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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, 2022

OR

    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, 9th 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 5, 2022 was: 53,591,225.

CARA THERAPEUTICS, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

PART I –FINANCIAL INFORMATION

PAGE

NUMBER

Item 1.

Financial Statements (Unaudited):

Condensed Balance Sheets as of March 31, 2022 and December 31, 2021

1

Condensed Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021

2

Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021

3

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

4

Notes to Condensed Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

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

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, 2022

    

December 31, 2021

Assets

 

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

21,362

$

13,453

Marketable securities

 

119,749

 

153,582

Accounts receivable - related party

2,496

Inventory, net

1,907

2,584

Income tax receivable

 

697

 

697

Other receivables

 

438

 

455

Prepaid expenses

 

5,113

 

2,519

Total current assets

 

151,762

 

173,290

Operating lease right-of-use assets

2,629

2,973

Marketable securities, non-current

 

68,456

 

69,754

Property and equipment, net

 

611

 

631

Restricted cash

 

408

 

408

Total assets

$

223,866

$

247,056

Liabilities and stockholders’ equity

 

 

  

Current liabilities:

 

 

  

Accounts payable and accrued expenses

$

16,501

$

15,861

Operating lease liabilities, current

 

1,795

 

1,755

Total current liabilities

 

18,296

 

17,616

Operating lease liabilities, non-current

1,455

1,918

Commitments and contingencies (Note 16)

 

 

Stockholders’ equity:

 

 

  

Preferred stock; $0.001 par value; 5,000,000 shares authorized at March 31, 2022 and December 31, 2021, zero shares issued and outstanding at March 31, 2022 and December 31, 2021

 

 

Common stock; $0.001 par value; 100,000,000 shares authorized at March 31, 2022 and December 31, 2021, 53,591,225 shares and 53,480,812 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

53

 

53

Additional paid-in capital

 

714,292

 

708,585

Accumulated deficit

 

(508,507)

 

(480,758)

Accumulated other comprehensive loss

 

(1,723)

 

(358)

Total stockholders’ equity

 

204,115

 

227,522

Total liabilities and stockholders’ equity

$

223,866

$

247,056

See Notes to Condensed Financial Statements.

1

CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

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

(unaudited)

Three Months Ended

    

March 31, 2022

    

March 31, 2021

    

Revenue:

Commercial supply revenue

$

4,790

$

License and milestone fees

 

 

1,192

Collaborative revenue

706

Clinical compound revenue

 

 

37

Total revenue

 

4,790

 

1,935

Operating expenses:

 

  

 

  

Cost of goods sold

2,081

Research and development

 

21,273

 

19,131

General and administrative

 

9,347

 

6,365

Total operating expenses

 

32,701

 

25,496

Operating loss

 

(27,911)

 

(23,561)

Other income, net

 

162

 

260

Net loss

$

(27,749)

$

(23,301)

Net loss per share:

 

  

 

  

Basic and Diluted

$

(0.52)

$

(0.47)

Weighted average shares:

 

  

 

Basic and Diluted

 

53,507,060

 

49,917,990

Other comprehensive loss, net of tax of $0:

 

  

 

  

Change in unrealized losses on available-for-sale marketable securities

 

(1,365)

 

(61)

Total comprehensive loss

$

(29,114)

$

(23,362)

See Notes to Condensed Financial Statements.

2

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, 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

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

Balance at December 31, 2020

49,872,213

$

50

$

641,195

$

(392,317)

$

73

$

249,001

Stock-based compensation expense

 

 

 

2,744

 

 

 

2,744

Shares issued upon exercise of stock options

 

45,035

 

 

688

 

 

 

688

Shares issued upon vesting of restricted stock units

109,419

1,388

1,388

Net loss

 

 

 

 

(23,301)

 

 

(23,301)

Other comprehensive loss

 

 

 

 

 

(61)

 

(61)

Balance at March 31, 2021

50,026,667

$

50

$

646,015

$

(415,618)

$

12

$

230,459

See Notes to Condensed Financial Statements.

3

CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

Three Months Ended

    

March 31, 2022

    

March 31, 2021

    

Operating activities

 

  

 

  

Net loss

$

(27,749)

$

(23,301)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

Stock-based compensation expense

 

5,704

 

4,132

Depreciation and amortization

 

63

 

63

Amortization expense component of lease expense

 

344

 

316

Amortization of available-for-sale marketable securities, net

292

194

Realized gain on sale of available-for-sale marketable securities

 

 

(39)

Realized gain on sale of property and equipment

 

 

(70)

Changes in operating assets and liabilities:

 

 

Accounts receivable - related party

(2,496)

Inventory, net

677

Other receivables

 

17

 

(1,687)

Prepaid expenses

 

(2,594)

 

(942)

Accounts payable and accrued expenses

 

640

 

(2,001)

Operating lease liabilities

(423)

(386)

Net cash used in operating activities

 

(25,525)

 

(23,721)

Investing activities

 

  

 

  

Proceeds from maturities of available-for-sale marketable securities

 

44,000

 

27,655

Proceeds from redemptions of available-for-sale marketable securities, at par

2,100

Proceeds from sale of available-for-sale marketable securities

 

 

8,029

Purchases of available-for-sale marketable securities

 

(10,526)

 

(23,985)

Purchases of property and equipment

 

(43)

 

Proceeds from sale of property and equipment

70

Net cash provided by investing activities

 

33,431

 

13,869

Financing activities

 

 

  

Proceeds from the exercise of stock options

 

3

 

688

Net cash provided by financing activities

 

3

 

688

Net increase (decrease) in cash, cash equivalents and restricted cash

 

7,909

 

(9,164)

Cash, cash equivalents and restricted cash at beginning of period

 

13,861

 

32,091

Cash, cash equivalents and restricted cash at end of period

$

21,770

$

22,927

See Notes to Condensed Financial Statements.

4

Table of Contents

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 an early 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 and clinical trials of difelikefalin-based product candidates, and raising capital.

On August 23, 2021, the Company received U.S. Food and Drug Administration, or FDA, approval for KORSUVATM (difelikefalin) injection, or KORSUVA injection, for the treatment of moderate-to-severe pruritus associated with chronic kidney disease in adults undergoing hemodialysis. The Company has a license agreement with Vifor (International) Ltd., or Vifor, that provides full commercialization rights of KORSUVA injection to Vifor in dialysis clinics in the United States under a profit-sharing arrangement, whereby total net sales of KORSUVA injection in the U.S., as recorded by Vifor, are reduced by 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) profit split (see Note 11, Collaboration and Licensing Agreements). The Company expects commercial launch of KORSUVA injection in the U.S. in April 2022 and associated revenues in the second quarter of 2022.

As of March 31, 2022, 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. The Company had also earned approximately $229,710 under its license and supply agreements for difelikefalin, primarily with Vifor, Vifor Fresenius Medical Care Renal Pharma Ltd., or VFMCRP, Maruishi Pharmaceutical Co. Ltd., or Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, and an earlier product candidate for which development efforts ceased in 2007. In October 2021, the Company received net proceeds of $44,969 from the issuance and sale of 3,282,391 shares of the Company’s common stock to Vifor in connection with U.S. regulatory approval for KORSUVA injection in August 2021. Additionally, in October 2020, the Company received net proceeds of $38,449 from the issuance and sale of 2,939,552 shares of the Company’s common stock to Vifor in connection with the Company’s license agreement with Vifor. Furthermore, in May 2018, the Company received net proceeds of $14,556 from the issuance and sale of 1,174,827 shares of the Company’s common stock to Vifor in connection with the Company’s license agreement with VFMCRP (see Note 11, Collaboration and Licensing Agreements).

As of March 31, 2022, the Company had unrestricted cash and cash equivalents and marketable securities of $209,567 and an accumulated deficit of $508,507. 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 $27,749 and $23,301 for the three months ended March 31, 2022 and 2021, respectively, and had net cash used in operating activities of $25,525 and $23,721 for the three months ended March 31, 2022 and 2021, 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 or any of its other product candidates, it will be unable to generate additional recurring product revenue or achieve profitability.

5

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

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 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, 2021 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, 2021.

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, accounts receivable, inventory valuation and related reserves, the determination of prepaid research and development, or R&D, clinical costs and accrued research projects, 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 ongoing COVID-19 pandemic and geopolitical tensions, such as Russia’s recent incursion into Ukraine, have interrupted business operations across the globe. 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, 2021, except as disclosed below.

6

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

Accounts Receivable – Related Party

Accounts receivable – related party consists of amounts due from sales of KORSUVA injection under the Company’s licensing agreement with Vifor. The Company does not obtain collateral for its accounts receivable.

The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for credit losses when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed. The Company believes that credit risk associated with its licensing partner Vifor is not significant. The Company reviews the need for an allowance for credit losses for any receivable based on various factors including payment history and historical bad debt experience. The Company had no allowance for credit losses as of March 31, 2022.

3. Available-for-Sale Marketable Securities

As of March 31, 2022 and December 31, 2021, the Company’s available-for-sale marketable securities consisted of debt securities issued by the U.S. Treasury, U.S. government-sponsored entities and investment grade institutions as well as municipal bonds.

The following tables summarize the Company’s available-for-sale marketable securities by major type of security as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

Gross Unrealized

Estimated Fair

Type of Security

    

Amortized Cost

    

Gains

    

Losses

    

Value

U.S. Treasury securities

$

15,577

$

$

(27)

$

15,550

U.S. government agency obligations

 

12,000

 

 

(370)

 

11,630

Corporate bonds

 

66,765

 

 

(740)

 

66,025

Commercial paper

72,952

(163)

72,789

Municipal bonds

 

22,634

 

 

(423)

 

22,211

Total available-for-sale marketable securities

$

189,928

$

$

(1,723)

$

188,205

As of December 31, 2021

Gross Unrealized

Estimated Fair

Type of Security

    

Amortized Cost

    

Gains

    

Losses

    

Value

U.S. Treasury securities

$

11,573

$

$

(3)

$

11,570

U.S. government agency obligations

 

17,020

 

 

(45)

 

16,975

Corporate bonds

 

66,495

 

 

(171)

 

66,324

Commercial paper

 

106,914

 

5

 

(31)

 

106,888

Municipal bonds

21,692

(113)

21,579

Total available-for-sale marketable securities

$

223,694

$

5

$

(363)

$

223,336

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, 2022 and December 31, 2021:

7

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

As of March 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. Treasury securities

$

15,550

$

(27)

$

$

$

15,550

$

(27)

U.S. government agency obligations

 

9,687

 

(313)

 

1,943

 

(57)

 

11,630

 

(370)

Corporate bonds

61,610

(644)

4,415

(96)

66,025

(740)

Commercial paper

72,789

(163)

72,789

(163)

Municipal bonds

 

21,213

 

(396)

 

998

 

(27)

 

22,211

 

(423)

Total

$

180,849

$

(1,543)

$

7,356

$

(180)

$

188,205

$

(1,723)

As of December 31, 2021

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. Treasury securities

$

11,570

$

(3)

$

$

$

11,570

$

(3)

U.S. government agency obligations

9,456

(45)

9,456

(45)

Corporate bonds

 

62,704

 

(170)

 

2,020

 

(1)

 

64,724

 

(171)

Commercial paper

 

52,163

 

(31)

 

 

 

52,163

 

(31)

Municipal bonds

 

20,562

 

(105)

 

1,017

 

(8)

 

21,579

 

(113)

Total

$

156,455

$

(354)

$

3,037

$

(9)

$

159,492

$

(363)

As of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, the Company held a total of 73 out of 73 positions and 58 out of 76 positions, respectively, that were in an unrealized loss position, four of which had been in an unrealized loss position for 12 months or greater as of March 31, 2022. Unrealized losses individually and in aggregate 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. Treasury and U.S. government agency obligations. The unrealized losses on the Company’s investments in direct obligations of U.S. Treasury and 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 6 out of 6 positions for its U.S. Treasury securities, and 4 out of 4 positions for its U.S. government agency obligations, that were in unrealized loss positions as of March 31, 2022.

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

8

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

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 25 out of 25 positions for its corporate bonds, 23 out of 23 positions for its commercial paper, and 15 out of 15 positions for its municipal bonds, that were in unrealized loss positions as of March 31, 2022.

The Company classifies its marketable debt securities based on their contractual maturity dates. As of March 31, 2022, 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, 2022

As of December 31, 2021

Contractual maturity

    

Amortized Cost

    

Fair Value

    

Amortized Cost

    

Fair Value

Less than one year

$

120,070

$

119,749

$

153,631

$

153,582

One year to three years

 

69,858

 

68,456

 

70,063

 

69,754

Total

$

189,928

$

188,205

$

223,694

$

223,336

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, 2022. During the three months ended March 31, 2021, the Company sold certain shares of its available-for-sale debt securities with a total fair value of $8,029, which resulted in realized gains of $39 for the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, accrued interest receivables on our available-for-sale debt securities were $438 and $455, respectively.

9

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

4. Accumulated Other Comprehensive (Loss) Income

The following table summarizes the changes in accumulated other comprehensive (loss) income, net of tax, from unrealized gains (losses) on available-for-sale marketable securities, the Company’s only component of accumulated other comprehensive (loss) income, for the three months ended March 31, 2022 and 2021, respectively.

    

Total Accumulated

Other Comprehensive 

(Loss) Income

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)

Balance, December 31, 2020

$

73

Other comprehensive loss before reclassifications

 

(22)

Amount reclassified from accumulated other comprehensive income

 

(39)

Net current period other comprehensive loss

 

(61)

Balance, March 31, 2021

$

12

Amounts reclassified out of accumulated other comprehensive (loss) income into net loss are determined by specific identification. The reclassifications out of accumulated other comprehensive (loss) income and into net loss were as follows:

Three Months Ended

Affected Line Item in the 

Component of Accumulated Other

March 31, 

Condensed Statements of

Comprehensive (Loss) Income

    

2022

    

2021

    

Comprehensive Loss

Unrealized gains (losses) on available-for-sale marketable securities:

 

  

 

  

 

  

Realized gains on sales of securities

$

$

39

Other income, net

Income tax effect

 

 

Benefit from income taxes

Realized gains on sales of securities, net of tax

$

$

39

5. Fair Value Measurements

As of March 31, 2022 and December 31, 2021, the Company’s financial instruments consisted of cash, cash equivalents, available-for-sale marketable securities, accounts receivable – related party, prepaid expenses, restricted cash, accounts payable and accrued liabilities. The fair values of cash, cash equivalents, accounts receivable – 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, 2022 or December 31, 2021.

10

Table of Contents

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 financial assets measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

Fair value measurement as of March 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

$

21,362

$

21,362

$

$

Available-for-sale marketable securities:

 

 

  

 

 

U.S. Treasury securities

 

15,550

 

 

15,550

 

U.S. government agency obligations

 

11,630

 

 

11,630

 

Corporate bonds

 

66,025

 

 

66,025

 

Commercial paper

 

72,789

 

 

72,789

 

Municipal bonds

 

22,211

 

 

22,211

 

Restricted cash:

 

 

  

 

 

Commercial money market account

 

408

 

408

 

 

Total financial assets

$

209,975

$

21,770

$

188,205

$

Fair value measurement as of December 31, 2021:

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

$

13,453

$

13,453

$

$

Available-for-sale marketable securities:

 

  

 

  

 

  

 

  

U.S. Treasury securities

11,570

11,570

U.S. government agency obligations

 

16,975

 

 

16,975

 

Corporate bonds

 

66,324

 

 

66,324

 

Commercial paper

 

106,888

 

 

106,888

 

Municipal bonds

21,579

21,579

Restricted cash:

 

  

 

  

 

  

 

  

Commercial money market account

 

408

 

408

 

 

Total financial assets

$

237,197

$

13,861

$

223,336

$

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, 2022 and 2021, respectively. There were no transfers of financial assets into or out of Level 3 classification during the three months ended March 31, 2022 and 2021, 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

11

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

(unaudited)

balance to serve as collateral for the letter of credit issued to the landlord by the bank. As of March 31, 2022, the restricted cash balance for the Stamford Lease was invested in a commercial money market account.

As of March 31, 2022 and December 31, 2021, the Company had $408 of restricted cash related to the Stamford Lease in long-term 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, 2022

    

December 31, 2021

Cash and cash equivalents

$

21,362