Michael Schaffzin - Stern Investor Relations Derek Chalmers - Co-Founder, President, CEO & Director Mani Mohindru - CFO & Chief Strategy Officer

David Amsellem - Piper Jaffray Nick Rubino - Stifel Alan Carr - Needham Oren Livnat - H.C. Wainwright Ken Trbovich - Janney

Good afternoon, this is Michael Schaffzin with Stern Investor Relations, and welcome to Cara Therapeutics' third quarter 2018 financial results and update conference call. The news release became available just after 4 pm today and can be found on our website at www.caratherapeutics.com.

You may also listen to a live webcast and replay of today's call in the Investors Section of the website. Before we begin, let me remind you that statements made on today's call regarding matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Examples of these forward-looking statements include statements concerning the expected timing of the completion and announcement of the results of our ongoing clinical trials, the expected timing and design of our planned clinical trials, the potential [ph] for CR845 to be a therapeutic option in multiple pruritus indications, future regulatory and development milestones for our product candidates. The timing and size of the markets that are potentially addressable by our product candidates and our expected cash reach.

Participating on this call are Dr. Derek Chalmers, Cara President and CEO; and Dr.

Mani Mohindru, Chief Financial Officer and Chief Strategy Officer. I'll now turn the call over to Dr.

Chalmers.

Thanks, Michael. Good afternoon, everybody.

And thanks for joining us on the call, especially today. During the third quarter, we continue to execute on the clinical development of KORSUVA or CR845 across our pipeline for pruritus.

We are especially pleased with the progress in our lead Phase 3 program for KORSUVA Injection and Chronic Kidney Disease Associated Pruritus or CKD-aP Hemodialysis patients, where we’re on track with patient enrolment and both ongoing, pivotal efficacy trials. We also have an active development program for Oral KORSUVA for pruritus across a range of clinical conditions, including a Phase 2 trial for pre-dialysis patients that is stage III to V with CKD-aP and a Phase 1 trial for patients with chronic liver disease to support an upcoming Phase 2 trial in patients with chronic liver disease associated pruritus.

Overall, we are happy with the progression and pace of our clinical activity this quarter and I’ll provide greater detail on each of our programs as we go through the call today. Taking a step back to begin and as a reminder, KORSUVA is of course our novel first-in-class selective peripherally acting kappa opioid receptor agonists designed to function with traditional opioid side effects, including diminished [ph] abuse liability due to its unique pharmacology and very importantly its chemistry and the clinical data we presented to date in pruritus and the acute postop pain setting overall greater than 2000 patients are certainly supportive of that target profile.

To start, I'd like to first focus on our most advanced program KORSUVA Injection and CKD patients on haemodialysis with moderate to severe pruritus for which we receive breakthrough designation in 2017. As we've discussed previously, the design of our pivotal Phase 3 program includes three currently ongoing trials, a U.S.

Phase 3 efficacy trial or KALM-1, our global Phase 3 efficacy trial designated KALM-2 and a Phase 3 open label extension safety study. We began dosing patients in KALM-1 and KALM-2 in January and August of this year respectively and we're pleased to report that enrollment remains on track and is progressing well.

We have approximately 60 U.S. sites active in KALM-1 and aim to have 50% of our targeted 80 sites for KALM-2 active by year end, with a current target goal of enrolling 350 patients in both trials.

Both KALM-1 and KALM-2 trials are designed to investigate the efficacy of KORSUVA Injection at a dose of 0.5 micrograms per kilo versus placebo, administered three times per week or TIW after scheduled dialysis sessions. Over a 12 week treatment period with a 52 week open label extension phase.

The primary efficacy endpoint is the proportion of patients achieving at least a 3-point improvement from baseline at week-12, with respect to the weekly mean of the daily worst itch intensity score measured on a standard numeric rating scale or NRS. Secondary endpoints in the Phase 3 trials measure aspects of itch-related quality of life using validated self-assessment scales, the Skindex-10 and the 5-D Itch as employed in our completed successful Phase 2b trial, as well as the proportion of patients achieving greater than or equal to 4 point improvement from baseline and weekly mean of the worst etching NRS score at week 12.

Both KALM-1 and KALM-2 trials are designed with a pre-specified interim assessment after approximately 50% of patients complete the treatment period and that's allows for expansion of the study up to 500 patients based on desired power for endpoint analysis. Based on the current status for KALM-1, we anticipate the completion of the interim assessment for this trial by year end 2018 or early 2019 and completion of the 12 week treatment period for the full trial within the first half of 2019.

The open label long-term safety extension study, the third ongoing Phase 3 trial in the program is also on track. This 52 week study is designed to evaluate the safety of KORSUVA Injection in up to 240 patients.

We have over 175 patients enrolled in the study so far with approximately 50% of patients complete at six months of treatment with a number of these through one year of treatment. To date, we have recorded no unexpected adverse events.

We remain very pleased with the progress on our Phase 3 pivotal program for KORSUVA Injection overall and we expect to announce data from both KALM-1 and KALM-2 trials in 2019. So CKD-aP is an area of significant unmet clinical need in both dialysis and pre-dialysis patients.

In the U.S. alone based on generic providers related script numbers we estimate that approximately 2.5 million CKD stage 3 to 5 patients experience pruritus with no FDA approved therapies.

With next patient population in mind, in July of last year we began dosing patients in the U.S. phase 2 trial for oral KORSUVA for the treatment of CKD-aP in stage 3 to 5 patients.

This trial is a multi-center randomized double blind placebo controlled 12 week trial designed to evaluate the safety and efficacy of three dose levels of oral KORSUVA of point 2 5 migs, 0.5 megs and one migs given once daily compared to placebo. The exposures achieved with oral KORSUVA tablet in this range were approximately equivalent to the exposure level achieved with 0.5 migs per kilo dose of IV KORSUVA that exhibits – that exhibited statistically significant and clinically meaningful reduction in itch intensity in hemodialysis patients in our previous Phase 2b trial.

The primary efficacy endpoint is a change from baseline and the weekly mean of the daily 24 worst itch, numerical rating scale score at week 12 of the treatment period. Secondary endpoints include change from baseline and itch-related quality of life scores as assessed by the total Skindex-10 and 5-D itch, as well as a proportion of patients achieving an improvement from baseline or greater than or equal to 3 points with respect to the weekly mean of the worst itch NRS score at week 12.

We plan to enroll 240 patients, 60 per arm in this trial, and we'll conduct an un-blended interim analysis of 50% enrollment for those who have completed 12 week of treatment that allows for expansion of the study up to 480 patients. We are pleased that this trial is on track with currently greater than 35 active sites, and we expect to reach our target of 60 clinical sites by year-end.

We're also exploring the potential of Oral KORSUVA in chronic liver disease associated pruritus, which affects approximately 20% to 30% of patients with cholestatic chronic liver disease. Our phase I PK and safety trial of Oral KORSUVA and mild, moderate and severe liver disease patients is now fully enrolled, and we expect to enhance top line data within the fourth quarter of this year with the aim of initiating Phase 2 trial of Oral KORSUVA for the treatment of chronic liver disease associated pruritus by year-end or early 2019.

As I mentioned in past calls since KORSUVA's mechanism of action is mediated by kappa receptors on peripheral sensory occurrence [ph] and so in immune cells, we believe that this therapy may serve as an important treatment for pruritus across a range of clinical conditions, including dermatological conditions in which treatment resistant pruritus remains a significant unmet medical need. In this regard, we were very pleased to recently announce we have expanded the Cara executive team with the addition of Dr.

Joana Goncalves, as Chief Medical Officer. Joana joined the team in October 2018 from Celgene where she most recently served as Vice President for Medical Affairs for Dermatology and Neurology, and she brings extensive clinical development and medical affairs expertise to the Cara team, particularly with novel dermatology products.

And we look forward to guiding on our clinical development plans for Oral KORSUVA in dermatological conditions in the very near future. And with that, I'd now like to turn the call over to Mani, who will discuss our financials for the third quarter.

Mani?

Thank you, Derek, and good afternoon, everyone. As a reminder, the full financial results for the third quarter of 2018 can be found in our press release that was issued earlier today after the market closed.

We reported a net loss of $19.4 million or $0.51 per basic and diluted share for the third quarter of 2018 compared to a net loss of $12.4 million or $0.38 per basic and diluted share for the same period of 2017. We recognized $5 million of license and milestone fee revenue during the third quarter of 2018 related to our license agreement with Vifor Fresenius Medical Care Renal Pharma or VFMCRP, a joint company of Vifor Pharma Group and Fresenius Medical Care.

There was no license and milestone fee revenue recognized during the third quarter of 2017. Additionally, we also recognized $33,000 of clinical compound revenue during the third quarter of 2018 in connection with the sale of clinical compound to our partner Maruishi Pharma.

No such clinical compound revenue was recognized during the third quarter of 2017. R&D expenses were $22.3 million in the third quarter of 2018 compared to $9.2 million in the same period of 2017.

The higher R&D expense in 2018 were due to increase in clinical trial costs, as well as increases in stock compensation expense and R&D personnel related cost. These increases were partially offset by lower costs associated with conferences.

General and administrative expenses were $3.2 million in the third quarter of 2018 compared to $3 million in the same period of 2017. The decrease in 2018 was primarily due to decreases in stock compensation expense, as well as facilities related cost.

These decreases were partially offset by increased consulting and legal fees. Other income was $1 million in the third quarter of 2018 compared to $367,000 in the same period of 2017.

This increase was primarily due to an increased higher average balance of company's portfolio of investments in the 2018 period. As of September 30, 2018, cash, cash equivalents and marketable securities were $206.1 million compared to $92.6 million at December 31, 2017.

The increase in the balance of cash and marketable securities primarily resulted from the $92.1 million of net proceeds raised from a July follow-on offering of 5.175 million shares, proceeds of $70 million related to the license agreement with VFMCRP, as well as $3.6 million from the exercise of stock options. Now turning on – turning to our financial expectations.

As we previously stated, based on the timing of our expectations and projected costs of our development plans, we expect that our existing cash, cash equivalents and marketable securities as of September 30, 2018 will be sufficient for us to fund our operating expenses and CapEx requirements into 2021 without taking into account any potential milestone payments from our existing collaborations. With that, I'll turn the call back over to the operator for Q&A.

Thanks. Just a couple of quick ones.

So first on the liver study, could you just walk us through - and I apologize if I missed this, just walk us through how you're thinking about next steps in terms of the dose trends [ph] you're going to test in Phase 2? And how we should think about just overall design?

And will you also be looking at the 3-point responder analysis as you are in the dialysis setting? So that's number one.

\ And then number two, how you are thinking about commercialization within liver setting? Is that something that you're looking at partnering out as opposed to commercializing on your own?

Thanks.

Thanks, David. To a lot of questions, just quickly, we're a little early to think about commercialization strategy in terms of liver versus any of the other indications, so that's something we'll address a little further down the line once we look at the data we are generating there.

In terms of design for the phase 2 level [ph], that's actually going to look pretty close to the design you've seen for CKD-aP in stage 3 to 5. The dosing regimen will be most likely different than that, because as you know, those CKD patients have some issues in terms of kidney function and that allows us to does once a day and those particular patients is most likely they're going to be twice a day in liver patients, but we'll announce the actual design and the dosing range when we start that trial.

That would be the main difference between the two trials. The endpoints would be very similar.

We'll use the same endpoints we used in our phase 2b trial with CKD-aP in hemodialysis patients looking first of all [indiscernible] from baseline and worst itch intensity and then looking at quality of life scores beyond that.

Okay. I want to sneak in a follow up and I know in other psoriatic [ph] settings, the responder analysis is based on a 4-point or more improvement in NRS.

And you're looking at a few different psoriatic settings here. So what's you level of confidence that you know, 3 points, whether it's in dialysis, non-dialysis, or CLD, the 3 points that responder analysis is indeed another hurdle we need to get through as opposed to the 4 points that we've seen in certain dermatologic conditions?

That's a great question, David. And so we think as appropriate based on really empiric to analysis.

I think we've covered this on previous calls that when we analyze our phase 2b data, particularly in relation to breakthrough designation, we actually went all the way back to empirical statistical analysis and convinced analysis of our NRS reduction versus clinically meaningful changes in QOL, and there's a standard statistical analysis to undertake there, which we've learned inn those CKD patients. And based on that analysis, our clinically meaningful reduction, which is what we're all interested in, and including the FDA, was something like 2.5 points in the NRS for CKD patients.

So therefore, we bump that up to 3 points and that was our proposed Phase 3 study design that obviously we discussed with the FDA at the end of Phase 2 meeting. For these other populations, particularly when we get to dermatological populations, and we haven't decided absolutely yet on the subgroup of dermatological patient, we'll be looking at - I think there is some fairly good validations for psoriatic edge and some analysis there is also published, less convincing analysis and things like atopic dermatitis..

So we will be announced in our endpoints when we get to those particular patient subgroups, but for the CKD in particular, that's really based on our empirical analysis of a clinically meaningful reduction from baseline.

Okay. That’s helpful.

Thanks.

Thanks, David.

Hi, everyone. This is Nick Rubino on for Annabel Samimy.

Thanks for taking our questions. How do you see the landscape within pruritus changing as there seem to be several new entrants in the market, specifically kappa agonists, Mu antagonist combinations?

How do you plan to position yourselves from the light of other oral options?

Yes. Thanks, Nick.

So in terms of - if we're talking about CKD-related pruritus, there really is no other options out there. I think we are in fact the only drug that shown effectiveness in a standard RCT type design there for that particular patient class.

So we haven't seen any other modalities, kappa agonism or otherwise that are effective in those patients at all. And I suspect that was the basis for the breakthrough designation from the agency there.

And beyond that in other situations, if you look at dermatological - again, dependent on the subgroup, obviously, biologics have come to the 4th there, and there is a number of those that have been approved. Those are obviously very effective when it comes to disease alteration, but most of those do not have a rapid effect on resistant pruritus.

The basis of our approach there would be that there is an opportunity, probably first-line opportunity to treat the pruritus ahead of any biological effects that are out there. But there aren't any other - on the horizon that we've seen any selected peripheral kappa agonist, or Mu antagonist that are in late stage development out there.

Got you. Okay, thanks.

And maybe just a quick follow-up, regarding your successful Phase 2, 3 post-op pain study, you guys reported earlier this year, we know that the pain programs are taking a backseat to pruritus, but have you had any discussions with the FDA in the meantime, or have you had any internal discussions as to how you may move forward to capture the value of that program?

Yes. Yes.

So what we're looking at, there are two things. We're looking at - we're running a qualitative analysis right now in the U.S.

and soliciting feedback from end-users, if you like both anesthesiologist and hospital pharmacists on the target profile based on that data, and what's lacking in that particular setting. And then we are in the process of consulting with the agency itself on some questions we have in relation to developing that particular program most likely in relation to the PONV aspect there, the postoperative nausea and vomiting and the requirements for labeling in relation to that.

So those are the two things that are ongoing for that particular program. And when we have that in hand, and we decide on a path forward, they we’ll certainly guide us to where we're going with that program.

All right. Awesome.

Thank you.

Thanks, Nick.

Hi. Its Ben Shen [ph] calling in for Arlinda.

Thanks for taking our questions. Some of its been answered.

I just wanted to double check, I thought I heard earlier that you were talking about the liver trial, potentially being designed similarly to the hemodialysis patients, is that correct?

No. It's designed similarly to the CKD stage 3 to 5 patient design.

So it's going to be an oral KORSUVA trial. Probably twice a day, we will announce the dose range when we start the trial, at a reduced dose.

Got it. Okay.

With respect to R&D spend, there is bit of a tick up this quarter, and I know you guys don't officially give guidance, but is that something that we can look to as sort of a pace magnitude of order that we can expect for the next few quarters?

As we've said in our previous calls this year that we do expect the R&D expense to go up in 2018 versus 2017. So this is in line with that.

Whether the sequential increase will be proportionate to this one, its a little bit harder to say, given the choppy nature of contracts and the progression of the trial. So it's difficult to be that specific, but it's on the increase from last year onwards.

All right. Thank you very much.

Thanks, Ben.

Hi. Thanks for taking my questions.

Can you talk about the early analysis for your Phase 3 trials? What sort of data will you see and/or you report to us when you're considering expanding the size of the patient population?

And then with respect to the Phase 1 trial on liver disease, is it wise [ph] just speaking those patients have any pruritus? Thanks.

Thanks, Alan. To the latter question, just quickly no they don’t have any pruritus, so its just PK and safety there, and obviously analysing the dose range for carrying forward.

On the former question, when we complete the interim from the KALM-1 trial, we will announce the IDMC, the independent data monitoring committee recommendation as the sample size that we carry forward within that trial. So that will be something we'll guide to once we have that complete.

But they will be seeing any more than just a recommendation on the size of the trial, nothing with respect to efficacy or anything like that?

No. No.

Because as we've discussed before, as a conditional power analysis there is no P value attend [ph]. So we don't take an alpha analysis, so there is no P value to report as they were.

So we will report our recommendation we received from IDMC in terms of sample size.

Okay. And then with respect to your plans dermat [ph], it sounds like you’re thinking of any a few subsets of dermatitis patients.

Are you thinking of running a few Phase 2 trials in parallel? Or how much you move forward in that broader indication?

Yes. That's something we're discussing internally right now, Alan, we’ll simply get to that once we get there, and obviously, Joanna has just come on board in the last couple of weeks, and we're organizing around her and in terms of what made sense as the first patient subgroup there.

But we'll announce that fairly early next year as to where we're going with that particular program.

Great. Thanks for taking the questions.

Thanks, Alan.

Hey, folks. Thanks for taking a couple of questions.

Firstly, has there been any changes in the recent ESRD prospective payment updates that might affect either you or your partner life [ph] ability to get bundled or unbundled reimbursement for the hemodialysis setting?

Yes, thanks Oren. Yes, you are correct.

So we're actually - we're very pleased. As you know, there's been a recommendation from CMS that any new drug approved after 2020 and the ESRD setting would automatically receive to adopt the payment, so a transitional drug add-on on payment adjustment there.

So that's good news for us. We know we're going to get ASP for the drug, and it's going to give us the opportunity to launch and establish KORSUVA in that marketplace.

So we're actually very pleased with the recent update and proposal from CMS.

And that's ASP plus zero, correct?

That's ASP plus zero.

Okay. And do you think the ASP plus zero without a mark-up has any headwind?

Or is it just as long as not economically [indiscernible] product to your goal?

Yes. Well, that remains to be seen.

We don't think so, and that was one of the reasons that we teamed up as you've indicated with Vifor Fresenius in relation to that and commercialization with us and we're going to be taking advantage of the relationship that Vifor Fresenius have developed there. So we don't think so.

And remember this is a drug that's meeting a -- an unmet need. And so there it really is no alternatives here in treating this severe symptoms.

So we don't think that's going to be a severe headwind.

Great. Thanks.

And with regards to the conditional powering analysis, as it turns out that you're going to increase the sample size may be materially, do you anticipate that having a substantial impact on the length of time it takes to enrol the entire study? Or do you - can you flex with bandwidth perhaps and open that wider and maybe still catch up to your…

No. We don't - on based on where we are today in terms of enrolment status, even if there is an adjustment in sample size, and I think we stated this in the call that we anticipate we're going to complete the full 12-week treatment period within the first half of 2019.

Okay. If you don't expand it, it better would be - it would be a material different thing.

In Q1, if you didn't expand, in Q2, if you did? Or you don't want to comment at all at this point?

Well, we'll get to that once we have the interim complete. We will provide something more granular on that once we have that complete.

All right. Thanks so much.

Appreciate it.

Thanks, Oren.

Hi, Derek, I'm just curious you mentioned surveying anesthesiologists and surgeons about the pain data, and you hinted about postoperative nausea and vomiting. So I guess I'm curious about whether that survey in terms of the product profile is focused on pain separate from nausea and vomiting or some sort of combination of the two?

No. That - Hi, Ken.

Thanks for the question. That product profile is based on PONV specifically.

And the data that we are aware of on top of standard and care within that patient population, which is standard 5-HT3 antagonism that was used for all of our late-stage post-op study. So that's the target product profile based solely on PONV we're looking at.

Okay. So does that suggest that those are things you're looking to get answer to before you make a decision on partnering or continuing development internally?

That does suggest that, that's the label we're looking for answers too, exactly.

Okay. So I guess alternatively, does that mean you're open to out-licensing the pain indication already?

Or is that something you're going to wait until you get the answer?

Well, those two things go hand in hand of course, right? So we know for sure the molecules and analgesic [ph] I guess, just at the window as you've seen from the data is larger to walk through in terms of the PONV response and the greatest unmet need in that clinical population is reduction in relation to traditional opioid side effects, primarily nausea and vomiting.

So it makes sense we should get after that as a primary label. And if you like an additional benefit for our molecule would be an addition and the analgesic response with co-administration there.

But PONV probably makes the most sense for that patient population given our data set.

Okay. Then just one final question, I know in the press release you commented about the 12-week treatment period being completed during the first half of '19.

Does that suggest that the assessment does not require expansion to 500 that we see the data by midyear?

Well, we're going to get to that once we finished the interim assessment. But what that implies is the status of the enrollment at this point allows us to make a prediction that we can finish the 12-week treatment period even if there is a sample size adjustment after the interim analysis.

Okay, sounds good. Thanks so much.

Thanks, Ken.

Okay. Thank you, and thank everybody for participating in today's call.

I'd also like to, again, thank all of the study investigators and patient participants, as well as their families, who continue to support our development efforts for KORSUVA. And we look forward to updating everybody again very soon.

So thank you, everybody.

Thank you.