cara-10q_20190331.htm

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 definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 2, 2019 was: 39,751,606.

	March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	14,188		$	15,081
Marketable securities		120,265			146,302
Income tax receivable		749			664
Other receivables		1,019			926
Prepaid expenses		7,577			4,805
Restricted cash, current		361			361
Total current assets		144,159			168,139
Operating lease right-of-use asset		3,492			—
Marketable securities, non-current		21,687			21,396
Property and equipment, net		841			880
Restricted cash		408			408
Total assets	$	170,587		$	190,823
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	13,310		$	13,622
Operating lease liability, current		901			—
Current portion of deferred revenue		28,194			26,825
Total current liabilities		42,405			40,447

Operating lease liability, non-current		4,087			—
Deferred revenue, non-current		9,573			15,184
Deferred lease obligation		—			1,562
Commitments and contingencies (Note 15)		—			—
Stockholders’ equity:
Preferred stock; $0.001 par value; 5,000,000 shares authorized at March 31, 2019 and December 31, 2018, zero shares issued and outstanding at March 31, 2019 and December 31, 2018		—			—
Common stock; $0.001 par value; 100,000,000 shares authorized at March 31, 2019 and December 31, 2018, 39,575,044 shares and 39,547,558 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		39			39
Additional paid-in capital		430,724			428,059
Accumulated deficit		(316,314	)		(294,354	)
Accumulated other comprehensive income (loss)		73			(114	)
Total stockholders’ equity		114,522			133,630
Total liabilities and stockholders’ equity	$	170,587		$	190,823

	Three Months Ended
	March 31, 2019			March 31, 2018
Revenue:
License and milestone fees	$	4,242		$	—
Clinical compound revenue		140			—
Total revenue		4,382			—
Operating expenses:
Research and development		23,608			13,427
General and administrative		3,908			3,697
Total operating expenses		27,516			17,124
Operating loss		(23,134	)		(17,124	)
Other income		1,089			311
Loss before benefit from income taxes		(22,045	)		(16,813	)
Benefit from income taxes		85			46
Net loss	$	(21,960	)	$	(16,767	)
Net loss per share:
Basic and Diluted	$	(0.56	)	$	(0.51	)
Weighted average shares:
Basic and Diluted		39,552,277			32,681,661
Other comprehensive income (loss), net of tax of $0:
Change in unrealized gains (losses) on available-for- sale marketable securities		187			(44	)
Total comprehensive loss	$	(21,773	)	$	(16,811	)

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2017		32,662,255	$	33	$	307,158	$	(220,341	)	$	(70	)	$	86,780
Stock-based compensation expense		—		—		1,871		—			—			1,871
Shares issued upon exercise of stock options		37,688		—		263		—			—			263
Net loss		—		—		—		(16,767	)		—			(16,767	)
Other comprehensive loss		—		—		—		—			(44	)		(44	)
Balance at March 31, 2018		32,699,943	$	33	$	309,292	$	(237,108	)	$	(114	)	$	72,103

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2018		39,547,558	$	39	$	428,059	$	(294,354	)	$	(114	)	$	133,630
Stock-based compensation expense		—		—		2,234		—			—			2,234
Shares issued upon exercise of stock options		17,291		—		234		—			—			234
Shares issued for consulting services		10,195		—		197		—			—			197
Net loss		—		—		—		(21,960	)		—			(21,960	)
Other comprehensive income		—		—		—		—			187			187
Balance at March 31, 2019		39,575,044	$	39	$	430,724	$	(316,314	)	$	73		$	114,522

	Three Months Ended
	March 31, 2019			March 31, 2018
Operating activities
Net loss	$	(21,960	)	$	(16,767	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		2,234			1,871
Depreciation and amortization		50			125
Amortization expense component of lease expense		145			—
Accretion of available-for-sale marketable securities		(478	)		(217	)
Realized loss on sale of available-for-sale marketable securities		—			15
Deferred rent costs		—			(61	)
Deferred revenue		(4,242	)		—
Changes in operating assets and liabilities:
Income tax receivable		(85	)		(46	)
Other receivables		(93	)		39
Prepaid expenses		(2,574	)		(1,796	)
Accounts payable and accrued expenses		(312	)		(1,631	)
Operating lease liability		(211	)		—
Net cash used in operating activities		(27,526	)		(18,468	)
Investing activities
Proceeds from maturities of available-for-sale marketable securities		79,295			26,650
Proceeds from sale of available-for-sale marketable securities		—			10,850
Purchases of available-for-sale marketable securities		(52,885	)		(16,804	)
Purchases of property and equipment		(11	)		(2	)
Net cash provided by investing activities		26,399			20,694
Financing activities
Proceeds from the exercise of stock options		234			263
Net cash provided by financing activities		234			263
Net (decrease) increase in cash, cash equivalents and restricted cash		(893	)		2,489
Cash, cash equivalents and restricted cash at beginning of period		15,850			10,157
Cash, cash equivalents and restricted cash at end of period	$	14,957		$	12,646
Noncash investing and financing activities
Shares of common stock issued in exchange for consulting services (recorded as a prepaid expense)	$	197		$	—

Cara Therapeutics, Inc., or the Company, is a clinical-stage biopharmaceutical corporation formed on July 2, 2004. The Company is focused on developing and commercializing new chemical entities with a primary focus on pruritus as well as pain by selectively targeting peripheral kappa opioid receptors. The Company’s primary activities to date have been organizing and staffing the Company, developing its product candidates, including conducting preclinical studies and clinical trials of CR845/difelikefalin-based product candidates and raising capital.

As of March 31, 2019, the Company had raised aggregate net proceeds of approximately $383,200 from several rounds of equity financing, including its initial public offering, or IPO, which closed in February 2014 and three follow-on public offerings of common stock, which closed in July 2018, April 2017 and August 2015, and the issuance of convertible preferred stock and debt prior to the IPO. The Company had also received $88,900 under its license agreements for CR845/difelikefalin, primarily with 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. Additionally, 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 (International) Ltd., or Vifor, in connection with the Company’s license agreement with VFMCRP (see Note 10, Collaboration and Licensing Agreements).

As of March 31, 2019, the Company had unrestricted cash and cash equivalents and marketable securities of $156,140 and an accumulated deficit of $316,314. 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 $21,960 and $16,767 for the three months ended March 31, 2019 and 2018, respectively, and had net cash used in operating activities of $27,526 and $18,468 for the three months ended March 31, 2019 and 2018, 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 Food and Drug Administration, or FDA, and other government regulations. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve profitability.

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, 2018 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, 2018.

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. Actual results could differ materially from the Company’s estimates and assumptions. Significant estimates include the fair value of marketable securities that are classified as level 2 of the fair value hierarchy, useful lives of fixed assets, the periods over which certain revenues will be recognized, including licensing and collaborative revenue recognized from non-refundable up-front and milestone payments, 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 and the periods over which those costs are expensed, the incremental borrowing rate used in lease calculations and the likelihood of realization of deferred tax assets.

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, 2018, except for the recent adoption of new accounting pronouncements as disclosed below.

On January 1, 2019, the Company adopted ASC 842, Leases, under which it elected not to adjust prior comparative periods, which are reported under ASC 840. In addition, the Company elected to adopt both the practical expedient to use hindsight when determining the lease term and the package of practical expedients available under ASC 842, including:

Upon adoption of ASC 842, the Company had only one lease, the Stamford Lease (see Note 15, Commitments and Contingencies: Leases), which is included in operating lease right-of-use asset, or ROU asset, operating lease liability – current and operating lease liability – non-current in the Company’s Condensed Balance Sheets.

In general, the Company determines if a contract, at its inception, is a lease or contains a lease based on whether the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses whether, throughout the period of use, it has both the right to obtain substantially all of the economic benefits from use of the identified asset, and the right to direct the use of the identified asset. Both of these criteria are met by the Stamford Lease.

Under ASC 842, the Company determines the amount of the operating lease liability based on the present value of the future minimum lease payments over the remaining lease term. The amount of the operating lease ROU asset is equal to the amount of the lease liability, less accrued rent and lease incentives received from the landlord. Initial direct costs were deemed to be immaterial.

Since the Stamford Lease does not provide an implicit interest rate, the Company used an annual incremental borrowing rate of 7% based on the information available at the date of adoption for the purpose of determining the lease liability during the term of the lease.

As noted above, upon adoption of ASC 842, the Company used hindsight in determining the term of the Stamford Lease. Although the Stamford Lease is renewable for one five-year term, upon inception of the lease the renewal term was not included in the lease term since it was not reasonably certain that the Company will exercise that option. Accordingly, the lease term of the Stamford Lease was not adjusted upon adoption of ASC 842 to determine the operating lease ROU asset and operating lease liability.

The Stamford Lease contains both a lease and non-lease component which are accounted for separately. The Company allocates the consideration to the lease and the non-lease component on a relative standalone price basis. Lease expense under ASC 842 is recognized on a straight-line basis over the lease term in the Condensed Statements of Comprehensive Loss.

There was no cumulative effect adjustment as a result of the adoption of ASC 842 on January 1, 2019, which reflects the difference between the amount of lease expense under ASC 842 that would have been recognized from inception of the Stamford Lease through December 31, 2018 and the amount of rent expense actually recognized under ASC 840 during that same period.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. Accordingly, under ASU 2018-07, the fair value of stock options granted to nonemployees will be measured only on the grant date, the amount of which will be recognized as compensation expense over the nonemployee’s service (vesting) period in the same period(s) and in the same manner as if the Company had paid cash for the goods or services instead of paying with or using share-based payment awards. On an award-by-award basis, the Company may elect to use the contractual term as the expected term when estimating the fair value of a nonemployee award to satisfy the measurement objective. Prior guidance under Subtopic 505-50 required the fair value of nonemployee stock options to be marked to market at each reporting period during the service period, which resulted in volatility of compensation expense during that period. The Company adopted ASU 2018-07 on January 1, 2019 on a modified retrospective basis and remeasured, on that date, the fair value of all outstanding unvested stock options that had been granted to nonemployees. The adoption of ASU 2018-07 did not have a material effect on its results of operations, financial position or cash flows because grants of stock options to nonemployees have been insignificant.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, or ASU 2018-18, which clarifies the interaction between Topic 808 and Topic 606 by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for under Topic 606; (2) adding unit-of-account guidance in Topic 808 to align with the guidance in Topic 606; and (3) clarifying presentation guidance for transactions with a collaborative arrangement participant that are not accounted for under Topic 606. ASU 2018-18 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. The Company has determined that ASU 2018-18 will not have any effect on its financial position, results of operations or cash flows since all three of its collaboration and licensing agreements are accounted for under Topic 606 (see Note 10, Collaboration and Licensing Agreements and Note 11, Revenue Recognition).

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13, which modifies the disclosure requirements on fair value measurements in Topic 820 to remove the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also amends Topic 820 to clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. ASU 2018-13 also requires additional disclosure for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively

for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of ASU 2018-13. The Company will adopt ASU 2018-13, as applicable, on January 1, 2020. The Company does not expect that the adoption of ASU 2018-13 will have a material effect on its results of operations, financial position, cash flows or footnote disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which replaces the incurred loss impairment methodology in current GAAP, that delays recognition of a credit loss until it is probable that such loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debt securities by requiring (1) estimating expected credit losses only when the fair value is below the amortized cost of the asset; (2) recording a credit loss without regard to the length of time a security has been in an unrealized loss position; (3) limiting the measurement of the credit loss to the difference between the security’s amortized cost basis and its fair value and (4) presenting credit losses as an allowance rather than as a write-down, which will allow the Company to record reversals of credit losses in current period net income, a practice that is currently prohibited. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As such, the Company expects to adopt ASU 2016-13 on January 1, 2020 and is currently evaluating the effect it will have on its results of operations, financial position and cash flows.

As of March 31, 2019 and December 31, 2018, 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, 2019 and December 31, 2018:

			Gross Unrealized
Type of Security	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. Treasury securities	$	15,921	$	16	$	—		$	15,937
U.S. government agency obligations		12,440		7		—			12,447
Corporate bonds		69,914		56		(10	)		69,960
Commercial paper		38,104		6		(2	)		38,108
Municipal bonds		5,500		—		—			5,500
Total available-for-sale marketable securities	$	141,879	$	85	$	(12	)	$	141,952

			Gross Unrealized
Type of Security	Amortized Cost		Gains		Losses			Estimated Fair Value
U.S. Treasury securities	$	19,540	$	—	$	(1	)	$	19,539
U.S. government agency obligations		17,860		—		(1	)		17,859
Corporate bonds		75,999		5		(94	)		75,910
Commercial paper		50,413		—		(23	)		50,390
Municipal bonds		4,000		—		—			4,000
Total available-for-sale marketable securities	$	167,812	$	5	$	(119	)	$	167,698

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.

The Company classifies its marketable debt securities based on their contractual maturity dates. As of March 31, 2019, the Company’s marketable debt securities mature at various dates through March 2021. The amortized cost and fair values of marketable debt securities by contractual maturity were as follows.

	As of March 31, 2019				As of December 31, 2018
Contractual maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	120,201	$	120,265	$	146,363		146,302
One year to two years		21,678		21,687		21,449		21,396
Total	$	141,879	$	141,952	$	167,812	$	167,698

The following tables show the fair value of the Company's available-for-sale marketable securities that have unrealized losses and that are deemed to be only temporarily impaired, aggregated by investment category and length of time that the individual investments have been in a continuous unrealized loss position.

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate bonds	$	14,761	$	(10	)	$	—	$	—	$	14,761	$	(10	)
Commercial paper		15,884		(2	)		—		—		15,884		(2	)
Total	$	30,645	$	(12	)	$	—	$	—	$	30,645	$	(12	)

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	16,392	$	(1	)	$	—	$	—	$	16,392	$	(1	)
U.S. government agency obligations		5,596		(1	)		—		—		5,596		(1	)
Corporate bonds		71,322		(94	)		—		—		71,322		(94	)
Commercial paper		39,445		(23	)		—		—		39,445		(23	)
Total	$	132,755	$	(119	)	$	—	$	—	$	132,755	$	(119	)

As of March 31, 2019 and December 31, 2018, the Company held a total of 18 out of 73 positions and 69 out of 84 positions, respectively, that were in an unrealized loss position, none of which had been in an unrealized loss position for 12 months or greater. 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 and that, therefore, it had no other-than-temporary impairments on these securities as of March 31, 2019 and December 31, 2018. The Company does not intend to sell these debt securities before maturity and the Company believes it is not more likely than not that it will be required to sell these securities before the recovery of their amortized cost basis, which may be maturity.

The following table summarizes the changes in accumulated other comprehensive income (loss), or AOCI, net of tax, from unrealized gains (losses) on available-for-sale marketable securities, the Company's only component of AOCI, for the three months ended March 31, 2019 and March 31, 2018.

	Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2018	$	(114	)
Other comprehensive income before reclassifications		187
Amount reclassified from accumulated other comprehensive income		—
Net current period other comprehensive income		187
Balance, March 31, 2019	$	73

Balance, December 31, 2017	$	(70	)
Other comprehensive loss before reclassifications		(59	)
Amount reclassified from accumulated other comprehensive loss		15
Net current period other comprehensive loss		(44	)
Balance, March 31, 2018	$	(114	)

	Three Months Ended March 31,					Affected Line Item in the Statements of
Component of AOCI	2019		2018			Operations
Unrealized gains (losses) on available- for-sale marketable securities
Realized gains (losses) on sale of securities	$	—	$	(15	)	Other income
		—		—		Benefit from income taxes
	$	—	$	(15	)

The amounts reclassified out of AOCI into net loss were determined by specific identification.

As of March 31, 2019 and December 31, 2018, the Company’s financial instruments consisted of cash, cash equivalents, available-for-sale marketable securities, prepaid expenses, restricted cash, accounts payable and accrued liabilities. The fair values of cash, cash equivalents, 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 on the Company’s Condensed Balance Sheets as Marketable Securities at their fair values, based upon pricing of securities with the same or similar investment characteristics as provided by third-party pricing services, as described below.

Current accounting guidance defines fair value, establishes a framework for measuring fair value in accordance with ASC section 820, and requires certain disclosures about fair value measurements. The valuation techniques included in the guidance are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

The Company classifies its investments in a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is divided into three levels based on the source of inputs as follows:

The Company estimates the fair values of its financial instruments categorized as level 2 in the fair value hierarchy, including U.S. Treasury securities, U.S. government agency obligations, corporate bonds, commercial paper and municipal bonds, by taking into consideration valuations obtained from third-party pricing services. The pricing services use industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, benchmark yields, issuer credit spreads, benchmark securities, and other observable inputs. The Company obtains a single price for each financial instrument and does not adjust the prices obtained from the pricing service.

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, 2019 or December 31, 2018.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018.

Financial assets			Quoted prices in		Significant other		Significant
			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	$	14,188	$	14,188	$	—	$	—
Available-for-sale marketable securities:
U.S. Treasury securities		15,937		—		15,937		—
U.S. government agency obligations		12,447		—		12,447		—
Corporate bonds		69,960		—		69,960		—
Commercial paper		38,108		—		38,108		—
Municipal bonds		5,500		—		5,500		—
Restricted cash:
Commercial money market account		769		769		—		—
Total financial assets	$	156,909	$	14,957	$	141,952	$	—

Financial assets			Quoted prices in		Significant other		Significant
			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	$	15,081	$	15,081	$	—	$	—
Available-for-sale marketable securities:
U.S. Treasury securities		19,539		—		19,539		—
U.S. government agency obligations		17,859		—		17,859		—
Corporate bonds		75,910		—		75,910		—
Commercial paper

Delaware	75-3175693
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4 Stamford Plaza 107 Elm Street, 9^th Floor Stamford, Connecticut	06902
(Address of registrant’s principal executive offices)	(Zip Code)

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

		PAGE NUMBER

Item 1.	Financial Statements (Unaudited):

	Condensed Balance Sheets as of March 31, 2019 and December 31, 2018	1

	Condensed Statements of Comprehensive Loss for the Three Months Ended March 31, 2019 and 2018	2

	Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018	3

	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	4

	Notes to Condensed Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

Item 4.	Controls and Procedures	43

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	44

Item 4.	Mine Safety Disclosures	44

Item 5.	Other Information	44

Item 6.	Exhibits	45

	SIGNATURES	46

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☒