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Cara Therapeutics, Inc. (CARA)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 revenue was $6.93M, down 69.9% year over year due to the absence of a $15.0M milestone recorded in Q2 2022; EPS was $(0.58) versus $(0.08) in Q2 2022, reflecting higher R&D spend across three late-stage oral difelikefalin programs .
  • KORSUVA injection net sales climbed to $11.4M (from $5.7M in Q1), and wholesalers shipped 66,852 vials (+46% QoQ), indicating accelerating demand across dialysis organizations; DaVita reorder rates reached 73%, and USRC 80% .
  • CMS proposed a post‑TDAPA add‑on payment methodology for CY2024; management is pressing for modifications (money following patients; reconsidering 35% discount; clarity beyond year 3) and an additional TDAPA period, with a final rule expected in 4Q23—this is the key stock reaction catalyst .
  • Cash and marketable securities were $101.7M, with management guiding runway for “at least the next 12 months” versus Q1 guidance “into 2H24”; the team is exploring non‑dilutive funding, including potential ex‑U.S. royalty monetization .
  • Ex‑U.S. Kapruvia net sales were $1.2M, with seven EU launches and a NICE recommendation in England; Japan PMDA decision expected in 2H23 (triggers a $2M milestone) .

What Went Well and What Went Wrong

What Went Well

  • U.S. KORSUVA demand inflected: shipments rose 46% QoQ to 66,852 vials; FMC reorder penetration improved (over 700 clinics, 27%) as inventory drawdown progressed; DaVita reorder rate hit 73% .
  • Strong clinic engagement and positive patient/provider feedback sustaining reorder momentum; “Ongoing anecdotal feedback… remains highly positive” and “once a clinic starts dosing patients… over 70%… place additional orders” .
  • International execution: Kapruvia net sales of $1.2M and seven EU launches; NICE recommendation supports broader adoption; EU pricing (e.g., ~€48/vial in Germany) provides reference for uptake planning .

What Went Wrong

  • Top‑line contraction versus prior year driven by missing $15.0M EU milestone in Q2 2022; total revenue fell to $6.93M from $23.00M; net loss widened to $(31.5)M due to higher clinical trial spend .
  • Operating leverage remained negative: operating loss of $(32.34)M vs revenue of $6.93M, reflecting heavy R&D across AD, advanced CKD, and NP programs; gross margin benefited from low COGS but could not offset opex .
  • Regulatory uncertainty: Proposed CMS methodology could create reverse incentives (funding not tied to treated patients; 35% discount not tailored to first‑in‑class drugs), and utilization during TDAPA may unduly drive future rate setting; outcome of final rule is critical to 2024 trajectory .

Financial Results

MetricQ4 2022Q1 2023Q2 2023
Total Revenue ($USD Millions)$3.261 $6.165 $6.933
Net Loss ($USD Millions)$(30.339) $(26.665) $(31.479)
Diluted EPS ($USD)$(0.56) $(0.49) $(0.58)
Cost of Goods Sold ($USD Millions)$2.130 $2.590 $1.418
Operating Loss ($USD Millions)$(31.307) $(27.650) $(32.340)
KORSUVA Net Sales ($USD Millions)$2.3 $5.7 $11.4
Wholesaler Vials Shipped (Units)20,844 45,720 66,852
Margins (calculated)Q4 2022Q1 2023Q2 2023
Gross Profit ($USD Millions)$1.131 (Revenue–COGS) $3.575 $5.515
Gross Margin %34.7% 58.0% 79.5%
EBIT Margin % (Operating Income)−959.9% −448.5% −466.3%
Net Income Margin %−931.1% −432.6% −453.9%
Revenue Composition ($USD Millions)Q4 2022Q1 2023Q2 2023
Collaborative Revenue$1.126 $2.750 $5.410
Commercial Supply Revenue$2.063 $3.191 $1.400
Royalty Revenue$0.072 $0.125 $0.123
License & Milestone Fees$0.000 $0.000 $0.000
Clinical Compound Revenue$0.000 $0.099 $0.000
Total Revenue$3.261 $6.165 $6.933
KPIsQ4 2022Q1 2023Q2 2023
FMC Clinics Dosing ≥1 Patient—1,500 (later corrected) 1,300 (~50%)
FMC Clinics Reordered—500 (18%) 700+ (27%)
DaVita Clinics Ordering (%)—300 (11%) ~410 (15%)
DaVita Reorder Rate—70% 73%
MDO/IDO Reorder Rate—66% 68%
USRC Clinics Ordered—~66% of clinics 73% of clinics; 80% reorder

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cash Runway2023–2024“Sufficient… into 2H24” (as of Q1 2023) “Sufficient… for at least the next 12 months” (as of Q2 2023) Updated (shortened)
Reimbursement Framework (CMS)Post‑TDAPA—Proposed CY2024 ESRD PPS add‑on payment; final rule expected in 4Q23 New external framework
Non‑Dilutive Funding2023–2024Exploring non‑dilutive options Continuing to pursue (incl. ex‑U.S. monetization) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022, Q1 2023)Current Period (Q2 2023)Trend
CMS Reimbursement (Post‑TDAPA)Working with kidney community; confident additional funding to be made available Engaging CMS to refine add‑on method; seeking patient‑following payments, reconsider 35% discount, clarity beyond 3 years; requesting additional TDAPA period Intensifying advocacy; regulatory outcome is key catalyst
U.S. KORSUVA Launch MetricsQ1: vials 45,720; FMC dosing 1,500 clinics (later corrected), 500 reorders; DaVita 70% reorder Q2: vials 66,852; FMC 1,300 clinics dosing, 700+ reorders; DaVita 73% reorder; USRC 80% reorder Acceleration; stronger reorder momentum
International KapruviaQ4: EU launches (AT/DE/SE/DK) and approvals globally ; Q1: +4 EU launches; NICE decision imminent Q2: 7 EU launches; NICE recommendation in England; $1.2M net sales; EU pricing context Broadening geography; steady early revenue
Pipeline (Oral DFK)Initiated Phase 2/3 NP; ongoing Phase 3 AD and advanced CKD KIND 1 Part A readout expected 4Q23; KICK topline 2024; KOURAGE Part A 2H24; mgmt calls oral DFK centerpiece of long‑term value On‑track execution; multi‑indication strategy
Financing/RunwayCash $156.7M YE22; runway into 1H/2H24 Cash/marketable $101.7M; guidance “≥12 months”; exploring non‑dilutive ex‑U.S. royalty monetization Runway shortened; active funding options

Management Commentary

  • “Wholesaler shipments to dialysis clinics totaled approximately 67,000 vials, a 46% increase from the prior quarter… Ongoing anecdotal feedback… remains highly positive” — CEO .
  • “We are pleased that CMS proposed additional funding… However… we will be laying out a case for additional TDAPA time… and press for changes… for innovative, first‑in‑class products” — CEO .
  • “We strongly believe that oral difelikefalin is the centerpiece of our strategy… and the key to unlocking the long‑term value of Cara” — CEO .
  • “Cash, cash equivalents and marketable securities at June 30, 2023 totaled $101.7 million… sufficient to fund… for at least the next 12 months” — CFO .
  • “NICE recommended Kapruvia… seven EU countries have launched… $1.2M net sales; $123,000 royalty revenue” — Management .

Q&A Highlights

  • Trajectory/Inflection: Management sees accelerating vials and clinic dosing/reorders across FMC and DaVita, with early Q3 growth continuing; no forward‑looking sales guidance provided .
  • CMS Final Rule & TDAPA: Team pushing for payments that follow the patient, rationalization of 35% discount, clarity post‑year‑3, and an additional two‑year TDAPA period; engagement ongoing, final rule expected Fall/Winter .
  • Reorder Dynamics: DaVita reorder ~73% and USRC ~80%; mgmt views ~70% reorder rate as “normalized,” a proxy for strong patient experience .
  • Financing Options: Exploring non‑dilutive funding, including potential monetization of ex‑U.S. royalty streams; U.S. profit share (~46% of net sales) not the focus for monetization near‑term .
  • Europe Pricing: Example Germany price ~€48 per vial (~one‑third of U.S. list); EU5 patient population comparable to U.S., reimbursement pathways differ from TDAPA .

Estimates Context

  • S&P Global Wall Street consensus for CARA Q2 2023 EPS and revenue was unavailable via our SPGI integration due to missing CIQ mapping for the ticker. As a result, we cannot assess beats/misses versus consensus for Q2 2023, Q1 2023, or Q4 2022 at this time. Values would normally be retrieved from S&P Global; consensus data is unavailable in this instance.*

Key Takeaways for Investors

  • Near‑term growth in U.S. KORSUVA is driven by inventory normalization at FMC and strong reorder rates across LDOs and MDOs; continued vials/order momentum supports improving demand visibility into 2H23 .
  • The CY2024 CMS final rule is the central catalyst: modifications to the proposed add‑on payment, and any TDAPA extension, will heavily influence 2024 utilization and economics; monitor CMS comment period outcomes and final rule timing in 4Q23 .
  • Revenue optics: Q2 revenue decline vs prior year is largely a comp effect from the $15M EU milestone in Q2 2022; underlying collaborative revenue and KORSUVA net sales improved materially QoQ .
  • Operating leverage remains negative given R&D intensity; however, pipeline milestones (KIND 1 Part A in 4Q23; KICK topline in 2024; KOURAGE Part A in 2H24) can shift the narrative to oral DFK value creation .
  • International rollout is building: NICE endorsement and seven EU launches underpin early royalties; Japan approval (2H23) would add a $2M milestone and future royalties .
  • Funding flexibility: Cash of $101.7M with ≥12‑month runway and active pursuit of non‑dilutive options, including potential ex‑U.S. royalty monetization; watch for transactions to extend runway .
  • Trading implication: Stock likely to be sensitive to CMS reimbursement clarity and any TDAPA extension signals; operational KPIs (clinic reorders/dosing penetration) are key signposts for sustained uptake .
Notes:
- All margin figures are calculated from reported revenue, COGS, operating loss, and net loss cited in the press releases/transcripts.
- CMS policy content reflects management commentary; final ruling may differ.
- *Estimates disclaimer: S&P Global consensus values were unavailable via SPGI for CARA in this instance.

Citations:
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