Tvardi Therapeutics, Inc.: Form 10-Q for the period ended Mar 31, 2024

In this Quarterly Report on Form 10-Q, the terms “we,” “us” and “our” refer to Cara Therapeutics, Inc. Also, in this Quarterly Report, unless the context otherwise requires, we use the term “CSL Vifor” to refer to CSL Vifor and its affiliated entities, including where applicable, the joint venture between CSL Vifor and Fresenius Medical Care with which we are a party to two collaborations for the commercialization of KORSUVA (difelikefalin) injection.

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,” “seek,” “should,” “will,” or “would,” and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this 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:

• our plans to develop and commercialize oral difelikefalin for the treatment of pruritus associated with notalgia paresthetica, or NP, and any potential future product candidates;
• our ability to execute on our strategic plans, including efforts to focus our resources on the development of oral difelikefalin for the treatment of chronic pruritus associated with NP and significantly reduce our operating expenses;
• the timing of our clinical trials and reporting of our results from these trials, including our clinical trial programs for oral difelikefalin in chronic pruritus associated with NP;
• the potential results of ongoing and planned preclinical studies and clinical trials and future regulatory and development milestones for our product candidates;
• the performance of third-party manufacturers, clinical research organizations, or CROs, and other vendors;
• the size and growth of the potential markets for pruritus management, including the treatment of chronic pruritus associated with NP;
• the rate and degree of market acceptance of any other future approved indications or products;
• our ability to obtain and maintain additional regulatory approval of our product candidate, and the labeling under any approval we may obtain;
• the anticipated use of Enteris Biopharma, Inc.’s, or Enteris’s, Peptelligence® technology to develop, manufacture and commercialize oral difelikefalin;
• 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 for any approved products;
• regulatory developments in the United States and foreign countries;
• our ability to obtain and maintain coverage and adequate reimbursement from third-party payers and governments for any other future approved indications or 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;
• our ability to maintain proper and effective internal controls, especially due to our high dependence on CSL Vifor for timely and accurate information;
• the success of competing drugs that are or may become available;
• the potential effects of any global health crises, geopolitical tensions and macroeconomic conditions on our business, operations and clinical development and regulatory timelines and plans; and
• the performance of our current and future collaborators and licensees, including CSL Vifor, Maruishi Pharmaceuticals Co. Ltd., or Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, as well as sub-licensees, including Winhealth Pharma and Kissei Pharmaceutical Co. Ltd., or Kissei, and our ability to maintain such collaborations.

You should refer to the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023, or the Annual Report, 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 Consolidated Financial Statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) our Annual Report.

Overview

Introduction

We are a development-stage biopharmaceutical company driving innovation in sizable, yet underserved diseases and conditions. Specifically, we are focused on leading a new treatment paradigm to improve the lives of patients suffering from chronic pruritus. We are developing an oral formulation of difelikefalin, a selective, predominantly peripherally acting, non-scheduled Kappa opioid receptor agonist, for the treatment of chronic neuropathic pruritus associated with NP, a common, underdiagnosed neuropathy affecting the upper back. We are conducting a Phase 2/3 program with topline results of the dose-finding portion expected by the end of the second quarter of 2024. We also developed an IV formulation of the same molecule, which is approved for the treatment of moderate-to-severe pruritus associated with advanced chronic kidney disease in adults undergoing hemodialysis in the United States, the European Union, or EU, and multiple other countries. The IV formulation is out-licensed worldwide.

Corporate History

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

NASDAQ Notice

On February 1, 2024, we received a letter from The Nasdaq Stock Market, or Nasdaq, notifying us that, for the previous 30 consecutive business day periods prior to the date of the letter, the closing bid price for our common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) we were provided an initial period of 180 calendar days, or until July 30, 2024, to regain compliance with Nasdaq’s bid price requirement. If, at any time before July 30, 2024, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive business days, we would regain compliance with the bid price requirement, unless Nasdaq staff exercised its discretion to extend this 10-day period pursuant to Nasdaq rules. In the event we do not regain compliance with the minimum bid price requirement by July 30, 2024, we may be eligible for an additional 180-calendar day compliance period if we elect to transfer to The Nasdaq Capital Market to take advantage of the additional compliance period offered on that market. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of our intention to cure the bid price deficiency during the second compliance period. Our failure to regain compliance during this period could result in delisting.

Our board of directors approved and has recommended for stockholder approval at our 2024 Annual Meeting of Stockholders a series of alternate amendments to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our common stock and corresponding proportionate reduction in the total number of authorized shares of our common stock, where the board of directors will have the discretion to select the reverse stock split ratio from within a range between and including one-for-four and one-for-twelve. Such reverse stock split and corresponding reduction in authorized shares of common stock, and the reverse stock split ratio, will be at the sole discretion of the board of directors at any time prior to our 2025 Annual Meeting of Stockholders.

Our Product Portfolio

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

Oral Difelikefalin, Our Development Stage Product Candidate

Oral Difelikefalin for Treatment of Moderate-to-Severe Pruritus Associated with Notalgia Paresthetica (NP)

In June 2022, we announced positive top-line results from the proof-of-concept Phase 2 KOMFORT trial of oral difelikefalin for the treatment of pruritus in patients with NP.

KOMFORT was a Phase 2 randomized, double-blind, placebo-controlled trial designed to evaluate the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in 125 adult patients with NP and moderate-to-severe pruritus. Patients were randomized to receive oral difelikefalin 2 mg twice daily (BID) or matching placebo for eight weeks followed by a 4-week open-label active extension period and follow-up visit approximately 14 days after the last dose of the study drug.

KOMFORT’s primary efficacy endpoint was the change from baseline in the weekly mean of the daily 24-hour worst itch numerical rating scale, or NRS, score at week 8 of the treatment period. Patients treated with oral difelikefalin achieved the primary endpoint (-4.0 difelikefalin vs. -2.4 placebo, p=0.001) with statistically significant improvement observed as early as Day 1 and sustained through Week 8.

Other endpoints included a ≥4-point improvement in worst itch NRS, complete response in worst itch NRS, and safety assessments. A statistically significantly greater proportion of patients treated with oral difelikefalin achieved a ≥4-point improvement in worst itch NRS score at Week 8 vs. placebo (41% difelikefalin vs. 18% placebo, p=0.007). In addition, oral difelikefalin met the complete response endpoint, defined as a worst itch NRS score of 0 or 1 for 70% of the daily non-missing worst itch NRS scores for the week. At Week 8, a significantly greater proportion of patients receiving oral difelikefalin vs. placebo achieved a complete response (22% difelikefalin vs. 5% placebo, p<0.01).

Oral difelikefalin was generally well tolerated, with all adverse events, or AEs, in difelikefalin-treated patients reported as mild or moderate in severity. Nausea, headache, dizziness, constipation, and increased urine output were more commonly reported in patients on difelikefalin.

In November 2022, we had a positive interaction with the FDA leading to the initiation of a Phase 2/3 program for the treatment of chronic pruritus associated with NP. In February 2023, the results of our KOMFORT Phase 2 trial were published in the New England Journal of Medicine.

In the first quarter of 2023, we initiated a Phase 2/3 program for the treatment of moderate-to-severe pruritus in NP. The Phase 2/3 program for difelikefalin in NP will comprise two studies: KOURAGE 1 and KOURAGE 2. The KOURAGE 1 study will be composed of two parts: Part A and Part B.

Part A of KOURAGE 1, the dose finding portion of the study, is a double-blind, placebo-controlled, 8-week study. In the first quarter of 2024, we completed enrollment with 214 patients who were randomized equally to four arms (0.25 mg BID, 1.0 mg BID, 2.0 mg BID, placebo BID). Part A is not powered for statistical significance. We expect to have topline efficacy and safety results from KOURAGE 1 Part A by the end of the second quarter of 2024. This readout will provide key information, specifically the dose and the sample size, to initiate the pivotal Phase 3 portions of the program - Part B of KOURAGE 1 and the second study KOURAGE 2.

Part B of KOURAGE 1 and KOURAGE 2, the pivotal studies, will be identical in design. They will likely be double-blind, placebo-controlled, 8-week studies with patients allowed to roll over into open label 52-week extensions. Patients will be randomized 1:1 to either difelikefalin or matching placebo. The primary endpoint will likely be the proportion of patients with a ≥4-point improvement at Week 8 from baseline in the worst itch NRS.

KOURAGE 1 and KOURAGE 2 will include adult patients with NP who have had chronic pruritus of moderate-to-severe intensity for ≥6 months (worst itch NRS of ≥ 5).

We expect to release final topline results from the first pivotal study KOURAGE 1 Part B by the end of 2025 with the second pivotal study KOURAGE 2 results in early 2026.

KORSUVA (difelikefalin) injection – Our Commercial Stage Product

Overview

We have out-licensed to CSL Vifor the commercialization of KORSUVA injection/Kapruvia in dialysis patients with advanced CKD-aP worldwide, excluding Japan (licensed to Maruishi/sub-licensee Kissei), and South Korea (licensed to CKDP).

On August 23, 2021, KORSUVA injection was approved by the FDA for the treatment of moderate-to-severe pruritus associated with advanced CKD in adults undergoing hemodialysis. In December 2021, Centers for Medicare & Medicaid Services, or CMS, granted Transition Drug Add-on Payment Adjustment, or TDAPA, to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022 for two years. The commercial launch of KORSUVA injection commenced in April 2022 and we began recording the associated profit-sharing revenues in the second quarter of 2022. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on payment as proposed in the draft CY 2024 rule. Under the final rule, TDAPA drugs in existing functional categories will receive a post-TDAPA add-on payment set at 65 percent of the total trailing 12-months expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA add-on payment will be applied to all End Stage Renal Disease, or ESRD, Prospective Payment System, or PPS, payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection commenced on April 1, 2024. The unfavorable CMS reimbursement codified in the final CY2024 rule has resulted in a lack of sequential revenues growth for KORSUVA injection since its launch. For the three months ended March 31, 2024 and 2023, CSL Vifor recorded net sales of KORSUVA injection in the United States of approximately $1.8 million and $5.7 million, respectively, and we recorded associated collaborative revenue of $0.8 million and $2.8 million, respectively, which represented our share of the profit from these sales. As a result of the final CY 2024 rule, we expect no meaningful revenue contribution from KORSUVA injection following the TDAPA period expiration.

In April 2022, the European Commission granted a marketing authorization to difelikefalin injection under the brand name Kapruvia for the treatment of moderate-to-severe pruritus associated with advanced CKD in adult hemodialysis patients. The marketing authorization approves Kapruvia for use in all member states of the EU, as well as Iceland, Liechtenstein, and Norway. Difelikefalin injection was also approved in the UK (04/2022) and Switzerland (08/2022) under the brand name Kapruvia as well as Singapore (08/2022), Canada (08/2022), Australia (11/2022), UAE (01/2023), Kuwait (05/2023), Israel (06/2023), Japan (09/2023), and Saudi Arabia (01/2024) under the brand name KORSUVA injection. For the three months ended March 31, 2023, we recorded royalty revenue of approximately $125,000, which represented our royalties on net sales of Kapruvia.

During the fourth quarter of 2023, we entered into a Purchase and Sale Agreement, or the HCR Agreement, with HCRX Investments Holdco, L.P. and Healthcare Royalty Partners IV, L.P., or collectively HCR, pursuant to which HCR will receive current and future royalty and milestone payments for Kapruvia and KORSUVA (ex-U.S. only) up to certain capped amounts in exchange for certain payments made to us. As a result, there was no royalty revenue recorded for the three months ended March 31, 2024. However, we recorded other revenue of approximately $623,000, of which approximately $290,000 related to CSL Vifor royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

We have out-licensed to Maruishi and its sub-licensee Kissei the commercialization of KORSUVA injection in Japan. In September 2023, Maruishi received manufacturing and marketing approval from Japan’s Ministry of Health, Labour and Welfare for KORSUVA IV Injection Syringe for the treatment of pruritus in hemodialysis patients.

During the fourth quarter of 2023, we entered into the HCR Agreement where we sold our future royalties and milestones for KORSUVA in Japan to HCR. For the three months ended March 31, 2024, we recorded other revenue of approximately $623,000, of which approximately $333,000 related to Maruishi royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below). There was no other revenue recorded for the three months ended March 31, 2023 as the HCR Agreement was not entered into until the fourth quarter of 2023.

As a result of our sales of the royalties and milestones for KORSUVA/Kapruvia, we expect no meaningful revenue contribution from KORSUVA/Kapruvia royalties and milestones in the foreseeable future.

KORSUVA Injection U.S. Commercialization

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

KORSUVA Injection and Kapruvia Revenue and Other Metrics

We generate revenue from our commercial products KORSUVA injection and Kapruvia primarily through our collaboration agreements with CSL Vifor:

• Collaborative revenue from our share of the profit generated by KORSUVA injection sales in the United States. For the three months ended March 31, 2024 and 2023, we recorded collaborative revenue of $0.8 million and $2.8 million, respectively.
• Commercial supply revenue from our sales of commercial product to CSL Vifor, which is subsequently sold to wholesalers. For the three months ended March 31, 2024 and 2023, we recorded commercial supply revenue of $0.6 million and $3.2 million, respectively.
• Royalty revenue in conjunction with the launch of Kapruvia. For the three months ended March 31, 2023, we recorded royalty revenue of approximately $125,000, which represented royalty payments earned by us. We

recorded no royalty revenue in connection with Kapruvia for the three months ended March 31, 2024 as a result of entering the HCR Agreement in the fourth quarter of 2023.

During the fourth quarter of 2023, we entered into the HCR Agreement where we sold our current and future royalties and milestone payments for Kapruvia and KORSUVA injection to HCR. For the three months ended March 31, 2024, we recorded other revenue of approximately $623,000, of which approximately $290,000 related to CSL Vifor royalties and approximately $333,000 related to Maruishi royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

We are also eligible for sales-based or regulatory milestone payments, which could be earned in the future in accordance with certain licensing agreements and would be subject to the HCR Agreement for ex-U.S. milestone payments. For the three months ended March 31, 2024 and 2023, we did not record any sales-based or regulatory milestone revenue.

Additional metrics that we have reported in the past:

• Net sales of KORSUVA injection in the United States. This amount is the net sales amount recorded by CSL Vifor to reflect shipments of KORSUVA injection vials from CSL Vifor to wholesalers. For the three months ended March 31, 2024 and 2023, CSL Vifor recorded net sales of KORSUVA injection in the United States of approximately $1.8 million and $5.7 million, respectively.
• Shipments of KORSUVA injection vials from wholesalers in the United States to the dialysis clinics. 111,720 and 45,720 KORSUVA injection vials were shipped from wholesalers to the dialysis clinics for the three months ended March 31, 2024 and 2023, respectively. Of the vials shipped to the FMC dialysis centers for the three months ended March 31, 2024, a portion was reallocated product by FMC within its network of clinics.

Royalty Purchase and Sale Agreement

During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub LLC, or Cara Royalty Sub, entered into the HCR Agreement, pursuant to which Cara Royalty Sub sold to HCR certain of its rights to receive future royalties and milestone payments, or the Royalties, due and payable to Cara Royalty Sub (as our assignee) under our agreements with Maruishi and CSL Vifor, collectively the Covered License Agreements, in exchange for up to $40.0 million. We have retained all of our rights, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin.

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

The HCR Agreement will automatically expire, and the payment of Royalties to HCR will cease, when HCR has received payments of Royalties equal to two times the aggregate amount of payments made by HCR under the HCR Agreement if achieved on or prior to December 31, 2029, or 2.8 times the aggregate amount of payments made by HCR under the HCR Agreement, if not achieved on or prior to December 31, 2029. In the event of a change of control, Cara Royalty Sub will pay to HCR an amount equal to 2.8 times the aggregate amount of payments made by HCR less the total net amounts paid by Cara Royalty Sub to HCR as of the effective date of control. In certain situations, Cara Royalty Sub would not be obligated to pay the change of control payment to HCR. After the HCR Agreement expires, all rights to receive the Royalties return to Cara Royalty Sub. During the three months ended March 31, 2024, approximately $0.7 million was repaid to HCR under the HCR Agreement.

Collaboration and License Agreements

Agreements with CSL Vifor

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

We received an upfront payment of $100.0 million and an additional payment of $50.0 million for the purchase of an aggregate of 2,939,552 shares of our common stock at a price of $17.0094 per share, which represented a premium over a pre-determined average closing price of our common stock. The U.S. regulatory approval of KORSUVA injection in August 2021 triggered an additional $50.0 million equity purchase by CSL Vifor in October 2021, in which we sold an aggregate of 3,282,391 shares of our common stock at a price of $15.23 per share, which represented a 20% premium to the 30-day trailing average price of our common stock. In addition, pursuant to this agreement, we are eligible to receive payments of up to $240.0 million upon the achievement of certain sales-based milestones. However, based on the limited commercial success of KORSUVA injection, we do not expect to achieve these sales-based milestones.

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

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

Upon entry into this agreement, we received a non-refundable, non-creditable $50.0 million upfront payment for the purchase of an aggregate of 1,174,827 shares of our common stock at a price of $17.024 per share, which represented a premium over a pre-determined average closing price of our common stock.

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

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

Maruishi Pharmaceutical Co., Ltd., or Maruishi

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

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

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

In September 2022, Maruishi submitted a New Drug Application in Japan for approval of difelikefalin injection for the treatment of pruritus in hemodialysis patients. In September 2023, Maruishi received manufacturing and marketing approval from Japan’s Ministry of Health, Labour and Welfare for KORSUVA IV Injection Syringe for the treatment of pruritus in hemodialysis patients. In conjunction with the approval, we earned a $1.4 million milestone payment per the terms of the licensing agreement. In November 2023, we entered into an active pharmaceutical ingredient, or API, supply agreement with Maruishi for difelikefalin.

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

Chong Kun Dang Pharmaceutical Corporation, or CKDP

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

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

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

Manufacturing and License Agreements

Polypeptide Laboratories S.A., or PPL

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

The API Commercial Supply Agreement will continue until the fifth anniversary of the approval by the FDA of the New Drug Application for KORSUVA injection, unless the API Commercial Supply Agreement is earlier terminated, and will automatically be extended for successive five-year periods unless either party gives notice to the other party of its intention to terminate.

Enteris Biopharma, Inc., or Enteris

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

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

We are also obligated, pursuant to the Enteris License Agreement, to pay Enteris (1) milestone payments upon the achievement of certain development, regulatory and commercial milestones and (2) low-single digit royalty percentages on net sales of licensed products, subject to reductions in specified circumstances. Until the second anniversary of the entry into the Enteris License Agreement, we had the right, but not the obligation, to terminate our obligation to pay any royalties under the Royalty Buyout. We did not exercise our Royalty Buyout right and such right expired in August 2021. During the three months ended March 31, 2024 and 2023, no milestone payments or royalties were paid to Enteris by us in relation to the Enteris License Agreement.

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

Either party may terminate the Enteris License Agreement upon written notice if the other party has failed to remedy a material breach within 60 days (or 30 days in the case of a material breach of a payment obligation). Enteris may terminate the Enteris License Agreement upon 30 days’ written notice to us if we or any of our affiliates formally challenge the validity of any licensed patent rights or assists a third party in doing so. We may terminate the Enteris License Agreement for any reason or no reason (a) prior to receipt of first regulatory approval for a licensed product in the United States for any indication upon 30 days’ prior written notice to Enteris or (b) on or after receipt of first regulatory approval for a licensed product in the United States for any indication upon 60 days’ prior written notice to Enteris.

Patheon UK Limited, or Patheon

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

The MSA has an initial term ending December 31, 2024, 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.

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

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

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

In December 2023, we entered into an agreement with Patheon to reimburse Patheon approximately $1.7 million for forecasted manufacturing commitments that are no longer needed due to the reduced demand expectations of KORSUVA in the United States. As of March 31, 2024, $0.2 million of the $1.7 million remained within accounts payable and accrued expenses on our Condensed Consolidated Balance Sheet. In connection with the agreement with Patheon, we agreed to schedule additional manufacturing commitments in 2024.

Components of Operating Results

The following discussion sets forth certain components of our Condensed Consolidated Statements of Comprehensive Loss as well as factors that impact those items.

Revenue

To date, we have generated revenue primarily from (1) collaborative revenue from our share of the profit generated by KORSUVA injection sales in the United States; (2) commercial supply revenue from our sales of commercial product to CSL Vifor, which is subsequently sold to wholesalers; (3) the receipt of upfront license fees and milestone payments; (4) royalty revenue in conjunction with sales of Kapruvia in Europe through September 30, 2023; and (5) clinical compound sales from certain license agreements. We are eligible to receive sales-based milestones in the future in accordance with certain licensing agreements.

Beginning in the fourth quarter of 2023, the revenue received under our agreements with CSL Vifor and Maruishi for royalty and sales-based milestone payments received in conjunction with ex-U.S. sales of KORSUVA/Kapruvia were recorded as other revenue and considered non-cash until we have fulfilled our obligations under HCR Agreement (see “Royalty Purchase and Sale Agreement” above).

To date, we have earned a total of $138.3 million in clinical development or regulatory milestone payments, clinical compound and commercial compound sales from certain license agreements, collaborative revenue from our share of the profit generated by KORSUVA injection sales, and royalty revenue (which ceased upon entry into the HCR Agreement during the fourth quarter of 2023).

Revenue from sales of KORSUVA injection in future periods is subject to uncertainties and will depend on several factors, including the success of our and our commercial partners’ commercialization efforts in the United States, the number of new patients adopting or switching to KORSUVA injection, patient retention and sustained demand, the number of physicians prescribing KORSUVA injection, the rate of monthly prescriptions, reimbursement from third-party payors including the U.S. government, and market trends. More specifically, in December 2021, CMS granted TDAPA to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022, for two years. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on payment as proposed in the draft CY 2024 rule. Under the final rule, TDAPA drugs in existing functional categories will receive a post-TDAPA add-on payment set at 65 percent of the total trailing 12-months expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA add-on payment will be applied to all ESRD PPS payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection commenced on April 1, 2024. The anticipated unfavorable CMS reimbursement codified in the final CY 2024 rule has resulted in a lack of sequential revenues growth for KORSUVA injection since its launch. As a result, we expect no meaningful revenue contribution from KORSUVA injection post its TDAPA expiration.

In the third quarter of 2023, FMC decided to reallocate all remaining clinic level inventory within its network of clinics resulting in limited revenues in the fourth quarter of 2023 and in the first quarter of 2024. During the three months ended March 31, 2024, there was approximately $1.8 million of net sales by CSL Vifor.

As of March 31, 2024, Vifor International owned 7,396,770, or 13.5%, of our common stock. CSL Vifor and its affiliates are all considered related parties as of March 31, 2024 and December 31, 2023 (see Note 18 of Notes to Condensed Consolidated Financial Statements, Related Party Transactions, in this Quarterly Report on Form 10-Q).

Cost of Goods Sold (COGS)

COGS includes costs related to sales of our commercial product, KORSUVA injection, to CSL Vifor. Costs related to the sales of KORSUVA injection are generally recognized upon receipt of shipment by CSL Vifor. Our COGS for KORSUVA injection include the cost of producing commercial product that correspond with commercial supply revenue, such as third-party supply and overhead costs, as well as certain period costs related to freight, packaging, stability, and quality testing. The related COGS for CSL Vifor associated with the net profit share arrangement as well as the marketing and distribution fee for the applicable period reduces our profit share revenue for the period.

For the three months ended March 31, 2024 and 2023, we recorded commercial supply revenue of $0.6 million and $3.2 million, respectively, with associated COGS of $0.6 million for the 2024 period and $2.6 million for the 2023 period. We expect our COGS to be reflective of future KORSUVA injection sales.

Research and Development (R&D)

Our R&D expenses relate primarily to the development of oral difelikefalin. R&D expenses consist of expenses incurred in performing R&D activities, including compensation and benefits for full-time R&D employees, clinical trial and related clinical manufacturing expenses, third-party formulation expenses or milestone payments, fees paid to CROs and other vendors and 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 will decrease in the future as we focus our development efforts on the clinical trials for NP. However, it is difficult to determine with certainty the duration and completion costs of our current studies in NP or future nonclinical and clinical studies of our current or any future product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for oral difelikefalin or any future product candidates.

The duration, costs and timing of clinical trials and development of our product candidate 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 our product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. In the future, we will determine which, if any, other programs to pursue and how much to fund each program in response to the scientific and clinical success of our product candidate, as well as an assessment of our product candidate’s commercial potential.

General and Administrative (G&A)

General and administrative, or G&A, expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, legal, business development, information technology, or IT, human resources, project management, alliance management, and procurement functions. Other costs include facility costs not otherwise included in R&D expenses, legal fees, insurance costs, investor relations costs, patent costs and fees for accounting and consulting services.

We anticipate that our G&A expenses will decrease in the future as a result of our workforce reduction in January 2024. G&A expenses include costs related to personnel, fees to outside consultants, lawyers, and accountants. In addition, if oral difelikefalin or any future product candidate obtains regulatory approval for marketing, we may incur expenses associated with building sales and marketing, commercial operations, and market access teams.

Our license agreements with CSL Vifor provide full U.S. commercialization rights of KORSUVA injection to CSL Vifor under profit-sharing arrangements. Under these profit-sharing arrangements, in consideration of CSL Vifor’s conduct of the marketing, promotion, selling and distribution of KORSUVA injection in the United States, we pay a marketing and distribution fee to CSL Vifor based on the level of annual net sales. This fee as well as CSL Vifor’s COGS are deducted from product sales in calculating the net profits that are subject to the profit-sharing arrangement (see Note 12 of Notes to Condensed Consolidated Financial Statements, Collaboration and Licensing Arrangements, in this Quarterly Report on Form 10-Q).

Restructuring

On January 22, 2024, we announced a workforce reduction of up to 50% of our employees in order to reduce our operating expenses and focus our efforts on development of oral difelikefalin in chronic pruritus associated with NP. Restructuring expenses consist of pre-tax severance and employee-related costs for those involuntary terminations associated with the strategic prioritization of NP and the related workforce reduction (see Note 17 of Notes to Condensed Consolidated Financial Statements, Commitments and Contingencies – Restructuring Action, in this Quarterly Report on Form 10-Q).

Other Income, Net

Other income, net consists of interest and dividend income earned on our cash, cash equivalents, and marketable securities, realized gains and losses on the sale of marketable securities and property and equipment, as well as accretion of discounts/amortization of premiums on purchases of marketable securities. In the event we record a credit loss expense on our available-for-sale debt securities, those expenses would be offset against other income.

Non-cash Interest Expense on Liability Related to Sales of Future Royalties and Milestones

Non-cash interest expense on liability related to sales of future royalties and milestone payments, which are received in conjunction with ex-U.S. sales of KORSUVA/Kapruvia under our agreements with CSL Vifor and Maruishi, consists of imputed interest on the carrying value of the liability and the amortization of the related issuance costs resulting from the HCR Agreement (see “Royalty Purchase and Sale Agreement” above). This non-cash interest expense is recognized separately on the Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2024.

Income Taxes

Historically, our benefit from income taxes related to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program, which permits qualified small businesses engaged in R&D activities within Connecticut to exchange their unused R&D tax credits for a cash amount equal to 65% of the value of the exchanged credits.

The Inflation Reduction Act of 2022 included tax legislation that became effective early in 2023. Significant legislation for corporate taxpayers includes a corporate alternative minimum tax of 15.0% for companies with $1.0 billion or more in average net financial statement profits over the three previous years, as well as a 1.0% indirect excise tax on the repurchase of shares by a publicly traded company. We do not expect this legislation to have an effect on our tax provision as of March 31, 2024; however, we will continue to evaluate the effect on the tax provision each reporting period.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

Revenue

Dollar amounts in thousands

Collaborative Revenue

We recognized collaborative revenue of $0.8 million and $2.8 million for the three months ended March 31, 2024 and 2023, respectively. This change in collaborative revenue was related to our share of the profit from CSL Vifor’s sales of KORSUVA injection to third parties in the United States, which commercially launched in April 2022 (see Notes 12 and 13 of Notes to Condensed Consolidated Financial Statements, Collaboration and Licensing Agreements and Revenue Recognition, respectively, in this Quarterly Report on Form 10-Q).

Commercial Supply Revenue

We recognized commercial supply revenue of $0.6 million and $3.2 million for the three months ended March 31, 2024 and 2023, respectively. This change in commercial supply revenue was related to our sales of KORSUVA injection to CSL Vifor, which commercially launched in April 2022.

Royalty revenue

We recognized royalty revenue of approximately $125,000 for the three months ended March 31, 2023, which was related to our royalties on the net sales of Kapruvia in Europe prior to October 1, 2023. Beginning on October 1, 2023, royalty revenue will no longer be recognized until we have fulfilled our obligations under the HCR Agreement (see “Royalty Purchase and Sale Agreement” above). As a result, there was no royalty revenue for the three months ended March 31, 2024.

Clinical compound revenue

We recognized clinical compound revenue of approximately $84,000 and $99,000 for the three months ended March 31, 2024 and 2023, respectively, which were related to sales of clinical compound to Maruishi.

Other revenue

We recognized non-cash revenue of approximately $623,000 for the three months ended March 31, 2024, which represent royalty payments earned in conjunction with ex-U.S. sales of KORSUVA/Kapruvia under our agreements with CSL Vifor and Maruishi, which were sold to HCR under the HCR Agreement. There was no non-cash revenue recognized for the three months ended March 31, 2023.

Cost of Goods Sold (COGS)

Dollar amounts in thousands

During the three months ended March 31, 2024 and 2023, we recorded COGS of $0.6 million and $2.6 million, respectively, which was related to our commercial supply revenue for KORSUVA injection sales to CSL Vifor.

Research and Development Expense

Dollar amounts in thousands

For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the $1.9 million increase in direct clinical trial costs was primarily due to increases related to the oral difelikefalin NP program, partially offset by the discontinuations of the oral difelikefalin program in atopic dermatitis due to the clinical trial results in December 2023 and the oral difelikefalin program in advanced chronic kidney disease due to the prioritization of the NP program. The decrease in stock compensation expense is primarily related to the reduction in workforce and the resulting reversal of stock compensation expense for unvested stock options and restricted stock units that were forfeited during the three months ended March 31, 2024, partially offset by performance-based restricted stock units that were achieved during the three months ended March 31, 2024. The decrease in other R&D operating expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily related to decreases in payroll and related costs, travel costs and other related conference costs.

The following table summarizes our R&D expenses by program for the three months ended March 31, 2024 and 2023:

Dollar amounts in thousands

General and Administrative Expenses

Dollar amounts in thousands

For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the decrease in professional fees and public/investor relations was primarily due to decreases in legal costs. The increase in stock-based compensation expense was primarily related to performance-based restricted stock units that were achieved during the three months ended March 31, 2024, partially offset by the reduction in workforce and the resulting reversal of stock compensation expense for unvested stock options that were forfeited during the three months ended March 31, 2024. The decrease in other G&A operating expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily related to decreases in payroll and related costs, travel costs and other related conference costs.

Restructuring Expenses

Dollar amounts in thousands

For the three months ended March 31, 2024, restructuring expenses were $2.4 million which were related to our strategic prioritization of NP and the associated workforce reduction during the three months ended March 31, 2024. There were no restructuring expenses recorded during the three months ended March 31, 2023.

Other Income, Net

Dollar amounts in thousands

For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the decrease in other income, net was primarily due to a decrease in interest income resulting from a lower balance in our portfolio of investments in 2024 as compared to 2023, partially offset by a higher yield on our portfolio of investments in 2024 as compared to 2023, and an increase in accretion income from our available-for-sale marketable securities.

Non-cash Interest Expense on Liability Related to the Sales of Future Royalties and Milestones

Dollar amounts in thousands

We recognized $2.0 million of non-cash interest expense on the liability related to sales of future royalties and milestones for the three months ended March 31, 2024, which represented imputed interest on the carrying value of the liability to HCR in the first quarter of 2024 and the amortization of the related issuance costs associated with the HCR Agreement. There was no non-cash interest expense on liability recognized during the three months ended March 31, 2023 as the HCR Agreement was entered into in the fourth quarter of 2023 (see “Royalty Purchase and Sale Agreement” above).

Benefit from Income Taxes

We have not exchanged our R&D tax credit for cash for the three months ended March 31, 2024, and were not eligible to exchange our R&D tax credit for cash for the three months ended March 31, 2023, therefore there was no benefit from income taxes for each of the three months ended March 31, 2024 and 2023. As of March 31, 2024, we recorded $0.7 million within income tax receivable which related to the 2020 R&D credit.

We recognized a full valuation allowance against deferred tax assets at March 31, 2024 and December 31, 2023. The tax benefit related to the exercise of stock options is recognized as a deferred tax asset that is offset by a corresponding valuation allowance. As such, our effective tax rate is zero for the three months ended March 31, 2024 and 2023.

Capital Requirements, Liquidity, and Capital Resources

Short-Term and Long-Term Cash Requirements

Our primary uses of capital have been, and we expect will continue to be, third-party clinical R&D services, clinical costs related to the oral difelikefalin program, and compensation and related expenses.

As of March 31, 2024, we have no commitments for capital expenditures in either the short-term or long-term. The following discussion summarizes our current and long-term material cash requirements as of March 31, 2024, which we expect to fund primarily with current unrestricted cash and cash equivalents and available-for-sale marketable securities:

(1) Operating lease obligations in 2024 and beyond relate to our new Stamford operating lease entered into in May 2023 for our new principal office, for which rent payments are expected to begin in late 2024. See Note 17 of Notes to Condensed Consolidated Financial Statements, Commitments and Contingencies, in this Quarterly Report on Form 10-Q for details about our operating lease obligations.

(2) Based on our MSA with Patheon that we entered into in July 2019, we have a purchase capacity reservation through December 31, 2024. In December 2023, we entered into an agreement with Patheon to reimburse Patheon approximately $1.7 million for forecasted manufacturing commitments that were no longer needed due to the reduced demand expectations of KORSUVA in the United States. As of March 31, 2024, $0.2 million of the $1.7 million remained within accounts payable and accrued expenses on our Condensed Consolidated Balance Sheet. In the event the purchase capacity reservation is not met in 2024, it will rollover into 2025. We expect a portion of this capacity reservation will be reimbursed in accordance with the supply agreement with CSL Vifor. See Note 17 of Notes to Condensed Consolidated Financial Statements, Commitments and Contingencies, in this Quarterly Report on Form 10-Q for details about our MSA with Patheon. We have no other material non-cancelable purchase commitments with any other contract manufacturers or service providers, as we have generally contracted on a cancelable purchase order basis.

(3) We are required to maintain a stand-by letter of credit as a security deposit under our new lease for office space in Stamford, Connecticut. After the first and second anniversaries of the rent commencement date, the face amount of the letter of credit can be reduced by $500,000 each period if we are not in default of our lease obligations. See Note 6 of Notes to Condensed Consolidated Financial Statements, Restricted Cash, in this Quarterly Report on Form 10-Q for details about our letter of credit for our new lease for our principal office in Stamford, Connecticut.

Based on the Enteris License Agreement that we entered into in August 2019, we are obligated to pay (1) milestone payments upon the achievement of certain development, regulatory and commercial milestones and (2) low-single digit royalty percentages on net sales of licensed products, subject to reductions in specified circumstances. As these milestone payments may or may not be achieved, and royalties may or may not be owed depending on our future commercial success, there were no future potential payments that were considered cash requirements in the table above as of March 31, 2024. We did not make any milestone payments to Enteris during the three months ended March 31, 2024 and 2023. See Note 17 of Notes to Condensed Consolidated Financial Statements, Commitments and Contingencies, in this Quarterly Report on Form 10-Q for details about our Enteris License Agreement.

During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub, entered into the HCR Agreement with HCR pursuant to which Cara Royalty Sub sold to HCR certain of its rights to the Royalties, due and payable to Cara Royalty Sub (as our assignee) under our agreements with CSL Vifor and Maruishi, in exchange for up to $40.0 million. We have retained all of our rights, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin. These future payments to HCR were not included in the table above since the amounts and timing of royalty and milestone payments received under the agreements with CSL Vifor and Maruishi could change in the future as they are subject to CSL Vifor’s and Maruishi’s commercialization efforts (see “Royalty Purchase and Sale Agreement” above).

We do not have any other requirements or off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Since inception, we have incurred significant operating and net losses. We incurred net losses of $30.7 million and $26.7 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $715.4 million. We expect to continue to incur significant expenses and operating and net losses in the foreseeable future, as we develop and seek marketing approval for oral difelikefalin in NP. Our financial results may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and the future sales of KORSUVA.

We anticipate that our expenses will be focused on:

• the continued development of oral difelikefalin for chronic pruritus associated with NP;
• the potential regulatory approvals for any product candidates that successfully complete clinical trials;
• potentially establishing a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any other products for which we may obtain regulatory approval; and
• maintaining, expanding, and protecting our global intellectual property portfolio.

The successful development of our product candidate is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of oral difelikefalin in NP. We are also unable to predict when, if ever, we will generate any further material net cash inflows from 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;
• obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidate;
• 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 oral 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 global health crises, introducing additional uncertainty.

Our product candidate is still in clinical development and since the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidate 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 CSL Vifor, 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. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and continuing disruptions to and volatility in the credit and equity markets in the United States and worldwide, including impacts from global health crises, geopolitical tensions, such as the ongoing conflicts between Russia and Ukraine, conflict in the Middle East, and increasing tensions between China and Taiwan, and government actions implemented as a result of the foregoing, fluctuations in inflation, rising interest rates, uncertainty and liquidity concerns in the broader financial services industry, and a potential recession in the United States. 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.

Sources of Liquidity

Since our inception to date, we have raised an aggregate of $943.8 million to fund our operations, including (1) net proceeds of $447.4 million from the sale of shares of our common stock in five public offerings, including our initial public offering; as well as the sale of our common stock under our open market sales agreement in 2023; (2) proceeds of $73.3 million from the sale of shares of our convertible preferred stock and from debt financings prior to our initial public offering; (3) $258.8 million under our license and supply agreements (including commercial supply sales and royalty payments), primarily with CSL Vifor, Maruishi, CKDP, and an earlier product candidate for which development efforts ceased in 2007; (4) our share of the profit generated by KORSUVA injection sales of $29.8 million; (5) net proceeds of $98.0 million from the purchase of our common stock in relation to the license agreements with CSL Vifor; and (6) net proceeds of $36.5 million from the sale of future ex-U.S. royalties and milestones to HCR under our agreements with CSL Vifor and Maruishi (see Note 12 of Notes to Condensed Consolidated Financial Statements, Collaboration and Licensing Agreements, in this Quarterly Report on Form 10-Q).

During the fourth quarter of 2023, we, through our wholly-owned subsidiary Cara Royalty Sub, entered into the HCR Agreement with HCR pursuant to which Cara Royalty Sub sold to HCR certain of its rights to receive the Royalties, due and payable to Cara Royalty Sub (as our assignee) under the Covered License Agreements, in exchange for up to $40.0 million. We have retained all of our rights, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin.

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

In order to fund our future operations, including our planned clinical trials, on March 1, 2022, we filed a universal shelf registration statement, or the Shelf Registration Statement, which provides for aggregate offerings of up to $300.0 million of common stock, preferred stock, debt securities, warrants or any combination thereof. The Shelf Registration Statement was declared effective by the Securities and Exchange Commission on May 11, 2022. The securities registered under the Shelf Registration Statement include $154.5 million of unsold securities that had been registered under our previous Registration Statement on Form S-3 (File No. 333-230333) that was declared effective on April 4, 2019. We believe that our Shelf Registration Statement will provide us with the flexibility to raise additional capital to finance our operations as needed.

On March 1, 2022, we entered into an open market sales agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $80.0 million in an at-the-market offering pursuant to the Shelf Registration Statement. Jefferies is acting as sole sales agent for any sales made under the Sales Agreement for a 3% commission on gross proceeds. The common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. No shares were sold under the Sales Agreement during the three months ended March 31, 2024 and 2023.

We may offer additional securities under our Shelf Registration Statement from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders.

Under our agreement with CSL Vifor for the commercialization of KORSUVA injection, we are eligible to receive commercial milestone payments in the aggregate of up to $240.0 million from CSL Vifor upon the achievement of certain sales-based milestones. In October 2021, we received a $50.0 million milestone payment from CSL Vifor in exchange for the issuance of 3,282,391 shares of our common stock to CSL Vifor as a result of the regulatory approval of KORSUVA injection in August 2021. To date, we have received $50.0 million of regulatory milestones from CSL Vifor under this agreement.

Under a separate agreement with CSL Vifor, we are eligible to receive commercial milestone payments in the aggregate of up to $440.0 million, all of which are sales related. We are also eligible to receive tiered double-digit royalty payments based on annual net sales of difelikefalin injection in the licensed territories. To date, we have received $30.0 million of regulatory milestones from CSL Vifor. During the fourth quarter of 2023, we entered into the HCR Agreement where we sold our future royalties and milestone payments under this agreement to HCR (see “Royalty Purchase and Sale Agreement” above).

Under the Maruishi Agreement, we are also potentially eligible to earn up to an aggregate of $6.0 million in clinical development milestones and $4.5 million in regulatory milestones, before any foreign exchange adjustment, as well as tiered royalties, with percentages ranging from the low double digits to the low twenties, based on net sales of products containing difelikefalin in Japan, if any, and share in any sub-license fees. In September 2023, Maruishi received manufacturing and marketing approval from Japan’s Ministry of Health, Labour and Welfare for KORSUVA IV Injection Syringe for the treatment of pruritus in hemodialysis patients. To date, we have received $6.5 million (before contractual foreign currency exchange adjustments) for clinical development and regulatory milestones from Maruishi. During the fourth quarter of 2023, we entered into the HCR Agreement where we sold our future royalties and milestone payments to HCR (see “Royalty Purchase and Sale Agreement” above).

Under the CKDP Agreement, we are potentially eligible to earn up to an aggregate of $2.3 million in clinical development milestones and $1.5 million in regulatory milestones, before South Korean withholding tax, as well as tiered royalties with percentages ranging from the high single digits to the high teens, based on net sales of products containing difelikefalin in South Korea, if any, and share in any sub-license fees. To date, $2.3 million (before South Korean withholding tax) of development and regulatory milestones have been received under the CKDP Agreement.

In December 2021, CMS granted TDAPA designation to KORSUVA injection in the anti-pruritic functional category. TDAPA went into effect on April 1, 2022, for two years. On October 27, 2023, CMS published the final CY 2024 rule, which finalized the post-TDAPA add-on as proposed in the draft CY 2024 rule. Under the final rule, TDAPA drugs in existing functional categories will receive a post-TDAPA add-on payment set at 65 percent of the total trailing 12-months expenditure levels for the given renal dialysis drug or biological product. The post-TDAPA add-on payment adjustment will be applied to all ESRD PPS payments and paid for 3 years, adjusted annually. The add-on payments for KORSUVA injection commenced on April 1, 2024. The unfavorable CMS reimbursement codified in the final CY2024 rule has resulted in a lack of sequential revenues growth for KORSUVA injection since its launch. As a result, we expect no meaningful revenue contribution from KORSUVA injection post its TDAPA expiration.

Our ability to earn these milestone and royalty payments and their timing is dependent upon successful commercialization of KORSUVA injection/Kapruvia, and successful future repayments made to HCR using CSL Vifor and Maruishi milestones and royalties under the HCR Agreement. However, our receipt of any further such amounts is uncertain at this time and we may never receive any more of these amounts.

Outlook

As a result of our strategic prioritization and reduction in workforce, we expect that our current unrestricted cash and cash equivalents and available-for-sale marketable securities will be sufficient to fund our currently anticipated operating plan into 2026. 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 ended March 31, 2024 and 2023:

Dollar amounts in thousands

Net cash used in operating activities

Net cash used in operating activities for the three months ended March 31, 2024 consisted primarily of a net loss of $30.7 million and a $4.9 million cash outflow from net changes in operating assets and liabilities, partially offset by a $5.1 million cash inflow from net non-cash charges. The change in operating assets and liabilities primarily consisted of a decrease of $10.2 million in accounts payable and accrued expenses due to operating payments made during the period, partially offset by a decrease in prepaid expenses of $2.4 million, primarily related to a decrease in prepaid clinical costs, an increase of $1.7 million for lease incentives reimbursed to us, and a decrease in accounts receivable, net – related party of $1.0 million. Net non-cash charges primarily consisted of stock-based compensation expense of $3.3 million and the noncash interest expense related to the HCR Agreement of $2.0 million.

Net cash used in operating activities for the three months ended March 31, 2023 consisted primarily of a net loss of $26.7 million and a $11.6 million cash outflow from net changes in operating assets and liabilities, partially offset by a $3.7 million cash inflow from net non-cash charges. The change in operating assets and liabilities primarily consisted of cash outflows of $6.3 million from an decrease in accounts payable and accrued expenses primarily relating to increased payments made in the first quarter of 2023, an increase of $2.8 million in accounts receivable, net – related party primarily relating to amounts due from CSL Vifor from our share of the profit generated by KORSUVA injection sales and for commercial supply of KORSUVA injection to CSL Vifor, an increase in inventory, net of $1.1 million, an increase in prepaid expenses of $0.9 million, primarily related to an increase in prepaid clinical costs, and a cash outflow of $0.5 million relating to operating lease liabilities associated with our lease agreements for our operating facility in Stamford, Connecticut. Net non-cash charges primarily consisted of stock-based compensation expense of $3.4 million, and the amortization expense component of lease expense of $0.4 million relating to our previous Stamford operating leases.

Net cash provided by investing activities

Net cash provided by investing activities was $26.0 million for the three months ended March 31, 2024, which primarily included cash inflows of $59.0 million from maturities of available-for-sale marketable securities, partially offset by cash outflows of $32.2 million for the purchases of available-for-sale marketable securities and $0.8 million for the purchases of property and equipment.

Net cash provided by investing activities was $17.7 million for the three months ended March 31, 2023, which primarily included cash inflows of $33.5 million from maturities and redemptions of available-for-sale marketable securities, partially offset by cash outflows of $15.8 million for the purchases of available-for-sale marketable securities.

Net cash (used in) provided by financing activities

Net cash used in financing activities for the three months ended March 31, 2024 consisted of payments made to HCR under the royalty purchase and sale agreement of approximately $685,000.

Net cash provided by financing activities for the three months ended March 31, 2023 consisted of proceeds of approximately $560,000 received from the exercise of stock options.

Recent Accounting Pronouncements

Please refer to Note 2 of Notes to Condensed Consolidated Financial Statements, Basis of Presentation, in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates

The preparation of our condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of financial condition and results of operations require us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments, and assumptions. We periodically review our estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate. Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies, in our Annual Report describes the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements.

We define our critical accounting estimates as those subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply U.S. GAAP. Our critical accounting policies that require significant judgments and estimates are more fully described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report and in Note 2 to our audited financial statements contained in our Annual Report. There have been no significant changes to our critical accounting policies that require significant judgments and estimates from those disclosed in our Annual Report.

Accounting Pronouncements Recently Adopted; Recent Accounting Pronouncements Not Yet Adopted

We do not expect that any recently issued accounting pronouncements will have a material effect on our condensed consolidated financial statements. Refer to Note 2 of Notes to Condensed Consolidated Financial Statements within this Quarterly Report on Form 10-Q, as well as Note 2 of Notes to Consolidated Financial Statements*, Summary of Significant Accounting Policies* in our Annual Report for a full description of accounting pronouncements recently adopted, and issued but not yet adopted, if applicable.

Interest Rate Risk

Historically, we invested substantially all of our cash reserves in a variety of available-for-sale marketable securities, including investment-grade debt instruments, principally corporate bonds, commercial paper, municipal bonds and direct obligations of the U.S. government and U.S. government-sponsored entities, and in cash equivalents. See Note 3 of Notes to Condensed Consolidated Financial Statements, Available-for-Sale Marketable Securities, in this Quarterly Report on Form 10-Q for details about our available-for-sale marketable securities.

As of March 31, 2024, we had invested $22.8 million of our cash reserves in such marketable securities. Those marketable securities included $22.8 million of investment grade debt instruments with a yield of approximately 3.83% and maturities through November 2024. As of December 31, 2023, we had invested $49.0 million of our cash reserves in such marketable securities. Those marketable securities included $49.0 million of investment grade debt instruments with a yield of approximately 4.41% and maturities through November 2024.

We maintain an investment portfolio in accordance with our investment policy, which includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The primary objectives of our investment policy are to preserve principal, maintain proper liquidity and to meet operating needs. Our investments are subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of our investments and relatively short duration, we do not believe we are materially exposed to changes in interest rates related to our investments. As a result, we do not currently use interest rate derivative instruments to manage exposure to interest rate changes.

Duration is a sensitivity measure that can be used to approximate the change in the fair value of a security that will result from a change in interest rates. Applying the duration model, a hypothetical 100 basis point, or 1%, increase in interest rates as of March 31, 2024 and December 31, 2023, would have resulted in immaterial decreases in the fair values of our portfolio of marketable securities at those dates.

Credit Quality Risk

Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Nonetheless, deterioration of the credit quality of an investment security subsequent to purchase may subject us to the risk of not being able to recover the full principal value of the security. As of March 31, 2024 and December 31, 2023, the aggregate unrealized losses on our available-for-sale marketable securities were $0.2 million and $0.3 million, respectively. For each of the three months ended March 31, 2024 and 2023, we did not record any charges to credit loss expense for our available-for-sale securities. Refer to Note 3 of Notes to Condensed Consolidated Financial Statements, Available-for-Sale Marketable Securities, in this Quarterly Report on Form 10-Q.

As of March 31, 2024 and December 31, 2023, we had accounts receivable, net - related party from CSL Vifor of $1.7 million and $2.8 million, respectively, primarily for our share of the profit generated by KORSUVA injection sales and commercial supply revenues, and payments for ex-U.S. royalties from CSL Vifor. We also had $0.3 million and $0.4 million recorded within other receivables for Japan royalties/milestones owed to us from Maruishi which was included within other receivables as of March 31, 2024 and December 31, 2023, respectively. We believe that credit risk associated with CSL Vifor and Maruishi are not significant. We review the need for an allowance for credit losses for any receivable based on various factors including payment history and historical bad debt experience. We had an insignificant allowance for credit losses as of March 31, 2024 and December 31, 2023.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of March 31, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Because of the inherent limitations of the effectiveness of all control systems, no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within Cara Therapeutics, Inc. have been detected.

PART II

OTHER INFORMATION

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and trading price of our securities. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report. We may disclose changes to risk factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. There have been no material changes to our risk factors as presented in our Annual Report on Form 10-K for the year ended December 31, 2023.