SEC Filing | Cara Therapeutics

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-36279

CARA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-3175693
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4 Stamford Plaza 107 Elm Street, 9^th Floor Stamford, Connecticut	06902
(Address of registrant’s principal executive offices)	(Zip Code)

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

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CARA	The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of May 11, 2023 was: 53,983,227.

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CARA THERAPEUTICS, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

PART I –FINANCIAL INFORMATION

		PAGE NUMBER

Item 1.	Financial Statements (Unaudited):

	Condensed Balance Sheets as of March 31, 2023 and December 31, 2022	1

	Condensed Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022	2

	Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	3

	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	4

	Notes to Condensed Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	54

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

	SIGNATURES	57

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PART I

FINANCIAL INFORMATION

Item 1.Financial Statements.

CARA THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(amounts in thousands, excluding share and per share data)

(unaudited)



	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	47,391	$	63,741
Marketable securities		66,892		81,658
Accounts receivable, net - related party		6,066		3,260
Inventory, net		3,515		2,383
Income tax receivable		697		697
Other receivables		495		496
Prepaid expenses		17,195		16,267
Restricted cash		408		408
Total current assets		142,659		168,910
Operating lease right-of-use assets		1,175		1,551
Marketable securities, non-current		9,074		11,350
Property and equipment, net		368		426
Total assets	$	153,276	$	182,237
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	15,222	$	21,540
Operating lease liabilities, current		1,456		1,918
Total current liabilities		16,678		23,458

Commitments and contingencies (Note 16)		—		—
Stockholders’ equity:
Preferred stock; $0.001 par value; 5,000,000 shares authorized at March 31, 2023 and December 31, 2022, zero shares issued and outstanding at March 31, 2023 and December 31, 2022		—		—
Common stock; $0.001 par value; 100,000,000 shares authorized at March 31, 2023 and December 31, 2022, 53,974,352 shares and 53,797,341 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		54		53
Additional paid-in capital		730,542		726,630
Accumulated deficit		(592,897)		(566,232)
Accumulated other comprehensive loss		(1,101)		(1,672)
Total stockholders’ equity		136,598		158,779
Total liabilities and stockholders’ equity	$	153,276	$	182,237

See Notes to Condensed Financial Statements.

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CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands, excluding share and per share data)

(unaudited)


	Three Months Ended
	March 31, 2023		March 31, 2022
Revenue:
Collaborative revenue	$	2,750	$	—
Commercial supply revenue		3,191		4,790
Royalty revenue		125		—
Clinical compound revenue		99		—
Total revenue		6,165		4,790
Operating expenses:
Cost of goods sold		2,590		2,081
Research and development		24,334		21,273
General and administrative		6,891		9,347
Total operating expenses		33,815		32,701
Operating loss		(27,650)		(27,911)
Other income, net		985		162
Net loss	$	(26,665)	$	(27,749)
Net loss per share:
Basic and Diluted	$	(0.49)	$	(0.52)
Weighted average shares:
Basic and Diluted		53,872,038		53,507,060
Other comprehensive income (loss), net of tax of $0:
Change in unrealized gains (losses) on available-for-sale marketable securities		571		(1,365)
Total comprehensive loss	$	(26,094)	$	(29,114)

See Notes to Condensed Financial Statements.

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CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands except share and per share data)

(unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		(Loss) Income		Equity
Balance at December 31, 2022	53,797,341	$	53	$	726,630	$	(566,232)	$	(1,672)	$	158,779
Stock-based compensation expense	—		—		2,972		—		—		2,972
Shares issued upon exercise of stock options	93,218		1		559		—		—		560
Shares issued upon vesting of restricted stock units	83,793		—		381		—		—		381
Net loss	—		—		—		(26,665)		—		(26,665)
Other comprehensive income	—		—		—		—		571		571
Balance at March 31, 2023	53,974,352	$	54	$	730,542	$	(592,897)	$	(1,101)	$	136,598


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance at December 31, 2021	53,480,812	$	53	$	708,585	$	(480,758)	$	(358)	$	227,522
Stock-based compensation expense	—		—		4,266		—		—		4,266
Shares issued upon exercise of stock options	470		—		3		—		—		3
Shares issued upon vesting of restricted stock units	109,943		—		1,438		—		—		1,438
Net loss	—		—		—		(27,749)		—		(27,749)
Other comprehensive loss	—		—		—		—		(1,365)		(1,365)
Balance at March 31, 2022	53,591,225	$	53	$	714,292	$	(508,507)	$	(1,723)	$	204,115

See Notes to Condensed Financial Statements.

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CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)


	Three Months Ended
	March 31, 2023		March 31, 2022
Operating activities
Net loss	$	(26,665)	$	(27,749)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		3,353		5,704
Depreciation and amortization		58		63
Amortization expense component of lease expense		375		344
(Accretion)/amortization of available-for-sale marketable securities, net		(94)		292
Changes in operating assets and liabilities:
Accounts receivable, net - related party		(2,806)		(2,496)
Inventory, net		(1,132)		677
Other receivables		1		17
Prepaid expenses		(928)		(2,594)
Accounts payable and accrued expenses		(6,318)		640
Operating lease liabilities		(462)		(423)
Net cash used in operating activities		(34,618)		(25,525)
Investing activities
Proceeds from maturities of available-for-sale marketable securities		29,500		44,000
Proceeds from redemptions of available-for-sale marketable securities, at par		4,000		—
Purchases of available-for-sale marketable securities		(15,792)		(10,526)
Purchases of property and equipment		—		(43)
Net cash provided by investing activities		17,708		33,431
Financing activities
Proceeds from the exercise of stock options		560		3
Net cash provided by financing activities		560		3
Net (decrease) increase in cash, cash equivalents and restricted cash		(16,350)		7,909
Cash, cash equivalents and restricted cash at beginning of period		64,149		13,861
Cash, cash equivalents and restricted cash at end of period	$	47,799	$	21,770

See Notes to Condensed Financial Statements.

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

1. Business

Cara Therapeutics, Inc., or the Company, is a commercial-stage biopharmaceutical corporation formed on July 2, 2004. The Company is leading a new treatment paradigm to improve the lives of patients suffering from pruritus. The Company’s primary activities to date have been organizing and staffing the Company, developing its lead product and product candidates, including conducting preclinical studies and clinical trials of difelikefalin-based product candidates, and raising capital.

In August 2021, the Company received U.S. Food and Drug Administration, or FDA, approval for KORSUVA®(difelikefalin) injection, or KORSUVA injection, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. Commercial launch of KORSUVA injection began in the United States in April 2022 and the Company began recording the associated profit-sharing revenues in the second quarter of 2022.

In April 2022, the European Commission granted marketing authorization to difelikefalin injection under the brand name Kapruvia® (difelikefalin), or Kapruvia, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adult hemodialysis patients. The marketing authorization approved Kapruvia for use in all member states of the European Union, or EU, as well as Iceland, Liechtenstein, and Norway. Kapruvia was also approved in the United Kingdom in April 2022. Commercial launches in Austria, Germany, Sweden, France, the Netherlands, and Finland have commenced. In August 2022, as part of the Access Consortium, difelikefalin injection was approved in Switzerland under the brand name Kapruvia, as well as Singapore and Canada under the brand name KORSUVA. Commercial launch in Switzerland has also commenced. In November 2022, difelikefalin injection was approved in the last Access Consortium country, Australia, under the brand name KORSUVA. The Company expects additional commercial launches to commence over the next 12-18 months.

In 2018, the Company entered into a license and collaboration agreement with a joint venture between Vifor Pharma Group and Fresenius Medical Care Renal Pharmaceutical Ltd., or Vifor Fresenius Medical Care Renal Pharma Ltd., that provides full commercialization rights of Kapruvia, and where applicable KORSUVA, to Vifor Fresenius Medical Care Renal Pharma Ltd. worldwide (excluding the United States, Japan and South Korea). In markets outside of the United States, the Company is eligible to receive tiered double-digit royalty payments based on annual net sales, as defined in the agreement with Vifor Fresenius Medical Care Renal Pharma Ltd., of difelikefalin injection in the licensed territories. In the U.S. market, the agreement with Vifor Fresenius Medical Care Renal Pharma Ltd. provides that Vifor Fresenius Medical Care Renal Pharma Ltd. will promote difelikefalin injection in the dialysis clinics of Fresenius Medical Care North America, or FMCNA, under a profit-sharing arrangement, whereby the Company is generally entitled to 50% of the annual net profits (as defined in the agreement with Vifor Fresenius Medical Care Renal Pharma Ltd.) based on net FMCNA clinic sales (as defined in the agreement with Vifor Fresenius Medical Care Renal Pharma Ltd.) 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 (see Note 11, Collaboration and Licensing Agreements).

In 2020, the Company entered into a second licensing and collaboration agreement, along with stock purchase agreements, with Vifor (International) Ltd., or Vifor International, that provides full commercialization rights of KORSUVA injection to Vifor International in dialysis clinics in the United States under a profit-sharing arrangement, whereby total net sales of KORSUVA injection in the United States, as recorded by Vifor International, are reduced by Vifor International’s cost of goods sold, or COGS, as well as a marketing and distribution fee owed by the Company based on the level of annual net sales, and the resulting amount is shared according to a 60% (Company)/40% (Vifor International) profit split (excluding sales to Fresenius Medical Center dialysis clinics, compensation for which is governed by the agreement with Vifor Fresenius Medical Care Renal Pharma Ltd.), subject to potential temporary adjustment in future years based on certain conditions (see Note 11, Collaboration and Licensing Agreements).

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

In May 2022, Vifor International assigned its rights and obligations under the license agreement and a supply agreement, as permitted under the agreements, to Vifor Fresenius Medical Care Renal Pharma Ltd. The Company’s rights and obligations under these agreements were unaffected by this assignment and the assignment did not affect the Company’s economic rights under the agreements with Vifor International.

In August 2022, Vifor Pharma Group (which includes Vifor International) was acquired by CSL Limited and subsequently renamed CSL Vifor as part of the acquisition. The acquisition of Vifor Pharma Group did not affect any of the Company’s rights and obligations pursuant to these agreements.

The Company also has a license agreement with Maruishi Pharmaceutical Co. Ltd., or Maruishi, under which the Company granted Maruishi an exclusive license to develop, manufacture, and commercialize drug products containing difelikefalin for acute pain and/or uremic pruritus in Japan. In September 2022, Maruishi submitted a New Drug Application in Japan for approval of difelikefalin injection for the treatment of pruritus in hemodialysis patients (see Note 11, Collaboration and Licensing Agreements).

As of March 31, 2023, the Company had raised aggregate net proceeds of approximately $519,600 from several rounds of equity financing, including its initial public offering, or IPO, which closed in February 2014 and four follow-on public offerings of common stock, which closed in July 2019, July 2018, April 2017 and August 2015, respectively, and the issuance of convertible preferred stock and debt prior to the IPO. Including profit share revenue and royalties, the Company has also earned approximately $273,000 under its license and supply agreements for difelikefalin, primarily with CSL Vifor, Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, and an earlier product candidate for which development efforts ceased in 2007. The Company has also received aggregate net proceeds of approximately $98,000 from the issuance and sale of the Company’s common stock to Vifor International in connection with the Company’s licensing agreement with CSL Vifor (see Note 11, Collaboration and Licensing Agreements).

As of March 31, 2023, the Company had unrestricted cash and cash equivalents and marketable securities of $123,357 and an accumulated deficit of $592,897. The Company has incurred substantial net losses and negative cash flows from operating activities in nearly every fiscal period since inception and expects this trend to continue for the foreseeable future. The Company recognized net losses of $26,665 and $27,749 for the three months ended March 31, 2023 and 2022, respectively, and had net cash used in operating activities of $34,618 and $25,525 for the three months ended March 31, 2023 and 2022, respectively.

The Company is subject to risks common to other life science companies including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, ability to raise additional financing, and compliance with FDA and other government regulations. If the Company does not successfully commercialize KORSUVA injection, Kapruvia or any of its other product candidates, it will be unable to generate additional recurring product revenue or achieve profitability.

2. Basis of Presentation

The unaudited interim condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America, or GAAP. In the opinion of management, these unaudited interim financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of results for the periods presented. The results of operations for

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

interim periods are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by SEC rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed balance sheet data as of December 31, 2022 were derived from audited financial statements, but do not include all disclosures required by GAAP. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. The more significant estimates include the fair value of marketable securities that are classified as level 2 of the fair value hierarchy, the amount and periods over which certain revenues will be recognized, including licensing and collaborative revenue recognized from non-refundable up-front and milestone payments, related party accounts receivable reserve, as applicable, inventory valuation and related reserves, research and development, or R&D, clinical costs and accrued research projects included in prepaid expenses and accounts payable and accrued expenses, the amount of non-cash compensation costs related to share-based payments to employees and non-employees, the incremental borrowing rate used in lease calculations and the likelihood of realization of deferred tax assets.

The impact from global economic conditions and potential and continuing disruptions to and volatility in the credit and equity markets in the United States and worldwide are highly uncertain and cannot be predicted, including impacts from the COVID-19 pandemic or future public health crises, geopolitical tensions, such as the ongoing military conflict between Russia and Ukraine and related sanctions against Russia, decades-high inflation, rising interest rates, uncertainty and liquidity concerns in the broader financial services industry, such as those caused by certain recent banking failures, and a potential recession in the United States. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these condensed financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the reported amounts of assets and liabilities or the disclosure of contingent assets and liabilities. These estimates, however, may change as new events occur and additional information is obtained, and are recognized in the condensed financial statements as soon as they become known.

Actual results could differ materially from the Company’s estimates and assumptions.

Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in Note 2 to the Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

3. Available-for-Sale Marketable Securities

As of March 31, 2023 and December 31, 2022, the Company’s available-for-sale marketable securities consisted of debt securities issued by U.S. government-sponsored entities and investment grade institutions as well as municipal bonds.

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

The following tables summarize the Company’s available-for-sale marketable securities by major type of security as of March 31, 2023 and December 31, 2022:

As of March 31, 2023


			Gross Unrealized				Estimated Fair
Type of Security	Amortized Cost		Gains		Losses		Value
U.S. government agency obligations	$	9,500	$	—	$	(483)	$	9,017
Corporate bonds		35,704		—		(403)		35,301
Commercial paper		15,943		1		(1)		15,943
Municipal bonds		15,920		—		(215)		15,705
Total available-for-sale marketable securities	$	77,067	$	1	$	(1,102)	$	75,966

As of December 31, 2022


			Gross Unrealized				Estimated Fair
Type of Security	Amortized Cost		Gains		Losses		Value
U.S. government agency obligations	$	9,500	$	—	$	(623)	$	8,877
Corporate bonds		35,828		—		(643)		35,185
Commercial paper		26,879		2		(6)		26,875
Municipal bonds		22,473		—		(402)		22,071
Total available-for-sale marketable securities	$	94,680	$	2	$	(1,674)	$	93,008

The following tables summarize the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities by investment category and disaggregated by the length of time that individual debt securities have been in a continuous unrealized loss position as of March 31, 2023 and December 31, 2022:

As of March 31, 2023


	Less than 12 Months				12 Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
U.S. government agency obligations	$	—	$	—	$	9,017	$	(483)	$	9,017	$	(483)
Corporate bonds		4,000		(4)		31,301		(399)		35,301		(403)
Commercial paper		4,975		(1)		—		—		4,975		(1)
Municipal bonds		—		—		15,705		(215)		15,705		(215)
Total	$	8,975	$	(5)	$	56,023	$	(1,097)	$	64,998	$	(1,102)

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

As of December 31, 2022


	Less than 12 Months				12 Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
U.S. government agency obligations	$	—	$	—	$	8,877	$	(623)	$	8,877	$	(623)
Corporate bonds		1,470		(26)		33,715		(617)		35,185		(643)
Commercial paper		15,906		(6)		—		—		15,906		(6)
Municipal bonds		982		(16)		19,589		(386)		20,571		(402)
Total	$	18,358	$	(48)	$	62,181	$	(1,626)	$	80,539	$	(1,674)

As of March 31, 2023 and December 31, 2022, no allowance for credit losses were recognized on the Company’s available-for-sale debt securities as no portion of the unrealized losses associated with those securities were due to credit losses. The information that the Company considered in reaching the conclusion that an allowance for credit losses was not necessary is as follows:

As of March 31, 2023 and December 31, 2022, the Company held a total of 30 out of 35 positions and 35 out of 39 positions, respectively, that were in an unrealized loss position, 27 of which had been in an unrealized loss position for 12 months or greater as of March 31, 2023. Unrealized losses individually and in aggregate, including any in an unrealized loss position for 12 months or greater, were not considered to be material for each respective period. Based on the Company’s review of these securities, the Company believes that the cost basis of its available-for-sale marketable securities is recoverable.

U.S. government agency obligations. The unrealized losses on the Company’s investments in direct obligations of government agencies were due to changes in interest rates and non-credit related factors. The credit ratings of these investments in the Company’s portfolio have not been downgraded below investment grade status. The contractual terms of these investments do not permit the issuer to repay principal at a price less than the amortized cost bases of the investments, which is equivalent to the par value on the maturity date. The Company expects to recover the entire amortized cost bases of these securities on the maturity date. The Company does not intend to sell these investments, and it is not “more likely than not” that the Company will be required to sell these investments before recovery of their amortized cost bases. The Company held 3 out of 3 positions for its U.S. government agency obligations, that were in unrealized loss positions as of March 31, 2023.

Corporate bonds, commercial paper, and municipal bonds. The unrealized losses on the Company’s investments in corporate bonds, commercial paper and municipal bonds were due to changes in interest rates and non-credit related factors. The credit ratings of these investments in the Company’s portfolio have not been downgraded below investment grade status. The contractual terms of these investments do not permit the issuer to repay principal at a price less than the amortized cost bases of the investments, which is equivalent to the par value on the maturity date. The Company expects to recover the entire amortized cost bases of these securities on the maturity date. The Company does not intend to sell these investments, and it is not “more likely than not” that the Company will be required to sell these investments before recovery of their amortized cost bases. The Company held 13 out of 13 positions for its corporate bonds, 2 out of 7 positions for its commercial paper, and 12 out of 12 positions for its municipal bonds, that were in unrealized loss positions as of March 31, 2023.

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

The Company classifies its marketable debt securities based on their contractual maturity dates. As of March 31, 2023, the Company’s marketable debt securities mature at various dates through November 2024. The amortized cost and fair values of marketable debt securities by contractual maturity were as follows:


	As of March 31, 2023				As of December 31, 2022
Contractual maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	67,565	$	66,892	$	82,678	$	81,658
One year to two years		9,502		9,074		12,002		11,350
Total	$	77,067	$	75,966	$	94,680	$	93,008

All available-for-sale marketable securities are classified as marketable securities, current or marketable securities, non-current depending on the contractual maturity date of the individual available-for-sale security. Other income, net includes interest and dividends, accretion/amortization of discounts/premiums, realized gains and losses on sales of securities and credit loss expense due to declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method.

There were no sales of available-for-sale marketable securities during the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022, accrued interest receivables on the Company’s available-for-sale debt securities were $495 and $489, respectively, and were included within other receivables.

4. Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated other comprehensive loss, net of tax, from unrealized gains (losses) on available-for-sale marketable securities, the Company’s only component of accumulated other comprehensive loss, for the three months ended March 31, 2023 and 2022, respectively.


	Total Accumulated
	Other Comprehensive
	Loss
Balance, December 31, 2022	$	(1,672)
Other comprehensive income before reclassifications		571
Amount reclassified from accumulated other comprehensive loss		—
Net current period other comprehensive income		571
Balance, March 31, 2023	$	(1,101)

Balance, December 31, 2021	$	(358)
Other comprehensive loss before reclassifications		(1,365)
Amount reclassified from accumulated other comprehensive loss		—
Net current period other comprehensive loss		(1,365)
Balance, March 31, 2022	$	(1,723)

Amounts reclassified out of accumulated other comprehensive loss into net loss are determined by specific identification. There were no reclassifications out of accumulated other comprehensive loss and into net loss for the three months ended March 31, 2023 and 2022.

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

5. Fair Value Measurements

As of March 31, 2023 and December 31, 2022, the Company’s financial instruments consisted of cash, cash equivalents, available-for-sale marketable securities, accounts receivable, net – related party, prepaid expenses, restricted cash, accounts payable and accrued liabilities. The fair values of cash, cash equivalents, accounts receivable, net – related party, prepaid expenses, restricted cash, accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of these financial instruments. Available-for-sale marketable securities are reported at their fair values, based upon pricing of securities with the same or similar investment characteristics as provided by third-party pricing services.

The Company validates the prices provided by its third-party pricing services by reviewing their pricing methods, obtaining market values from other pricing sources, and comparing them to the share prices presented by the third-party pricing services. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by its third-party pricing services as of March 31, 2023 or December 31, 2022.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.

Fair value measurement as of March 31, 2023:


			Quoted prices in		Significant other		Significant
Financial assets			active markets for		observable		unobservable
			identical assets		inputs		inputs
Type of Instrument	Total		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents:
Money market funds and checking accounts	$	47,391	$	47,391	$	—	$	—
Available-for-sale marketable securities:
U.S. government agency obligations		9,017		—		9,017		—
Corporate bonds		35,301		—		35,301		—
Commercial paper		15,943		—		15,943		—
Municipal bonds		15,705		—		15,705		—
Restricted cash:
Commercial money market account		408		408		—		—
Total financial assets	$	123,765	$	47,799	$	75,966	$	—

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

Fair value measurement as of December 31, 2022:


			Quoted prices in		Significant other		Significant
Financial assets			active markets for		observable		unobservable
			identical assets		inputs		inputs
Type of Instrument	Total		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents:
Money market funds and checking accounts	$	63,741	$	63,741	$	—	$	—
Available-for-sale marketable securities:
U.S. government agency obligations		8,877		—		8,877		—
Corporate bonds		35,185		—		35,185		—
Commercial paper		26,875		—		26,875		—
Municipal bonds		22,071		—		22,071		—
Restricted cash:
Commercial money market account		408		408		—		—
Total financial assets	$	157,157	$	64,149	$	93,008	$	—

There were no purchases, sales or maturities of Level 3 financial assets and no unrealized gains or losses related to Level 3 available-for-sale marketable securities during the three months ended March 31, 2023 and 2022, respectively. There were no transfers of financial assets into or out of Level 3 classification during the three months ended March 31, 2023 and 2022, respectively.

6. Restricted Cash

The Company is required to maintain a stand-by letter of credit as a security deposit under its leases for its office space in Stamford, Connecticut (refer to Note 16, Commitments and Contingencies: Leases). The fair value of the letter of credit approximates its contract value. The Company’s bank requires the Company to maintain a restricted cash balance to serve as collateral for the letter of credit issued to the landlord by the bank. As of March 31, 2023, the restricted cash balance for the Stamford Lease was invested in a commercial money market account.

As of March 31, 2023 and December 31, 2022, the Company had $408 of restricted cash related to the Stamford Lease in current assets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Balance Sheets that sum to the total of the same such amounts shown in the Condensed Statements of Cash Flows.


	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	47,391	$	63,741
Restricted cash, current assets		408		408
Total cash, cash equivalents, and restricted cash shown in the Condensed Statements of Cash Flows	$	47,799	$	64,149

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

7. Inventory, net

Inventory, net consists of the following:


	March 31, 2023		December 31, 2022
Raw materials	$	2,504	$	1,918
Work-in-process		1,009		499
Finished goods		2		—
		3,515		2,417
Less Inventory Reserve for Obsolescence		—		(34)
Total	$	3,515	$	2,383

As of March 31, 2023 and December 31, 2022, inventory balances include inventory costs subsequent to regulatory approval of KORSUVA injection on August 23, 2021. There were no write-downs of commercial supply inventory during the three months ended March 31, 2023.

8. Prepaid expenses

As of March 31, 2023, prepaid expenses were $17,195, consisting of $14,407 of prepaid R&D clinical costs, $1,887 of prepaid insurance and $901 of other prepaid costs. As of December 31, 2022, prepaid expenses were $16,267, consisting of $15,188 of prepaid R&D clinical costs, $543 of prepaid insurance, and $536 of other prepaid costs.

9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:


	March 31, 2023		December 31, 2022
Accounts payable	$	4,424	$	9,604
Accrued research projects		5,824		5,200
Accrued compensation and benefits		2,947		5,219
Accrued professional fees and other		2,027		1,517
Total	$	15,222	$	21,540

10. Stockholders’ Equity

In March 2023, as a result of the completion of the second year of the three-year vesting period for restricted stock units granted in March 2021, an aggregate of 15,999 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

In February 2023, as a result of the completion of the first year of the three-year vesting period for restricted stock units granted in February 2022, an aggregate of 42,920 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

Also in February 2023, as a result of the completion of the third year of the three-year vesting period for restricted stock units granted in February 2020, an aggregate of 15,999 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

In January 2023, as a result of satisfaction of the quarterly vesting period for restricted stock units granted in October 2021, an aggregate 8,875 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

In March 2022, as a result of the achievement of certain performance targets, an aggregate of 37,999 performance-based restricted stock units of certain employees vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

In March 2022, as a result of the completion of the first year of the three-year vesting period for restricted stock units granted in March 2021 and the full vesting of the second tranche of restricted stock units granted to the new Chief Executive Officer in October 2021, an aggregate of 39,278 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

In March 2022, the Company filed a universal shelf registration statement, or the Shelf Registration Statement, which provides for aggregate offerings of up to $300,000 of common stock, preferred stock, debt securities, warrants or any combination thereof. The Shelf Registration Statement was declared effective on May 11, 2022. The securities registered under the Shelf Registration Statement include $154,525 of unsold securities that had been registered under the Company’s previous Registration Statement on Form S-3 (File No. 333-230333) that was declared effective on April 4, 2019.

Also in March 2022, the Company entered into an open market sales agreement, or the Sales Agreement, with Jefferies LLC, as sales agent, pursuant to which it may, from time to time, issue and sell common stock with an aggregate value of up to $80,000 in an at-the-market offering. 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 as of March 31, 2023.

The Company may offer additional securities under its Shelf Registration Statement from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders.

In February 2022, as a result of the completion of the second year of the three-year vesting period for restricted stock units granted in February 2020, an aggregate of 32,666 time-based restricted stock units vested and were settled in shares of the Company’s common stock (see Note 14, Stock-Based Compensation).

11. Collaboration and Licensing Agreements

Vifor (International) Ltd. (Vifor International)

In October 2020, the Company entered into a license agreement with Vifor International, or Vifor Agreement No. 1, under which the Company granted Vifor International an exclusive license solely in the United States to use, distribute, offer for sale, promote, sell and otherwise commercialize 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. Under Vifor Agreement No. 1, the Company retains all rights with respect to the clinical development of, and activities to gain regulatory approvals of, difelikefalin injection in the United States.

After the assignment of rights of Vifor Agreement No. 1 from Vifor International to Vifor Fresenius Medical Care Renal Pharma Ltd. in May 2022, Vifor Agreement No. 1 provides full commercialization rights in dialysis clinics to

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CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

CSL Vifor in the United States under a profit-sharing arrangement. Pursuant to the profit-sharing arrangement, the Company is generally entitled to 60% of the net profits (as defined in Vifor Agreement No. 1) from sales of difeli