Cara Therapeutics Inc

Previous wording

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.

Current wording

You should refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q 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

Previous wording

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.

Current wording

We also developed an IV formulation of oral difelikefalin, 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.

Previous wording

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.

Current wording

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. On July 31, 2024, we received a notice, or the Extension Notice, from the Listing Qualifications Department of Nasdaq informing us that Nasdaq granted us an additional 180 calendar days, or until January 27, 2025, to regain compliance with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2), or the Rule. In connection with the Extension Notice, the listing of our common stock was transferred from the Nasdaq Global Market to the Nasdaq Capital Market, effective as of August 1, 2024. The Extension Notice has no other immediate effect on the listing of the Company’s common stock.

Previous wording

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.

Current wording

Our stockholders approved, at our 2024 Annual Meeting of Stockholders on June 4, 2024, 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. To date, we have not effected a reverse stock split and corresponding reduction in authorized shares. Any 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, and the Board of Directors may elect never to do so.

Previous wording

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).

Current wording

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

Previous wording

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.

Current wording

On August 23, 2021, KORSUVA injection was approved by the U.S. Food and Drug Administration, or 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.

Previous wording

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.

Current wording

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 and six months ended June 30, 2023, we recorded royalty revenue of approximately $123,000 and $248,000, respectively, which represented our royalties on net sales of Kapruvia.

Previous wording

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).

Current wording

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 and six months ended June 30, 2024. However, we recorded other revenue of approximately $1.0 million and $1.6 million for the three and six months ended June 30, 2024, respectively, of which approximately $0.4 million and $0.6 million, respectively, related to CSL Vifor royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

Previous wording

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.

Current wording

million, respectively, 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 and six months ended June 30, 2023 as the HCR Agreement was not entered into until the fourth quarter of 2023.

Previous wording

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.

Current wording

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 during the three months ended March 31, 2024 and no revenue in the three months ended June 30, 2024.

Previous wording

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).

Current wording

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 and six months ended June 30, 2024, we recorded other revenue of approximately $1.0 million and $1.6 million, respectively, of which approximately $0.4 million and $0.6 million, respectively, related to CSL Vifor royalties to be paid to HCR under this agreement and approximately $0.6 million and $1.0 million, respectively, related to Maruishi royalties to be paid to HCR under this agreement (see “Royalty Purchase and Sale Agreement” below).

Previous wording

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.

Current wording

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 and six months ended June 30, 2024 and 2023, we did not record any sales-based or regulatory milestone revenue.

Previous wording

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.

Current wording

Difelikefalin, our selective, predominantly peripherally acting, non-scheduled Kappa opioid receptor agonist, acts on the peripheral neurons responsible for sensing pruritus. Given this unique mechanism of action, difelikefalin is thought to work broadly independent of the origin of itch. To date, we have studied difelikefalin for pruritus associated with systemic, inflammatory, and neuropathic diseases. The IV formulation is approved in the United States, EU and other countries around the world for the treatment of advanced CKD-aP in adults undergoing hemodialysis. We studied the oral formulation at multiple dosage strengths in moderate-to-severe pruritus associated with NP with positive efficacy signals across all completed mono therapy studies. In our NP program, oral difelikefalin was generally well tolerated with all adverse events in difelikefalin-treated patients reported as mild or moderate in severity.

Previous wording

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.

Current wording

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 and six months ended June 30, 2024, approximately $0.6 million and $1.3 million, respectively, was repaid to HCR under the HCR Agreement.

Previous wording

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).

Current wording

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).

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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 and six months ended June 30, 2024 and 2023, no milestone payments or royalties were paid to Enteris by us in relation to the Enteris License Agreement.

Previous wording

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.

Current wording

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. In June 2024, we announced our decision to discontinue the clinical program in NP following the outcome from the dose-finding Part A of the KOURAGE-1 study evaluating the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in adult patients with NP.

Previous wording

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.

Current wording

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. For the three months ended June 30, 2024, CSL Vifor recorded net sales of KORSUVA injection in the United States of approximately negative $2.7 million, which resulted in our profit share amount of negative $1.4 million. The negative net sales reported by CSL Vifor was primarily due to

Previous wording

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.

Current wording

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 the three months ended March 31, 2024 and no revenue in the three months ended June 30, 2024.

Previous wording

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,

Current wording

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.

Previous wording

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.

Current wording

There was no commercial supply revenue recorded for the three months ended June 30, 2024. For the three months ended June 30, 2023, we recorded commercial supply revenue of $1.4 million, with associated COGS of $1.4 million. For the six months ended June 30, 2024 and 2023, we recorded commercial supply revenue of $0.6 million and $4.6 million, respectively, with associated COGS of $0.6 million for the 2024 period and $4.0 million for the 2023 period. We expect our COGS to be reflective of future KORSUVA injection sales.

Previous wording

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.

Current wording

R&D activities have been central to our business model. Based on our recent announcement that we are discontinuing our NP program, we presently expect that our R&D expenses will significantly decrease in the future as we focus on exploring strategic alternatives to maximize shareholder value. However, it is difficult to determine with certainty the duration and completion costs in connection with the discontinuation of our studies in NP or future nonclinical and clinical studies of our current or any future product candidates, should we resume the development of 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, should we resume the development of any future

Previous wording

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:

Current wording

The duration, costs and timing of clinical trials and development of future product candidates, should we resume the development of any future product candidates, will depend on a variety of factors including, but not limited to:

Previous wording

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.

Current wording

In addition, the probability of success for future product candidates, should we resume the development of any future product candidates, will depend on numerous factors, including competition, manufacturing capability and commercial viability. In the future, should we resume the development of any future product candidates, 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 future product candidates, as well as an assessment of our future product candidates’ commercial potential.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

We anticipate that our G&A expenses will decrease in the future as a result of our workforce reductions during the six months ended June 30, 2024. However, G&A expenses will continue to include costs related to remaining personnel, fees to outside consultants, lawyers, and accountants, as well as costs associated with our exploration of potential strategic alternatives, which could offset the decreases from workforce reductions. In addition, if any future product candidate obtains regulatory approval for marketing, should we resume the development of any future product candidates, we may incur expenses associated with building sales and marketing, commercial operations, and market access teams.

Previous wording

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).

Current wording

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

Previous wording

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).

Current wording

Restructuring expenses consist of pre-tax severance and employee-related costs for those involuntary terminations associated with the discontinuation of our oral programs in atopic dermatitis and chronic kidney disease in December 2023 and January 2024, respectively, the discontinuation of our oral program in NP in June 2024, and the related workforce reductions in 2024 (see Note 17 of Notes to Condensed Consolidated Financial Statements, Commitments and Contingencies – Restructuring Actions, in this Quarterly Report on Form 10-Q).

Previous wording

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.

Current wording

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 and six months ended June 30, 2024.

Previous wording

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

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

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).

Current wording

There was no collaborative revenue recognized for the three months ended June 30, 2024 due to negative net sales reported by CSL Vifor during the period. We recognized collaborative revenue of $5.4 million for the three months ended June 30, 2023, and $0.8 million and $8.2 million for the six months ended June 30, 2024 and 2023, respectively. This change in collaborative revenue for both periods 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 Agreementsand* Revenue Recognition*, respectively, in this Quarterly Report on Form 10-Q).

Previous wording

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.

Current wording

There was no commercial supply revenue recognized for the three months ended June 30, 2024. We recognized commercial supply revenue of $1.4 million for the three months ended June 30, 2023, and $0.6 million and $4.6 million for the six months ended June 30, 2024 and 2023, respectively. This change in commercial supply revenue for both periods was related to our sales of KORSUVA injection to CSL Vifor, which commercially launched in April 2022.

Previous wording

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.

Current wording

We recognized royalty revenue of approximately $123,000 and $248,000 for the three and six months ended June 30, 2023, respectively, 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 and six months ended June 30, 2024.

Previous wording

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.

Current wording

There was no clinical compound revenue for the three months ended June 30, 2024 and 2023. We recognized clinical compound revenue of approximately $84,000 and $99,000 for the six months ended June 30, 2024 and 2023, respectively, which were related to sales of clinical compound to Maruishi.

Previous wording

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.

Current wording

We recognized non-cash revenue of approximately $1.0 million and $1.6 million for the three and six months ended June 30, 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 and six months ended June 30, 2023.

Previous wording

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.

Current wording

We did not record COGS during the three months ended June 30, 2024 as there was no commercial supply revenue in the current period. We recorded COGS of $1.4 million for the three months ended June 30, 2023, and $0.6 million and $4.0 million for the six months ended June 30, 2024 and 2023, respectively, which were related to our commercial supply revenue for KORSUVA injection sales to CSL Vifor for these periods.

Previous wording

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

Current wording

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023, the $15.6 million decrease in direct clinical trial costs and consultant services in support of clinical trials was primarily due to decreases related to the discontinuation of our oral difelikefalin atopic dermatitis program due to the clinical trial results announced in December 2023, the discontinuation of our oral difelikefalin program in advanced chronic kidney disease in January 2024, and decreases in other general costs associated with oral difelikefalin, partially offset by increases related to our former oral difelikefalin NP program, which was discontinued due to the clinical trial results announced in June 2024. The decrease in stock compensation expense is primarily related to the reductions in workforce in January 2024 and June 2024, resulting in no additional vesting of options and restricted stock units for those terminated as part of the January 2024 workforce reduction, and a reversal of stock compensation expense for unvested stock options and restricted stock units that were forfeited in the current period as part of the June 2024 workforce reduction. The decrease in other R&D operating expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily related to decreases in payroll and related costs, travel costs and other related conference costs.

Previous wording

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

Current wording

The following table summarizes our R&D expenses by program for the three and six months ended June 30, 2024 and 2023:

Previous wording

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.

Current wording

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023, the decrease in professional fees and public/investor relations was primarily due to decreases in legal costs. The decrease in stock compensation expense is primarily related to the reductions in workforce in January 2024 and June 2024, resulting in no additional vesting of options and restricted stock units for those terminated as part of the January 2024 workforce reduction, and a reversal of stock compensation expense for unvested stock options and restricted stock units that were forfeited in the current period as part of the June 2024 workforce reduction. The increase in other G&A operating expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily due to our negative profit share amount recorded for CSL Vifor’s negative net sales for the second quarter of 2024, partially offset by decreases in payroll and related costs, travel costs and other related conference costs.