , we entered into a license agreement, or the Vifor Agreement, with Vifor under which we granted Vifor an exclusive license solely inthe United States to use, distribute, offer for sale, promote, sell and otherwise commercialize KORSUVA (CR845/difelikefalin) injection for all therapeutic uses relating to the inhibition, prevention 39
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or treatment of itch associated with pruritus in hemodialysis and peritoneal dialysis patients inthe United States . Under the Vifor Agreement, we retain all rights with respect to the clinical development of, and activities to gain regulatory approvals of, KORSUVA (CR845/difelikefalin) injection inthe United States . Under the terms of the Vifor Agreement, we received from Vifor an upfront payment of$100.0 million and an additional payment of$50.0 million for the purchase of an aggregate of 2,939,552 shares of our common stock at a price of$17.0094 per share, which represents a premium over a pre-determined average closing price of our common stock. UponU.S. regulatory approval of KORSUVA (CR845/difelikefalin) injection, we will also be eligible to receive an additional$50.0 million common stock investment at a 20% premium to the 30-day trailing average price of our common stock as of such date. In addition, pursuant to the Vifor Agreement, we are eligible to receive payments of up to$240.0 million upon the achievement of certain sales-based milestones. The Vifor Agreement provides full commercialization rights in dialysis clinics to Vifor inthe United States under a profit-sharing arrangement. Pursuant to the profit-sharing arrangement, we will generally be entitled to 60% of the net profits (as defined in the Vifor Agreement) from sales of KORSUVA (CR845/difelikefalin) injection inthe United States (excluding sales toFresenius Medical Center dialysis clinics, compensation for which is governed by the VFMCRP Agreement) and Vifor is entitled to 40% of such net profits, subject to potential temporary adjustment in future years based on certain conditions. Under the Vifor Agreement, in consideration of Vifor's conduct of the marketing, promotion, selling and distribution of KORSUVA (CR845/difelikefalin) injection inthe United States , we will pay a marketing and distribution fee to Vifor based on the level of annual net sales. This fee will be deducted from product sales in calculating the net profits that are subject to the profit-sharing arrangement under the Vifor Agreement.
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. Upon entry into the VFMCRP Agreement, VFMCRP made a non-refundable, non-creditable$50.0 million upfront payment to us and Vifor purchased 1,174,827 shares of our common stock for$20.0 million , at a premium for the price of$17.024 per share. We are eligible to receive from VFMCRP 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, 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 40 Table of Contents
approval for and commercialize CR845/difelikefalin in
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). InJanuary 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 inJapan . As a result, we recorded a receivable for the milestone payment of$2.0 million ($1.9 million after contractual foreign currency exchange adjustments from Maruishi). As ofMarch 31, 2021 , we have earned$4.5 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 ofone 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. 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 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). As ofMarch 31, 2021 , 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.
Manufacturing and License Agreements
InAugust 2019 , we entered into a license agreement with 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, 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 41
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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. No milestone payments were made to Enteris during the three months endedMarch 31, 2021 and 2020 in relation to the Enteris License Agreement. Based on a successful End of Phase 2 Meeting with the FDA inApril 2021 , we expect to pay a$10.0 million milestone to Enteris during the second quarter of 2021. 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 InJuly 2019 , we entered into an MSA with 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. The MSA has an initial term endingDecember 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 inJuly 2019 , we entered into two related Product Agreements under the MSA, one with each ofPatheon and Patheon Manufacturing Services LLC , or PatheonGreenville , 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 andGreenville, 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. Substantially all of our revenue recognized to date has consisted of upfront payments under license agreements with Vifor, 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. ThroughMarch 31, 2021 , we have earned a total of$8.6 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 Vifor or VFMCRP agreements 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.
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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 2021 will be consistent with 2020. 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.
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, or IT,
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 2021 will be
consistent with 2020 to support our continued R&D activities and for 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 Oral
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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. Because our revenue in 2020 exceeded$70.0 million , we are not eligible to exchange our 2021 R&D tax credit for cash, therefore there was no benefit from income taxes for the three months endedMarch 31, 2021 .
Results of Operations
Comparison of the Three Months Ended
Revenue
Three Months Ended
March 31,
2021 2020 % change
Dollar amounts in thousands
License and milestone fees $ 1,192 $ 8,021 -85%
Collaborative revenue 706 - N/A
Clinical compound revenue 37 72 -49%
Total revenue $ 1,935 $ 8,093 -76%
License and milestone fees revenue
License and milestone fees revenue of$1.2 million for the three months endedMarch 31, 2021 was related to the milestone payment we earned from Maruishi's first initiation of a Phase 3 trial for uremic pruritus inJapan that was allocated to the license fee performance obligation under the Maruishi Agreement (see Notes 10 and 11 of Notes to Condensed Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Quarterly Report on Form 10-Q). License and milestone fees revenue of$8.0 million for the three months endedMarch 31, 2020 was related to license fees earned by us in connection with the VFMCRP Agreement (see Notes 10 and 11 of Notes to Condensed Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Quarterly Report on Form 10-Q).
Collaborative Revenue
Collaborative revenue of$0.7 million for the three months endedMarch 31, 2021 was related to the milestone payment we earned from Maruishi's first initiation of a Phase 3 trial for uremic pruritus inJapan that was allocated to the R&D services performance obligation under the Maruishi Agreement (see Notes 10 and 11 of Notes to Condensed Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Quarterly Report on Form 10-Q). There was no collaborative revenue for the three months endedMarch 31, 2020 . 44 Table of Contents Clinical compound revenue
Clinical compound revenue of
Research and Development Expense
Three Months Ended
March 31,
2021 2020 % change
Dollar amounts in thousands
Direct clinical trial costs $ 10,000 $ 25,738 -61%Consultant services in support of clinical trials 1,170 1,275 -8% Stock-based compensation 2,158 1,623 33% Depreciation and amortization 31 27 16% Other R&D operating expenses 5,772
4,873 18%
Total R&D expense $ 19,131 $ 33,536 -43%
For the three months ended March 31, 2021 compared to the three months ended
March 31, 2020 , the net decrease in direct clinical trial costs and related
consultant costs primarily resulted from decreases totaling $19.8 million ,
mainly from activities related to the KALM-2 Phase 3 efficacy trial of KORSUVA
(CR845/difelikefalin) injection in CKD patients undergoing hemodialysis, the
Phase 3 (up to 12 weeks) safety trial of KORSUVA (CR845/difelikefalin) injection
in CKD patients undergoing hemodialysis, 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
for pruritus associated with AD, the Phase 2 efficacy trial of Oral CR845 in
CKD-aP patients, costs associated with supportive Phase 1 studies, and costs
associated with preparing for our NDA submission. These decreases were partially
offset by an increase of $2.5 million , mainly from the Phase 2 efficacy and
safety trial for pruritus associated with NP, and start-up costs related to Oral
CKD Phase 3 programs in non-hemodialysis patients. There was also an increase of
$1.5 million in clinical and commercial drug manufacturing costs. The increase
in stock-based compensation expense was primarily related to the vesting of
performance-based restricted stock units, for which performance conditions were
achieved in 2021 as compared to 2020. The increase in other R&D operating
expenses primarily resulted from increases in payroll and related costs,
partially offset by decreases in travel and related costs.
The following table summarizes our R&D expenses by programs for the three months
ended
Three Months Ended
March 31,
2021 2020 % change
Dollar amounts in thousands
External research and development expenses:
I.V. CR845 - Pruritus $ 2,995 $ 18,990 -84%
I.V. CR845 - Pain 12 31 -62%
Oral CR845 - Pruritus 8,070 7,971 1%
Oral CR845 - Pain 4 10 -64%Internal research and development expenses 8,050 6,534 23% Total research and development expenses $ 19,131 $
33,536 -43%
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General and Administrative Expenses
Three Months Ended
March 31,
2021 2020 % change
Dollar amounts in thousandsProfessional fees and public/investor relations $ 877 $
1,131 -22%
Stock-based compensation 1,974 1,223 61%
Depreciation and amortization 31 21 48%
Other G&A operating expenses 3,483 2,183 60%
Total G&A expense $ 6,365 $ 4,558 40%
For the three months ended March 31, 2021 compared to the three months ended
March 31, 2020 , the decrease in professional fees and public/investor relations
expenses was primarily the result of a decrease in consultants' costs. The
increase in stock-based compensation expense was primarily the result of
additional stock option grants and the vesting of performance-based restricted
stock units, for which performance conditions were achieved in 2021 as compared
to 2020, partially offset by forfeitures during the period. The increase in
other G&A operating expenses was primarily the result of increases in payroll
and related costs, commercial costs, insurance costs and IT related costs.
Other Income, Net
Three Months Ended
March 31,
2021 2020 % change
Dollar amounts in thousandsOther income, net $ 260$ 957 -73% For the three months endedMarch 31, 2021 compared to the three months endedMarch 31, 2020 , the decrease in other income, net was primarily due to a decrease in interest income and a decrease in net accretion income resulting from a lower yield on our higher average balance of our portfolio of investments in the 2021 period. Benefit from Income Taxes For the three months endedMarch 31, 2021 and 2020, pre-tax losses were$23.3 million and$29.0 million , respectively, and we recognized a benefit from income taxes of$122 thousand for the three months endedMarch 31, 2020 . Because our revenue in 2020 exceeded$70.0 million , we are not eligible to exchange our 2021 R&D tax credit for cash, therefore there was no benefit from income taxes for the three months endedMarch 31, 2021 . 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, 2021 andDecember 31, 2020 .
Liquidity and Capital Resources
Sources of Liquidity
Since our inception and throughMarch 31, 2021 , we have raised an aggregate of approximately$776.4 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$203.8 million under our license agreements, primarily with Vifor, VFMCRP, Maruishi, CKDP and an earlier product candidate for which development efforts ceased in 2007; and (4) net proceeds of$53.0 million from the purchase of our common stock in relation to the license agreements with Vifor and VFMCRP (see Note 10 of Notes to Condensed Financial Statements, Collaboration and Licensing Agreements, in this Quarterly Report on Form 10-Q). 46
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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, 2021 , we had$228.3 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 2023, without giving effect to any potential milestone payments or potential product revenue we may receive under our licensing and collaboration agreements with Vifor, 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 Vifor Agreement, we are eligible to receive regulatory and commercial milestone payments in the aggregate of up to$290.0 million , consisting of a$50.0 million common stock investment for a regulatory milestone and up to$240.0 million upon the achievement of certain sales-based milestones. As ofMarch 31, 2021 , we have not received any milestone payments under the Vifor Agreement. 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, 2021 , 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. InJanuary 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 inJapan . As a result, we recorded a receivable for the milestone payment of$2.0 million ($1.9 million after contractual foreign currency exchange adjustments from Maruishi). As ofMarch 31, 2021 , we have earned$4.5 million (before contractual foreign currency exchange adjustments) of clinical development and regulatory milestones from Maruishi. 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 CR845/difelikefalin inSouth Korea , if any, and share in any sub-license fees. As ofMarch 31, 2021 , we have received$2.3 million (before South Korean withholding tax) of development and regulatory milestones from CKDP.
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.
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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$23.3 million and$28.9 million for the three months endedMarch 31, 2021 and 2020, respectively. As ofMarch 31, 2021 , we had an accumulated deficit of$415.6 million . Although we generated net income for the year endedDecember 31, 2020 as a result of a commercial license transaction, we expect to continue to incur significant expenses and operating and net losses in the foreseeable future, as we continue to develop and seek marketing approval for I.V. and Oral CR845/difelikefalin. Our financial results 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 Vifor, 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;
? receipt of marketing approvals from applicable regulatory authorities;
? establishing commercial manufacturing capabilities or making arrangements with
third-party manufacturers;
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? 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 ongoing 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 Vifor, 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. 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 conducting supportive Phase 1 trials, Phase 2 trials, and Phase 3 trials of Oral KORSUVA (CR845/difelikefalin) in patients with pruritus associated with CKD, CLD, AD, and NP, we expect that our existing cash and cash equivalents and available-for-sale marketable securities as ofMarch 31, 2021 will be sufficient for us to fund our currently anticipated operating expenses and capital expenditures into 2023, without giving effect to any potential milestone payments or potential product revenue we may receive under our collaboration agreements with Vifor, 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. 49 Table of Contents 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, 2021 and 2020: Three Months EndedMarch 31, 2021 March 31, 2020 Dollar amounts in thousands
Net cash used in operating activities$ (23,721) $ (38,303) Net cash provided by investing activities 13,869
36,959
Net cash provided by financing activities 688 75 Net decrease in cash, cash equivalents and restricted cash$ (9,164) $ (1,269)
Net cash used in operating activities
Net cash used in operating activities for the three months endedMarch 31, 2021 consisted primarily of a net loss of$23.3 million and a$5.0 million cash outflow from net changes in operating assets and liabilities, partially offset by a$4.6 million cash inflow from net non-cash charges. The change in operating assets and liabilities primarily consisted of a cash outflow of$2.0 million from a decrease in accounts payable and accrued expenses, a cash outflow of$1.7 million from an increase in Other receivables due to the milestone payment we earned from Maruishi during the three months endedMarch 31, 2021 , a cash outflow of$0.9 million from an increase in prepaid expenses, primarily related to an increase in prepaid clinical costs, and a cash outflow of$0.4 million relating to operating lease liabilities associated with our lease agreements for our operating facility inStamford, Connecticut , or theStamford operating leases. Net non-cash charges primarily consisted of stock-based compensation expense of$4.1 million and the amortization expense component of lease expense of$0.3 million relating to ourStamford operating leases. 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 provided by investing activities
Net cash provided by investing activities was$13.9 million for the three months endedMarch 31, 2021 , which primarily included cash inflows of$29.8 million from maturities and redemptions of available-for-sale marketable securities and proceeds of$8.0 million from the sales of available-for-sale marketable securities, partially offset by cash outflows of$24.0 million for the purchases of available-for-sale marketable securities. 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 financing activities
Net cash provided by financing activities for the three months ended
Contractual Obligations and Commitments
Contractual obligations and commitments as of
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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 for details about our
contractual obligations and commitments, and Note 6 of Notes to Condensed
Financial Statements, Restricted Cash, in this Quarterly Report on Form 10-Q for
details about our letter of credit associated with our
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
Our management's discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed balance sheets and the reported amounts of revenues and expenses during the reporting periods. 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 condensed financial statements prospectively from the date of the change in estimate. We define our critical accounting policies as those accounting principles generally accepted inthe United States that require us to make 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 those principles. During the three months endedMarch 31, 2021 , 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, 2020 .
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