Cara Therapeutics Inc. (CARA) Q1 2022 Earnings Call Transcript

Cara Therapeutics Inc.  (NASDAQ: CARA) Q1 2022 earnings call dated May. 09, 2022

Corporate Participants:

Iris Francesconi — Interim Head of Investor Relations

Christopher Posner — President, Chief Executive Officer and Director

Thomas Reilly — Chief Financial Officer

Joana Goncalves — Chief Medical Officer

Analysts:

Joseph Stringer — Needham & Company — Analyst

Chi Zhang — Bank of America — Analyst

Daniel Wolle — J.P Morgan — Analyst

David Amsellem — Piper Sandler Companies — Analyst

Unidentified Participant — — Analyst

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

Oren Livnat — H.C. Wainwright & Co. — Analyst

Presentation:

Operator

Good afternoon. My name is Mee, and I will be your conference facilitator. I would like to welcome everyone to Cara Therapeutics’ First Quarter 2022 Financial Results and Update Conference Call. [Operator Instructions]

Please be advised that this call is being recorded. I would now like to introduce Iris Francesconi, Interim Head of Investor Relations from Cara Therapeutics. Ms. Francesconi, you may begin the call.

Iris Francesconi — Interim Head of Investor Relations

Thank you, Mae, and good afternoon. Just after market closed today, we issued a press release detailing our corporate progress and financial results for the first quarter of 2022. The press release can be found on our website at www.caratherapeutics.com. You may also listen to a live webcast and replay of today’s call on the Investors section of the website. Participating in today’s call are Chris Posner, Cara’s President and Chief Executive Officer; Tom Reilly, Cara’s Chief Financial Officer; and Dr. Joana Goncalves, Cara’s Chief Medical Officer.

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 company’s ability to successfully commercialize KORSUVA injection and triple layer, including the timing of product launches, planned future regulatory submission and potential future regulatory approvals. The company’s ability to obtain and maintain coverage and adequate reimbursement for KORSUVA injection, the performance of our commercial partners including the Vifor Pharma, expected timing of the initiation of enrollment and data readout from the company’s planned and ongoing clinical trials, the potential results of ongoing clinical trials, timing of future, regulatory and development milestones for the company’s product candidate, the potential for the company’s product candidates to be alternatives in the therapeutic areas investigated, the size and growth of the potential market for pruritus management, the company’s expected cash reach and the potential impact of COVID-19 and the company’s commercial launches, clinical development, and regulatory timelines and plans.

Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Risks are described more fully in Cara Therapeutics’ filings with the Securities and Exchange Commission, including the Risk Factors section of the company’s annual report and Form 10-K for the year ending December 31, 2021, and its other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements contained in today’s call speak only as of the date on which they were made. Cara Therapeutics undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

With this, I will now turn the call over to Chris.

Christopher Posner — President, Chief Executive Officer and Director

Thanks, Iris, and good afternoon, everyone. The first quarter was pivotal for Cara as we are now a commercial-staged company moving our growth story forward. The first few weeks of KORSUVA injection’s U.S. launch have proceeded as planned and all of our programs and many of which, we have recently detailed to you, remain on track. I will give some highlights on our encouraging progress in a moment. Tom will follow with the financial update and after that, we will be available to take your questions.

Cara Therapeutics has a unique mission, focus on value proposition. We are building the world leader of pruritus. We see this as a differentiated value proposition and opportunity. Chronic pruritus is often a severe, intractable problem for patients in a wide range of diseases, and it is underserved by currently used treatments.

This quarter, we continued to execute on our 3 strategic priorities, which we believe will put Cara on a firm path to sustainable growth. Of course, our first priority is to maximize the commercial potential of the KORSUVA injection. We are now in full launch mode in the U.S. As you will recall, the commercialization efforts in the U.S. are being led by our partner, Vifor Pharma, a leading renal pharmaceutical company in the U.S. While we are still at a very early stage of the launch, so what we will share with you today is largely qualitative. Beginning in Q2, we will provide more quantitative data, which will paint a more detailed picture.

Now, our primary objectives in the first four weeks of launch were to A, have product shipped to wholesalers, B, have contract negotiations underway with the top dialysis organizations, C, have VO systems updated with product, pricing, and reimbursement information to allow product ordering, D, pivot the sales force from disease awareness and patient identification to promoting KORSUVA injection. And E, enhance patient awareness to help steepen the launch trajectory.

Now, I am pleased to report we are tracking to our expectations and are seeing very encouraging progress across all of these goals. Let me elaborate. First, KORSUVA injection is available to be ordered by dialysis clinics nationwide. The Vifor team has been working diligently to ensure that the product, pricing and reimbursement information is loaded into the respective systems, so that orders can be placed. That means that physician can prescribe it to a patient when they are identified as a candidate for the product and remember, KORSUVA injection reimbursement is in place via Medicare and needs a TDAPA qualification. Now, Vifor has shipped product to wholesalers and wholesalers have started to ship product to dialysis clinics. I am pleased to report that patients have received commercial product at this point.

Second, nephrologists are aware of KORSUVA injection and ready and started to prescribe. Since the launch meetings in March, the Vifor sales force has transitioned from patient identification to product promotion. They are promoting KORSUVA injection to physicians, advanced practice providers, and nurses and I am pleased to report that they have reached the majority of HCPs at least once in the past four weeks. Now anecdotally, palpable excitement is also evident within the nephrology community around the introduction of this new breakthrough first-in-class product. After the National Kidney Foundation Meeting in March, one nephrologist wrote that KORSUVA injection is poised to change the treatment of uremic pruritus and feedback from the Field Ride suggests similar tangible interest in this product.

Third, patient outreach is expanding through new channels. Significant efforts have already been underway to raise patient awareness for pruritus and hemodialysis. And as you know, patients can be key drivers of demand for a product like KORSUVA injection. The latest activity is the first large-scale education and awareness campaign on pruritus with chronic kidney diseases by the American Kidney Fund with support from Vifor.

While this pay-off to all this work is that patients finally can receive a treatment for a longstanding unmet need. And I would like to remind you that this is an under-reported, underserved patient population. We are confident that the addressable market is about 40% of the total hemodialysis patients. This is a baseline of roughly 200,000 U.S. hemodialysis patients with moderate to severe pruritus associated with chronic kidney disease. They are looking for answers and our product can provide one.

Looking ahead, in the second quarter, we expect to share more quantitative metrics for you to track our progress. We will disclose net sales of KORSUVA injection, as well as Cara’s revenue of the profit share. We will also update you on the units shipped from wholesalers to dialysis clinics. This is a really good proxy for end-user demand, so dialysis clinics do not carry much inventory.

Now turning to markets outside the U.S., the opportunity in Europe is squarely in our sites. Kapruvia is now the first therapy available in Europe for the treatment of pruritus in hemodialysis patients. On April 28th, we announced Kapruvia was approved by the European Commission. The UK followed with this approval, the next day. As we mentioned before, the EU approval triggered a $15 million cash milestone payment from our ex-U.S. partner, Vifor Fresenius Medical Care Renal Pharma. This payment adds even more strength to our balance sheet. We expect the launch of Kapruiva by our partner in the EU to commence in the second half of 2022. Stay tuned.

Now let’s turn to our second strategic priority of advancing our Oral KORSUVA Phase 3 pruritus programs for non-dialysis dependent advanced chronic kidney disease and atopic dermatitis. These pivotal Phase 3 oral programs have started and are moving forward as anticipated. Now, just to remind you, these programs address significant markets. In the U.S., about 400,000 patients have moderate to severe pruritus with advanced kidney disease. In atopic dermatitis, about 12 million patients suffer from pruritus. While we believe we have the right programs to capitalize on these opportunities, there are no FDA-approved therapies for pruritus in either disease area and currently used treatments have been insufficient. As you recall, our third strategic priority is to expand the clinical utility of Oral KORSUVA in other therapeutic areas, including notalgia paresthetica, a chronic liver disease.

Our next catalyst is approaching quickly. The Phase 2 proof of concept trial for notalgia paresthetica is on track to report top-line data in the second quarter. This trial is looking for an efficacy signal to establish a proof-of-concept clinical benefit in treating pruritus in notalgia paresthetica. We will use this data to inform the development path in this indication. In addition, the Phase 2 data readout in primary biliary cholangitis associated pruritus remains on schedule for the second half of this year. Simply put, our pipeline is progressing well. Our approved product is starting to reach patients, so we are accelerating to full scale at Cara.

Now, I’d like to turn the call over to Tom for details on our first quarter results. Over to you, Tom.

Thomas Reilly — Chief Financial Officer

Thank you, Chris. As a reminder, the full financial results for the first quarter of 2022 can be found in our press release issued today after the market closed. Cash, cash equivalents, and marketable securities at March 31, 2022, totaled $209.6 million compared to $236.8 million at December 31, 2021. The decrease in the balance primarily resulted in $25.5 million of cash used in operating activities.

For the first quarter of 2022, net loss was $27.7 million or $0.52 per basic and diluted share compared to a net loss of $23.3 million or $0.47 per basic and diluted share for the same period in 2021. Total revenue was $4.8 million for the first quarter of 2022 compared to $1.9 million during the same period of 2021. The $4.8 million in Q1 2022 related to KORSUVA injection commercial supply to Vifor Pharma. In Q1 2021, the $1.9 million related to the licensed revenue earned from Maruishi Pharmaceutical Company from the first initiation of the Phase 3 trial for uremic pruritus in Japan.

Since February 2022, the company had not recorded any cost of goods sold related to its commercial supply revenue as all inventory costs were incurred prior to receipt of regulatory approval of KORSUVA injection and accordingly were expensed as incurred. In March 2022, the company recorded commercial supply revenue of $2.5 million with associated cost of goods sold at $2.1 million as these inventory costs were incurred subsequent to the receipt of the regulatory approval of KORSUVA injection.

R&D expenses were $21.3 million for the three months ended March 31, 2022, compared to $19.1 million in the same period of 2021. The higher R&D expenses in 2022 were principally due to an increases in direct clinical trial costs and payroll-related cost. G&A expenses were $9.3 million for the three months ended March 31, 2022, compared with $6.4 million in the same period of 2021. The higher G&A expenses in 2022 were principally due to an increase in stock-based compensation expense, which includes an additional $1.6 million compensation expense related to the modification of the company’s former Chief Executive Officer’s equity awards in 2021, as well as an increases in payroll-related cost.

Based on timing expectations and projected cost for current clinical development plans, Cara expects that its existing unrestricted cash and cash equivalents and available for marketable securities as of March 31, 2022, including the $15 million regulatory milestone payment earned in April 2022 upon European Commission approval of Kapruvia will be sufficient to fund its currently anticipated operating expenses and capital requirements into the first half of 2024, without giving effect to any potential milestone payments under existing collaboration for product revenue and the commercialization of KORSUVA injection.

With that, I will now turn the call back over to Chris.

Christopher Posner — President, Chief Executive Officer and Director

Thanks, Tom. In summary, we are optimistic with the start of this year. Our continued execution propels us down the road of significant value creation. The launch of KORSUVA injection is progressing well. We set our expectations and met them. A, the product can be ordered by all dialysis organizations. Two, reimbursement is in place. Three, physicians know the benefit of the product and are starting to prescribe. And lastly, patients have started to receive KORSUVA injection.

In the EU and UK, Kapruvia is now approved, providing a second significant market opportunity. The EU rollout is expected to start in the second half of 2022 and the associated milestone payment of $15 million extends our cash runway into the first half of 2024 and we are executing to deliver on our pipeline. The oral programs have potential to create a platform product with a much broader market opportunity across many diseases. Pivotal Phase 3 programs in AV and advanced CKD are underway. The Phase 2 proof of concept data in notalgia paresthetica is expected in the second quarter. Our PBC Phase 2 data remain on track for the second half of 2022. Now, our strategy is to be the leader in bringing new treatments for pruritus to market, an under-realized opportunity of millions of patients. We have taken important steps this quarter to make this happen.

Now with that, Tom, Jo, and I will be happy to take your questions. Operator, over to you to open the call up for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Joseph Stringer from Needham & Company. Your line is open.

Joseph Stringer — Needham & Company — Analyst

Hi. Good afternoon. Thanks for taking our questions. Our question — 2 questions from us. The first one is on IV KORSUVA. You mentioned that the addressable patient population, you mentioned the 40% or so of dialysis patients that with moderate to severe pruritus, just wondering if you could provide some additional color on maybe what those 40% of — are there patients that believe that you can reach first initially with the drug and is it sort of tiered on sort of level of response to itch or any additional thoughts on how you think about those in terms of the initial patients for IV KORSUVA and then sort of working your way up the tier to get more patients?

Christopher Posner — President, Chief Executive Officer and Director

Yes. Joe and nice to hear from you. Certainly. So, if you look at the literature, we see roughly 65% of kind of hemodialysis patients in the U.S. suffer from some form of itch and again in the literature, about 40% suffer from moderate to severe pruritus that are undergoing dialysis and you kind of triangulate that now with practice in the real world and we’re hearing very similar numbers in terms of the addressable population. So, the 40%, Joe, is really what we view as the addressable market. There is roughly 500,000 patients undergoing dialysis in the U.S. and about 200,000 of them suffer from kind of this moderate to severe form of pruritus that would be a candidate for KORSUVA injection. And I’ll just add Joey, I mean, the nephrologists agreed that this is really significantly under-diagnosed condition among patients and that’s really due to the lack of effective treatment options. And the majority of nephrologists that we talked to, we’re hearing it from the field as well saying that they’re going to actively start to identify these patients, now that they have realized that there is a solution available, so we feel pretty darn good about that number.

Joseph Stringer — Needham & Company — Analyst

Okay. Great. Thanks for taking our question.

Christopher Posner — President, Chief Executive Officer and Director

You got it, Joe.

Operator

Your next question comes from the line of Jason Gerberry from Bank of America. Your line is open.

Chi Zhang — Bank of America — Analyst

Okay. Good afternoon, good evening. This is Chi on for Jason. Thanks for taking our question. Maybe just a quick one, I think there is some — we’ve been getting questions and sort of like expectations for the second quarter which is going to be the first quarter of — Cara will report net sales and royalty contribution and whatnot. So I’m hoping you can provide some color in terms of — what sort of — what is the one-timer? What do you expect from manufacturing fee and what do you expect from the accounting purpose? If you can lay it out for us. I think there is going to be $15 million milestone expected from — you expect to receive from the approval. How are you going to recognize that from a breakpoint perspective? And then the rest of it, is it going to be from the underlying demand of IV KORSUVA launch in the U.S. and then hoping you can provide some color. You recognized a commercial supply revenue of about $4.8 million in the first quarter. Is this sort of the manufacturing fee that you’re contributing? You said it that recurring item, so just think about from a sales and marketing perspective, should we keep — is that going to be a separate item? Is it not going to be a recurring item separate from the revenue contribution of IV KORSUVA? So if can sort of help us understand…

Christopher Posner — President, Chief Executive Officer and Director

Yeah.

Chi Zhang — Bank of America — Analyst

The different components for second quarter…

Christopher Posner — President, Chief Executive Officer and Director

Yeah.

Chi Zhang — Bank of America — Analyst

It would be helpful.

Christopher Posner — President, Chief Executive Officer and Director

No, no doubt. So Chi, I mean, let me first — I’ll turn it to Tom for some of the accounting on the P&L and how we’re going to account for that. But what I would stress is what we intend — I mentioned some qualitative things around the early days of the launch. Q2, we will obviously provide much more quantitative metrics. And the three metrics that we’re committed to provide just to reinforce is, one, total net IV KORSUVA sales; two, will be core — will be Cara’s IV KORSUVA’s revenue and then the third, which I think is really important because it gives transparency on-demand generation, that’s going to be aggregate wholesaler sales volume to customers. And we do believe this is a really good proxy for end-user demand. As I mentioned before, dialysis centers don’t carry a lot of inventory. I just want to be clear those are the three metrics that will track consistently quarter-to-quarter beginning in 2Q. Let me turn to Tom from a P&L accounting standpoint. Hopefully, you get those questions from Chi.

Thomas Reilly — Chief Financial Officer

Yeah. Sure. Thanks, Chris. Hey, Chi. So the question was more on the transparency related to revenue and in particular on the commercial supply. So related to the first one, the $15 million milestone, that’d be separated out, that is part of our license and milestone P&L line items, so that’ll be separated out. As Chris just mentioned, for transparency perspective, we will be showing on our P&L, the profit split revenues which also have been in separate P&L line and then we’ll be disclosing KORSUVA injection net sales, so you’d be able to see the comparison of the profit split versus the injection net sales in this quarter. And I think the third question, Chi, if I got it right, was related to commercial supply revenue. And so the commercial supply revenue will also be broken out separately. And you had mentioned more forecasting and modeling purposes, so that’s related to supply that we ship over to our partner Vifor. And so, as the products demand’s starts building, we will be sending products to Vifor commercial supply to sell to the channel. So that will be transparent in our P&L on a revenue line item and the associated cost of goods sold that you’ll see will be associated with that commercial supply P&L line. So you will see from our disclosures in this quarter, the transparency between what was actually encouraged with the relative cost of goods sold starting in March versus anything that was expensed prior. So hopefully that answers all of your questions.

Chi Zhang — Bank of America — Analyst

No, this is very clear. Thanks so much. We were getting some questions and we are aware that consensus is sort of the spotty and just hoping to sort of like get some clarity, hoping that you know we have less body numbers looking at second quarter. So, thanks so much for the help and that’s it. Look forward to host you guys at our conference this week.

Christopher Posner — President, Chief Executive Officer and Director

Yeah, Chi. Looking forward to it.

Thomas Reilly — Chief Financial Officer

Thanks, Chi.

Chi Zhang — Bank of America — Analyst

Thank you.

Operator

Your next question comes from the line of Daniel Wolle from JP Morgan. Your line is open.

Daniel Wolle — J.P Morgan — Analyst

Good afternoon, guys. Thanks for taking our question. A couple from me. First, with a little bit over one month of commercial launch behind us, what can you tell us about the initial activities that would indicate that significant uptake is still an expectation for KORSUVA injection? And I have a follow-up.

Christopher Posner — President, Chief Executive Officer and Director

Yes, Daniel. I’ll tackle the first one. So here, let me just tell you specifically in the first couple of weeks of the launch — I mean, a, the Vifor team has really worked diligently to ensure that the product pricing reimbursement information is loaded into the systems, so orders can be placed. And Vifor ship product to wholesalers and wholesalers have started to ship product to dialysis clinics. So most importantly, patients are receiving commercial product.

And then the second thing is execution. I mean since the launch meetings in March, the Vifor sales force has transitioned from patient identification to product promotion and they are promoting KORSUVA injection to physicians and advanced practitioners, providers and nurses. And I’m really pleased to report that they have actually reached the majority of these ACPs at least once in the past four weeks. And anecdotally I mentioned before my prepared remarks, there is a high level of excitement.

And then lastly, really of the efforts in terms of activating and engaging patients, we believe both, Vifor and Cara believe that the patients are key drivers of demand. So a lot of that activity around activating patients that I mentioned again in my prepared remarks, a campaign that they just launched with the American Kidney Fund with support from Vifor. So, from my standpoint and what we’re seeing in the marketplace is quite encouraging. There is a lot of excitement around the product. We’re seeing ordering and we obviously expect that to accelerate in the coming weeks.

Daniel Wolle — J.P Morgan — Analyst

Okay. Great. And in terms of activating and engaging these patients, is it possible for you to quantify for us, the potential contribution to the addressable patient population that can be driven by raising this patient awareness?

Christopher Posner — President, Chief Executive Officer and Director

Well, it’s hard to quantify at this stage. What I can tell you is it’s a multi-prong demand generation program. Obviously bottoms up working with nephrologists, advanced practitioners as well as nurses and the patients and at the top-down approach, working with the dialysis organization. So the Vifor team, it’s hard to put a number on the kind of value creation of each of those, but the Vifor team has done a very nice job leaving no stone unturned in the marketing efforts. That’s what I can tell you.

Daniel Wolle — J.P Morgan — Analyst

Okay. Great. And then on the European launch, can you provide us some color on how we should think about that your late launch for Kapruvia, the reimbursement dynamics across different countries and then, the economics involved with the JV?

Christopher Posner — President, Chief Executive Officer and Director

Yes. So I’ll come back with the JV question if you allow me Daniel, but let me talk a little bit about Europe. Again, early days. I mean the great thing a, is we have an approved product, Kapruvia, we announced April 28 via the European Commission. And overall if you look at the opportunity in Europe, you’re looking at about 300,000 patients undergoing dialysis in Europe and we’re hearing kind of a similar sort of prevalence during the addressable population. Around 40% of that population would be addressable for a drug like Kapruvia. And I’d be remiss and I have my Chief Medical Office sitting next be remiss, not to tell you that there is a tremendous unmet need and no approved therapies for these patients in Europe. That’s A.

In terms of how — what we’ve guided to with Vifor is that launch will occur sequentially with countries beginning in the second half of 2022. Germany will — was traditionally the first country to launch. In Europe, it will be no different for Kapruvia. And reimbursement is different — Europe’s not one country, so reimbursement’s different across the different countries. But again in terms of sequence of launch in Germany, we’ll go first in the second half of this year and then the rest of the Western European countries will follow suit in the 2024 end. We’re quite excited about the opportunity in Europe. Again similar dynamics in the U.S. in terms of high unmet need, no approved therapies and the Vifor team has really done a good job preparing the market. It’s not like — they’ve been preparing the European market really at the same time they’ve been working in the U.S. market. So, we’re quite excited about the potential there. In terms of the JV, Tom, maybe you could talk to Danielle about the JV real quick.

Thomas Reilly — Chief Financial Officer

Sure. No problem. So, Danielle, as we mentioned earlier that will be a $15 million and its cash milestone which will receive week 12 neutral of the program. Relating to the economics, it’s traditional our royalty base agreement outside the U.S. for its face of net sales. So I think it’s — the royalty is a tiered double-digit royalty structure based on the net sales outside the U.S.

Daniel Wolle — J.P Morgan — Analyst

Great. Thank you very much.

Thomas Reilly — Chief Financial Officer

Thanks, Daniel.

Operator

Your next question comes from the line of David Amsellem from Piper Sandler. Your line is open.

David Amsellem — Piper Sandler Companies — Analyst

Hey, thanks. I joined late, so I apologize if I missed these topics. But just on the launch, can you just talk about who you think are the ideal initial patients if you will? Or maybe I’ll ask a different way. Can you just talk about where is sort of the low hanging fruit in terms of patients that those who have already been on say oral antihistamines or #1.13 or how is your partner thinking about [Technical Issues] that’s number one. And then number two, can you just talk about pricing in Europe, and how you think it’s going to shape out relative to the U.S? I mean to dampen the bundled notwithstanding but at least initially, how do you think that will shake out? Thanks.

Christopher Posner — President, Chief Executive Officer and Director

Yeah. David, nice to hear from you. Let me tackle the last question, because it’s a bit more straightforward. The price in Europe, obviously, we’ve just got an approval Vifor, we’ll work on pricing in the European countries, with the government committees over the course of the next X number of months. In terms of the expectation, I would tell you, obviously, it’s going to be lower than the U.S. in general to the degree and magnitude of how much lower, we don’t know yet. I think that’s work to be done by the Vifor team with the value proposition again, with the authorities in the European countries.

Your first question is a really interesting one on patient segmentation. And again, there has been a lot of market research and a lot of work done by the Vifor team and the Cara team on patient segmentation. There are a lot of patients that have basically tried in and simply resigned for the fact that there is no great treatment alternatives. So we really believe that activating these patients to tell their nephrologists and their nursing staff that there is a solution now available, we believe that they are low-hanging fruit. And what we’re hearing in the marketplace is warrants, it’s kind of like the marketing outage of magnified problem solution, really talking about the solution with these patients, there have been very active now engaging with their nephrologist. So I think in sort of getting in the individual segmentation, that’s what we believe we are really is a patient population, that will be the initial patients who’ve been on drug.

David Amsellem — Piper Sandler Companies — Analyst

That’s helpful. Thanks.

Christopher Posner — President, Chief Executive Officer and Director

You got it, David.

Operator

[Operator Instructions] Your next question comes from the line of Annabel Samimy from Stifel. Your line is open.

Unidentified Participant — — Analyst

Hi. This is Suzy calling in for Annabel. Congratulations on all the development and thanks for taking our question. Notalgia paresthetica proof-of-concept data is coming up soon. Will this be reported out in a similar fashion as the base to atopic dermatitis and pre-dialysis study? And is there any benchmark for Notalgia that we should be thinking about? What are some of the assumptions baked in there in terms of placebo and what you need to see over placebo which reached a circle — the circle, sorry, which is of significant. And if successful, will you be pursuing any Phase 3 programs or use of data quickly to establish activity in neuropathic edge? And second question is do you expect R&D expenses to increase throughout the quarter or say in the similar range as this quarter? Thank you so much.

Christopher Posner — President, Chief Executive Officer and Director

You got it. I’ll have Tom tackle second one, if you allow me. But let me turn it to to Dr. Goncalves who will answer the mortality paresthetica question.

Joana Goncalves — Chief Medical Officer

So thank you for your question. So, to tackle the first part of it, we will be sharing the data as we typically have done on the top-line results, fall and the study in this quarter, quarter two. And you were asking about benchmarks within the paresthetica cut. The up-to-date has not been any robust plaebo controlled study and to be able to glean on what the placebo response would behave like. So we will wait for our data and wait to see what the placebo will look like but there’s is really nothing in there that speaks to the unmet need of the Notalgia paresthetica that very little research if we know effectively been done in this space. So we look forward to our data. And I mean our people expectations of the data in the next step.

As a small proof-of-concept study, we are expecting to see a numerical separation from placebo. What we also would like to see is a consistent pattern of efficacy that we have seen across all other disease areas, so fast onset of action and sustained out to the eight-week. We’ll wait for the data and reviewed it comprehensively and you can take it from the — on what the mix in the development stage.

Christopher Posner — President, Chief Executive Officer and Director

Great. And on the R&D expenses, Tom, maybe just speak to that.

Thomas Reilly — Chief Financial Officer

Yeah. Sure. So we don’t guide on R&D expenses on a quarter-by-quarter basis. So what I would suggest, what I would recommend we did provide guidance today related to our cash runway, which is encouraged for with recurring or ongoing operating expenses and development expenses into the first half of 2024, and that does not take into consideration any revenue associated with KORSUVA injection. So I think from that perspective, that should help you get a sense of what we’re expecting from a cash burn over — into the first half of 2024.

Unidentified Participant — — Analyst

Awesome. Thank you so much. Very helpful. Thank you.

Christopher Posner — President, Chief Executive Officer and Director

Thank you.

Thomas Reilly — Chief Financial Officer

You’re welcome.

Operator

Your next question comes from the line of Sumant Kulkarni from Canaccord. Your line is open.

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

Good afternoon. Thanks for taking my questions. The first is on the launch and the second is a clarification. First, it’s good to hear the your partners launch is tracking per your expectations. It’s still early days, you have reimbursement, but if they have been any nitpicks or push back against the KORSUVA IV what have those been if at all?

Christopher Posner — President, Chief Executive Officer and Director

Yeah, Sumant, This is a year from yet. No, we have not heard any pushback and in fact, there is some — I check in with the Vifor pretty much daily. And I think the general theme is excitement. There hasn’t been a lot of innovation in the CKD space and dialysis to begin with. So a lot of excitement that there is a solution now, and that’s the general fee.

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

Understood. And then the clarification, you mentioned the inventory dynamics, the way they work dialysis clinics. So just wanted to clarify that on the $4.8 million of commercial supply revenue, that shipping was close to actual put through demand?

Christopher Posner — President, Chief Executive Officer and Director

Yeah. Tom, you want to?

Thomas Reilly — Chief Financial Officer

I am sorry.

Christopher Posner — President, Chief Executive Officer and Director

$4.8 million.

Thomas Reilly — Chief Financial Officer

Yeah. The $4.8 million. Sumant, just repeat the question sorry.

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

The question was the $4.8 million, how does that ship in recognition work relative to the actual pull-through demand?

Thomas Reilly — Chief Financial Officer

Okay. So the way that that is related to shipment to our partner Vifor, it’s commercial supply business entity. From there the actual shipments — Vifor will then shift to the wholesalers and from there the wholesalers shift to the dialysis organizations. So the revenue that we recorded was the commercial supply because the chain started over to lead there.

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

Okay. Let me give me asked that another way then. Roughly how many months of usage would that correspond to then?

Thomas Reilly — Chief Financial Officer

That we don’t disclose.

Sumant Kulkarni — Canaccord Genuity Group Inc. — Analyst

Thanks.

Operator

[Operator Instructions] There is no question at this time, please continue. We have our next question from the line of Oren Livnat from HC Wainwright. Your line is open.

Oren Livnat — H.C. Wainwright & Co. — Analyst

For the last-second punch and I think I tried to couple of times.

Christopher Posner — President, Chief Executive Officer and Director

You got it.

Oren Livnat — H.C. Wainwright & Co. — Analyst

If I could just ask a little bit about — and I know you’re limited in what you can say, Vifor is launching this, but I think you can talk big picture about essentially, what is the commercial model for this product in this space you haven’t talked about it in a while? You mentioned the top-down efforts from dialysis centers. I’m trying to understand who is really the touchpoint that’s going to drive I guess awareness and utilization or prescribing of this product? Does Vifor really have to in a typical pharma sense their launch have to make individual nephrologists aware of and fully educated on this product before they even start thinking about prescribing it aside from patient activation? Or given that these patients are actually seeing these dialysis centers every other day, are they really the driving force here such that assuming Fresenius, for example, already is intimately familiar with this product or will be very soon, are they reaching out to their affiliated physicians to sort of drive awareness of this new option that’s available?

Christopher Posner — President, Chief Executive Officer and Director

Yes, it’s a great question on the entire buying process. It’s a rather unique ecosystem and that’s why I’ve mentioned already that the projects have to prescribe the product, Oren, so they have to be educated and made aware of the product in order to prescribe it so the patient can get it. The dialysis organization’s helped demand generation by talking to their clinics and training their nurses, et cetera, and making it available. So the DOs have a job to play in demand generation as well. And then the third formula is that patients. Kind of similar to other typical prescription markets is when the patient’s educated and activated and actually asked for a drug, they tend to get it. It works pretty similar here. So the buying process across all those demand levers is where Vifor has allocated resources and that’s why I put in my marketing add on, that’s why I’m very keen on the launch to date as well as the acceleration in the coming months.

Oren Livnat — H.C. Wainwright & Co. — Analyst

I guess to ask it another way is without understanding the rules and the laws of the land here intimately myself, is there a possibility that a nephrologist who sends patients to Fresenius centres routinely is going to be receiving any materials coming from the Fresenius side, not from a Vifor rep directly, that is raising their awareness directly about this product being available to their patients that come to Fresenius centers?

Christopher Posner — President, Chief Executive Officer and Director

Yes, and that’s a top-down approach, so the DOs could help raise awareness and educate the community as well but Vifor’s team has taken a bottoms-up approach as well, obviously targeting the 4,000 or so nephrologists. As I told you, we’re quite keen on execution and as you probably know very well, the launches typically fail because execution is poor and what we’re seeing very strong controls on key performance indicators on the execution side by Vifor and I mentioned before, they’ve hit pretty much all 4,000 nephrologists in the first couple of weeks of launch. It’s a very strong execution number. So it’s this bottoms-up, top-down approach, or that I think really caters to the ecosystem in ESRD dialysis.

Oren Livnat — H.C. Wainwright & Co. — Analyst

All right. It sounds like a drinking game, bottoms-up, top-down. The EU commercial dynamics, just also on that front. How concentrated is that market across the continent there? Is it similar, do you have large corporate players across a country or countries, or are these government-provided dialysis facilities or is it just totally fragmented and you should not think about it being similar to the U.S. market?

Christopher Posner — President, Chief Executive Officer and Director

Yes, I would say every country is a little different but I would tell you it’s a fairly concentrated market as well, maybe different players in the U.S. in individual countries but concentrated as well.

Oren Livnat — H.C. Wainwright & Co. — Analyst

All right. Thanks. I appreciate the help.

Christopher Posner — President, Chief Executive Officer and Director

You got it. Thanks, Oren.

Operator

[Operator Instructions] There is no question at this time, please continue.

Christopher Posner — President, Chief Executive Officer and Director

Okay. With that, I’d like to wish everybody a great afternoon and thank you so much for joining the call.

Operator

[Operator Closing Remarks]