Cara Therapeutics
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934COMMISSION FILE NUMBER: 001-36279CARA THERAPEUTICS, INC.(Exact name of registrant as specified in its charter) Delaware 75-3175693(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 4 Stamford Plaza107 Elm Street, 9th FloorStamford, Connecticut 06902(Address of registrant’s principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (203) 406-3700Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.001 per share The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒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 preceding12 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of theregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growthcompany. 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 ☒ Smaller Reporting Company ☒Non-accelerated filer☐ 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 revisedfinancial 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 Act). Yes ☐ No ☒ The aggregate market value of the registrant’s Common Stock (the only common equity of the registrant) held by non-affiliates, based on the closing sales price of the stockon the Nasdaq Global Market for the last business day of the registrant’s most recently completed second fiscal quarter, was $561,082,035. For purposes of this calculation, shares ofcommon stock held by directors and officers and their affiliated entities at June 30, 2018 were excluded. Exclusion of shares held by any person should not be construed to indicatethat the person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that the person is controlled by or undercommon control with the registrant.The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of March 5, 2019 was 39,547,558.  CARA THERAPEUTICS, INC.2018 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS PAGE PART I Item 1. Business 3 Item 1A. Risk Factors 32 Item 1B. Unresolved Staff Comments 71 Item 2. Properties 72 Item 3. Legal Proceedings 72 Item 4. Mine Safety Disclosures 72 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 73 Item 6. Selected Financial Data 75 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 77 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 94 Item 8. Financial Statements and Supplementary Data 95 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 95 Item 9A. Controls and Procedures 95 Item 9B. Other Information 96 PART III Item 10. Directors, Executive Officers and Corporate Governance 97 Item 11. Executive Compensation 100 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 108 Item 13. Certain Relationships and Related Transactions, and Director Independence 110 Item 14. Principal Accounting Fees and Services 112 PART IV Item 15. Exhibits, Financial Statement Schedules 114  PART IIn this Annual Report on Form 10-K, the terms “we,” “us” and “our” refer to Cara Therapeutics, Inc.Cautionary Note Regarding Forward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995,that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections of this Annual Report on Form 10-Ktitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also containedelsewhere in this Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,”“could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” andor the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known andunknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially differentfrom the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that these statements are based on a combination of facts and factorscurrently known by us and our expectations of the future, about which we cannot be certain.The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about: •the success and timing of our clinical trials, including our clinical trial programs for KORSUVATM (CR845/difelikefalin) injection inchronic kidney disease associated pruritus, or CKD-aP, and Oral KORSUVA (CR845/difelikefalin) in CKD-aP, and chronic liver diseaseassociated pruritus, or CLD-aP, and other investigational indications, and the reporting of clinical trial results; •the potential regulatory development pathway for KORSUVA (CR845/difelikefalin) injection in CKD-aP and CR845/difelikefalin injectionin acute post-operative setting; •our plans to develop and commercialize KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) and our otherproduct candidates; •the potential results of ongoing and planned preclinical studies and clinical trials and future regulatory and development milestones for ourproduct candidates; •the size and growth of the potential markets for pruritus management, including CKD-aP in hemodialysis and non-dialysis markets, CLD-aPmarkets as well as post-operative care markets, and for our other product candidates and our ability to serve those markets; •our ability to obtain and maintain regulatory approval of our product candidates, including intravenous, or I.V., and OralCR845/difelikefalin, and the labeling under any approval we may obtain; •the anticipated commercial launch of our lead product candidate, KORSUVA (CR845/difelikefalin) injection; •the potential of future scheduling of KORSUVA (CR845/difelikefalin) injection by the United States Drug Enforcement Administration, orDEA, if regulatory approval is received; •the performance of our current and future collaborators and licensees, including Vifor Fresenius Medical Care Renal Pharma Ltd., orVFMCRP, Maruishi Pharmaceuticals Co. Ltd., or Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, as well as sub-licensees,including Kissei Pharmaceutical Co. Ltd., or Kissei, and our ability to maintain such collaborations; •our ability to establish additional collaborations for our product candidates; •the continued service of our key scientific or management personnel; •our ability to establish commercialization and marketing capabilities; 1  •regulatory developments in the United States and foreign countries; •the rate and degree of market acceptance of any approved products; •our ability to obtain and maintain coverage and adequate reimbursement from third-party payers for any approved products; •our planned use of our cash and cash equivalents and marketable securities and the clinical milestones we expect to fund with such proceeds; •the accuracy of our estimates regarding expenses, future revenues and capital requirements; •our ability to obtain funding for our operations; •our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business withoutinfringing on the intellectual property rights of others; •the success of competing drugs that are or may become available; and •the performance of third-party manufacturers and clinical research organizations.You should refer to Part I Item 1A. “Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that may cause our actualresults to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that theforward-looking statements in this Annual Report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to beinaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard thesestatements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. Weundertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except asrequired by law.You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed asexhibits to this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what weexpect. We qualify all of our forward-looking statements by these cautionary statements.Industry and Market DataWe obtained the industry and market data in this Annual Report on Form 10-K from our own research as well as from industry and generalpublications, surveys and studies conducted by third parties. Industry and general publications, studies and surveys generally state that the informationcontained therein has been obtained from sources believed to be reliable. These third parties may, in the future, alter the manner in which they conductsurveys and studies regarding the markets in which we operate our business. As a result, you should carefully consider the inherent risks and uncertaintiesassociated with the industry and market data contained in this Annual Report on Form 10-K, including those discussed in Part I Item 1A. “Risk Factors.” 2  Item 1. Business.Overview We are a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities with a primary focus onpruritus as well as pain by selectively targeting peripheral kappa opioid receptors. We are developing a novel and proprietary class of product candidates, ledby KORSUVA (CR845/difelikefalin), a first-in-class kappa opioid receptor agonist that targets the body’s peripheral nervous system, as well as certainimmune cells. In Phase 2 trials, KORSUVA (CR845/difelikefalin) injection (intravenous formulation) has demonstrated statistically significant reductions in itchintensity and concomitant improvement in pruritus-related quality of life measures in hemodialysis patients with moderate-to-severe CKD-aP, and iscurrently being investigated in Phase 3 trials in hemodialysis patients with CKD-aP. We have partnered with VFMCRP, a joint venture between Vifor PharmaGroup and Fresenius Medical Care, to commercialize KORSUVA (CR845/difelikefalin) injection in dialysis patients with CKD-aP worldwide, excluding theUnited States, Japan (Maruishi/sub-licensee Kissei), and South Korea (CKDP). We retain all rights in the United States and will promote KORSUVA(CR845/difelikefalin) injection, if approved, with VFMCRP in U.S. Fresenius Medical Care North America, or FMCNA, dialysis clinics under a profit shareagreement. CR845/difelikefalin has also demonstrated statistically significant pain reduction in clinical trials in patients with moderate-to-severe acute pain inthe post-operative setting, without inducing many of the undesirable side effects typically associated with currently available opioid pain therapeutics. Weretain rights to all KORSUVA/CR845 formulations and indications worldwide, excluding KORSUVA (CR845/difelikefalin) injection in dialysis patientswith CKD-aP under our agreement with VFMCRP for certain ex-U.S. territories and our other license agreements for CR845/difelikefalin in Japan(Maruishi/sub-licensee Kissei) and South Korea (CKDP). The U.S. Food and Drug Administration, or FDA, has conditionally accepted KORSUVA as the trade name for CR845/difelikefalin injection and itssafety and efficacy have not been fully evaluated by any regulatory authority.We commenced operations in 2004, and our primary activities to date have been organizing and staffing our company, developing our productcandidates, including conducting preclinical studies and clinical trials of CR845/difelikefalin-based product candidates and raising capital. To date, we havefinanced our operations primarily through sales of our equity and debt securities and payments from license agreements. We have no products currentlyavailable for sale, and substantially all of our revenue to date has been revenue from license agreements, although we have received nominal amounts ofrevenue under research grants. Recent Developments Chief Medical Officer Effective October 22, 2018, we appointed Joana Goncalves, M.D. as our new Chief Medical Officer, or CMO. Prior to joining Cara, Dr. Goncalves wasthe Vice President, Global Medical Affairs for Dermatology and Neurology at Celgene Corporation. Previously, she held various positions at LEO PharmaInc., the U.S. subsidiary of Leo Pharma A/S and at Novartis Pharmaceuticals. Dr. Goncalves received her M.D. from The University of Cape Town, SouthAfrica. On October 22, 2018, we entered into a Separation and Consulting Agreement with Joseph Stauffer, D.O., our former CMO, pursuant to which he willprovide consulting services to us for a period of up to nine months. Equity Offering On July 18, 2018, we entered into an underwriting agreement with Jefferies LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, asrepresentatives of the several underwriters named therein, relating to the issuance and sale by us of up to 5,175,000 shares of our common stock, including675,000 shares of common stock the underwriters had the option to purchase, at a public offering price of $19.00 per share. This offering was pursuant toRegistration Statement on Form S-3 (File No. 333-216657), filed with the SEC on March 13, 2017 and declared effective on March 24, 2017, and a relatedprospectus dated March 24, 2017 and prospectus supplement dated July 18, 2018, which was filed with the SEC on July 20, 2018.3  On July 23, 2018, we closed the offering, including the full exercise of the underwriters’ option to purchase 675,000 additional shares of commonstock. We received net proceeds of approximately $92.1 million, after deducting $6.3 million relating to underwriting discounts and commissions andoffering expenses. Vifor Fresenius Medical Care Renal Pharma Ltd. License Agreement On May 17, 2018, we entered into a license agreement, or the VFMCRP Agreement, with VFMCRP (see Item 1. Business – Commercial Partnershipsand License Agreements). The Market Opportunity – Pruritus Pruritus, or itch, is defined as an unpleasant sensation that provokes the desire to scratch. Certain systemic diseases have been known to causepruritus that ranges in intensity from a mild annoyance to an intractable, disabling condition. Itch originates in the epidermis and dermal–epidermal junctionand is transmitted by itch-selective sensory neuron C fibers, or pruriceptors. Some of these fibers are sensitive to histamine while others are not, and there isevidence for histamine-insensitive C fibers that are activated by numerous itch-inducing substances or pruritogens, many of which initiate signals throughinteraction with specific G-protein-coupled receptors. In addition, there is increasing evidence for the differential involvement of these systems in variousforms of itch which may involve disease-specific pruritogens. As an example, chronic pruritus associated with kidney failure is thought to involve complexinteractions among peripheral cells (T cells, mast cells, neutrophils, eosinophils, and keratinocytes) and histamine-insensitive nerve fibers, involvingincreased release of cytokines, proteases, and neuropeptides, interacting with multiple receptors that lead to exacerbation of itch. These different peripheralcell types express kappa opioid receptors, which can regulate the release of these pruritogenic substances, while the kappa opioid receptors on C fibers arethought to regulate their response to these pruritogens. Because kappa opioid receptors are expressed in peripheral tissues, there is a potential to modulateitch signals peripherally without impacting the central kappa opioid receptors. The itch-sensitive sensory nerve fibers transmit signals to the cell bodies inthe dorsal root ganglia (that also have kappa opioid receptors), which send fibers to enter the spinal cord. Itch signals then ascend via the spinothalamic tractto multiple brain areas for sensory processing and interactions with cognitive and other systems. Additionally, the activation of kappa receptors via an agonist is thought to reduce itching by functionally counteracting increased mu opioidreceptor activity which is suggested to be associated with some chronic forms of pruritus. Activation of the mu opioid receptor in the brain and in theperipheral nerve endings results in itching while non-selective mu opioid antagonists can inhibit itching. Kappa opioid receptor stimulation inhibits theeffects of mu receptor activation both centrally and peripherally.Pruritus may be classified into different categories on the basis of the underlying causative disease: renal or chronic kidney disease associatedpruritus or CKD-aP (previously known as uremic pruritus), cholestatic pruritus, dermatological pruritus, hematologic pruritus, endocrine pruritus, pruritusrelated to malignancy and idiopathic generalized pruritus. According to a study we conducted with IMS Health (now IQVIA) utilizing medical claims datafrom 2013, approximately 21 million patients received a prescription for an anti-pruritic agent such as corticosteroids, antihistamines, select antidepressants,counterirritants, bile acid sequestrants, rifampin, narcotic antagonists and partial agonists, topical immunomodulators or gabapentin.Chronic Kidney Disease-Associated Pruritus (CKD-aP) CKD-aP (also known as uremic pruritus) can occur in patients with chronic kidney disease, or CKD, as well as End Stage Renal Disease, or ESRD, andis commonly seen in patients receiving hemodialysis. According to Fresenius Medical Care, a world leading provider of products and medical care fordialysis patients, there were approximately 3.2 million patients globally undergoing dialysis in 2017. According to the Dialysis Outcomes and PracticePatterns Study, or DOPPS, published in December 2017 in the Clinical Journal of the American Society of Nephrologists, it is estimated that nearly 70% ofthese patients suffer from some form of CKD-aP with approximately 40% of these patients experiencing moderate to severe pruritus.4  Currently, there are no approved products in the United States or Europe to treat CKD-aP. Patients are generally managed with a multitude ofproducts including corticosteroids, gabapentin, antihistamines, antidepressants and others with varying degrees of success. There is one product, nalfurafine(Remitch®) marketed by Toray Industries, approved to treat CKD-aP in Japan only. It is not approved either in the United States or Europe for CKD-aP. Other Causes of PruritusThere are many other systemic diseases that can trigger pruritus in patients. They include cholestatic liver disease, endocrinologic disease (e.g.hyperthyroidism), malignancy (e.g. Hodgkin lymphoma), hematologic disease (e.g. polycythemia vera), atopic dermatitis, eczema, psoriasis, hives/urticarial,and lice/scabies. Data from a Cara-sponsored IMS Health (now IQVIA) study, utilizing medical claims data from 2013, indicate that over 20 millionprescriptions for anti-pruritic therapeutics are filled annually in the United States. The Market Opportunity – Pain and Post-Operative Nausea and Vomiting (PONV) Management Pain is generally categorized by its duration as either acute or chronic, by its severity, as either mild, moderate or severe, and its type and/or causality,such as postoperative or neuropathic. Acute pain is typically caused by an injury resulting in nerve, tissue or bone damage and is expected to subside inseverity when the injury heals. Postoperative pain is a subset of the acute pain market. According to the International Association for the Study of Pain, morethan 46 million inpatient and 53 million outpatient surgeries are performed annually in the United States. PONV is another significant issue for many patientsin the postoperative setting occurring in over 30% of patients. Chronic pain, on the other hand, is prolonged, and can be the long-term result of an acute injury or an ongoing disease condition, such asneuropathic pain associated with diabetes. According to an Institute of Medicine report, chronic pain affects approximately 100 million U.S. adults, whilemillions of others experience acute pain caused by events such as surgery, injury, childbirth and illness. The most common causes of moderate-to-severechronic pain are musculoskeletal problems and inflammatory conditions. Injuries from accidents resulting in fractures, dislocations or soft tissue injury, aswell as lower back pain, are the most frequent causes of musculoskeletal pain. Although these injuries are mostly non-fatal, the cost in terms of long-termdisability, medical expense and lost productivity is large. Post-Operative Pain and Chronic Pain MarketsAccording to IQVIA, the total U.S. market for pain management pharmaceuticals was $45.3 billion in 2018. The prescription pain managementmarket in the United States is still dominated by opioid analgesics, which, according to IQVIA data, represented 52% of the 368 million analgesicprescriptions written in 2018 and accounted for sales of $5.7 billion in that year. Opioid analgesics decrease the perception of pain by stimulating mu, deltaand/or kappa opioid receptors. All of these receptors are involved in modulating pain signals. The most widely used opioid analgesics, includinghydrocodone, oxycodone, morphine, and fentanyl, act primarily through the activation of mu opioid receptors in the CNS. However, because of the widedistribution of mu opioid receptors throughout the brain, morphine and other mu opioid analgesics also trigger a characteristic pattern of adverse “central”side effects, including nausea and vomiting, itching and respiratory depression. Mu opioids are also known to cause euphoria, which can lead to misuse,abuse and addiction issues. Moderate-to-severe chronic pain is typically treated with prescription products including immediate release and long-acting opioids, such as thebranded products OxyContin® (oxycodone), NUCYNTA® ER (tapentadol) and Opana® ER (oxymorphone), and combination products that include anopioid combined with an NSAID or acetaminophen, such as the branded products Vicodin® (hydrocodone and acetaminophen) and Percocet® (oxycodoneand acetaminophen). Prescription products for chronic pain are usually in oral tablet or capsule form because the vast majority of these patients are takingthese medications outside of the hospital setting. 5  Despite the size of the pain management market, there has been little innovation in the development of new analgesics, with nearly all recent newdrug approvals limited to reformulations and improved methods of delivery of existing therapeutics. Mu opioids continue to be the most prescribed drugs forpain management, despite their side effects and the potential for misuse, abuse and addiction. These concerns often cause healthcare providers to administeror prescribe less than optimal doses of mu opioids, or patients to take lower than prescribed doses, resulting in inadequate pain relief. Consequently, webelieve that the pain market represents a therapeutic area with substantial unmet needs for patients in pain, for physicians who must balance pain control withrisks of causing severe adverse events, and for healthcare organizations that bear the costs of managing the consequences of undertreated pain and drug-related adverse events. We believe that CR845/difelikefalin, with its novel mechanism of action, will likely be attractive to patients and physicians, as wellas hospitals and payers, as a treatment for moderate-to-severe pain because of its ability to provide pain relief without opioid-related adverse events or abuseand addiction issues associated with currently approved mu opioid analgesics. PONV Market PONV in a hospital or other medical setting in the United States is most often treated with 5-HT3 antagonists (e.g. ondansetron), NK-1 receptorantagonists (e.g. aprepitant) steroids (dexamethasone), dopamine receptor antagonists (haloperidol, metoclopramide) as well as Anticholinergics(scopolamine patch) either alone in low risk patients or in combination in patients with a higher risk of PONV. According to an article published in BestPractice & Research Clinical Anaesthesiology, PONV is one of the most important factors in determining length of stay after surgery, resulting in estimatedannual costs in the United States in the range of $1 billion. Per IQVIA, in 2017, there were over 700 million units of PONV drugs sold in the United States. The market for the prevention and treatment of PONV is highly fragmented. Anesthesiologists utilize a number of different agents alone or incombination (particularly in patients with a high risk for PONV) with different mechanism of actions to try to manage PONV. If approved, I.V.CR845/difelikefalin would likely be competing within the overall PONV market, although we expect that it would primarily be utilized as an add-on therapyin patients with a higher risk of PONV. Although most of the PONV products are generically available, there is still a significant segment of high-riskpatients where their PONV is not adequately managed, which can increase the hospital length of stay and add significant cost to managing a post-operativepatient. Our Strategy Our strategy is to develop and commercialize a novel and first-in-class portfolio of peripherally-acting kappa opioid receptor agonists, withKORSUVA (CR845/difelikefalin) injection and Oral KORSUVA (CR845/difelikefalin) as our lead candidates. We have designed and are developing productcandidates which have clearly defined clinical development programs and target significant commercial market opportunities. The key elements of ourstrategy are as follows: Advance KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe CKD-aP in patients undergoing hemodialysis tosupport regulatory approval. In January 2018, based on positive data from our earlier Phase 2 studies, we initiated the first pivotal Phase 3 trial (KALM-1) of KORSUVA (CR845/difelikefalin) injection in hemodialysis, or HD, patients suffering from moderate to severe CKD-aP. In January 2019, we completedenrollment in this trial and expect top-line data to read out in the second quarter of 2019. In August 2018, we initiated a global Phase 3 study (KALM-2) withKORSUVA (CR845/difelikefalin) injection in HD patients with CKD-aP in multiple countries worldwide, including the United States. We expect top-linedata from the global study to read out in the second half of 2019. In addition, we also have a 52-week single arm safety study ongoing in the United Statesthat has currently over 100 patients that have completed at least 6 months of treatment. These studies will support filings for regulatory approval in theUnited States and other non-U.S. markets. In June, 2017, the FDA granted Breakthrough Therapy Designation to KORSUVA (CR845/difelikefalin) injectionfor the treatment of CKD-aP in HD patients, for which there are currently no approved therapies in the United States. The Breakthrough Therapy Designationwas in part supported by positive data from our previous Phase 2 efficacy studies. In March 2017, we reported positive Phase 2 data from a trial of KORSUVA(CR845/difelikefalin) injection in HD patients with CKD-aP where patients receiving KORSUVA (CR845/difelikefalin) experienced a highly statisticallysignificant reduction in worst itch scores as well as statistically significant and clinically meaningful improvements6  in quality of life measures versus placebo after eight weeks of treatment. KORSUVA (CR845/difelikefalin) was observed to be well tolerated, with nosignificant drug-related events. Earlier, in July 2015, we reported similar positive top-line safety and efficacy results from a smaller Phase 2 trial in HDpatients with CKD-aP after two weeks of treatment. Build a specialty sales and marketing organization to commercialize KORSUVA (CR845/ difelikefalin) injection for the treatment of CKD-aP inHD patients in the United States, if approved. If KORSUVA (CR845/ difelikefalin) injection is approved by the FDA for the treatment of CKD-aP in HDpatients, we expect to establish a sales force to market to nephrologists in dialysis centers across the United States. We also intend to build a supportivecommercialization organization as well as establish a reimbursement strategy and infrastructure to support our sales and marketing efforts. We do not intendto commercialize KORSUVA (CR845/difelikefalin) injection for CKD-aP in HD patients on our own outside the United States. In May 2018, we licensedworldwide rights, excluding the United States, Japan and South Korea, to commercialize KORSUVA (CR845/difelikefalin) injection for the treatment CKD-aP in dialysis patients to VFMCRP, a joint company of Vifor Pharma Group (SIX: VIFN) and Fresenius Medical Care (NYSE: FMS) that specializes intreatments for CKD. Under the agreement, VFMCRP has the exclusive rights to commercialize KORSUVA injection for the treatment of CKD-aP in dialysispatients in all countries outside the United States except in Japan and South Korea. We retain full development and commercialization rights for KORSUVAinjection for the treatment of CKD-aP in the United States except in the dialysis clinics of Fresenius Medical Care North America (FMCNA), where we andVFMCRP will promote KORSUVA injection under a profit-sharing arrangement based on net FMCNA clinic sales recorded by us. In addition, we alreadyhave development and commercialization agreements with Maruishi and CKDP for development of KORSUVA (CR845/difelikefalin) for the Japanese andSouth Korean markets, respectively. Expand the use of Oral KORSUVA (CR845/difelikefalin) in other pruritic indications by establishing proof-of-concept in clinical conditions suchas non-dialysis stage III-V CKD-aP, chronic liver disease associated pruritus, or CLD-aP, and certain dermatologic conditions. Based on potent anti-pruritic effect we observed with KORSUVA (CR845/difelikefalin) injection in CKD-aP in hemodialysis patients as well as the data we and others havegenerated in preclinical models of itch, we have initiated clinical programs with Oral KORSUVA for the treatment of pruritus in patients with stage III to V(moderate to severe) CKD as well as in patients with CLD-aP. In July 2018, we initiated a double blind, randomized, placebo-controlled Phase 2 study withOral KORSUVA in stage III to V (moderate-to-severe) CKD patients with CKD-aP. The Oral KORSUVA doses selected in the Phase 2 study were based ondrug exposure data from the Phase 1 safety and pharmacokinetic, or PK, study with Oral KORSUVA (CR845/difelikefalin) in patients with stage III to V(moderate-to-severe) CKD. We also conducted a Phase 1 safety/ tolerability and PK study in patients with CLD due to various underlying etiologies tosupport an efficacy proof-of-concept Phase 2 study in similar patients with CLD-aP. In addition, we also expect to initiate a Phase 2 trial in certaindermatologic conditions, including atopic dermatitis, with Oral KORSUVA around mid-year 2019. Establish partnerships for further development and commercialization of I.V. CR845/difelikefalin for the treatment of moderate-to-severe acutepain and/or PONV in acute care settings in the United States. In June 2018, we reported positive top-line data from the adaptive Phase 2/3 post-operativepain trial of I.V. CR845/ difelikefalin in patients undergoing abdominal surgeries. At the higher dose of 1.0 mcg/kg dose, I.V. CR845/ difelikefalindemonstrated statistically significant reductions in pain intensity compared to placebo at all pre-specified post-operative assessment periods. Additionally,I.V. CR845 treatment resulted in statistically significant reductions in the incidence of post-operative nausea and vomiting over the 24-hour period post-surgery for both the lower and higher doses of 0.5 and 1.0 mcg/kg, respectively. We are currently assessing the best path forward for I.V. CR845/ difelikefalinin the post-operative acute care setting and expect to seek FDA input regarding PONV as a potential indication. We expect to seek partnerships for furtherdevelopment of I.V. CR845/ difelikefalin in the acute care setting. 7  Establish partnerships for further development and commercialization of Oral CR845/difelikefalin for chronic pain indications. We do not intendto further develop and commercialize Oral CR845/difelikefalin for chronic pain indications on our own and will likely seek partnerships and collaborationswith companies that have development and commercialization expertise in chronic pain. In June 2017, we announced top-line results of OralCR845/difelikefalin from the Phase 2b double blind placebo-controlled trial where three different doses (1, 2.5 and 5 mg twice daily) of CR845/difelikefalinwere evaluated in patients with moderate to severe osteoarthritis, or OA, of the hip or knee over an eight-week treatment period. While the study did not meetstatistical significance in reduction in pain scores across all OA patients (OA of hip and knee), at the 5 mg twice daily dose, patients with OA of the hipexperienced statistically significant reduction in mean weekly pain score. Our Product Candidates Our lead product candidate, CR845/difelikefalin, is a new chemical entity, which is designed to selectively stimulate kappa, rather than mu, anddelta opioid receptors outside of the CNS. CR845/difelikefalin has been designed with specific chemical characteristics to restrict its entry into the CNS andfurther limit its mechanism of action to kappa opioid receptors in the peripheral nervous system and on immune cells. In addition to the side effectsassociated with activation of mu opioid receptors in the CNS, activation of kappa receptors in the CNS is also known to result in some undesirable effects,including dysphoria. CR845/difelikefalin is designed to specifically target kappa receptors located on peripheral nervous system and certain immune cellsthat results in modulation of pain signals as well as relief from pruritus or itch associated with certain chronic diseases. Since CR845/difelikefalin is designedto modulate kappa receptor signals peripherally without any significant activation of opioid receptors in the CNS, it is generally not expected to produce theCNS-related side effects of mu opioid agonists (such as addiction and respiratory depression) or centrally-active kappa opioid agonists (such as dysphoriaand hallucinations). CR845/difelikefalin has been administered to more than 2,000 human subjects in Phase 1, Phase 2 and Phase 3 clinical trials as an I.V.infusion, rapid intravenous injection or oral capsule or tablet, and thus far has been observed to be generally well tolerated in multiple clinical trials. Based on the non-clinical and clinical studies we have completed to date, we believe that CR845/difelikefalin, if approved, would be attractive toboth patients and physicians as a treatment for moderate-to-severe pruritus associated with certain diseases such as CKD, CLD and dermatological disease aswell as moderate-to-severe pain due to the following attributes: •novel, peripherally-acting, kappa opioid receptor agonist mechanism of action; •evidence of efficacy in completed clinical trials of pruritus and pain; •potential for reducing mu opioid use and opioid-related adverse events, or AEs, such as nausea and vomiting; •potential for reduction of post-operative nausea and vomiting; •avoidance of mu opioid-related CNS side effects, such as respiratory depression and euphoria; •lower potential for addiction or abuse liability; •avoidance of interactions with other drugs because CR845/difelikefalin is not metabolized in the liver and does not interact with liverenzymes responsible for the metabolism of most commonly used classes of drugs; and •availability in injectable form for the treatment of pruritus in CKD patients undergoing hemodialysis in the hospital and dialysis centersettings as well as for pain and/or PONV treatment in the acute care setting and oral form for treatment of chronic pain or pruritus conditionsin the outpatient setting.8  Our current product candidate pipeline is summarized in the table below: Program Product Candidate Primary Indication Status Commercialization RightsPruritus KORSUVA (CR845/difelikefalin) Injection Pruritus Chronic Kidney Disease-Hemodialysis • KALM-1 (U.S.) and KALM-2 (Global)Phase 3 efficacy trials ongoing. KALM-1:enrollment completed• Phase 3 long term safety trial ongoing Cara (United States); Maruishi(Japan); CKDP (South Korea);VFMCRP (Worldwide, other thanthe United States, Japan and SouthKorea) • Phase 2 adaptive trial completed and datareported • Breakthrough Therapy Designation grantedby FDA in June 2017 Oral KORSUVA(CR845/difelikefalin) Pruritus CKD (Stage III - V) • Phase 2 efficacy trial ongoing Cara (Worldwide, other than Japanand South Korea); Maruishi (Japan);CKDP (South Korea) Oral KORSUVA(CR845/difelikefalin) Pruritus Chronic Liver Disease(CLD) • Phase 1 safety and PK trial completed;Phase 2 initiation expected in Q2 2019 Cara (Worldwide, other than SouthKorea); CKDP (South Korea)Pain CR845/difelikefalin Injection Acute Post-Operative Pain • Adaptive Phase 2/3 trial completed; Top-line data released Cara (Worldwide, other than Japanand South Korea); Maruishi (Japan);CKDP (South Korea) Oral CR845/difelikefalin Chronic Pain • Phase 2b osteoarthritis, or OA, clinical trialcompleted. Top-line data released Cara (Worldwide, other than Japanand South Korea); Maruishi (Japan);CKDP (South Korea) CR701 Chronic Pain • Preclinical Cara (Worldwide) KORSUVA (CR845/Difelikefalin) Injection for Treatment of Chronic Kidney Disease-Associated Pruritus (CKD-aP) Pruritus, or itch, is associated with certain chronic conditions such as kidney disease, atopic dermatitis, eczema, liver disease and psoriasis. Based onKORSUVA (CR845/difelikefalin)’s effect on the peripheral nervous system and immune cells which result in anti-pruritic and anti-inflammatory effects innon-clinical models, we believe KORSUVA (CR845/difelikefalin) has the potential to treat pruritus associated with multiple medical conditions. CKD-associated pruritus, or CKD-aP, also known as uremic pruritus, is an intractable systemic itch condition with high prevalence in patients withCKD for which there are no approved therapeutics in the United States or Europe. In the first quarter of 2018, we initiated the first pivotal Phase 3 efficacy trial of KORSUVA (CR845/difelikefalin) injection in the United States forthe treatment of CKD-aP in patients undergoing hemodialysis. The enrollment in this study is now complete and we expect top-line data in the secondquarter of 2019. In August 2018, we initiated a Global Phase 3 efficacy trial (with a 52-week open label extension phase) of KORSUVA (CR845/difelikefalin)injection that is expected to enroll patients in the United States and multiple countries outside the United States. In addition to the efficacy trials, we are alsoconducting a 52-week Phase 3 safety study of KORSUVA (CR845/difelikefalin) injection in hemodialysis patients with CKD-aP.9  In June 2017, the FDA granted breakthrough therapy designation for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe uremic pruritus in patients with CKD undergoing hemodialysis. This regulatory decision was supported by positive results from Phase 2 clinical trialsof KORSUVA (CR845/difelikefalin) injection in hemodialysis patients with CKD-aP. Breakthrough therapy designation is granted to expedite thedevelopment and review process for new therapies addressing serious or life-threatening conditions, where preliminary clinical evidence indicates that thedrug candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.KALMTM-1 and KALM-2 Phase 3 Efficacy Trials of KORSUVA (CR845/Difelikefalin) InjectionIn January 2018, we initiated the first Phase 3 efficacy trial (KALM-1) to support regulatory filings for the approval of KORSUVA(CR845/difelikefalin) injection. This U.S study is a multicenter, randomized, double-blind, placebo-controlled 12-week treatment trial (with a 52-week openlabel extension phase) that is designed to evaluate the safety and efficacy of 0.5 mcg/kg of KORSUVA (CR845/difelikefalin) injection to be administeredthree times per week after dialysis in 350 hemodialysis patients with moderate-to-severe pruritus (with a pre-specified interim assessment that allowed forexpansion of the study to up to 500 patients, if needed). The primary efficacy endpoint is the proportion of patients achieving at least a 3‑point improvementfrom baseline with respect to the weekly mean of the daily 24‑hour worst itching intensity numeric rating scale, or NRS, score at week 12. Secondaryendpoints of the Phase 3 trial include assessment of itch-related quality of life changes measured using self-assessment 5-D Itch and Skindex-10 scales, aswell as the proportion of patients achieving at least 4-point improvement from baseline in weekly mean of the daily 24-hour worst itching NRS score at week12 and patient global impression of change. In January 2019, we announced the completion of enrollment in KALM-1 Phase 3 trial after a pre-specifiedinterim conditional power analysis conducted by the Independent Data Monitoring Committee, or IDMC, that recommended no adjustment to the originaltrial size. Over 350 hemodialysis patients with CKD-aP have been randomized across approximately 60 clinical sites in the United States and we expect toreport top-line data in the second quarter of 2019.In August 2018, we announced the dosing of the first patient in the second Phase 3 efficacy trial (KALM-2) that is matching in design and size to theKALM-1 trial and will facilitate regulatory filings worldwide. This second Phase 3 trial is designed to enroll hemodialysis patients with moderate-to-severepruritus in the United States as well as in multiple countries in Europe and Asia Pacific. Based on current enrollment projections, we expect to report top-linedata from the KALM-2 trial in the second half of 2019.Phase 3 Safety Trial of KORSUVA (CR845/Difelikefalin) InjectionIn the second quarter of 2017, we initiated a 52-week Phase 3 safety trial that is expected to enroll up to 240 hemodialysis patients with CKD-aP,including those who have completed prior Phase 2 trials of KORSUVA (CR845/difelikefalin) injection as well as patients who have not been previouslyexposed to CR845/difelikefalin. This open-label trial is evaluating the long-term safety of KORSUVA (CR845/ difelikefalin) injection at the dose of0.5mcg/kg. The enrollment is nearing completion, with approximately 125 patients who have completed at least six months of treatment and approximately40% of these patients have completed one year of treatment.The design and dose selection for our Phase 3 trials are based on results of the previously completed Phase 2 trials of KORSUVA(CR845/difelikefalin) injection in hemodialysis patients with CKD-aP in consultation with the FDA as part of our End of Phase 2 meeting with the FDA thatwas held in September 2017.Phase 2/3 Adaptive Design Trial of KORSUVA (CR845/Difelikefalin) Injection in Dialysis PatientsIn June 2016, we initiated a two-part Phase 2/3 adaptive design trial of KORSUVA (CR845/difelikefalin) injection in dialysis patients suffering frommoderate-to-severe uremic pruritus. In March 2017, we announced top-line data from the Phase 2 trial, which was a randomized, double-blind, placebo-controlled trial of three doses of intravenous KORSUVA (CR845/difelikefalin) injection (0.5 mcg/kg, 1.0 mcg/kg and 1.5 mcg/kg) administered three timesper week after dialysis over an eight-week treatment period in 174 patients with moderate-to-severe uremic pruritus. 10  The primary endpoint of this trial was the change from baseline of the mean worst itching score for week eight measured on a patient reported 24-hour worst itching intensity 11-point NRS scale. Patients receiving KORSUVA (CR845/difelikefalin) injection experienced a 68% greater reduction frombaseline in worst itch scores than those receiving placebo (p<0.0019). The secondary endpoints of this trial focused on itch-related quality of life measuresassessed using the Skindex-10 scale, 5-D itch scale, sleep disturbance subscale and others. In addition to reduction of pruritus, patients experiencedsubstantial improvement in multiple itch-related quality of life (Skindex-10, 5-D Itch scale) measures and sleep over two months of treatment. Additionally,in a post-hoc analysis, (1) 64% of the patients treated at the 0.5 mcg/kg dose experienced at least a 3‑point improvement from baseline with respect to theweekly mean NRS score versus 29% of patients on placebo (p<0.01), and (2) 51% of the patients treated at the 0.5 mcg/kg dose experienced at least a 4‑pointimprovement from baseline with respect to the weekly mean NRS score versus 24% of patients on placebo (p<0.05).Overall, KORSUVA (CR845/difelikefalin) was observed to be generally well tolerated over the eight-week treatment period and the unblinded DrugSafety Monitoring Board did not raise any safety concerns during the course of the trial. The most common treatment-emergent adverse events weresomnolence, headache, dizziness, mental status changes, nausea and diarrhea, generally in line with what has been observed in previous clinical studies ofKORSUVA (CR845/difelikefalin). The Phase 3 part of this study has been replaced by the KALM-1 Phase 3 trial.Phase 2 Efficacy Trial in Dialysis PatientsIn 2014, we conducted a Phase 2 randomized, double-blind, placebo-controlled proof-of-concept trial (Part B), which measured the efficacy ofKORSUVA (CR845/difelikefalin) injection at the dose of 1.0 mcg/kg compared to placebo in reducing the intensity of itch in 65 dialysis patients withuremic pruritus over a two-week dosing period, who had baseline "worst itching" scores of greater than 40 mm on a visual analog scale, or VAS ranging from0 to 100 mm. In July 2015, we reported positive top-line efficacy results from this trial, in which we observed that KORSUVA (CR845/difelikefalin) injectiondemonstrated statistically significant reduction in worst itch intensity as measured by VAS, the primary endpoint of the trial, as well as statisticallysignificant improvement in quality of life measures such as Skindex-10, the trial’s secondary endpoint. The overall safety and tolerability profile wasfavorable. The dose of the Phase 2 study was informed by Phase 1 safety and pharmacokinetic, or PK, trial (Part A) that was conducted in subjects undergoinghemodialysis at doses ranging from 0.5 mcg/kg to 2.5 mcg/kg after each dialysis session up to three times per week.Oral KORSUVA (CR845/Difelikefalin) for Treatment of Chronic Kidney Disease-Associated Pruritus (CKD-aP)In July 2018, we announced the dosing of the first patients in a Phase 2 trial of Oral KORSUVA (CR845/difelikefalin) for the treatment of pruritus instage III-V (moderate-to-severe) CKD patients. The Phase 2, multicenter, randomized, double-blind, placebo-controlled 12-week trial is designed to evaluatethe safety and efficacy of three dose levels (0.25 mg, 0.5 mg and 1 mg, once daily) of Oral KORSUVA versus placebo in approximately 240 stage III-V(moderate to severe) CKD patients with moderate-to-severe pruritus, with a pre-specified interim analysis that allows for expansion of the study to up to 480patients, if needed. The primary efficacy endpoint is the change from baseline in the weekly mean of the daily 24-hour Worst Itch Numeric Rating Scale, orNRS, score at Week 12 of the treatment period. Secondary endpoints include change from baseline in itch-related quality of life scores at the end of Week 12,as assessed by the total Skindex-10 and 5-D itch scores, as well as the proportion of patients achieving an improvement from baseline ≥3 points with respectto the weekly mean of the daily 24-hour Worst Itch NRS score at week 12. We expect top-line data from this trial in the second half of 2019. The dosing of the above Phase 2 trial was informed by the results of our Phase 1 trial of Oral KORSUVA (CR845/difelikefalin) in patients with StageIII - V CKD. Data from the Phase 1 trial was used to assess the PK and safety of different tablet strengths of Oral KORSUVA (CR845/difelikefalin) (forexample, 0.25 mg, 0.5 mg and 1.0 mg), dosed daily over a one-week treatment period in three groups of patients with moderate renal impairment and threegroups of patients with severe renal impairment (six groups total). The exposure levels achieved with Oral KORSUVA tablets were approximately equivalentto the exposure level achieved with 0.5 mcg/kg dose of I.V. KORSUVA that exhibited statistically significant and clinically meaningful reduction in itchintensity in hemodialysis patients with moderate to severe CKD-aP in a previous Phase 2 trial.11  Oral KORSUVA (CR845/Difelikefalin) for Treatment of Chronic Liver Disease-Associated PruritusPruritus is a common and irritating symptom in patients with chronic liver disease, or CLD, especially those with chronic cholestatic disease. Severepruritus can have debilitating effects and can lead to a significant reduction in a patient’s quality of life. Although the pathogenesis of CLD-aP remainspoorly understood, it is likely multifactorial including evidence for an imbalance in the endogenous opioid system driven by higher mu receptor activation(pruritic) versus kappa receptor activation (antipruritic). Consequently, the use of selective kappa-opioid receptor agonists has been suggested for thetreatment of pruritus in patients with chronic liver disease, or CLD.In the fourth quarter of 2017, we submitted an investigational new drug application, or IND, to the FDA for Oral KORSUVA (CR845/difelikefalin) forsymptomatic relief of CLD-aP and initiated a Phase 1 safety and PK clinical trial of Oral KORSUVA (CR845/difelikefalin) in patients with CLD in the firstquarter of 2018. The open-label study was designed to evaluate the safety and PK profile of repeated doses of Oral KORSUVA (twice daily) in up to 60patients with CLD and up to 12 matched healthy control subjects. Oral KORSUVA was evaluated over an eight-day treatment period in patients with CLDbased on their Child-Pugh classification (i.e, Class A, B and C). The study is now complete. The PK parameters were dose-proportional in patients with mild-to-moderate CLD and Oral KORSUVA was generally well tolerated with no unexpected safety signals reported. We expect to initiate a Phase 2 trial in chronicliver disease patients with moderate-to-severe pruritus in the second quarter of 2019. Intravenous CR845/Difelikefalin for Treatment of Acute Postoperative Pain We also investigated CR845/difelikefalin for the treatment of pain in an acute care setting. CR845/difelikefalin is designed to provide pain reliefwithout stimulating mu opioid receptors and therefore potentially without mu opioid-related side effects, such as nausea, vomiting, respiratory depressionand euphoria.Phase 2/3 Efficacy and Safety Trial of CR845/Difelikefalin Injection in Patients Undergoing Abdominal SurgeryIn June 2018, we reported positive top-line date from the adaptive Phase 2/3 study of CR845/difelikefalin in patients undergoing abdominal surgery.This trial was initiated in September 2015 and was designed as a multi-center, randomized, double-blind, placebo-controlled, parallel-group adaptive designtrial with repeated doses of CR845/difelikefalin injection or placebo administered both prior to and following abdominal surgery. The trial protocol initiallyincluded three dose levels of CR845/difelikefalin injection (1.0 mcg/kg, 2.0 mcg/kg and 5.0 mcg/kg versus placebo) that was subsequently modified in June2016 to test two doses of I.V. CR845/difelikefalin (1.0 mcg/kg and 0.5 mcg/kg) versus placebo, based on a safety review by us, the trial’s IDMC, and theFDA, of unblinded safety data from the first 90 patients dosed. The safety review was conducted in response to a clinical hold that the FDA placed on the trialin February 2016 and removed in April 2016 following the safety review. The clinical hold was based on a pre-specified stopping rule related to elevatedserum sodium levels of greater than 150 mmol/L that was included in the clinical trial protocol. The trial enrolled 444 patients undergoing abdominalsurgery, composed of 228 patients who underwent ventral hernia surgery and 216 patients who completed a hysterectomy procedure. The primary endpointwas pain relief as measured by Area Under the Curve, or AUC, of the NRS pain intensity scores collected over the first 24-hour period after the baseline dose(0 hour) post-surgery for all combined surgeries. The secondary endpoints included incidence of vomiting, improvement in impact scores of PONV, reductionin use of rescue analgesic medication, as well as patient global assessment at 24 hours post baseline dose after surgery. •CR845 injection achieved statistical significance for the primary endpoint of pain relief over 24 hours (AUC 0-24) post-surgery with the 1.0mcg/kg dose versus placebo (p=0.032). The 0.5 mcg/kg dose did not achieve statistical significance over the 0-24 hour period (p=0.076). Inaddition, improvement in pain AUC was statistically significant for both the 0.5 and 1.0 mcg/kg doses over 0 to 6 hours (p=0.041, p=0.001)and 0 to 12 hours (p=0.035, p=0.004) periods and also statistically significant for the 1.0 mcg/kg dose over the 0 to 18-hour period (p=0.013)post-surgery. •At 6 and 24 hours after baseline dose post-surgery, there were statistically significant improvements in PONV impact scores with both dosesof CR845 injection compared to placebo: 0.5 mcg/kg (6 hrs.: p=0.0072, 24 hrs.: p<0.006) and 1.0 mcg/kg (6 hrs.: p<0.0001, 24 hrs.:p<0.0001).12  •There were statistically significant differences between placebo and both doses of CR845 with respect to the total use of anti-emeticmedication over the first 24 hours post-surgery (0.5 mcg/kg: p=0.0003; 1.0 mcg/kg: p< 0.0001). •There was a 73% reduction in the incidence of patient-reported vomiting in the group receiving the 1.0 mcg/kg dose versus placebo(p=0.029). Although the 0.5 mcg/kg also showed reduction in vomiting, it did not reach statistical significance. Both doses of CR845exhibited numerical trends toward reduced use of rescue analgesic medication compared to placebo, but did not achieve statisticalsignificance. •There was no significant effect, compared to placebo, on patient’s global assessment of medication for either dose of CR845 over the 24-hourperiod. Common adverse effects reported in the placebo and both CR845 groups were generally low and similar in incidence, and included nausea,constipation, vomiting, flatulence, headache and dyspepsia. The next steps for the acute post-operative program will be determined after we have completed detailed analysis of the data and consulted with theFDA. Phase 1 Safety and PK and Phase 2 Acute Pain Clinical Trials (Post-Surgery) of CR845/Difelikefalin InjectionPreviously, in three different randomized, double-blind, placebo-controlled Phase 2 clinical trials, CR845/difelikefalin injection has been shown tobe well tolerated and demonstrated efficacy of pain relief. Two of these trials were conducted in patients undergoing laparoscopic hysterectomy, a soft tissuesurgical procedure, and a third trial was in patients undergoing bunionectomy, a hard tissue surgical procedure. Intravenous administration ofCR845/difelikefalin resulted in statistically significant reductions in pain intensity, as measured by the sum of pain intensity difference. In addition, in bothsurgical models, CR845/difelikefalin injection exhibited an ability to decrease the opioid-related adverse events, or AEs, of nausea and vomiting associatedwith current therapies, along with no evidence of drug-related respiratory depression.The safety profile of CR845/difelikefalin injection has been demonstrated in multiple studies. CR845/difelikefalin injection was observed to begenerally well tolerated in all of these clinical trials. The most common treatment-emergent adverse events, or TEAEs, across evaluated populations in acutepain trials were transient facial tingling or numbness, dizziness and fatigue. In addition, a transient increase in urine output in the absence of electrolyte loss,otherwise known as aquaresis, was also observed, which in some subjects in acute pain trials was accompanied by asymptomatic elevations in plasma sodiumthat were generally considered to be clinically unimportant. No clinically significant changes in electrocardiogram characteristics have been observed in anyof these studies. Importantly, there appeared to be no cases of dysphoria/hallucinations typically observed with prior-generation CNS-active kappa agonists.Human Abuse Liability Trial of CR845/Difelikefalin InjectionIn the fourth quarter of 2014, we successfully completed a Human Abuse Liability, or HAL, trial of CR845/difelikefalin injection. The results fromthis HAL trial indicate that I.V. CR845/difelikefalin (5 mcg/kg or 15 mcg/kg) demonstrates statistically significant lower “drug liking” scores as measured byVAS Emax (p <0.0001) when compared to I.V. pentazocine (0.5 mg/kg), an approved Schedule IV opioid receptor agonist. I.V. CR845 also demonstratedhighly statistically significant lower “feeling high,” “overall liking,” and “take drug again” scores (p <0.0001) as compared to pentazocine. Additionally,CR845/difelikefalin injection showed no “drug liking” dose response as both doses of CR845/difelikefalin injection were the same. Those scores representstandard subjective measures recommended by the FDA to assess a drug’s abuse liability. We believe that the totality of the results from the HAL trial aresupportive of the potential for CR845/difelikefalin to be the first non-scheduled or low (Schedule V) scheduled peripheral kappa opioid for acute pain orpruritus.13  Respiratory Safety Phase 1 Trial of CR845/Difelikefalin InjectionIn April 2017, we announced summary results from our quantitative Phase 1 trial evaluating respiratory safety of CR845/difelikefalin injection.Respiratory depression remains the most life-threatening side effect of traditional, centrally acting, opioid analgesics, the most commonly used drug class forcurrent treatment of postoperative pain in the United States. The Phase 1 trial was a randomized, double-blind, placebo-controlled, three-way crossover trialof two doses of CR845/difelikefalin injection versus placebo on three measures of respiratory drive in 15 healthy volunteers. Each subject was randomized toone of three treatment sequences and was administered I.V. bolus placebo, I.V. CR845/difelikefalin (1.0 mcg/kg) and I.V. CR845/difelikefalin (5.0 mcg/kg)on sequential 24-hour periods, with I.V. CR845/difelikefalin (5.0 mcg/kg) representing a projected five-fold supra-therapeutic dose. After eachadministration, and continuing through four hours post-dosing, end-tidal CO2, or ETCO2, oxygen saturation, or SpO2, and respiratory rate were continuouslymonitored. The primary safety endpoints were: a >10 mmHg sustained (>30 seconds duration) increase in ETCO2 above baseline or to >50 mmHg, and asustained reduction in SpO2 to <92 percent.There were no statistically significant differences in any respiratory measures observed between groups throughout the four-hour observation periodpost-dosing and no individual subject met the threshold for a respiratory safety event. Additionally, all treatment-emergent adverse events were previouslyreported with CR845/difelikefalin administration and were mild, resolving without intervention.Oral CR845/Difelikefalin for Treatment of OsteoarthritisWe also investigated an oral version of CR845/difelikefalin, or Oral CR845/difelikefalin for pain relief, which we believe could be used to providepain relief to patients with acute or chronic pain in an outpatient setting and also as an I.V.-to-oral transition, or step-down, therapy for hospital patientsbeing prepared for discharge.Phase 2b Trial of Oral CR845/DifelikefalinIn the third quarter of 2016 we initiated a Phase 2b trial with Oral CR845/difelikefalin, which was designed to evaluate three tablet strengths (1.0 mg,2.5 mg and 5.0 mg), dosed twice-daily over an eight-week treatment period in 476 patients with OA of the knee or hip experiencing moderate-to-severe painacross the United States. The primary efficacy endpoint was the change from baseline at week eight, with respect to the weekly mean of the daily painintensity score using an NRS score. Secondary endpoints included overall Patient Global Assessment, or PGA, score, and overall improvement in WesternOntario and McMaster Osteoarthritis Index, or WOMAC, scores, two commonly used patient-reported outcome measures, as well as mean reduction in rescuemedication. In June 2017, we announced top-line results from the Phase 2b trial. The results of the primary efficacy analysis of change from baseline in painintensity NRS score comparing Oral CR845/difelikefalin (all doses) vs. placebo were not statistically significant across all patients (OA of the knee or hip).However, patients with OA of the hip maintained on the 5.0 mg dose to the end of the eight-week treatment period exhibited a statistically significant 39%reduction in mean joint pain score versus placebo (p=0.043); although this effect did not reach statistical significance in a combined analysis of all patientswith OA of the knee or hip maintained on the 5.0 mg dose (p=0.111). For patients maintained on the 5.0 mg dose, there was a statistically significant increasein the proportion of patients whose OA pain was “very much improved” or “much improved” as indicated by PGA score in both the total patient group (p<0.005 vs. placebo) and in patients with primary OA of the hip (p<0.006 vs. placebo). The reduction in pain score in the 5.0 mg dose group in hip patientswas accompanied by a reduction in mean rescue medication of 41% at week eight versus placebo. Patients maintained on the 1.0 mg and 2.5 mg tabletstrengths did not exhibit significant reductions in mean joint pain scores compared to placebo. All tablet strengths were generally well tolerated with nodrug-related serious adverse events. For the 5.0 mg dose, the most common adverse events reported at the >5 percent incidence level were dry mouth (6%)and constipation (12%). There were no clinically significant changes in serum sodium levels observed during the eight-week treatment period for any dosegroup.14  In 2015, we completed a Phase 2a trial of Oral CR845/difelikefalin in 80 patients with OA of the knee or hip with moderate-to-severe pain evaluatingfour tablet strengths (0.25 mg, 0.5 mg, 1.0 mg and 5.0 mg) administered twice a day over a two-week treatment period. We reported data that showed doserelated reduction in mean joint pain score and that all four tablet strengths were observed to be generally well tolerated with no unexpected safety signalsreported.We do not intend to develop Oral CR845/difelikefalin in pain associated with OA on our own and will likely seek one or more potential partner(s) forfurther development of Oral CR845/difelikefalin in this indication.CR701In addition to our CR845/difelikefalin family of peripheral kappa agonists, we have discovered lead molecules that selectively modulate peripheralcannabinoid receptors. Studies on the effects of cannabis have led to the discovery of an endogenous system of ligands in humans involved in a number ofphysiological processes, including pain and inflammation. The main naturally occurring ligands for this system, anandamide and 2-arachidonoylglycerol (2-AG), activate a number of cannabinoid receptors, including CB1 and CB2 receptors. Like opioid receptors, CB1 and CB2 receptors are members of the Gprotein-coupled receptor superfamily. CB1 receptors and associated ligands are mainly localized in the brain, whereas CB2 receptors are found mainly inperipheral tissues, particularly immune cells such as leukocytes and mast cells, which have been shown to be involved in pain and inflammatory responses.Our most advanced CB compound, CR701, is a peripherally-restricted, mixed-CB1/CB2 receptor agonist that selectively interacts with thesecannabinoid receptor subtypes, with no off-target activities. The compound is orally bioavailable, active in preclinical models of inflammatory andneuropathic pain, and does not produce the side effects characteristic of centrally-active cannabinoids, such as sedation and hypothermia. Accordingly,CR701 would be expected to have substantially less abuse potential than centrally-active cannabinoids, but retain activity against therapeutically valuableperipheral targets, similar in principle to CR845/difelikefalin.Commercial Partnerships and License AgreementsVifor Fresenius Medical Care Renal Pharma Ltd.In May 2018, we entered into a license agreement, or the VFMCRP Agreement, with VFMCRP, a joint venture between Vifor Pharma Group andFresenius Medical Care, under which we granted VFMCRP a license to seek regulatory approval to commercialize, import, export, use, distribute, offer forsale, promote, sell and otherwise commercialize KORSUVA (CR845/difelikefalin) injection for all therapeutic uses to prevent, inhibit or treat itch associatedwith pruritus in hemodialysis and peritoneal-dialysis patients worldwide (excluding the United States, Japan and South Korea). We retain full developmentand commercialization rights for KORSUVA injection for the treatment of CKD-aP in dialysis patients in the U.S. except in the dialysis clinics of FreseniusMedical Care North America (FMCNA), where we and VFMCRP will promote KORSUVA injection under a profit-sharing arrangement. Upon entry into the VFMCRP Agreement, VFMCRP made a non-refundable, non-creditable $50 million upfront payment to us and Vifor(International) Ltd., or Vifor, purchased 1,174,827 shares of our common stock for $20 million, at a premium for the price of $17.024 per share. In addition,we are eligible to receive from VFMCRP regulatory and commercial milestone payments in the aggregate of up to $470 million, consisting of up to$30 million in regulatory milestones and up to $440 million in tiered commercial milestones, all of which are sales-related. We are also eligible to receivetiered double-digit royalty payments based on annual net sales, as defined, of KORSUVA (CR845/difelikefalin) injection in the licensed territories. In theUnited States, we and VFMCRP will promote KORSUVA (CR845/difelikefalin) injection in the dialysis clinics of FMCNA under a profit-sharingarrangement (subject to the terms and conditions of the VFMCRP Agreement) based on net FMCNA clinic sales recorded by us.15  Maruishi Pharmaceutical Co., Ltd.In April 2013, we entered into a license agreement with Maruishi, or the Maruishi Agreement, under which we granted Maruishi an exclusive licenseto develop, manufacture and commercialize drug products containing CR845/difelikefalin in Japan in the acute pain and uremic pruritus fields. Maruishi hasa right of first negotiation for any other indications for which we develop CR845/difelikefalin and, under certain conditions, Maruishi may substitute anotherpruritus indication for the uremic pruritus indication originally included in its license from us. If we abandon development of CR845/difelikefalin and begindevelopment of another kappa opioid receptor agonist that is covered by the claims of the patents we licensed to Maruishi, such other agonist willautomatically be included in the license to Maruishi. Maruishi is required to use commercially reasonable efforts, at its expense, to develop, obtainregulatory approval for and commercialize CR845/difelikefalin in Japan. We are required to use commercially reasonable efforts, at our expense, to develop,obtain regulatory approval for and commercialize CR845/difelikefalin in the United States.Under the terms of the Maruishi Agreement, we received a non-refundable and non-creditable upfront license fee of $15.0 million and are eligible toreceive up to an aggregate of $10.5 million in clinical development and regulatory milestones. In August 2014, we received a milestone payment of $0.5million upon the completion by Maruishi of a Phase 1 clinical trial in Japan related to CR845/difelikefalin in acute post-operative pain. In September 2015,Maruishi initiated a Phase 2 clinical trial of CR845/difelikefalin in Japan for uremic pruritus, which triggered a $1.7 million milestone payment (net ofcontractual foreign currency exchange adjustments of $0.3 million) to us. In March 2017, we received a payment of $0.8 million from Maruishi when itentered into a sub-license agreement with Kissei related to CR845/difelikefalin. We are also eligible to receive a one-time sales milestone of one billion Yenwhen a certain sales level is attained. We also receive a mid-double-digit percentage of all non-royalty payments received by Maruishi from its sublicensees,if any. We are also eligible to receive tiered royalties based on net sales, if any, with minimum royalty rates in the low double digits and maximum royaltyrates in the low twenties. Maruishi’s obligation to pay us royalties continues, on a product-by-product basis, until the expiration of the last-to-expire licensedpatent covering such product or the later expiration of any market exclusivity period. The Maruishi Agreement continues until terminated. Either we orMaruishi may terminate the Maruishi Agreement for the other party’s breach of the agreement or bankruptcy. Maruishi may terminate the agreement at anytime at will. We may terminate the agreement as a whole if Maruishi challenges the licensed patent rights, and we may terminate the agreement with respectto any indication if Maruishi discontinues its development activities. In addition, in connection with the license agreement, Maruishi made an $8.0 millionequity investment in our company. Chong Kun Dang Pharmaceutical CorporationIn April 2012, we entered into a license agreement with CKDP, or the CKDP Agreement, under which we granted CKDP an exclusive license todevelop, manufacture and commercialize drug products containing CR845/difelikefalin in South Korea. CKDP is required to use commercially reasonableefforts, at its expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin in South Korea. We are required to usecommercially reasonable efforts, at our expense, to develop, obtain regulatory approval for and commercialize CR845/difelikefalin in the United States.Under the terms of the CKDP Agreement, we received a non-refundable and non-creditable $0.6 million upfront payment and are eligible to earn upto an aggregate of $3.8 million in development and regulatory milestones. In addition, in connection with the CKDP Agreement, CKDP made a $0.4 millionequity investment in our company. We will also receive a mid-double-digit percentage of all non-royalty payments received by CKDP from its sublicensees,if any. We are also eligible to receive tiered royalties ranging from the high single digits to the high teens based on net sales, if any. CKDP’s obligation topay us royalties continues, on a product-by-product basis, until the expiration of the last-to-expire licensed patent covering such product or the laterexpiration of any market exclusivity period.16  During 2012, we received an additional $0.6 million, net of foreign taxes, from CKDP upon the achievement of two clinical development milestonesunder the CKDP Agreement. During 2015, we received a total of $0.6 million, net of foreign taxes, from CKDP upon the achievement of two clinicaldevelopment milestones under the CKDP Agreement. The CKDP Agreement continues until CKDP no longer has any obligation to pay us royalties on anyproduct. Either we or CKDP may terminate the CKDP Agreement for the other party’s breach of the CKDP Agreement or bankruptcy. CKDP may terminate theCKDP Agreement if any of the licensed patent rights is invalid, unenforceable, is narrowed in scope or is deemed unpatentable, except as a result of achallenge by CKDP, or a third party commercializes a product containing a compound identical to CR845/difelikefalin without infringing any of thelicensed patent rights in South Korea. We may terminate the CKDP Agreement if CKDP challenges the licensed patent rights or if a third party in South Koreaowns an issued patent that claims CR845/difelikefalin and CKDP’s sale of products would infringe that patent.Sales and MarketingIn executing our strategy, our goal is to have significant control over the development process and commercial execution for CR845/difelikefalin inthe United States, if approved. We anticipate developing a distribution capability and commercial organization in the United States to market and sell KORSUVA(CR845/difelikefalin) injection, if approved, in the dialysis setting, while out-licensing commercialization rights in certain geographical territories outside ofthe United States. For Oral KORSUVA (CR845/difelikefalin), we plan to develop and commercialize our drug candidate in pruritus indications, such as CKD-aP, CLD-aP and potentially others, on our own in the United States, while exploring partnerships for development and commercialization in geographicalterritories outside the United States.In 2015, we commissioned a qualitative market research study of nephrologists to evaluate the commercial potential of KORSUVA(CR845/difelikefalin) for CKD-aP. The study suggests KORSUVA (CR845/difelikefalin) would be well received by nephrologists, if approved. The keyfindings from the study were: •There is a clear unmet need to manage CKD-aP among dialysis patients. •Currently, there are no effective options for severe CKD-aP. •CR845/difelikefalin demonstrates impressive efficacy for CKD-aP. •Physicians were impressed with placebo-like adverse event profile. •KORSUVA (CR845/difelikefalin) injection can easily be incorporated into dialysis sessions.As a result, we believe that, if successful, KORSUVA (CR845/difelikefalin) is well positioned to address the unmet needs for hemodialysis patientssuffering from CKD-aP.We had also commissioned market research for I.V. CR845/difelikefalin for the treatment of postoperative pain that suggests it would be wellreceived by physicians, if approved. This research indicated that in addition to providing pain relief, reducing side effects such as nausea and vomiting, wereamong the highest unmet needs in the postoperative setting. In our three Phase 2 trials, I.V. CR845/difelikefalin demonstrated statistically significant painrelief and statistically significant reductions in nausea and vomiting. As a result, we believe that, if successful, I.V. CR845/difelikefalin is well positioned toaddress unmet needs in the postoperative pain market. Intellectual PropertyWe strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protectionintended to cover the composition of matter of our product candidates, their methods of use, related technology and other inventions that are important to ourbusiness. As more fully described below, patent applications have been filed covering compositions of matter for and methods of using CR845/difelikefalin.Twelve U.S. patents directed to CR845/difelikefalin and its uses have been issued, which are expected to expire no earlier than 2027. We also rely on tradesecrets and careful monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not considerappropriate for, patent protection. 17  Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially importanttechnology, inventions and know-how related to our business, defend and enforce our patents, maintain our licenses to use intellectual property owned bythird parties, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable patents and other proprietary rights of thirdparties. We also rely on know-how, and continuing technological innovation to develop, strengthen, and maintain our proprietary position in the field ofperipheral analgesia and treatment of pruritus.A third party may hold intellectual property, including patent rights, which are important or necessary to the development of our products. It may benecessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain alicense from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. If we were not able to obtain alicense or were not able to obtain a license on commercially reasonable terms, our business could be harmed, possibly materially.We plan to continue to expand our intellectual property estate by filing patent applications directed to novel peripheral analgesics and novel uses ofour proprietary compounds. We anticipate seeking patent protection in the United States and internationally for the chemistries and processes formanufacturing these compounds and the use of these compounds in a variety of therapies. The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. Inaddition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be modified afterissuance by later judicial decisions. Consequently, we do not know whether any of our product candidates will be adequately protectable or remain protectedby enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction orwhether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged,circumvented or invalidated by third parties.Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for up to 18 months, and since publicationof discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of our entitlement to the inventions covered bypending patent applications. Moreover, although unlikely, we may have to participate in interference proceedings declared by the United States Patent andTrademark Office, or USPTO, to determine priority of invention, or in post-grant challenge proceedings in the USPTO, or a foreign patent office such asoppositions, inter-partes review, post grant review, or a derivation proceeding, that challenge our entitlement to an invention or the patentability of one ormore claims in our patent applications or issued patents. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.The patent portfolios for our most advanced programs are summarized below.CR845/DifelikefalinOur synthetic peptide amide kappa opioid agonist patent portfolio is wholly owned by us. The portfolio includes fifteen issued U.S. patents (U.S.Patent Nos. 7,402,564; 7,713,937; 7,727,963; 7,842,662; 8,217,007; 8,236,766; 8,486,894; 8,536,131; 8,906,859; 8,951,970; 9,321,810; 9,334,305;9,359,399; 10,017,536; and 10,138,270) with claims to compositions of a wide range of synthetic peptide amide kappa opioid agonists, includingCR845/difelikefalin and related molecules, as well as methods of using these compounds. U.S. Patent No. 7,402,564, which is the earliest issued U.S. patentclaiming CR845/difelikefalin compositions is due to expire November 12, 2027, although under certain circumstances the patent term may be extended forup to a further five (5) years based upon the Hatch-Waxman Act. The CR845/difelikefalin patent portfolio also includes pending U.S. patent applicationswhich claim additional uses and methods of administering CR845/difelikefalin. Related foreign applications were filed in more than 40 other countries.National patents have been granted in 31 European countries, as well as in Australia, Canada, China, Hong Kong, India, Israel, Japan, Malaysia, Mexico, NewZealand, Russia, Singapore, South Africa and South Korea. These granted foreign patents with claims to CR845/difelikefalin are due expire no earlier thanNovember 12, 2027. The sole remaining patent application claiming CR845/difelikefalin is still pending in Brazil. The Brazilian patent law provides for apatent term extension of up to ten years for pharmaceutical patents to compensate for the loss of patent term during prosecution.18  CR701Our imidazoheterocycle cannabinoid compound patent portfolio, which is wholly owned by us, includes U.S. Patent Nos. 7,517,874; 8,431,565; and8,859,538. These U.S. patents are due to expire no earlier than June 20, 2028. A related international PCT application was filed and sixteen national patentapplications and a European regional patent application has been filed based on the international patent application. The European regional patent has beengranted as have national patents in Australia, Canada, China, Hong Kong, India, Israel, Japan, Malaysia, Mexico, New Zealand, Philippines, Singapore,Russia, South Africa and South Korea. These and any other patents resulting from the pending national patent applications, if issued, expire no earlier thanJune 20, 2028. A patent application claiming CR701 is still pending in Brazil. Other Cara Patents and Patent ApplicationsWe also own several other U.S. Patents including U.S. Patent Nos. 7,741,350; 7,960,376; 7,960,377; and 8,211,926 with claims to other cannabinoidcompounds and U.S. Patent No. 8,217,000 with claims to regulation of prolactin in mammals including humans.In addition, our kappa receptor opioid peptide international patent portfolio, which is wholly owned by us, includes claims to CR665, our first-generation kappa opioid receptor agonist, related compounds, and methods of using these compounds. The international PCT patent applicationPCT/US98/27282 was filed and progeny national patent applications have been granted in over 40 other countries. Granted patents with claims to CR665were maintained in Brazil, Canada, China, France, Germany, India, Italy, Russia, Spain and the U.K. and expired on December 22, 2018, except for theBrazilian patent, the term of which has been extended to October 21, 2024 to compensate for patent office delays.The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which wefile, the patent term is 20 years from the earliest date of filing a PCT application or a non-provisional patent application. The term of a patent in the UnitedStates can be adjusted and extended due to the failure of the United States Patent and Trademark Office following certain statutory and regulation deadlinesfor progressing prosecution and issuing a patent.In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permitspatent term restoration as compensation for a portion of the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits apatent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drugis under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval andonly one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other non-United States jurisdictions toextend the term of a patent that covers an approved drug. In the future, if and when our pharmaceutical products receive FDA approval, we expect to apply forpatent term extensions on patents covering those products. Although we intend to seek patent term extensions to any of our issued patents in any jurisdictionwhere these are available there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment ofwhether such extensions should be granted, and even if granted, the length of such extensions. We also rely on trade secret protection for our confidential and proprietary information. Although we take steps to protect our proprietary informationand trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantiallyequivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able tomeaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and otheradvisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide thatall confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’srelationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreementsprovide that all inventions conceived by the individual, and which are related to our current or planned business or research and development, or R&D, ormade during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property.19  CompetitionThe biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasison proprietary products. While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, weface potential competition from many different sources, including large pharmaceutical and biotechnology companies, specialty pharmaceutical and genericdrug companies, and medical technology companies. Any product candidates that we successfully develop and commercialize will compete with existingtherapies and new therapies that may become available in the future.There are a large number of companies developing or marketing therapies for the indications that we are pursuing. Many of our competitors,including many of the organizations named below, have substantially greater financial, technical and human resources than we do and significantly greaterexperience in the development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of thoseproducts. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among asmaller number of competitors. Small or early stage companies may also prove to be significant competitors, particularly through collaborative arrangementswith large and established companies. We also compete with these companies in recruiting and retaining qualified scientific personnel and establishingclinical trial sites and patient registration for clinical trials.We believe the key competitive factors that will affect the development and commercial success of our product candidates, if approved for marketing,are likely to be their safety, efficacy and tolerability profile, reliability, convenience of dosing, price and reimbursement from government and third-partypayers. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDAor other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strongmarket position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-partypayers seeking to encourage the use of generic products. Generic products that broadly address these indications are currently on the market for theindications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our productcandidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic products.If our product candidates are approved for the indications for which we are currently undertaking clinical trials, they will compete with the therapiesand currently marketed drugs discussed below:KORSUVA (CR845/difelikefalin) injection - Uremic Pruritus or CKD-aP. We are developing KORSUVA (CR845/difelikefalin) injection for themanagement of CKD-aP in hemodialysis patients. Currently, there are no approved products for management of CKD-aP in the United States. However, thereare many products that are used to help manage CKD-aP. The most common of these agents are anti-itch creams and emollients as well as oral or injectableantihistamines. All of these products have limited degrees of efficacy and are available generically. Additionally, patients may try several other agents suchas gabapentin or naltrexone, generally with limited success or therapies such as UVB light therapy with limited availability. Because of the substantial unmet need for products that are safe and effective in CKD-aP, there are other companies that either were in the past or arecurrently involved in the discovery, development, and/or marketing of such products for CKD-aP or related conditions. Some of such product candidates orproducts include nalbuphine from Trevi Therapeutics, asimadoline from Tioga Pharmaceuticals, SK-1405 from Sanwa Kagaku Kenkyusho, and Remitch® ornalfurafine from Toray Industries.20  Oral KORSUVA (CR845/difelikefalin) – Chronic Pruritus. We are developing Oral KORSUVA (CR845/difelikefalin) for the management ofmoderate-to-severe chronic pruritus conditions like CKD-aP or CLD-aP. There are currently no products approved in the United States for CKD-aP or CLD-aP.The market for the management of moderate-to-severe chronic pruritus is highly fragmented and includes numerous generic products, including oralformulations of corticosteroids and antihistamines. The most common corticosteroids and antihistamines are available generically. Because of the size anduntapped potential of the chronic pruritus market and the substantial unmet need for products that are safe and effective, there are other companies involvedin the discovery, development, and/or marketing of new products for pruritus. Some product candidates being developed for pruritus or pruritic conditionsinclude Menlo Therapeutics’ serlopitant, Trevi’s nalbuphine ER and Vanda’s tradipitant. I.V. CR845/difelikefalin – Acute Pain. We are developing I.V. CR845/difelikefalin for the management of acute postoperative pain in adult patients.The market for management of postoperative pain is highly fragmented and can be segmented into three general classes of products: •mu opioid-based products, such as morphine, fentanyl, hydrocodone, and hydromorphone, all of which are available generically; •local anesthetic-based products, such as lidocaine and bupivacaine, which are available generically; and •adjunctive analgesics, which are defined as non-mu opioid pain-relieving drugs that provide additional control of postoperative pain.There has been a trend in recent years for anesthesiologists to use all three classes of products to manage postoperative pain, often referred to as“multimodal analgesia.” If approved, I.V. CR845/difelikefalin would be competing within the overall acute postoperative pain market, although we expectthat it would compete primarily with injectable mu-opioid analgesics, such as morphine, fentanyl and hydromorphone. Although these products aregenerically available, they cause significant mu-opioid side effects such as nausea and vomiting, sedation, constipation and respiratory depression, whichadd significant cost to managing a post-operative patient.In addition to the above products approved for use as adjunctive analgesics for moderate-to-severe pain, there have been clinical reports that genericdrugs originally approved for other indications, such as gabapentin and pregabalin, as well as dexmedetomidine, dextromethorphan, and clonidine mayexhibit efficacy in the treatment of postoperative pain, and these and other such drugs may be used off-label for this purpose and, therefore, also compete withI.V. CR845/difelikefalin. Additionally, numerous companies are developing additional product candidates for the treatment of acute postoperative pain.Oral CR845/difelikefalin– Chronic Pain. The market for the management of moderate-to-severe chronic pain is highly fragmented and includesnumerous generic as well as brand name products, including oral formulations of NSAIDs and controlled-release mu opioids. Common NSAIDs includeCelebrex®, which is marketed by Pfizer, and naproxen and ibuprofen, which are available generically. Common branded oral mu opioids include, amongothers: Avinza®, an extended-release morphine sulfate capsule marketed by Pfizer; EXALGO®, an extended-release hydromorphone hydrochloride tabletmarketed by Mallinckrodt; KADIAN®, an extended-release morphine sulfate capsule marketed by Allergan; NUCYNTA® ER, an extended releaseformulation of tapentadol marketed by Collegium and OxyContin®, a controlled-release oxycodone hydrochloride tablet marketed by Purdue Pharma. Inaddition to oral therapies, Janssen Pharmaceuticals markets Duragesic®, a fentanyl transdermal patch. Because of the size of the chronic pain market and the substantial unmet need for products that are safe and effective, there are a large number ofcompanies involved in the discovery, development, and/or marketing of such products. These product candidates include immediate release and extendedrelease formulations of various NSAIDs and mu opioids. These include combination products that include mu opioid combined with an NSAID oracetaminophen, such as Abbvie’s Vicodin® (hydrocodone and acetaminophen) and Endo Pharmaceuticals’ Percocet® (oxycodone and acetaminophen).Additionally, there are other product candidates in development with non-opioid mechanisms of action. 21  ManufacturingWe do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of our productcandidates for preclinical and clinical testing, as well as for commercial manufacture if our product candidates receive marketing approval. At this time, noneof our contract manufacturing agreements limit where, or with whom we can contract for commercial manufacture or distribution. It is our intention that bythe time of any regulatory approvals for commercialization, we will have negotiated long-term commitments with at least one primary supplier for eachmanufacturing and distribution function.All of our product candidates are either small peptides or organic small molecules and are manufactured in reliable and reproducible syntheticprocesses from readily available starting materials. The chemistry is amenable to scale up and does not require any special equipment or technology in themanufacturing process. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities.Government Regulation and Product ApprovalGovernment authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, theresearch, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and exportof pharmaceutical products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries,along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources. FDA RegulationIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. Theprocess of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requiresthe expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the productdevelopment process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’srefusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, productseizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil orcriminal penalties.The process required by the FDA before a drug may be marketed in the United States generally involves the following: •completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, orGLP, regulations; •submission to the FDA of an IND which must become effective before human clinical trials may begin; •approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated; •performance of human clinical trials, including adequate and well-controlled clinical trials, in accordance with good clinical practices, orcGCP, to establish the safety and efficacy of the proposed drug product for each indication; •submission to the FDA of an NDA; •satisfactory completion of an FDA advisory committee review, if applicable; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliancewith current good manufacturing practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve thedrug’s identity, strength, quality and purity, as well as satisfactory completion of an FDA inspection of selected clinical sites to determinecGCP compliance;22  •FDA review and approval of the NDA; and •potential DEA review and scheduling activities prior to launch for some of our product candidates.Preclinical Studies. Preclinical studies include laboratory evaluation of drug substance chemistry, toxicity and drug product formulation, as well asanimal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the preclinical tests, together with manufacturinginformation, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Manufacture of drug substance,drug product and the labeling and distribution of clinical supplies must all comply with cGMP standards. Some preclinical testing may continue even afterthe IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questionsrelated to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve anyoutstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.Clinical Trials. Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualifiedinvestigators in accordance with cGCP requirements, which include the requirement that all research subjects provide their informed consent in writing fortheir participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parametersto be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments mustbe submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for anyclinical trial before it commences at that institution, and the IRB must continue to oversee the clinical trial while it is being conducted. Information aboutcertain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on theirClinicalTrials.gov website.Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the drug is initiallyintroduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism,distribution, excretion and, if possible, to gain an initial indication of its effectiveness. In Phase 2, the drug typically is administered to a limited patientpopulation to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and todetermine dosage tolerance and optimal dosage. In Phase 3, the drug is administered to an expanded patient population, generally at geographicallydispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product forapproval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse eventsoccur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or thesponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to anunacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted inaccordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.Marketing Approval. Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together withdetailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as partof an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantialapplication user fee. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has agreed to certain performancegoals regarding the timing of its review of an application.In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data that are adequate to assess thesafety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for eachpediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals forsubmission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.23  The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to mitigate any identified or suspected serious risks andensure safe use of the drug. The REMS plan could include medication guides, physician communication plans, assessment plans, and elements to assure safeuse, such as restricted distribution methods, patient registries or other risk minimization tools.The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whetherthey are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event,the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it forfiling. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among otherthings, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed toassure the product’s continued safety, quality and purity.The FDA may refer an application for a novel drug to an external advisory committee. An advisory committee is a panel of independent experts,including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approvedand under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully whenmaking decisions.Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured, referred to as a Pre-ApprovalInspection. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMPrequirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDAwill typically inspect one or more clinical trial sites to assure compliance with cGCP.The testing and approval process for an NDA requires substantial time, effort and financial resources, and each may take several years to complete.Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit orprevent regulatory approval. The FDA may not grant approval of an NDA on a timely basis, or at all.After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding themanufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response lettergenerally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical orpreclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide thatthe application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issuean approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. For someproducts, an additional step of DEA review and scheduling is required.Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings orprecautions be included in the product labeling, including a boxed warning, require that post-approval studies, including Phase 4 clinical trials, beconducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or imposeother conditions, including distribution restrictions or other risk management mechanisms under a REMS which can materially affect the potential marketand profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillanceprograms. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labelingclaims, are subject to further testing requirements and FDA review and approval.24  Breakthrough Therapy Designation. The FDA may expedite the review of a product candidate designated as a breakthrough therapy, which isintended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidenceindicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantialtreatment effects observed early in clinical development. A sponsor may request the FDA to designate a drug as a breakthrough therapy at the time of, or anytime after, the submission of an IND application for the drug. If the FDA designates a drug as a breakthrough therapy, it must take actions appropriate toexpedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout thedevelopment of the drug; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure thatthe development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers andexperienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team tofacilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and taking steps toensure that the design of the clinical trials is as efficient as practicable, when scientifically appropriate, such as by minimizing the number of patientsexposed to a potentially less efficacious treatment. The FDA may rescind a Breakthrough Therapy designation in the future if further clinical developmentlater shows that the criteria for designation are no longer met. Breakthrough Therapy designation does not change the standards for approval, but mayexpedite the development or review process.Post-Approval Requirements. Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation bythe FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising andpromotion, reporting of adverse experiences with the product, and compliance with any post-approval requirements imposed as a condition of approval, suchas Phase 4 clinical trials and surveillance to assess safety and effectiveness after commercialization. After approval, most changes to the approved product,such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual program user feerequirements for any marketed products, as well as new application fees for supplemental applications with clinical data. In addition, drug manufacturers andother entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agenciesand are subject to periodic announced and unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changesto the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also requireinvestigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-partymanufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production andquality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market.Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or withmanufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safetyinformation; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMSprogram. Other potential consequences include, among other things: •restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; •fines, warning letters or holds on post-approval clinical trials; •refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; •product seizure or detention, or refusal to permit the import or export of products; or •injunctions or the imposition of civil or criminal penalties.25  The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Although physicians, in thepractice of medicine, may prescribe approved drugs for unapproved indications, pharmaceutical companies generally are required to promote their drugproducts only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce thelaws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject tosignificant liability.In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates thedistribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states.Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability indistribution. DEA RegulationI.V. CR845/difelikefalin, Oral CR845/difelikefalin or our other product candidates, if approved, may be regulated as a “controlled substance” asdefined in the Controlled Substances Act of 1970, or CSA, which establishes registration, security, recordkeeping, reporting, storage, distribution and otherrequirements administered by the DEA. The DEA is concerned with the control of handlers of controlled substances, and with the equipment and rawmaterials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinaluse and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substancesconsidered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. The manufacture,shipment, storage, sale and use of Schedule II substances are subject to a high degree of regulation.Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registrationis specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing,and each registration will specify which schedules of controlled substances are authorized.The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirements vary by controlledsubstance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include backgroundchecks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations. Records must bemaintained for the handling of all controlled substances, and periodic reports made to the DEA, for example distribution reports for Schedule I and IIcontrolled substances, Schedule III substances that are narcotics, and other designated substances. Reports must also be made for thefts or losses of anycontrolled substance, and to obtain authorization to destroy any controlled substance. In addition, special authorization and notification requirements applyto imports and exports.In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Distributions of anySchedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. The DEA may adjust aggregateproduction quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion inwhether or not to make such adjustments. Our quota of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Anydelay or refusal by the DEA in establishing our quota for controlled substances could delay or stop our clinical trials or product launches.To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Individual statesalso regulate controlled substances, and we and our collaborators will be subject to state regulation with respect to the distribution of these products. 26  Fraud and Abuse, Data Privacy and Security and Transparency Laws and RegulationsIn addition to FDA restrictions on marketing of pharmaceutical products, federal and state health care regulatory laws restrict business practices in thebiopharmaceutical industry. These laws include, among other things, anti-kickback and false claims laws and regulations, physician payment transparencylaws and regulations, as well as data privacy and security laws and regulations.The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting orreceiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arrangingfor or recommending the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. Theterm “remuneration” has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangementsbetween pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutoryexceptions and regulatory safe harbors protecting some common activities from prosecution. Practices that involve remuneration that may be alleged to beintended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure tomeet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts andcircumstances.Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, asamended by the Health Care Education Reconciliation Act (collectively, the “Health Care Reform Law”), to a stricter standard such that a person or entity nolonger needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Health CareReform Law provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statuteconstitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Federal false claims laws, including the federal civil False Claims Act prohibit, among other things, any person or entity from knowingly presenting,or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal government or knowingly making, using, or causing to bemade or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” formoney or property presented to the U.S. government. The federal civil False Claims Act has been used to assert liability on the basis of kickbacks and otherimproper referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price, improper use of Medicare provider orsupplier numbers when detailing a provider of services, improper promotion of off-label uses not expressly approved by FDA in a drug’s label, andallegations as to misrepresentations with respect to the services rendered. Additionally, the civil monetary penalties statute, which, among other things,imposes fines against any person or entity who is determined to have presented, or caused to be presented, claims to a federal healthcare program that theperson knows, or should know, is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability andAccountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute,a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under thecustody or control of, any healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering upby trick, scheme or device a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment forhealthcare benefits, items or services relating to healthcare matters. Also, many states have similar fraud and abuse statutes or regulations that apply to itemsand services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct ourbusiness. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementingregulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, imposes specified requirements on certain types of individuals andentities subject to the law, known as covered entities, such as certain healthcare providers, health plans, and healthcare clearinghouses, relating to theprivacy, security and transmission of individually identifiable health information. Among other things, HITECH makes security standards and certain privacystandards directly applicable to the business associates of covered entities that perform services for them that involve the creation, use,27  maintenance or disclosure of, individually identifiable health information. HITECH also created four new tiers of civil monetary penalties, amended HIPAAto make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damagesor injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. Inaddition, state laws may govern the privacy and security of health information in certain circumstances, many of which differ from each other in significantways and may not have the same effect, thus complicating compliance efforts. Additionally, federal transparency laws, including the federal Physician Payments Sunshine Act created under Section 6002 of the Health CareReform Law and its implementing regulations, require that manufacturers of drugs, devices, biologics and medical supplies for which payment is availableunder Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to the Centers for Medicare & MedicaidServices, or CMS, information related to payments or other transfers of value made or distributed to physicians (defined to include doctors of medicine,dentists, optometrists, podiatrists and chiropractors), generally, with some exceptions, and teaching hospitals, or to entities or individuals at the request of, ordesignated on behalf of, the physicians and teaching hospitals. Additionally, applicable manufacturers and applicable group purchasing organizations arerequired to report annually to CMS certain ownership and investment interests held by physicians (as defined above) and their immediate family members.There are also an increasing number of analogous state laws that require manufacturers to file reports with states on pricing and marketinginformation, such as tracking and reporting of gifts, compensations, other remuneration and items of value provided to healthcare professionals andhealthcare entities. Many of these laws contain ambiguities as to what is required to comply with such laws. For example, several states have enactedlegislation requiring pharmaceutical companies to, among other things, establish and implement commercial compliance programs, file periodic reports withthe state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities and/or register their sales representatives. Certainstate laws also regulate manufacturers’ use of prescriber-identifiable data. These laws may affect our future sales, marketing and other promotional activitiesby imposing administrative and compliance burdens. In addition, given the lack of clarity with respect to these laws and their implementation, our reportingactions once we commercialize could be subject to the penalty provisions of the pertinent state and federal authorities.If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may besubject to penalties, including significant criminal, civil and administrative penalties, damages, fines, individual imprisonment, exclusion from participationin government healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/oroversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and thecurtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To theextent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance,applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs andreporting of payments or transfers of value to healthcare professionals. Coverage and Reimbursement Generally The commercial success of our product candidates and our ability to commercialize any approved product candidates successfully will depend inpart on the extent to which governmental payer programs at the federal and state levels, including Medicare and Medicaid, private health insurers and otherthird-party payers provide coverage for and establish adequate reimbursement levels for our product candidates. In the United States, private health insurersand other third-party payers often provide reimbursement for products and services based on the level at which the government provides reimbursementthrough the Medicare or Medicaid programs for such products and services. In the United States, the European Union and other potentially significantmarkets for our product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medicalproducts and services, particularly for new and innovative products and therapies, which often has resulted in average selling prices lower than they wouldotherwise be. Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls inthe European Union will put additional pressure on product pricing, reimbursement and utilization, which may adversely affect our future product sales andresults of operations. For example, there have been several recent U.S. Congressional28  inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review therelationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursementmethodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains additional drug price controlmeasures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part Dplans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate costsharing for generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to lower drug prices and reduce out ofpocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcareprograms, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S.Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at the same, isimmediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow Medicare AdvantagePlans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, toinclude in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product. On January 31, 2019, the HHS Office ofInspector General proposed modifications to federal Anti-Kickback Statute safe harbors which, among other things, may affect rebates paid by manufacturersto Medicare Part D plans, the purpose of which is to further reduce the cost of drug products to consumers. Although a number of these, and other proposedmeasures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that itwill continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislationand implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, to encourage importation fromother countries and bulk purchasing. These pressures can arise from rules and practices of managed care groups, judicial decisions and laws and regulationsrelated to Medicare, Medicaid and healthcare reform, pharmaceutical coverage and reimbursement policies and pricing in general. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payers toreimburse all or part of the associated healthcare costs. In addition, many U.S. hospitals receive a fixed reimbursement amount per procedure for certainsurgeries and other treatment therapies they perform, or a predetermined rate for all hospital inpatient care provided as payment in full. Because this amountmay not be based on the actual expenses the hospital incurs, hospitals may choose to use therapies which are less expensive when compared to our productcandidates. Sales of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to which the costs of ourproducts will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed bygovernment health administration authorities, such as Medicare and Medicaid, private health insurers and other third-party payers. Third-party payers areincreasingly imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products, includingpharmaceuticals. For example, federal and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price.These restrictions and limitations influence the purchase of healthcare services and products. Third-party payers may limit coverage to specific drug productson an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. Additionally, third-party payersare increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to theirsafety and efficacy. Therefore, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medicallynecessary or cost-effective. Moreover, a payer’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will beapproved, and one payer’s determination to provide coverage for a product does not assure that other payers will also provide coverage. Adequate third-partyreimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development.Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products andproduct candidates or exclusion of our products and product candidates from coverage. The cost containment measures that healthcare payers and providersare instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. 29  Healthcare Regulatory Developments In the United States and some foreign jurisdictions, the legislative landscape with respect to healthcare continues to evolve. There have been anumber of legislative and regulatory changes to the healthcare system that could affect our ability to sell our products profitably. Among policy makers andpayers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containinghealthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts andhas been significantly affected by major legislative initiatives.For example, the Health Care Reform Law was passed in March 2010 and includes provisions that have substantially changed healthcare financingby both governmental and private insurers. Among other provisions that could have an impact on our business, the Health Care Reform Law revised themethodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug RebateProgram are calculated, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended theMedicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers tonew annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparativeeffectiveness research. Additionally, the Health Care Reform Law implemented a new Medicare Part D coverage gap discount program in whichmanufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during theircoverage gap period as a condition for the outpatient drugs being covered under Medicare Part D. The Health Care Reform Law’s future impact on ourbusiness is unclear.Some of the provisions of the Health Care Reform Law have yet to be implemented, and there have been judicial and Congressional challenges tocertain aspects of the Health Care Reform Law, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Health CareReform Law. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certainprovisions of the Health Care Reform Law or otherwise circumvent some of the requirements for health insurance mandated by the Health Care Reform Law.Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Health Care Reform Law. While Congress has notpassed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Health Care Reform Law have been signed intolaw. The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility paymentimposed by the Health Care Reform Law on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonlyreferred to as the “individual mandate”. On January 23, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 thatdelayed the implementation of certain Health Care Reform Law-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Health Care Reform Law, effective January 1,2019, to close the coverage gap in most Medicare drug plans. In July 2018, CMS published a final rule permitting further collections and payments to andfrom certain Health Care Reform Law qualified health plans and health insurance issuers under the Health Care Reform Law risk adjustment program inresponse to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a TexasU.S. District Court Judge ruled that the Health Care Reform Law is unconstitutional in its entirety because the “individual mandate” was repealed byCongress as part of the TCJA. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will haveno immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the HealthCare Reform Law will impact the Health Care Reform Law.In addition, other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted. In August 2011, PresidentObama signed into law the Budget Control Act of 2011, as amended, which, among other things, created the Joint Select Committee on Deficit Reduction torecommend proposals in spending reductions to Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction ofat least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government programs. These reductionsinclude aggregate reductions to Medicare payments to providers of30  up to 2% per fiscal year starting in 2013 and, following passage of the Bipartisan Budget Act of 2015, and subsequent legislative amendments, including theBBA, will remain in effect until 2027, unless additional congressional action is taken. In January 2013, President Obama signed into law the AmericanTaxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers and increased the statute of limitationsperiod for the government to recover overpayments to providers from three to five years.Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right toTry Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drugproducts that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patientscan seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligationfor a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.These and other healthcare reform initiatives may result in additional reductions in Medicare payments and other healthcare funding, which couldhave a material adverse effect on our financial operations. We expect that additional state and federal healthcare reform measures will be adopted in thefuture, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could further limit theprices we are able to charge, or the amounts of reimbursement available, for our product candidates once they are approved. Foreign RegulationIn order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of othercountries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of ourproducts. For example, in the European Union, we must obtain authorization of a clinical trial application, or CTA, in each member state in which we intendto conduct a clinical trial. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparableregulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process variesfrom country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval inother countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatoryapproval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. EmployeesAs of March 5, 2019, we had 55 employees, all of whom are located in the United States. None of our employees are represented by a labor union orcovered by a collective bargaining agreement. We consider our relationship with our employees to be good. Website Access to ReportsOur internet website is www.caratherapeutics.com. We make available free of charge on our website (under the heading “SEC Filings”) our Securitiesand Exchange, or SEC, filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendmentsto those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website address is provided onlyas an inactive textual reference. The information provided on our website is not part of this Annual Report on Form 10-K and is not incorporated by referenceherein. The SEC maintains an internet website (http://www.sec.gov) where our SEC filings may be accessed by the public.31  Item 1A. Risk Factors In addition to other information contained in this Annual Report on Form 10-K, the following risks should be considered in evaluating our businessand future prospects and an investment in our common stock. The risks and uncertainties described below are not the only ones we face. If any of thefollowing risks and uncertainties develops into actual events, our business, financial condition, results of operations and cash flows could be materiallyadversely affected. In that case, the price of our common stock could decline and you may lose all or part of your investment.Risks Related to Our Financial Condition and Capital RequirementsWe have incurred significant losses since our inception, anticipate that we will incur continued losses for the foreseeable future, and may neverachieve or maintain profitability.We are a clinical-stage biopharmaceutical company. For the last several years, we have focused our efforts primarily on developing I.V. and OralCR845/difelikefalin with the goal of achieving regulatory approval. Since inception, we have incurred significant operating and net losses. Our net losseswere $74.0 million, $58.1 million and $57.3 million for the years ended December 31, 2018, December 31, 2017 and December 31, 2016, respectively. As ofDecember 31, 2018, we had an accumulated deficit of $294.4 million. We expect to continue to incur significant expenses and operating and net losses overthe next several years, as we continue to develop I.V. and Oral CR845/difelikefalin. Our net losses may fluctuate significantly from year to year, dependingon the timing of our clinical trials, the receipt of additional milestone payments, if any, under our collaborations with VFMCRP, Maruishi and CKDP, thereceipt of payments under any future collaborations we may enter into, and our expenditures on other R&D activities.In addition, we expect to incur significant sales, marketing and manufacturing expenses related to the commercialization of I.V. and OralCR845/difelikefalin, if they are approved by the FDA. As a result, we expect to continue to incur significant losses for the foreseeable future. We anticipatethat our expenses will increase significantly as we: •continue the development of KORSUVA (CR845/difelikefalin) injection for CKD-aP; •continue the development of Oral KORSUVA (CR845/difelikefalin) for CKD-aP and CLD-aP; •expand our Oral KORSUVA (CR845/difelikefalin) program into certain dermatologic conditions, including atopic dermatitis; •explore further development of CR845/difelikefalin injection in the post-operative setting; •seek regulatory approvals for KORSUVA (CR845/difelikefalin) injection and any other product candidate that successfully completesclinical trials; •establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any productsfor which we may obtain regulatory approval; •maintain, expand and protect our global intellectual property portfolio; •hire additional clinical, quality control and scientific personnel; and •add operational, financial and management information systems and personnel, including personnel to support our drug development andpotential future commercialization efforts.To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. Thiswill require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates,discovering additional product candidates, potentially entering into collaboration and license agreements, obtaining regulatory approval for productcandidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We may never succeed in these activitiesand, even if we do, may never achieve profitability.32  Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timingor amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or foreign regulatory authorities, toperform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our productcandidates, our expenses could increase.Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become andremain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our R&D efforts,diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of yourinvestment. Our operating history makes it difficult to evaluate our business and prospects.We commenced operations in 2004, and our operations to date have been limited to organizing and staffing our company, business planning, raisingcapital and developing our product candidates, including undertaking preclinical studies and conducting clinical trials of I.V. and Oral CR845/difelikefalin.We have not yet demonstrated an ability to obtain regulatory approval for, or successfully commercialize, a product candidate. In addition, as a relativelynascent business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown difficulties. If our productcandidates are approved by the FDA, we will need to expand our capabilities to support commercial activities. We may not be successful in adding suchcapabilities. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfullydeveloping and commercializing pharmaceutical products.We will need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our productdevelopment programs or commercialization efforts.Conducting clinical trials, pursuing regulatory approvals, establishing outsourced manufacturing relationships and successfully manufacturing andcommercializing our product candidates is expensive. We will need to raise additional capital to: •progress our KORSUVA (CR845/difelikefalin) injection CKD-aP program through Phase 3 pivotal trials and NDA filing; •continue the further development of Oral KORSUVA (CR845/difelikefalin) for CKD-aP and CLD-aP; •expand our Oral KORSUVA (CR845/difelikefalin) program into certain dermatologic conditions, including atopic dermatitis; •explore further development of CR845/difelikefalin injection in the post-operative setting; •fund our operations and continue our efforts to hire additional personnel and build a commercial infrastructure to prepare for thecommercialization of KORSUVA (CR845/difelikefalin) injection and our other future product candidates, if approved by the FDA; •qualify and outsource the commercial-scale manufacturing of our products, including KORSUVA (CR845/difelikefalin) injection undercGMP; and •in-license other product candidates.33  We believe that with our available cash and cash equivalents and marketable securities balances as of December 31, 2018, we will have sufficientfunds to meet our projected operating requirements into 2021, without giving effect to any potential milestone payments we may receive under ourcollaboration agreements. We have based this estimate on assumptions that may prove to be wrong and we could spend our available financial resourcesfaster than we currently expect. Further, because we do not have sufficient financial resources to meet all of our development objectives, especially our effortsto build a commercial infrastructure to prepare for the commercialization of KORSUVA (CR845/difelikefalin) injection, if approved, and the completion ofour development of Oral KORSUVA (CR845/difelikefalin) for the treatment of CKD-aP and CLD-aP, we will need to raise additional capital. If we are notable to do so, we could be required to postpone, scale back or eliminate some, or all, of these objectives. Our future funding requirements will depend onmany factors, including, but not limited to: •the rate of progress and costs related to our Phase 3 development of KORSUVA (CR845/difelikefalin) injection and Phase 2 development ofOral KORSUVA (CR845/difelikefalin) for CKD-aP, CLD-aP and other indications; •the rate of progress and costs of our efforts to prepare for the submission of an NDA for KORSUVA (CR845/difelikefalin) injection for thetreatment of CKD-aP in hemodialysis patients or for any product candidates that we may in-license or acquire in the future, and the potentialthat we may need to conduct additional clinical trials to support applications for regulatory approval; •the costs of establishing a commercial organization to sell, market and distribute KORSUVA (CR845/difelikefalin) injection, if approved; •the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with our productcandidates, including any such costs we may be required to expend if our licensors are unwilling or unable to do so; •the cost and timing of manufacturing sufficient supplies of KORSUVA (CR845/difelikefalin) injection in preparation for commercialization,if approved; •the effect of competing technological and market developments; •the terms and timing of any collaborative, licensing, co-promotion or other arrangements that we may establish; and •the success of the commercialization of KORSUVA (CR845/difelikefalin) injection, if approved, and any future product candidates.Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products andtechnologies. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equityofferings, debt financings, milestone and royalty payments from corporate collaboration and licensing arrangements, as well as through interest incomeearned on cash and investment balances. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds arenot available, we may be required to delay, reduce the scope of, or eliminate, one or more of our development programs or our commercialization efforts.Risks Related to Our Business and the Development of Our Product CandidatesWe are substantially dependent on the success of our lead product candidate, KORSUVA (CR845/difelikefalin) injection being developed for thetreatment of CKD-aP in hemodialysis patients, and cannot guarantee that this product candidate will successfully complete Phase 3 clinical trials, receiveregulatory approval or be successfully commercialized.We currently have no products approved for commercial distribution. We have invested a significant portion of our efforts and financial resources inthe development of KORSUVA (CR845/difelikefalin) injection for the treatment of CKD-aP in patients undergoing hemodialysis. Our business dependsentirely on the successful development and commercialization of our product candidates, and in particular, KORSUVA (CR845/difelikefalin) injection,which may never occur. Our ability to generate revenues in the near term is substantially dependent on our ability to develop, obtain regulatory approval for,and then successfully commercialize KORSUVA (CR845/difelikefalin) injection for the treatment of CKD-aP in patients undergoing hemodialysis. Wecurrently generate no revenues from sales of any products, and we may never be able to develop or commercialize a marketable product. 34  In the first quarter of 2018, we initiated the first pivotal Phase 3 efficacy trial of KORSUVA (CR845/difelikefalin) injection in the United States forthe treatment of CKD-aP in patients undergoing hemodialysis and, in January 2019, we announced the completion of enrollment for this trial. In August2018, we initiated a Global Phase 3 efficacy trial of KORSUVA (CR845/difelikefalin) injection that is expected to enroll patients in the United States andmultiple countries outside of the United States. In addition to the efficacy trials, we are also conducting a 52-week Phase 3 safety study of KORSUVA(CR845/difelikefalin) injection in hemodialysis patients with CKD-aP. In June 2018, we reported positive top-line data from our adaptive Phase 2/3 study ofCR845/difelikefalin injection in patients undergoing abdominal surgery. The next steps for the acute post-operative pain and/or PONV program will bedetermined after we have completed detailed analysis of the data and consulted with the FDA. We cannot give you any assurance that our Phase 3 trials forKORSUVA (CR845/difelikefalin) injection will be completed within a specified period of time or at all, and if they are completed, we cannot assure you thatthey will successfully support our regulatory applications for approval. We are also unable to give you any assurance regarding the next steps for our acutepost-operative program after we review the completed detailed analysis of the data from our adaptive Phase 2/3 study of CR845/difelikefalin injection inpatients undergoing abdominal surgery and consult with the FDA.In addition to clinical development, KORSUVA (CR845/difelikefalin) injection will require regulatory approval, commercial manufacturingarrangements, establishment of a commercial organization, significant marketing efforts and further investment before we generate any revenues from productsales. We are not permitted to market or promote any of our product candidates, including KORSUVA (CR845/difelikefalin) injection, before we receiveregulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our productcandidates. If we do not receive FDA approval for, and successfully commercialize KORSUVA (CR845/difelikefalin) injection, we will not be able togenerate revenue in the United States in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializingCR845/difelikefalin injection will have a substantial adverse impact on our business and financial condition. We have not previously submitted an NDA to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate,and we cannot be certain that KORSUVA (CR845/difelikefalin) injection or any of our other product candidates will be successful in clinical trials or receiveregulatory approval. Even though KORSUVA (CR845/difelikefalin) injection is in its Phase 3 clinical development for the treatment of dialysis patients withCKD-aP, it is, nonetheless, susceptible to the risks of failure inherent at any stage of product development, including the appearance of unexpected adverseevents or failure to achieve its primary endpoints in these or subsequent clinical trials. Further, our product candidates, including KORSUVA(CR845/difelikefalin) injection, may not receive regulatory approval even if they are successful in clinical trials. If approved for marketing by applicableregulatory authorities, our ability to generate revenues from KORSUVA (CR845/difelikefalin) injection will depend on our ability to: •create market demand for KORSUVA (CR845/difelikefalin) injection through our own marketing and sales activities in the United States,and any other arrangements to promote this product candidate we may otherwise establish; •hire, train and deploy a sales force to commercialize KORSUVA (CR845/difelikefalin) injection in the United States; •manufacture KORSUVA (CR845/difelikefalin) injection in sufficient quantities and at acceptable quality and manufacturing cost to meetcommercial demand at launch and thereafter; •establish and maintain agreements with wholesalers, distributors and group purchasing organizations on commercially reasonable terms; •maintain existing partnerships and/or create new partnerships with, or offer licenses to, third parties to promote and sell KORSUVA(CR845/difelikefalin) injection in foreign markets where we receive marketing approval; •maintain patent and trade secret protection and regulatory exclusivity for KORSUVA (CR845/difelikefalin) injection;35  •launch commercial sales of KORSUVA (CR845/difelikefalin) injection, whether alone or in collaboration with others; •achieve market acceptance of KORSUVA (CR845/difelikefalin) injection by patients, the medical community and third-party payers; •achieve coverage and adequate reimbursement from third-party payers for KORSUVA (CR845/difelikefalin) injection; •effectively compete with other competing therapies; and •maintain a continued acceptable safety profile of KORSUVA (CR845/difelikefalin) injection following launch. As we continue to develop our other product candidates, including Oral KORSUVA (CR845/difelikefalin), we expect to face similar risks to ourability to develop, obtain regulatory approval for and successfully commercialize such product candidates as we face with KORSUVA (CR845/difelikefalin)injection.CR845/difelikefalin acts as a selective kappa opioid receptor agonist, which is a drug class that has not previously yielded a successfulcommercial product for pruritus or pain indications.The development of product candidates based on peripheral kappa opioid receptor agonists is an emerging field, and the scientific discoveries thatform the basis for our efforts to discover and develop product candidates that work through this mechanism are relatively recent. The scientific evidence tosupport the feasibility of developing differentiated product candidates based on these discoveries is both preliminary and limited. We believe that we areamong a relatively small group of companies that are pursuing the development of product candidates based on peripherally acting kappa opioid receptoragonists. In addition, we believe that companies that previously explored the development of kappa opioid receptor agonists abandoned these effortsbecause those prior generation kappa agonists, which were centrally active, resulted in psychiatric side effects. Although CR845/difelikefalin is aperipherally acting kappa opioid receptor agonist and these side effects have not been observed in any of our clinical trials to date, it is possible that wecould observe similar side effects, or other unacceptable adverse events. As a result, our approach to developing product candidates based on peripheralkappa opioid receptor agonists may not be successful and may never lead to marketable products.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates orindications that may be more profitable or for which there is a greater likelihood of success.Because we have limited financial and managerial resources, we focus on developing product candidates for specific indications that we identify asmost likely to succeed, in terms of both its regulatory approval and commercialization. As such, we are currently primarily focused on the development ofKORSUVA (CR845/difelikefalin) injection for CKD-aP in hemodialysis patients and Oral KORSUVA (CR845/difelikefalin) for CKD-aP in pre-dialysispatients, CLD-aP and certain dermatological conditions, including atopic dermatitis. As a result, we may forego or delay pursuit of opportunities with otherproduct candidates or for other indications that may prove to have greater commercial potential. Our resource allocation decisions may cause us to fail tocapitalize on viable commercial products or profitable market opportunities. Our spending on current and future R&D programs and product candidates forspecific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for aparticular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements incases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.36  Our future growth may depend on our ability to identify and develop products and if we do not successfully identify and develop productcandidates or integrate them into our operations, we may have limited growth opportunities.A component of our business strategy is to continue to develop a pipeline of product candidates by developing products that we believe are astrategic fit with our focus on pain and pruritus therapeutics. However, these business activities may entail numerous operational and financial risks,including: •difficulty or inability to secure financing to fund development activities for such development; •disruption of our business and diversion of our management’s time and attention; •higher than expected development costs; •exposure to unknown liabilities; •difficulty in managing multiple product development programs; and •inability to successfully develop new products or clinical failure.We have limited resources to identify and execute the development of products. Moreover, we may devote resources to potential development thatare never completed, or we may fail to realize the anticipated benefits of such efforts. If we do not successfully develop and commercialize productcandidates, we may not be able to obtain product revenues in future periods.The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. Ifwe are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidatesas expected, and our ability to generate revenue will be materially impaired.The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following thecommencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approvalpolicies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinicaldevelopment and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of ourexisting product candidates, including KORSUVA (CR845/difelikefalin) injection and Oral KORSUVA (CR845/difelikefalin), or any product candidates wemay seek to develop in the future, will ever obtain regulatory approval.Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDAand other regulatory agencies in the United States and by the European Medicines Agency, or EMA, and similar regulatory authorities outside the UnitedStates. Failure to obtain marketing approval for a product candidate will prevent us from commercializing that product candidate. We have no experience infiling and supporting the applications necessary to gain marketing approvals and expect to rely on third-party Clinical Research Organizations, or CROs, andconsultants to assist us in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supportinginformation to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy for that indication. Securingmarketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by,the regulatory authorities.37  Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during theclinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stageclinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed throughpreclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinicaltrials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not besuccessful. We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receivemarketing approval or commercialize our product candidates, including: •regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at aprospective trial site; •we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols withprospective trial sites; •clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, toconduct additional clinical trials or abandon product development programs; •the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinicaltrials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; •our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, orat all; •we may have to suspend clinical trials, as in the case of the IND clinical hold placed on our adaptive Phase 3 trial of I.V. CR845/difelikefalinfor postoperative pain in February 2016, which was subsequently removed in April 2016, or terminate clinical trials of our productcandidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks; •regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons,including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; •changes in marketing approval policies during the development period; •changes in or the enactment of additional statutes or regulations; •changes in regulatory review for each submitted product application; •the cost of clinical trials of our product candidates may be greater than we anticipate; •the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may beinsufficient or inadequate; and •our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators orinstitutional review boards to suspend or terminate the trials.Moreover, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currentlycontemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are notpositive or are only modestly positive or if there are safety concerns, we may: •be delayed in obtaining marketing approval for our product candidates; •not obtain marketing approval at all; •obtain approval for indications or patient populations that are not as broad as intended or desired; •obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;38  •be subject to additional post-marketing testing requirements; or •have the product removed from the market after obtaining marketing approval.Furthermore, regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide thatour data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained frompreclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may belimited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.Finally, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indicationsthan we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a labelthat does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of these scenarios couldcompromise the commercial prospects for our product candidates to assure safe use of the product candidates, either as a condition of product candidateapproval or on the basis of new safety information.If we experience delays in obtaining approval, if we fail to obtain approval of a product candidate or if the label for a product candidate does notinclude the labeling claims necessary or desirable for the successful commercialization of that product candidate, the commercial prospects for such productcandidate may be harmed and our ability to generate revenues will be materially impaired.We have been granted breakthrough therapy designation for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severepruritus associated with CKD in hemodialysis patients, however, it may not lead to a faster development or regulatory review or approval process, and itdoes not increase the likelihood that KORSUVA (CR845/difelikefalin) injection will receive marketing approval.In June 2017, the FDA granted breakthrough therapy designation for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe uremic pruritus in CKD patients undergoing hemodialysis. A breakthrough therapy is defined as a drug that is intended, alone or in combination withone or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstratesubstantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early inclinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor ofthe trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.Drugs designated as breakthrough therapies by the FDA may also be eligible for accelerated approval if the relevant criteria are met.The receipt of a breakthrough therapy designation for KORSUVA (CR845/difelikefalin) injection for the treatment of moderate-to-severe uremicpruritus in CKD patients undergoing hemodialysis may not result in a faster development process, review or approval compared to drugs considered forapproval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, the FDA may later decide that it no longermeets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. 39  The FDA may determine that I.V. CR845/difelikefalin, or any of our other product candidates, has undesirable side effects that could limit dosagein development, delay or prevent their regulatory approval or commercialization.Undesirable side effects caused by our product candidates could cause us or regulatory authorities to limit dosage in development or interrupt, delayor halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreignauthorities. For example, in February 2016, the FDA placed our adaptive trial of I.V. CR845/difelikefalin for postoperative pain on IND clinical hold pendinga safety review. The clinical hold was based on a stopping rule related to elevated serum sodium levels of greater than 150 mmol/L. After the safety reviewwas completed, the FDA removed this clinical hold in April 2016 and the clinical trial was resumed in June 2016. If other concerns are raised regarding thesafety of a new drug as a result of undesirable side effects identified during clinical testing, the FDA may order us to cease further development, decline toapprove the drug or issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve the drug. Thenumber of such requests for additional data or information issued by the FDA in recent years has increased and resulted in substantial delays in the approvalof several new drugs. Undesirable side effects caused by I.V. CR845/difelikefalin or any of our other product candidates could also result in denial ofregulatory approval by the FDA or other regulatory authorities for any or all targeted indications or the inclusion of unfavorable information in our productlabeling, and in turn prevent us from commercializing and generating revenues from the sale of I.V. CR845/difelikefalin or any other product candidate. To date, the side effects observed in the completed I.V. CR845/difelikefalin clinical trials include dizziness, transient facial tingling, a state of near-sleep, or somnolence, and hypernatremia, an electrolyte disturbance that is defined by an elevated sodium level in the blood, which we believe is secondary,at least in part, to another side effect, aquaresis, that is defined as electrolyte-free urination. As described above, the observation of mild to moderatehypernatremia in our adaptive trial for postoperative pain triggered a stopping rule in the trial protocol and led the FDA to institute an IND clinical holdrelated to the trial, pending a safety review. Prolonged aquaresis can result in a negative fluid balance if the excreted water is not replaced by oral orintravenous fluids, and although we recommend steps to control fluid balance, we cannot be certain that such instructions will be followed by healthcareproviders and/or patients, and failure to follow such instructions may be accompanied by adverse events associated with negative fluid balance, includingdisability and death. We believe that one such adverse event, which has been observed, postural tachycardia, an elevation of heart rate upon standing up, is aphysiological reflex that can be triggered as a result of decreased intravascular volume caused by a negative fluid balance. We have observed transientprolactin elevations, which are brief increases in the concentration of the hormone prolactin in the bloodstream, in response to I.V. CR845/difelikefalin,which we have measured as a nonselective opioid biomarker since both kappa and mu opioids elicit this effect. We cannot be certain that such elevations inprolactin will be transient, safe, and well tolerated in all patients. In addition, previously developed kappa opioid agonists, the pharmacological class ofdrugs that CR845/difelikefalin belongs to, have been associated with poorly tolerated psychiatric side effects, such as a feeling of emotional and mentaldiscomfort, or dysphoria, and hallucinations, at high doses, particularly for prior generations of kappa opioid agonists with substantially unrestricted or onlypartially restricted entry to the CNS. Although we have not observed psychiatric side effects in any CR845/difelikefalin clinical trials to date, we cannot becertain that these side effects or others will not be observed in the future, or that the FDA will not require additional trials or impose more severe labelingrestrictions due to these side effects or other concerns. The drug-related side effects could affect patient recruitment or the ability of enrolled patients tocomplete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospectssignificantly. Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused bysuch products, a number of potentially significant negative consequences could result, including: •regulatory authorities may withdraw approvals of such product; •regulatory authorities may require additional warnings on the label; •we may be required to create a medication guide outlining the risks of such side effects for distribution to patients, if not already requiredpursuant to a REMS; •we could be sued and held liable for harm caused to patients; and •our reputation may suffer.40  Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and couldsignificantly harm our business, results of operations and prospects.If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayedor prevented.We may not be able to initiate or continue conducting clinical trials for our product candidates if we are unable to locate and enroll a sufficientnumber of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Some of ourcompetitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwisebe eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is affected by other factorsincluding: •the size and nature of the patient population; •the severity of the disease under investigation; •the eligibility criteria for, and design of, the trial in question; •the perceived risks and benefits of the product candidate under study; •competition in recruiting and enrolling patients in clinical trials; •the efforts to facilitate timely enrollment in clinical trials; •the patient referral practices of physicians; •the ability to monitor patients adequately during and after treatment; and •the proximity and availability of clinical trial sites for prospective patients.Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one ormore clinical trials altogether. We may encounter difficulties and/or delays in completing our planned enrollments. Enrollment delays in our clinical trialsmay result in increased development costs for our product candidates, or the inability to complete development of our product candidates, which wouldcause the value of our company to decline, limit our ability to obtain additional financing, and materially impair our ability to generate revenues.CR845/difelikefalin is a kappa opioid receptor agonist and, if approved, will exist in the marketplace with mu opioid products that are subject torestrictive marketing and distribution regulations, which if applied to our product candidates would restrict their use and harm our ability to generateprofits.Many currently approved mu opioid receptor agonists require REMS as part of their approval by the FDA. REMS programs may require medicationguides for patients, special communication plans to healthcare professionals or elements to assure safe use, such as restricted distribution methods, patientregistries and/or other risk minimization tools. While CR845/difelikefalin has been well tolerated in clinical trials to date and has not shown any evidence ofthe euphoria that has led to misuse, abuse and addiction of mu opioids, including the results of our Human Abuse Liability, or HAL, trial, which wesuccessfully completed in the fourth quarter of 2014, the FDA may still determine that CR845/difelikefalin-based products require a REMS program,including for its use in non-pain indications such as KORSUVA (CR845/difelikefalin) injection for CKD-aP in hemodialysis patients or Oral KORSUVA(CR845/difelikefalin) for CKD-aP in pre-dialysis patients and CLD-aP. We cannot predict whether REMS will be required as part of the FDA’s approval ofour product candidates and, if required, what those requirements might be. Any limitations on approval or marketing could restrict the commercialpromotion, distribution, prescription or dispensing of our product candidates, if approved. If a REMS program is required, depending on the extent of theREMS requirements, the program might significantly increase our costs to commercialize these product candidates. Furthermore, risks of our productcandidates that are not adequately addressed through proposed REMS for such product candidates may also prevent or delay their approval forcommercialization.41  In addition, currently approved mu opioids with which CR845/difelikefalin -based products may compete are controlled substances, which aresubject to state, federal and foreign laws and regulations regarding their manufacture, use, sale, importation, exportation and distribution. Controlledsubstances are regulated under the federal Controlled Substances Act of 1970 and regulations of the DEA. The DEA regulates controlled substances asSchedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the UnitedStates. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse andSchedule V substances the lowest relative risk of abuse among such substances.The results from our HAL trial suggest that CR845/difelikefalin may have the potential to be a Schedule V or non-scheduled peripheral opioid.However, while CR845/difelikefalin-based products have not demonstrated any evidence of the euphoria that has led to misuse, abuse, and addiction of muopioids, and while CR845/difelikefalin-based products are not being treated as a controlled substance in clinical trials, it is possible that the DEA coulddetermine that CR845/difelikefalin-based products should be regulated as controlled substances. Even if the DEA does not regulate CR845/difelikefalin-based products, including KORSUVA (CR845/difelikefalin) injection for the treatment of CKD-aP in hemodialysis patients and Oral KORSUVA(CR845/difelikefalin) for other pruritic conditions such as CKD-aP in pre-dialysis patients and CLD-aP, as controlled substances, public perceptionsurrounding opioids as a class may lead to public opposition to approvability of CR845/difelikefalin and limit its commercial potential. The ‘opioid crisis’currently discussed among federal, state and local policymakers fails to distinguish between mu opioids and other opioids. Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the statesare separate jurisdictions, they may separately schedule drugs as well. While some states automatically schedule a drug when the DEA does so, in other statesthere must be rulemaking or a legislative action. State scheduling may delay commercial sale of any controlled substance drug product for which we obtainfederal regulatory approval and adverse scheduling could impair the commercial attractiveness of such product. We or our collaborators may also berequested to obtain separate state registrations in order to be able to obtain, handle and distribute controlled substances for clinical trials or commercial sale,and failure to meet applicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwisearising under federal law.If any of our product candidates are classified as controlled substances, we and our suppliers, manufacturers, contractors, customers and distributorswould be required to obtain and maintain applicable registrations from state, federal and foreign law enforcement and regulatory agencies and comply withstate, federal and foreign laws and regulations regarding the manufacture, use, sale, importation, exportation and distribution of controlled substances. Also,if any of our product candidates were classified as controlled substances, there is a risk that DEA regulations could limit the supply of the compounds used inclinical trials and, in the future, the ability to produce and distribute our products in the volume needed to meet commercial demand.Regulations associated with controlled substances govern manufacturing, labeling, packaging, testing, dispensing, production and procurementquotas, record keeping, reporting, handling, shipment and disposal. These regulations increase the personnel needs and the expense associated withdevelopment and commercialization of product candidates including controlled substances. The DEA, and some states, conduct periodic inspections ofregistered establishments that handle controlled substances. Failure to obtain and maintain required registrations or comply with any applicable regulationscould delay or preclude us from developing and commercializing our product candidates containing controlled substances and subject us to enforcementaction. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations. In some circumstances,violations could lead to criminal proceedings. Because of the restrictive nature of these regulations, if it were determined that our product candidates aresubject to these restrictions, the commercialization of our product candidates could be limited. 42  We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may adversely affectour business.We have received conditional approval from the FDA for the use of KORSUVA as the proprietary name for our product candidate I.V.CR845/difelikefalin for the treatment of itch or pruritus. However, this approval is conditional upon a further and final review by the FDA at the time of NDAapproval. Additionally, any name we intend to use for our other product candidates will require approval from the FDA regardless of whether we have secureda formal trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of the potentialfor confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims orcontributes to an overstatement of efficacy. If the FDA objects to any of our proposed product names, we may be required to adopt alternative names for ourproduct candidates. If we adopt alternative names, we would lose any goodwill or brand recognition developed for the KORSUVA mark as well as the benefitof our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify asuitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. Wemay be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize ourproduct candidates. Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad. In order to market and sell our products in the European Union, or EU, and many other jurisdictions, we or our collaborators or partners must obtainseparate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and caninvolve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approvalprocess outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside theUnited States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or these thirdparties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensureapproval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensureapproval by regulatory authorities in other countries or jurisdictions or by the FDA. However, the failure to obtain approval in one jurisdiction maycompromise our or our collaborators’ or partners’ ability to obtain approval elsewhere. We or our collaborators or partners may not be able to file formarketing approvals and may not receive necessary approvals to commercialize our products in any market.Regulatory approval is limited by the FDA to those specific indications and conditions for which clinical safety and efficacy have beendemonstrated, and we may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products for unapproved or “off-label” uses, resulting in damage to our reputation and business.When the FDA or comparable foreign regulatory authorities issue regulatory approval for a product candidate, the regulatory approval is limited tothose specific indications for which a product is approved. If we are not able to obtain FDA approval for any desired future indications for our products andproduct candidates, our ability to effectively market and sell our products may be reduced and our business may be adversely affected.While physicians may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested inclinical studies and approved by the regulatory authorities, we are prohibited from marketing and promoting the products for indications that are notspecifically approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an appropriate treatmentfor some patients in varied circumstances. Regulatory authorities in the United States generally do not restrict or regulate the behavior of physicians in theirchoice of treatment within the practice of medicine. Regulatory authorities do, however, restrict communications by pharmaceutical companies on off-labeluse. If the FDA determines that our promotional activities constitute promotion of an off-label use, it could request that we modify our promotional materialsor subject us to regulatory or enforcement actions by other agencies, including issuance of warning letters or untitled letters, suspension or withdraw anapproved product from the market, mandatory or voluntary recalls, civil fines, disgorgement of money, operating restrictions, additional reportingrequirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement, injunctions or criminal prosecution, any of whichcould significantly harm our business. 43  Even if one of our CR845/difelikefalin-based product candidates receives regulatory approval, we will be subject to ongoing obligations andcontinued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject tolabeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experienceunanticipated problems with our products.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, will besubject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safetyand other post-marketing information and reports, registration and listing requirements, continued compliance with cGMP requirements relating tomanufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution ofsamples to physicians and recordkeeping and cGCPs for any clinical trials that we conduct post-approval. Even if marketing approval of a product candidateis granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval,including any requirement to implement a REMS. If any of our product candidates receives marketing approval, the accompanying label may limit theapproved use of our drug, which could limit sales of the product.The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of theproduct. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications andin accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-labeluse and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of theFederal Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and statehealth care fraud and abuse laws, as well as state consumer protection laws.In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, orfailure to comply with regulatory requirements, may yield various results, including: •restrictions on manufacturing such products; •restrictions on the labeling or marketing of a product; •restrictions on product distribution or use; •requirements to conduct post-marketing studies or clinical trials; •warning letters; •withdrawal of the products from the market; •refusal to approve pending applications or supplements to approved applications that we submit; •recall of products; •fines, restitution or disgorgement of profits or revenues; •suspension or withdrawal of marketing approvals; •refusal to permit the import or export of our products; •product seizure; or •injunctions or the imposition of civil or criminal penalties.The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of ourproduct candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not ableto maintain regulatory compliance, we may lose any marketing approval that we may have obtained. 44  Risks Related to the Commercialization of Our Product CandidatesWe face significant competition from other pharmaceutical and biotechnology companies, academic institutions, government agencies and otherresearch organizations. Our operating results will suffer if we fail to compete effectively.The development and commercialization of new drug products is highly competitive. We face competition with respect to our current productcandidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from majorpharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical andbiotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of pain and pruritus. Potentialcompetitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patentprotection and establish collaborative arrangements for research, development, manufacturing and commercialization.There are a large number of companies developing or marketing therapies for the treatment and management of pruritus, including many majorpharmaceutical and biotechnology companies. Among the companies that currently market or are developing therapies that, if approved, our productcandidates may potentially compete with include: Pfizer, Menlo Therapeutics, Trevi, Vanda, Tioga, Leo Pharma, Chugai and others. Additionally, there are alarge number of companies developing or marketing therapies for the treatment and management of postoperative acute pain, moderate to severe chronic painand neuropathic pain, including many major pharmaceutical and biotechnology companies. Among the companies that currently market or are developingtherapies that, if approved, our product candidates would potentially compete with include: Pfizer, Cumberland Pharmaceuticals, Horizon Pharmaceuticals,Mallinckrodt, Actavis, Purdue Pharma, Janssen Pharmaceuticals, Celgene, Endo Pharmaceuticals, Collegium, Pacira, Egalet, Collegium Pharmaceuticals andPernix.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDAor other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strongmarket position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-partypayers seeking to encourage the use of generic products. Generic products are currently on the market for some of the indications that we are pursuing, andadditional products are expected to become available on a generic basis over the coming years. If our product candidates achieve marketing approval, weexpect that they will be priced at a significant premium over competitive generic products.Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resourcesand expertise in R&D, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products thanwe do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smallernumber of our competitors. Early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with largeand established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishingclinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.If we are unable to establish effective marketing and sales capabilities or enter into agreements with third parties to market and sell our productcandidates, if they are approved, we may be unable to generate product revenues.We currently do not have a commercial infrastructure for the marketing, sale and distribution of pharmaceutical products. If approved, in order tocommercialize our products, we must build our marketing, sales and distribution capabilities or make arrangements with third parties to perform theseservices. We may not be successful in doing so. If KORSUVA (CR845/difelikefalin) injection is approved by the FDA, we plan to build a commercialinfrastructure, including our own specialty sales force, to launch KORSUVA (CR845/difelikefalin) injection in the hemodialysis setting in the United States.We may seek to further penetrate the U.S. market in the future by expanding our sales force or through collaborations with other pharmaceutical orbiotechnology companies or third-party manufacturing and sales organizations. If approved for marketing outside the United States, our existing or newpartners will commercialize KORSUVA (CR845/difelikefalin) injection outside the United States with their own, or their collaborators’, sales force.45  We have no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in thebuilding and managing of a commercial infrastructure. The establishment and development of our own sales force and related compliance plans to marketany products we may develop will be expensive and time consuming and could delay any product launch, and we may not be able to successfully developthis capability. We, or our partners or collaborators, will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train,manage and retain marketing and sales personnel. In the event that we are unable to develop a marketing and sales infrastructure, we may not be able tocommercialize KORSUVA (CR845/difelikefalin) injection or any of our other product candidates, which would limit our ability to generate productrevenues. Factors that may inhibit our or our partners’ or collaborators’ efforts to commercialize KORSUVA (CR845/difelikefalin) injection or our otherproduct candidates include: •inability to recruit, train, manage and retain adequate numbers of effective sales and marketing personnel; •inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe KORSUVA(CR845/difelikefalin) injection or our other product candidates; •inability to effectively oversee a geographically dispersed sales and marketing team; •the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companieswith more extensive product lines; and •unforeseen costs and expenses associated with creating an independent sales and marketing organization.Although our current plan is to hire most of our sales and marketing personnel only if KORSUVA (CR845/difelikefalin) injection is approved by theFDA, we will incur expenses prior to product launch in recruiting this sales force and developing a marketing and sales infrastructure. If the commerciallaunch of KORSUVA (CR845/difelikefalin) injection is delayed as a result of FDA requirements or other reasons, we would incur these expenses prior tobeing able to realize any revenue from sales of KORSUVA (CR845/difelikefalin) injection. Even if we are able to effectively hire a sales force and develop amarketing and sales infrastructure, our sales force and marketing teams may not be successful in commercializing KORSUVA (CR845/difelikefalin) injectionor any of our other product candidates.In the event that we are unable to collaborate with a third-party marketing and sales organization to commercialize any approved product candidatesoutside the United States, our ability to generate product revenues may be limited. To the extent that we rely on third parties to commercialize any productsfor which we obtain regulatory approval, we may receive less revenues than if we commercialized these products ourselves. In addition, we would have lesscontrol over the sales efforts of any other third parties involved in our commercialization efforts.To the extent that any of our product candidates, if approved, does not achieve broad market acceptance, the revenues that we generate from itssales will be limited.We have never commercialized a product candidate for any indication. Even if KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA(CR845/difelikefalin) or any of our other product candidates is approved by the appropriate regulatory authorities for marketing and sale, it may not gainacceptance among physicians, hospitals, dialysis providers, patients and third-party payers. If any product candidates for which we obtain regulatoryapproval do not gain an adequate level of market acceptance, we may not generate significant product revenues or become profitable. Market acceptance ofKORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) and any of our other product candidates by physicians, hospitals, dialysisproviders, patients and third-party payers will depend on a number of factors, some of which are beyond our control. The degree of market acceptance of anyof our product candidates will depend on a number of factors, including: •the prevalence and severity of adverse events associated with such product candidate; •limitations or warnings contained in the product’s FDA-approved labeling, including potential limitations or warnings for such productcandidate, that may be more restrictive than other pain management or pruritus products; •changes in the standard of care for the targeted indications for such product candidate, which could reduce the marketing impact of anyclaims that we could make following FDA approval, if obtained; •the relative convenience and ease of administration of such product candidate;46  •cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies; •the availability of coverage and adequate reimbursement by third-party payers, such as insurance companies and other healthcare payers, andby government healthcare programs, including Medicare and Medicaid; •the extent and strength of our marketing and distribution of such product candidate; •the safety, efficacy and other potential advantages over, and availability of, alternative treatments already used to treat acute pain, chronicpain and/or pruritus; •distribution and use restrictions imposed by the FDA with respect to such product candidate or to which we agree as part of a mandatory riskevaluation and mitigation strategy or voluntary risk management plan; •the timing of market introduction of such product candidate, as well as competitive products; •our ability to offer such product candidate for sale at competitive prices; •the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; and •the clinical indications for such product candidate if approved.Our ability to effectively promote and sell KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) and any of our otherproduct candidates, if approved, will also depend on pricing and cost effectiveness, including our ability to produce a product at a competitive price andachieve acceptance of the product onto dialysis organization or hospital formularies, and our ability to obtain sufficient third-party coverage orreimbursement. Generally, before we can attempt to sell CR845/difelikefalin injection in a hospital or dialysis provider, CR845/difelikefalin injection mustbe approved for addition to that institution’s list of drugs approved for use in that institution, or formulary list. In evaluating drugs for inclusion on theformulary list, hospitals and dialysis providers evaluate a variety of factors, including cost. The frequency with which hospitals and dialysis providers addand remove drugs from their formulary lists varies from organization to organization, and institutions often require additional information prior to addingnew drugs to their formulary, which may result in substantial delays in our receiving formulary approval for CR845/difelikefalin injection. Since mosthospitals are members of group purchasing organizations, which leverage the purchasing power of a group of entities to obtain discounts based on thecollective buying power of the group, our ability to attract customers in the hospital marketplace will also depend on our ability to effectively promote ourproduct candidates to group purchasing organizations. We will also need to demonstrate acceptable evidence of safety and efficacy, as well as relativeconvenience and ease of administration. Market acceptance could be limited depending on the prevalence and severity of any expected or unexpectedadverse side effects associated with our product candidates. Our efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources andmay never be successful. Even if the medical community accepts that one of our product candidates is safe and effective for its approved indications,physicians and patients may not immediately be receptive to such product candidate and may be slow to adopt it as an accepted treatment of pain or pruritus.It is unlikely that any labeling approved by the FDA will contain claims that one of our product candidates is safer or more effective than competitiveproducts or will permit us to promote such product candidate as being superior to competing products. Further, the availability of inexpensive generic formsof products for acute and chronic pain as well as pruritus may also limit acceptance of our product candidates among physicians, patients and third-partypayers. If KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) or any of our other product candidates, is approved but does notachieve an adequate level of acceptance among physicians, patients and third-party payers, we may not generate meaningful revenues from KORSUVA(CR845/difelikefalin) injection, Oral CR845/difelikefalin or such other product candidate, and we may not become profitable.47  We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for KORSUVA(CR845/difelikefalin) injection or other product candidates that we may develop and may have to limit their commercialization.The use of KORSUVA (CR845/difelikefalin) injection or Oral KORSUVA (CR845/difelikefalin) and any of our other product candidates in clinicaltrials and the sale of any products for which we obtain regulatory approval expose us to the risk of product liability claims. We face inherent risk of productliability related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that wemay develop. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing,manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warnof dangers inherent in the product, negligence, strict liability or a breach of warranties. Product liability claims might be brought against us by consumers,healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against these claims, we will incursubstantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: •loss of revenue from decreased demand for our products and/or product candidates; •impairment of our business reputation or financial stability; •costs of related litigation; •substantial monetary awards to patients or other claimants; •diversion of management attention; •withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs; •the inability to commercialize our product candidates; •significant negative media attention; •initiation of investigations by regulators; and •product recalls, withdrawals or labeling, marketing or promotional restrictions.We have obtained limited product liability insurance coverage for our products and our clinical trials with a $10.0 million annual aggregatecoverage limit in the United States and various other coverage limits outside of the United States. However, our insurance coverage may not reimburse us ormay not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in thefuture, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. We intendto expand our insurance coverage to include the sale of commercial products if we obtain FDA approval for our product candidates in development, but wemay be unable to obtain commercially reasonable product liability insurance for any products approved for marketing, or at all. On occasion, large judgmentshave been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims broughtagainst us could cause our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.Risks Related to Our Dependence on Third PartiesWe rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may notperform satisfactorily, including failing to meet deadlines for the completion of such trials.We rely on third-party CROs to conduct our preclinical and clinical trials for all of our product candidates, and do not plan to independently conductclinical trials of any other potential product candidates. We expect to continue to rely on third parties, such as CROs, clinical data managementorganizations, medical institutions and clinical investigators, to conduct our preclinical studies and clinical trials. These agreements might terminate for avariety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, that would delay our productdevelopment activities and adversely affect our business.48  Our reliance on these third parties for development activities will reduce our control over these activities. Nevertheless, we are responsible forensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on theCROs does not relieve us of our regulatory responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conductedin accordance with the general investigational plan and protocols for the trial and for ensuring that our preclinical trials are conducted in accordance withGLP, as appropriate. Moreover, the FDA and comparable foreign regulatory authorities require us to comply with standards, commonly referred to as goodclinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible andaccurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements throughperiodic inspections of trial sponsors, clinical investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical datagenerated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additionalclinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatoryauthority will determine that any of our clinical trials complies with GCP regulations. In addition, our clinical trials must be conducted with productproduced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatoryapproval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsoreddatabase, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.Our CROs may also have relationships with other entities, some of which may be our competitors. In addition, our CROs are not our employees, andexcept for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to ouron-going clinical, non-clinical and preclinical programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlinesor conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, if they need to be replaced or if thequality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for otherreasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals forour product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. As a result, our resultsof operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues couldbe delayed.If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so oncommercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there isa natural transition period when a new CRO commences work. As a result, delays could occur, which could compromise our ability to meet our desireddevelopment timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similarchallenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition andprospects.If the manufacturers upon whom we rely fail to produce our product candidates in the volumes that we require on a timely basis, or to comply withstringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of, or be unable tomeet demand for, our products and may lose potential revenues.We do not manufacture any of our product candidates, and we do not currently plan to develop any capacity to do so. We do not yet have agreementsestablished regarding commercial supply of our product candidates and may not be able to establish or maintain commercial manufacturing arrangements oncommercially reasonable terms for KORSUVA (CR845/difelikefalin) injection, if approved, or any of our other product candidates, for which we obtainapproval in the future. Any problems or delays we experience in preparing for commercial-scale manufacturing of a product candidate may result in a delay inFDA approval of the product candidate or may impair our ability to manufacture commercial quantities, which would adversely affect our business. Forexample, our manufacturers will need to produce specific batches of our product candidates to demonstrate acceptable stability under various conditions andfor commercially viable lengths of time. We and our contract manufacturers will need to demonstrate to the FDA and other regulatory authorities thisacceptable stability data for our product candidates,49  as well as validate methods and manufacturing processes, in order to receive regulatory approval to commercialize KORSUVA (CR845/difelikefalin)injection or any of our other product candidates. Furthermore, if our commercial manufacturers fail to deliver the required commercial quantities of bulk drugsubstance or finished product on a timely basis and at commercially reasonable prices, we would likely be unable to meet demand for our products and wewould lose potential revenues.We currently only have one contract manufacturer for each of I.V. CR845 and Oral CR845 for use in our current clinical trials. However, we are alsoworking with other manufacturers to develop additional formulations of Oral CR845 for use in the future. In addition, we do not have any long-termcommitments from our suppliers of clinical trial material or guaranteed prices for our product candidates. The manufacture of pharmaceutical productsrequires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturersof pharmaceutical products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties withproduction costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel, aswell as compliance with strictly enforced federal, state and foreign regulations. Our manufacturers may not perform as agreed. If our manufacturers were toencounter any of these difficulties, our ability to provide product candidates to patients in our clinical trials would be jeopardized.Further, we may rely on proprietary technology developed by our contract manufacturers for purposes of manufacturing certain of our productcandidates and our failure to negotiate the long-term use of any such proprietary technology may lead to delays or interruptions in the regulatory approval orcommercialization process, as well as increased costs. For example, we have developed a formulation of Oral CR845 based on proprietary technology ofEnteris. Under our agreement with Enteris, it is providing to us clinical supplies for an oral tablet formulation of CR845 on a fee for service basis. Under theagreed scope of work for this agreement, Enteris is using its proprietary formulation technology for oral delivery of peptides to provide a tablet formulation ofCR845 with suitable characteristics to use in clinical testing. We have not yet negotiated terms related to our use of such technology for commercialmanufacturing of Oral CR845 and we may not be able to do so on commercially reasonable terms, or at all. If we fail to enter into an agreement to use suchproprietary technology, we may be forced to reformulate Oral CR845 which could result in significantly delaying commercializing Oral CR845 and requireus to incur additional costs in connection with such reformulation and potentially needed to seek additional approvals from the FDA. In addition, all manufacturers of our product candidates must comply with cGMP requirements enforced by the FDA through its facilities inspectionprogram. These requirements include quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our productcandidates may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. If our contractmanufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or otherregulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. We have little control over ourmanufacturers’ compliance with these regulations and standards. If the FDA or a comparable foreign regulatory authority does not approve these facilities forthe manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, whichwould significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. A failure to comply withthese requirements may result in fines and civil penalties, suspension of production, suspension, delay or denial of product approval, product seizure orrecall, or withdrawal of product approval. If the safety of any quantities supplied is compromised due to our manufacturers’ failure to adhere to applicablelaws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our product candidates.50  We may rely on third parties to perform many essential services for any products that we commercialize, including services related to warehousingand inventory control, distribution, customer service, accounts receivable management, cash collection and adverse event reporting. If these third partiesfail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize I.V. CR845/difelikefalin, and our otherproduct candidates, will be significantly impacted and we may be subject to regulatory sanctions.We may retain third-party service providers to perform a variety of functions related to the sale and distribution of KORSUVA (CR845/difelikefalin)injection and our other product candidates, key aspects of which will be out of our direct control. These service providers may provide key services related towarehousing and inventory control, distribution, customer service, accounts receivable management and cash collection, and, as a result, most of ourinventory may be stored at a single warehouse maintained by one such service provider. If we retain this provider, we would substantially rely on it as well asother third-party providers that perform services for us, including entrusting our inventories of products to their care and handling. If these third-party serviceproviders fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us, orencounter physical or natural damage at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired. Inaddition, we may engage third parties to perform various other services for us relating to adverse event reporting, safety database management, fulfillment ofrequests for medical information regarding our product candidates and related services. If the quality or accuracy of the data maintained by these serviceproviders is insufficient, or these third parties otherwise fail to comply with regulatory requirements related to adverse event reporting, we could be subject toregulatory sanctions.We are dependent on our collaboration agreements for certain revenues, and if our commercial partners do not perform their obligations undersuch agreements, we could lose revenues. In May 2018, we entered into an agreement with VFMCRP under which we granted VFMCRP a license to seek regulatory approval to commercialize,import, export, use, distribute, offer for sale, promote, sell and otherwise commercialize KORSUVA (CR845/difelikefalin) injection for all therapeutic uses toprevent, inhibit or treat itch associated with pruritus in hemodialysis and peritoneal-dialysis patients worldwide (excluding the United States, Japan andSouth Korea). In April 2013, we entered into an agreement with Maruishi under which we granted Maruishi an exclusive license to develop, manufacture andcommercialize products containing CR845/difelikefalin in Japan. Also, in April 2012, we entered into an agreement with CKDP under which we grantedCKDP an exclusive license to develop, manufacture and commercialize products containing CR845/difelikefalin in South Korea. Under the VFMCRPAgreement, we are responsible, at our own cost, to undertake clinical and non-clinical development. We are also responsible to provide all content andsubject matter expertise required for registration with the EMA in the EU that will be needed by VFMCRP for such registration, including participation inregulatory meetings, as needed. If third-party costs incurred by us with respect to our clinical development for the EMA registration exceed $20,000, suchexcess costs will be shared equally by us and VFMCRP. VFMCRP will contribute, at its own cost, its clinical development expertise as reasonably useful forsuch development activities, such as preparing the clinical results that we present to it in a format acceptable to the EMA to obtain marketing approval in theEU. Maruishi and CKDP are required to use commercially reasonable efforts, at their expense, to develop, obtain regulatory approval for and commercializeCR845/difelikefalin in Japan and South Korea, respectively. Our receipt of milestone payments and royalties under these agreements is dependent on thecontinued efforts by VFMCRP, Maruishi and CKDP, respectively, and their failure to adequately develop or commercialize the licensed products, or anydefault or inability to meet their payment obligations under their respective agreements, could harm our revenues and business.Any collaboration arrangements that we are a party to or may enter into in the future may not be successful, which could adversely affect ourability to develop and commercialize our product candidates.Our business model is to commercialize our product candidates in the United States and generally to seek collaboration arrangements withpharmaceutical or biotechnology companies for the development or commercialization of our product candidates in the rest of the world. We currently havelicense agreements with VFMCRP (I.V. CR845/difelikefalin for CKD-aP in dialysis patients) as well as Maruishi and CKDP (CR845/difelikefalin – both I.V.and Oral). In addition to our existing agreements, we may enter into additional collaboration arrangements in the future on a selective basis. Our existingcollaborations and future collaboration arrangements may not be successful. The success of our existing and future collaboration arrangements will dependheavily on the efforts and activities of our collaborators.51  Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaboration arrangements.Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in thedevelopment process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. Thesedisagreements can be difficult to resolve if neither of the parties has final decision-making authority.Collaborations with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. For example, theVFMCRP, Maruishi and CKDP Agreements may be terminated by our collaborator for our breach or insolvency, VFMCRP may terminate its agreement (in itsentirety or with respect to any countries within the Territory upon written notice to us) upon the earlier of (1) acceptance for filing of an NDA coveringLicensed Product filed with the FDA (after completion of the Phase 3 program) or (2) the third anniversary of the Effective Date. Maruishi may terminate itsagreement with us at will, and CKDP may terminate its agreement with us in certain circumstances relating to patent invalidity or unenforceability or genericentry by a third party, as further described in the section titled “Business –– Commercial Partnerships” above. Any such termination or expiration wouldadversely affect us financially and could harm our business reputation. Our current collaborations and any future collaborations we might enter into may posea number of risks, including the following: •collaborators may not perform their obligations as expected; •collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may electnot to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategicfocus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; •collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a productcandidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; •collaborators could fail to make timely regulatory submissions for a product candidate; •collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicableregulatory requirements; •collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products orproduct candidates if the collaborators believe that competitive products are more likely to be successfully developed or can becommercialized under terms that are more economically attractive than ours; •product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidatesor products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; •a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may notcommit sufficient resources to the marketing and distribution of such product or products; •disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course ofdevelopment, might cause delays or termination of the research, development or commercialization of product candidates, might lead toadditional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; •collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as toinvite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; •collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and •collaborations, including our collaboration with Maruishi, may be terminated for the convenience of the collaborator and, if terminated, wecould be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.52  If our current collaborations or any other collaborations we might enter into in the future do not result in the successful development andcommercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone orroyalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of our product candidatescould be delayed and we may need additional resources to develop our product candidates and our product platform. All of the risks relating to our productdevelopment, regulatory approval and commercialization described in this Annual Report on Form 10-K also apply to the activities of our collaborators intheir respective jurisdictions.Additionally, if any current or future collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminatedevelopment or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find itmore difficult to attract new collaborators and our reputation in the business and financial communities could be adversely affected.For KORSUVA (CR845/difelikefalin) injection and any other product candidates, we may in the future determine to collaborate with additionalpharmaceutical and biotechnology companies for their development and potential commercialization. We face significant competition in seekingappropriate collaborators. Our ability to reach a definitive agreement for collaboration will depend, among other things, upon our assessment of thecollaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number offactors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail thedevelopment of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potentialcommercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercializationactivities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additionalexpertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not havesufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our productcandidates or bring them to market or continue to develop our product platform and our business may be materially and adversely affected.We are dependent on third parties to decide to utilize KORSUVA (CR845/difelikefalin) injection and to make it readily available at the point ofcare throughout their dialysis centers or hospitals. In addition to extensive internal efforts, the successful commercialization of KORSUVA (CR845/difelikefalin) injection will require many thirdparties, over whom we have no control, to decide to utilize KORSUVA (CR845/difelikefalin) injection and to make it readily available at the point of carethroughout their hospitals. These third parties include physicians, dialysis providers, pharmacists and hospital pharmacy and therapeutics committees, whichare commonly referred to as P&T committees. Generally, even if CR845/difelikefalin injection is approved by the FDA, before we can attempt to sellCR845/difelikefalin injection in a hospital or dialysis center, CR845/difelikefalin injection must be approved for addition to that hospital or dialysis center’slist of approved drugs, or formulary list, by the institution’s P&T committee. An institutional P&T committee typically governs all matters pertaining to theuse of medications within the institution, including review of medication formulary data and recommendations for the appropriate use of drugs within theinstitution to the medical staff. The frequency of P&T committee meetings at various institutions varies considerably, and P&T committees often requireadditional information to aid in their decision-making process, so we may experience substantial delays in obtaining formulary approvals. Additionally,institutions may be concerned that the cost of acquiring CR845/difelikefalin injection for use in their institutions will adversely impact their overallpharmacy budgets, which could cause institution staff to resist efforts to add CR845/difelikefalin injection to the formulary, or to implement restrictions onthe usage of the drug in order to control costs, either initially or later, when the increasing use of CR845/difelikefalin injection within their institution beginsto significantly impact their budgets. We cannot guarantee that we will be successful in getting the approvals we need from enough P&T committees andovercoming any financial objections raised by institution staff quickly enough to maintain and grow institutional sales of CR845/difelikefalin injection. 53  Risks Related to Legal and Compliance MattersIf we fail to comply with federal and state healthcare laws, including fraud and abuse, transparency and health information laws, we could facesubstantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid orother third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse, transparency and patients’ rights may beapplicable to our business. The healthcare laws and regulations that may affect our ability to operate include, but are not limited to: •the federal Anti-Kickback Statute, which regulates, among other things, our marketing practices, educational programs, pricing policies, andrelationships with healthcare providers or other entities, by prohibiting, among other things, any person or entity from knowingly andwillfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce, orin return for, the purchase, recommendation, lease, order or furnishing of an item or service reimbursable, in whole or in part, under a federalhealthcare program, such as the Medicare and Medicaid programs; •federal civil and criminal false claims laws and civil monetary penalties law, including, without limitation, the federal civil False Claims Act,which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment orapproval from a federal health care program (including Medicare and Medicaid); •HIPAA, which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, orattempting to execute, a scheme to defraud any healthcare benefit program or to obtain, by means of false or fraudulent pretenses,representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program,regardless of the payer (e.g., public or private) and knowingly and willfully falsifying, concealing, or covering up by any trick, scheme ordevice a material fact or making any materially false statements in connection with the delivery of, or payment for, health care benefits, itemsor services relating to healthcare matters; •federal transparency laws, including the federal Physician Payments Sunshine Act, that requires certain manufacturers of drugs, devices,biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program toreport annually to CMS, or Centers for Medicare & Medicaid Services, information related to payments and other transfers of value providedto physicians and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually to CMSownership and investment interests held by physicians and their immediate family members; and •state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or servicesreimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government,or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drugmanufacturers to report information related to the pricing of certain drugs, as well as payments and other transfers of value to physicians andother healthcare providers or marketing expenditures; and state and local laws that require the registration of pharmaceutical salesrepresentatives, many of which differ from each other in significant ways and may not have the same effect, thus complicating complianceefforts. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under these laws, it ispossible that some of our business activities could be subject to challenge under one or more of such laws. Pharmaceutical and other healthcare companiescontinue to be prosecuted under the federal false claims laws for numerous activities, including those related to research, sales, marketing and promotionalprograms. In addition, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law among other things,amends the intent requirement of the federal Anti-Kickback Statute and certain other criminal healthcare fraud statutes. A person or entity no longer needs tohave actual knowledge of these statutes or specific intent to violate them in order to commit a violation. Moreover, the Health54  Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. To the extent that any product we make is sold in a foreigncountry, we may be subject to similar foreign laws and regulations. If we or our operations are found to be in violation of any of the laws described above orany other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and criminal penalties,damages, fines, disgorgement, exclusion from participation in U.S. federal or state health care programs, contractual damages, reputational harm, individualimprisonment, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrityagreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of whichcould materially adversely affect our ability to operate our business and our financial results. Although an effective compliance program can mitigate the riskof investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even ifwe successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of ourbusiness. Moreover, achieving and sustaining compliance with applicable federal and state transparency and fraud and abuse laws may prove costly. If any ofthe physicians or other healthcare providers or entities with whom we expect to do business, including our collaborators, is found not to be in compliancewith applicable laws, it may be subject to criminal, civil or administrative sanctions, including but not limited to, exclusions from participation ingovernment healthcare programs, which could also materially affect our business. Changes in and failures to comply with applicable U.S. and foreign privacy and data protection laws, regulations and standards may subject us toliabilities and adversely affect our business, operations and financial performance.We are subject to or affected by numerous federal, state and foreign laws and regulations, as well as regulatory guidance, governing the collection,use, disclosure, retention, and security of personal data, such as information that we collect about participants and healthcare providers in connection withclinical trials in the U.S. and abroad. The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices arelikely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, affect our or our service providers’ ability tooperate in certain jurisdictions or to collect, store, transfer use and share personal data, result in liability or impose additional costs on us. The cost ofcompliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply withfederal, state, or foreign laws or self-regulatory standards could result in negative publicity, diversion of management time and effort and proceedings againstus by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. In the U.S., HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, imposes certainrequirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entitiessubject to the rule, including health plans, healthcare clearinghouses, certain healthcare providers, and their business associates that perform services for themthat involve the creation, use, maintenance or disclosure of, individually identifiable health information. In the event we are subject to HIPAA and fail toproperly maintain the privacy and security of certain individually identifiable health information, or we are responsible for an inadvertent disclosure orsecurity breach of such individually identifiable health information, we could be subject to enforcement measures, including civil and criminal penalties andfines for violations of state and federal privacy or security standards, such as HIPAA and HITECH, and their respective implementing regulations.Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. On June28, 2018, California enacted the California Consumer Privacy Act, or CCPA, which takes effect on January 1, 2020. The CCPA gives California residentsexpanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about howtheir personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expectedto increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA couldmark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect ourbusiness.55  Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. Many countries in these regions haveestablished or are in the process of establishing privacy and data security legal frameworks with which we or our partners, collaborators, customers, or serviceproviders must comply. For example, the EU has adopted the General Data Protection Regulation, or GDPR, which went into effect in May 2018 andintroduced strict requirements for processing personal data. The GDPR is likely to increase compliance burden on us, including by mandating potentiallyburdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and leverage informationabout them or how we obtain consent from them. The processing of sensitive personal data, such as physical health condition, may impose heightenedcompliance burdens under the GDPR and is a topic of active interest among foreign regulators and supervisory bodies involved in the review and approval ofclinical trials. In addition, the GDPR provides for breach reporting requirements, more robust regulatory enforcement and fines of up to 20 million euros orup to 4% of the annual global revenue. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws andregulations that may affect how we conduct business.U.S. and foreign data protection laws, regulations and standards are subject to interpretation by various courts and other governmental authorities,thus creating potentially complex compliance issues for us and our future customers and strategic partners. Any liability from failure to comply with therequirements of these laws, to the extent such requirements are deemed to apply to our operations, could adversely affect our financial condition. The costs ofcomplying with privacy and security related legal and regulatory requirements are burdensome and could have a material adverse effect on our results ofoperations.If the government or other third-party payers fail to provide coverage and adequate reimbursement and payment rates for KORSUVA(CR845/difelikefalin) injection or any of our other product candidates, if any, or if providers choose to use therapies that are less expensive, our revenueand prospects for profitability will be limited.In both domestic and foreign markets, sales of our future products will depend in part upon the availability of coverage and reimbursement fromthird-party payers. Such third-party payers include government health programs such as Medicare and Medicaid, managed care providers, private healthinsurers and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when moreestablished or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverage is approved, the resultingreimbursement payment rates might not be adequate. KORSUVA (CR845/difelikefalin) injection for the treatment of pruritus in hemodialysis patients may bedesignated as a component of the government’s bundled reimbursement for end stage renal disease treatment.In November, 2018, CMS finalized the End-Stage Renal Disease Prospective Payment System, or ESRD PPS, rule for the calendar year 2019. In theruling, CMS expands the Transitional Drug Add-on Payment Adjustment, or TDAPA, to all new renal dialysis drugs and biological products to be reimbursedat Average Selling Price, or ASP, for a period of two years. The changes to the drug designation policy and TDAPA payment will be effective January 1, 2020.Based on this ruling, we expect KORSUVA (CR845/difelikefalin) injection, if approved for CKD-aP in hemodialysis patients, will qualify for TDAPApayments for two years post approval. However, there is no assurance that KORSUVA (CR845/difelikefalin) injection will qualify for TDAPA payments or,even if it does, that it will be able to maintain its price established in the TDAPA period in the post-TDAPA timeframe.Additionally, many U.S. hospitals receive a fixed reimbursement amount per procedure for certain surgeries and other treatment therapies theyperform, or a pre-determined rate for all hospital inpatient care provided as payment in full. Because, in these instances, the amount of reimbursement thatsuch providers receive may not be based on the actual expenses the provider incurs, providers may choose to use therapies which are less expensive whencompared to our product candidates. Accordingly, KORSUVA (CR845/difelikefalin) injection or any of our other product candidates, if approved, will facecompetition from other therapies and drugs for these limited provider financial resources. We may need to conduct post-marketing studies in order todemonstrate the cost-effectiveness of any future products to the satisfaction of hospitals, other target customers and their third-party payers. Such studiesmight require us to commit a significant amount of management time and financial and other resources. Our future products might not ultimately beconsidered cost-effective. Third-party coverage and adequate reimbursement might not be available to enable us to maintain price levels sufficient to realizean appropriate return on investment in product development.56  Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controllinghealthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payers.Therefore, coverage and reimbursement for drug products can differ significantly from payer to payer. Further, we believe that future coverage andreimbursement will likely be subject to increased restrictions both in the United States and in international markets. Third-party coverage and reimbursementfor our products or product candidates for which we receive regulatory approval may not be available or adequate in either the United States or internationalmarkets, which could have a negative effect on our business, results of operations, financial condition and prospects.We are subject to recent legislation, regulatory proposals and healthcare payer initiatives that may increase our costs of compliance and adverselyaffect our ability to market our products, obtain collaborators and raise capital.In March 2010, President Obama signed the Health Care Reform Law, which includes provisions that have changed, and likely will continue tochange, health care financing and the delivery of health care in the United States. Among the provisions of the Health Care Reform Law of importance to thepharmaceutical industry are the following: •an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportionedamong these entities according to their market share in certain government healthcare programs; •an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of theaverage manufacturer price for most branded and generic drugs, respectively; •a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that areinhaled, infused, instilled, implanted or injected; •a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts offnegotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’soutpatient drugs to be covered under Medicare Part D; •extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed careorganizations; •expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additionalindividuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing both the volume of sales andmanufacturers’ Medicaid rebate liability; •expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; •new transparency requirements under the federal Physician Payments Sunshine Act; •a new requirement to annually report certain drug samples that manufacturers and distributors provide to licensed practitioners, or topharmacies of hospitals or other healthcare entities; •a licensure framework for follow-on biologic products; •a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectivenessresearch, along with funding for such research; •establishment of a Center for Medicare & Medicaid Innovation at the CMS to test innovative payment and service delivery models to lowerMedicare and Medicaid spending, potentially including prescription drug spending; and •expansion of healthcare fraud and abuse laws, including the federal civil False Claims Act and the federal Anti-Kickback Statute, newgovernment investigative powers and enhanced penalties for non-compliance.57  Some of the provisions of the Health Care Reform Law have yet to be implemented, and there have been judicial and Congressional challenges tocertain aspects of the Health Care Reform Law, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Health CareReform Law. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certainprovisions of the Health Care Reform Law or otherwise circumvent some of the requirements for health insurance mandated by the Health Care Reform Law.Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Health Care Reform Law. While Congress has notpassed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Health Care Reform Law have been signed intolaw. The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility paymentimposed by the Health Care Reform Law on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonlyreferred to as the “individual mandate”. On January 23, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 thatdelayed the implementation of certain Health Care Reform Law-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Health Care Reform Law, effective January 1,2019, to close the coverage gap in most Medicare drug plans. In July 2018, CMS published a final rule permitting further collections and payments to andfrom certain Health Care Reform Law qualified health plans and health insurance issuers under the Health Care Reform Law risk adjustment program inresponse to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a TexasU.S. District Court Judge ruled that the Health Care Reform Law is unconstitutional in its entirety because the “individual mandate” was repealed byCongress as part of the TCJA. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will haveno immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the HealthCare Reform Law will impact the Health Care Reform Law and our business.In addition, other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted. These changes include,among other things, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went effective on April 1, 2013 and,following passage of the Bipartisan Budget Act of 2015, and subsequent legislative amendments, including the BBA, will remain in effect until 2027, unlessadditional congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among otherthings, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments toproviders from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a materialadverse effect on customers for our drugs, if approved, and, accordingly, our financial operations. We expect that the Health Care Reform Law, as well as other federal and state healthcare reform measures that may be adopted in the future, mayresult in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction inreimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payers. In addition, therehave been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring moretransparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reformgovernment program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 containsadditional drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measuresto permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaidand to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to lower drug pricesand reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certainfederal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid byconsumers. The U.S. Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and,at the same, is immediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow MedicareAdvantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019, in October 2018, CMS proposed a new58  rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is available through orunder Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product, and on January31, 2019, the HHS Office of Inspector General proposed modifications to federal Anti-Kickback Statute safe harbors which, among other things, may affectrebates paid by manufacturers to Medicare Part D plans, the purpose of which is to further reduce the cost of drug products to consumers. Although a numberof these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administrationhave each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures haveincreasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patientreimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, toencourage importation from other countries and bulk purchasing. The implementation of cost containment measures or other healthcare reforms may preventus from being able to generate revenue, attain profitability or commercialize our drugs. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs.We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, orwhat the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress ofthe FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. Moreover, the Drug Supply Chain Security Act imposes obligations on manufacturers of pharmaceutical products,among others, related to product tracking and tracing.Legislation and regulations that, among other things, reduce drug prices or require the implementation of costly compliance measures could result indecreased net revenues from our pharmaceutical products and decrease potential returns from our development efforts, and we cannot predict what legislationwill be enacted in the future.Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted priceceilings on specific products and therapies. In some countries, particularly the countries of the EU, the pricing of prescription pharmaceuticals is subject togovernmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketingapproval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial thatcompares the cost-effectiveness of our product candidate to other available therapies. There can be no assurance that our products will be considered cost-effective by third-party payers, that an adequate level of reimbursement will be available or that the third-party payers’ reimbursement policies will notadversely affect our ability to sell our products profitably. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set atunsatisfactory levels, our business could be harmed, possibly materially.59  Our employees, independent contractors, consultants, and commercial partners may engage in misconduct or other improper activities, includingnoncompliance with regulatory standards and requirements, which could have a material adverse effect on our business. We are exposed to the risk of fraud or other misconduct by our employees, independent contractors, consultants and commercial partners.Misconduct by such individuals could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, report financialinformation or data accurately or disclose unauthorized activities to us. Third party misconduct could also involve the improper use or misrepresentation ofinformation obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible toidentify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance withsuch laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actionscould have a significant impact on our business and financial results, including the imposition of civil, criminal and administrative penalties, damages,disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, individual imprisonment,contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to acorporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of ouroperations, any of which could adversely affect our ability to operate our business and our results of operations.Our business involves the use of hazardous materials and we must comply with environmental laws and regulations, which can be expensive andrestrict how we do business.Our manufacturing activities involve the controlled storage, use and disposal of hazardous materials, including the components of our products,product candidates and other hazardous compounds. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage,handling, release and disposal of, and exposure to, these hazardous materials. Violation of these laws and regulations could lead to substantial fines andpenalties. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by these lawsand regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, state or federalauthorities may curtail our use of these materials and interrupt our business operations. In addition, we could become subject to potentially materialliabilities relating to the investigation and cleanup of any contamination, whether currently unknown or caused by future releases.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resultingfrom the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance forenvironmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactivematerials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Thesecurrent or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations alsomay result in substantial fines, penalties or other sanctions.Risks Related to Intellectual PropertyIt is difficult and costly to protect our proprietary rights and as a result we may not be able to ensure their protection and all patents willeventually expire.Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for CR845/difelikefalin andfor any other product candidates that we may develop, license or acquire and the methods we use to manufacture them, as well as successfully defendingthese patents and trade secrets against third-party challenges. We will only be able to protect our technologies from unauthorized use by third parties to theextent that valid and enforceable patents or trade secrets cover them.60  The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patentapplications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our R&D output before it is too lateto obtain patent protection. Moreover, should we enter into additional collaborations we may be required to consult with or cede control to collaboratorsregarding the prosecution, maintenance and enforcement of our patents. Therefore, these patents and applications may not be prosecuted and enforced in amanner consistent with the best interests of our business. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain andinvolve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claimsallowed in pharmaceutical or biotechnology patents has emerged to date in the United States. The patent situation outside the United States is even moreuncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of ourintellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. Thedegree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect ourrights or permit us to gain or keep our competitive advantage. Moreover, the patent application process is also subject to numerous risks and uncertainties,and there can be no assurance that we or any of our future development partners will be successful in protecting CR845/difelikefalin and any other productcandidates that we may develop, license or acquire by obtaining and defending patents. For example: •we may not have been the first to make the inventions covered by each of our pending patent applications and issued patents; •we may not have been the first to file patent applications for these inventions; •others may independently develop similar or alternative technologies or duplicate any of our product candidates or technologies; •it is possible that none of the pending patent applications will result in issued patents; •the issued patents covering our product candidates may not provide a basis for commercially viable active products, may not provide us withany competitive advantages, or may be challenged by third parties; •we may not develop additional proprietary technologies that are patentable; •patents of others may have an adverse effect on our business; •noncompliance with governmental patent agencies requirements can result in abandonment or lapse of a patent or patent application,resulting in partial or complete loss of patent rights in the relevant jurisdiction, potentially allowing competitors to enter the market earlierthan would otherwise have been the case; •our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments incompeting technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use,and sell our potential product candidates; or •there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of available patentprotection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regardingworldwide health concerns.Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applicationsare prosecuted and may also affect patent litigation. The United States Patent Office has developed new regulations and procedures to govern administrationof the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, including and in particular, the first to fileprovisions, became effective on March 16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding theprosecution of our currently pending and future patent applications and the enforcement or defense of our issued patents, all of which could have a materialadverse effect on our business and financial condition. 61  Patent applications in the United States are generally maintained in confidence for at least 18 months after their earliest effective filing date.Furthermore, published patent applications may issue at a later date with new and/or amended claims substantially different from those published earlier.Consequently, we cannot be certain we were the first to invent or the first to file patent applications on CR845/difelikefalin or any other product candidatesthat we may develop, license or acquire.Until recent changes to the U.S. Patent Laws, patents and patent applications relating to substantially similar claimed inventions were potentiallysubject to interference proceedings to determine the first applicant to invent the claimed subject matter. For an interference to be declared against Cara’spatents and patent applications, any such interference would be under the 1952 law which was eliminated by the America Invents Act, or AIA, enacted in2011 and fully effective in 2013. Such an interference would therefore have to relate to a patent or application with an effective filing date before March 16,2013. No interference with such a patent or application has been declared to date. Therefore, it seems extremely unlikely that we may have to participate ininterference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States against one or more partiesclaiming the same or similar invention. However, in the unlikely event that such interference was to be declared, the costs of these proceedings could besubstantial and it is possible that our efforts would be unsuccessful, resulting in a material adverse effect on our U.S. patent position. The results of thesetypes of proceedings could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and competedirectly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Inaddition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies fromcollaborating with us to license, develop or commercialize current or future product candidates. Such results could have a material adverse effect on ourresults of operations.In addition, the patentability of claims in pending patent applications covering a CR845/difelikefalin-based product can be challenged by thirdparties during prosecution in the U.S. Patent and Trademark Office under the new AIA law of 2013, for example by third party observations and derivationproceedings, and the validity of claims in issued patents can be challenged by third parties in various post-grant proceedings such as Post-Grant Review,Inter-partes Reexamination, and Inter-partes Review proceedings.Furthermore, we may not have identified all United States and foreign patents or published applications that affect our business either by blockingour ability to commercialize our drugs or by covering similar technologies that affect our drug market. In addition, some countries, including many inEurope, do not grant patent claims directed to methods of treating humans, and in these countries patent protection may not be available at all to protect ourproduct candidates. Even if patents issue, we cannot guarantee that the claims of those patents will be valid and enforceable or provide us with anysignificant protection against competitive products, or otherwise be commercially valuable to us.We also rely on trade secrets to protect our technology, particularly where we do not believe patent protection is appropriate or obtainable. However,trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our licensors, employees, consultants, contractors, outsidescientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third partyillegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the UnitedStates are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.If we fail to obtain or maintain patent protection or trade secret protection for CR845/difelikefalin or any other product candidate that we maydevelop, license or acquire, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affectour ability to generate revenues and achieve profitability.Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, preventcompetitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned orlicensed patents by developing similar or alternative technologies or products in a non-infringing manner.62  The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may bechallenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patentclaims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializingsimilar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time requiredfor the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly aftersuch product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude othersfrom commercializing products similar or identical to ours.If we or any current or future collaboration partner are sued for infringing intellectual property rights of third parties, it will be costly and timeconsuming, and an unfavorable outcome in any litigation would harm our business.Our ability to develop, manufacture, market and sell KORSUVA (CR845/difelikefalin) injection or any of our other product candidates depends uponour ability to avoid infringing the proprietary rights of third parties, and our commercial success depends upon our ability, and the ability of ourcollaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rightsof third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. Numerous U.S. and foreign issuedpatents and pending patent applications, which are owned by third parties, exist in the general field of pain management and cover the use of numerouscompounds and formulations in our targeted markets. Third parties may assert infringement claims against us based on existing patents or patents that may begranted in the future. Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we and our licensors may not besuccessful in defending intellectual property claims by third parties, which could have a material adverse effect on our results of operations. Regardless of theoutcome of any litigation, defending the litigation may be expensive, time-consuming and distracting to management. In addition, because patentapplications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents thatKORSUVA (CR845/difelikefalin) injection or our other product candidates may infringe. There could also be existing patents of which we are not aware thatKORSUVA (CR845/difelikefalin) injection or our other product candidates may inadvertently infringe.There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceuticalindustries generally. If a third-party claims that we infringe on their products or technology, we could face a number of issues, including: •infringement and other intellectual property claims which, with or without merit, can be expensive and time consuming to litigate and candivert management’s attention from our core business; •substantial damages for past infringement which we may have to pay if a court decides that our product infringes on a competitor’s patent; •a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be requiredto do; •if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and •redesigning our processes so they do not infringe, which may not be possible or could require substantial funds and time.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continuedeveloping and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or atall. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. Wecould be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetarydamages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us fromcommercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we havemisappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.63  We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming andunsuccessful.Competitors may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assertcounterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours isinvalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on thegrounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at riskof being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual propertylitigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs ofcomplex patent litigation longer than we could. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability toraise the funds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into developmentpartnerships that would help us bring our product candidates to market.We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available oncommercially reasonable terms.A third party may hold intellectual property, including patent rights that are important or necessary to the development or commercialization of ourproducts. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would berequired to obtain a license from these third parties. Such a license may not be available on commercially reasonable terms or at all, which could materiallyharm our business.We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology orpharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject toclaims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantialcosts and be a distraction to management.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of someforeign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not beable to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patentprotection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, butenforcement rights are not as strong as those in the United States. These products may compete with our product candidates and our patents or otherintellectual property rights may not be effective or sufficient to prevent them from competing.64  Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legalsystems of certain countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop theinfringement of our patents generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our effortsand attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at riskof not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or otherremedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may beinadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.The validity and enforceability of the patents and applications that cover our CR845/difelikefalin product candidates can be challenged bycompetitors.If KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) or our other product candidates are approved by the FDA, oneor more third parties may challenge the patents covering these product candidates, which could result in the invalidation of, or render unenforceable, some orall of the relevant patent claims. For example, if a third party files an Abbreviated New Drug Application, or ANDA, for a generic drug product containingCR845/difelikefalin, and relies in whole or in part on studies conducted by or for us, the third party will be required to certify to the FDA that either: (1) thereis no patent information listed in the FDA’s Orange Book with respect to our NDA for KORSUVA (CR845/difelikefalin) injection; (2) the patents listed in theOrange Book have expired; (3) the listed patents have not expired, but will expire on a particular date and approval is sought after patent expiration; or(4) the listed patents are invalid or will not be infringed by the manufacture, use or sale of the third-party’s generic drug product. A certification that the newproduct will not infringe the Orange Book-listed patents for CR845/difelikefalin, or that such patents are invalid, is called a paragraph IV certification. If thethird party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us once the third-party’s ANDA isaccepted for filing by the FDA. We may then initiate a lawsuit to defend the patents identified in the notice. The filing of a patent infringement lawsuit within45 days of receipt of the notice automatically prevents the FDA from approving the third-party’s ANDA until the earliest of 30 months or the date on whichthe patent expires, the lawsuit is settled, or the court reaches a decision in the infringement lawsuit in favor of the third party. If we do not file a patentinfringement lawsuit within the required 45-day period, the third-party’s ANDA will not be subject to the 30-month stay. Litigation or other proceedings toenforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management’sattention from our core business, and may result in unfavorable results that could adversely impact our ability to prevent third parties from competing withour products.Risks Related to Employee Matters and Managing GrowthOur internal information technology systems, or those of our CROs, contract manufacturers or other contractors or consultants, may fail or suffersecurity breaches, loss or leakage of data and other disruptions, which could result in a material disruption of our development programs, compromisesensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability, which could adverselyaffect our business.We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course ofbusiness, we collect, store and transmit confidential information (including but not limited to intellectual property, proprietary business information andpersonal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We alsohave outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidentialinformation.65  Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that theymaintain, our internal information technology systems and those of our third-party CROs, contract manufacturers and other contractors and consultants arepotentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war andtelecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants,business partners and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware,denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability ofinformation), which may compromise our system infrastructure or lead to data leakage. To the extent that any disruption or security breach were to result in aloss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputationaldamage and the further development and commercialization of our product candidates could be delayed.While we have not experienced any such system failure, accident or security breach to date, we cannot assure you that our data protection efforts andour investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that couldadversely affect our business. For example, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption ofour programs and the development and commercialization of CR845/difelikefalin injection, if approved, could be delayed. In addition, the loss of clinicaltrial data could result in delays in our marketing approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore,significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation and/or unauthorizedaccess, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietarybusiness information and personal information), which could result in financial, legal, business and reputational harm to us. For example, any such event thatleads to unauthorized access, use, or disclosure of personal information, including personal information regarding our clinical trial subjects or employees,could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us tomandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information,which could result in significant legal and financial exposure and reputational damages that could adversely affect our business. We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth. As of March 5, 2019, we had 55 employees. We will need to substantially expand our managerial, commercial, financial, manufacturing andother personnel resources in order to manage our operations and prepare for the commercialization of CR845/difelikefalin injection, if approved. Ourmanagement and personnel systems and facilities currently in place may not be adequate to support this future growth. In addition, we may not be able torecruit and retain qualified personnel in the future, particularly for sales and marketing positions, due to competition for personnel among pharmaceuticalbusinesses, and the failure to do so could have a significant negative impact on our future product revenues and business results. Our need to effectivelymanage our operations, growth and various projects requires that we: •continue the hiring and training of an effective commercial organization in anticipation of the potential approval of KORSUVA(CR845/difelikefalin) injection, and establish appropriate systems, policies and infrastructure to support that organization; •ensure that our consultants and other service providers successfully carry out their contractual obligations, provide high quality results, andmeet expected deadlines; •continue to carry out our own contractual obligations to our licensors and other third parties; and •continue to improve our operational, financial and management controls, reporting systems and procedures.We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our development and commercializationgoals.66  We may not be able to manage our business effectively if we are unable to attract and retain key personnel.We may not be able to attract or retain qualified management and commercial, scientific and clinical personnel due to the intense competition forqualified personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel to accomplish ourbusiness objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raiseadditional capital and our ability to implement our business strategy.Our industry has experienced a high rate of turnover of management personnel in recent years. We are highly dependent on the skills and leadershipof our management team, including Derek Chalmers, our President and Chief Executive Officer. Our senior management may terminate their employmentwith us at any time. If we lose one or more members of our senior management team, our ability to successfully implement our business strategy could beseriously harmed. Replacing these employees may be difficult and may take an extended period of time because of the limited number of individuals in ourindustry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. Competition tohire from this limited pool is intense, and we may be unable to hire, train, retain or motivate additional key personnel. We do not maintain “key person”insurance for any of our executives or other employees. If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could beimpaired. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 and the rules andregulations of The Nasdaq Global Market. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to perform system andprocess evaluation and testing of our internal control over financial reporting to allow our management to report on the effectiveness of our internal controlover financial reporting in this Form 10-K. However, while we remain an “emerging growth company,” as defined in the Jumpstart Our Business Startups Actof 2012, or JOBS Act, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registeredpublic accounting firm. When we cease to be an emerging growth company next year, we will be required to incur substantial additional professional fees andinternal costs to expand our accounting and finance functions in order to include such attestation report.We may in the future discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a materialmisstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all error and all fraud. A control system, nomatter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of theinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur orthat all control issues and instances of fraud will be detected. If we identify one or more material weaknesses in our internal controls, investors could loseconfidence in the reliability of our financial statements, the market price of our stock could decline and we could be subject to sanctions or investigations byThe Nasdaq Global Market, the SEC or other regulatory authorities. Risks Related to Ownership of Our Common StockThe market price of our common stock has been, and is likely to continue to be, highly volatile, and you may not be able to resell your shares at orabove the price you paid for them.Since our initial public offering in January 2014 and through March 5, 2019, our stock price has been volatile, trading at prices ranging from $4.26to $28.50, and it is likely that the trading price of our common stock will continue to be volatile. As a result of this volatility, investors may not be able tosell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including: •delays in the commencement, enrollment and ultimate completion of our clinical trials, including our ongoing Phase 3 clinical trials forKORSUVA (CR845/difelikefalin) injection for CKD-aP and our ongoing and planned trials for KORSUVA injection and Oral KORSUVA inother indications;67  •any delay or refusal on the part of the FDA in approving an NDA for KORSUVA (CR845/difelikefalin) injection or our other productcandidates; •the commercial success of KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) or our other productcandidates, if approved by the FDA; •results of clinical trials of KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) or our other product candidatesor those of our competitors; •actual or anticipated variations in quarterly or annual operating results; •failure to meet or exceed financial projections we provide to the public; •failure to meet or exceed the estimates and projections of the investment community, including securities analysts; •introduction of competitive products or technologies; •changes or developments in laws or regulations applicable to our product candidates; •the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; •general economic and market conditions and overall fluctuations in U.S. equity markets; •developments concerning our sources of manufacturing supply, warehousing and inventory control; •disputes or other developments relating to patents or other proprietary rights; •additions or departures of key scientific or management personnel; •announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; •capital commitments; •investors’ general perception of our company and our business; •announcements and expectations of additional financing efforts, including the issuance of debt, equity or convertible securities; •sales of our common stock, including sales by our directors and officers or significant stockholders; •changes in the market valuations of companies similar to us; •announcements by us or our competitors of significant acquisitions, strategic partnerships, or divestitures; •changes in the structure of healthcare payment systems; •general conditions or trends in our industry; and •the other factors described in this “Risk Factors” section.In addition, the stock market in general, and the market for small pharmaceutical and biotechnology companies in particular, have experiencedextreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market andindustry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.Further, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods ofvolatility in the market prices of these companies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divertmanagement’s attention and resources from our business.68  If equity research analysts cease to publish research or reports about us or if they publish unfavorable research or reports about us, our business orour market, our stock price and trading volume could decline. The trading market for our common stock is likely to be influenced by the research and reports that equity research analysts publish about us and ourbusiness. As a relatively newly public company, to date we have only limited equity research analyst coverage. Additionally, we do not have any controlover the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgradeour stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publishreports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline. Our quarterly operating results may fluctuate significantly.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including: •the successful progress of our clinical trials for KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) and otherpotential future product candidates; •whether the FDA requires us to complete additional, unanticipated studies, tests or other activities prior to approving KORSUVA(CR845/difelikefalin) injection or our other product candidates, which would likely further delay any such approval; •if KORSUVA (CR845/difelikefalin) injection or any of our other product candidates is approved, our ability to establish the necessarycommercial infrastructure to launch this product candidate without substantial delays, including hiring sales and marketing personnel andcontracting with third parties for warehousing, distribution, cash collection and related commercial activities; •our ability to identify and enter into third party manufacturing arrangements capable of manufacturing KORSUVA (CR845/difelikefalin)injection or our other product candidates in commercial quantities; •our execution of other collaborative, licensing or similar arrangements and the timing of payments we may make or receive under thesearrangements; •variations in the level of expenses related to our future development programs; •any product liability or intellectual property infringement lawsuit in which we may become involved; •regulatory developments affecting KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin), our other productcandidates, or the product candidates of our competitors; and •if KORSUVA (CR845/difelikefalin) injection, Oral KORSUVA (CR845/difelikefalin) or other product candidates receives regulatoryapproval, the level of underlying demand for such product candidate and wholesaler buying patterns.If our quarterly or annual operating results fall below the expectations of investors or securities analysts, the price of our common stock could declinesubstantially. Furthermore, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our futureperformance.Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensingarrangements may restrict our operations or require us to relinquish proprietary rights.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equityofferings, debt financings, grants and license and development agreements in connection with any collaborations. We do not have any committed externalsource of funds. To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership will be diluted, and the termsof these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferredequity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurringadditional debt, making capital expenditures or declaring dividends.69  If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we mayhave to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that maynot be favorable to us. Any debt financing that we enter into may involve covenants that restrict our operations. These restrictive covenants may includelimitations on additional borrowing and specific restrictions on the use of our assets as well as prohibitions on our ability to create liens, pay dividends,redeem our stock or make investments. If we are unable to raise additional funds through equity or debt financings when needed, we may be required todelay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates thatwe would otherwise prefer to develop and market ourselves. We are an emerging growth company and a smaller reporting company, and as a result of the reduced disclosure and governance requirementsapplicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors.We are an emerging growth company and we are taking advantage of some of the exemptions from reporting requirements that are applicable to otherpublic companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404,reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements ofholding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Wemay take advantage of these reporting exemptions until we are no longer an emerging growth company. We cannot predict if investors will find our commonstock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less activetrading market for our common stock and our stock price may be more volatile. We will remain an emerging growth company until December 31, 2019.Even following the termination of our status as an emerging growth company, we will be able to take advantage of the reduced disclosurerequirements applicable to smaller reporting companies (as that term is defined in Rule 12b-2 of the Exchange Act) and, in particular, reduced disclosureobligations regarding executive compensation in our periodic reports and proxy statements. To the extent that we are no longer eligible to use exemptionsfrom various reporting requirements, we may be unable to realize our anticipated cost savings from these exemptions, which could have a material adverseimpact on our operating results.The use of our net operating loss carryforwards and research tax credits may be limited.Our net operating loss, or NOL, carryforwards and research and development, or R&D, tax credits may expire and not be used. As of December 31,2018, we had federal and state NOL carryforwards of approximately $274.8 million and $268.0 million, respectively, and we also had federal and state R&Dtax credit carryforwards of approximately $9.9 million and $1.2 million, respectively. Our NOL carryforwards will begin expiring in 2026 for federal purposesand 2027 for state purposes if we have not used them prior to that time, and our federal R&D tax credits will begin expiring in 2025 unless previously used.Under the TCJA, the use of NOLs generated after December 31, 2017 are subject to a limitation of 80% of taxable income, and such NOLs can be carriedforward indefinitely (but carryback is generally prohibited). It is uncertain if and to what extent various states will conform to the TCJA. To the extent that wehave not exchanged our Connecticut R&D tax credits for a tax refund, those tax credits carryforward indefinitely. Additionally, our ability to use any NOLand R&D tax credit carryforwards to offset taxable income or tax, respectively, in the future will be limited under Internal Revenue Code Sections 382 and383, respectively, if we have a cumulative change in ownership of more than 50% within a three-year period. The completion of our initial public offering in2014 and our follow-on public offerings in 2015, 2017 and 2018, together with private placements and other transactions that have occurred, may havetriggered such an ownership change. In addition, since we will need to raise substantial additional funding to finance our operations, we may undergoownership changes in the future. We have never completed an analysis as to whether such a change of ownership has occurred, but in such an event, we willbe limited regarding the amount of NOL carryforwards and R&D tax credits that could be utilized annually in the future to offset taxable income or tax,respectively. Any such annual limitation may significantly reduce the utilization of the NOL carryforwards and R&D tax credits before they expire. Inaddition, certain states have suspended use of NOL carryforwards for certain taxable years, and other states are considering similar measures. As a result, wemay incur higher state income tax expense in the future. Depending on our future tax position, continued suspension of our ability to use NOL carryforwardsin states in which we are subject to income tax could have an adverse impact on our results of operations and financial condition. 70  New or future changes to tax laws could materially adversely affect our company. On December 22, 2017, President Trump signed into law the TCJA, which significantly amends the Internal Revenue Code of 1986. The TCJA,among other things, reduces the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limits the tax deduction for interest expense to 30%of taxable income, eliminates certain NOL carrybacks, imposes a one-time tax on offshore earnings at reduced rates regardless of whether they are repatriated,allows immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifies or repeals many businessdeductions and credits. We continue to examine the impact these changes may have on our business. Notwithstanding the reduction in the corporate incometax rate, the overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected. The impact of the TCJA on holdersof our common stock is also uncertain and could be adverse. Because we do not intend to pay dividends on our common stock, your returns will be limited to any increase in the value of our stock.We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings tosupport our operations and finance the growth and development of our business and do not anticipate declaring or paying any cash dividends on ourcommon stock for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, if any. Investors seeking cashdividends should not purchase our common stock.Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change ourmanagement and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.There are provisions in our certificate of incorporation and bylaws, as amended, that may make it difficult for a third party to acquire, or attempt toacquire, control of our company, even if a change in control was considered favorable by you and other stockholders. For example, our Board of Directors hasthe authority to issue up to 5,000,000 shares of preferred stock and to fix the price, rights, preferences, privileges, and restrictions of the preferred stockwithout any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As aresult, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferredstock may result in the loss of voting control to other stockholders.Our charter documents also contain other provisions that could have an anti-takeover effect, including: •our Board of Directors are divided into three classes, with only one class of directors elected each year; •our stockholders are entitled to remove directors only for cause upon a 66 2/3% vote; •our stockholders are not permitted to take actions by written consent; •our stockholders are not permitted to call a special meeting of stockholders; and •our stockholders must give us advance notice of their intent to nominate directors or submit proposals for consideration at stockholdermeetings.In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates corporateacquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those companies. Theseprovisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect ofdiscouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may alsoprevent changes in our management or limit the price that investors are willing to pay for our stock.Item 1B. Unresolved Staff Comments.None.71  Item 2. Properties.Our principal offices occupy approximately 24,000 square feet of office space in Stamford, Connecticut under a lease that expires in November 2023.We believe that the office space in Stamford is suitable and adequate to meet our current needs and to allow for expansion as we increase our headcount. SeeNote 17 of Notes to Financial Statements, Commitments and Contingencies, in this Annual Report on Form 10-K.Item 3. Legal Proceedings. From time to time, we may become subject to arbitration, litigation or claims arising in the ordinary course of business. We are not currently a partyto any arbitration or legal proceeding that, if determined adversely to us, would have a material adverse effect on our business, operating results or financialcondition. The results of any future claims or proceedings cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverseimpact on us because of defense and settlement costs, diversion of management resources, and other factors.Item 4. Mine Safety Disclosures.Not applicable.72  PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common StockOur common stock is traded on The Nasdaq Global Market under the ticker symbol “CARA”.StockholdersAs of March 5, 2019, there were 33 holders of record of our common stock. This number does not reflect the beneficial holders of our common stockwho hold shares in street name through brokerage accounts or other nominees.Dividend PolicyWe have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings tosupport our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for theforeseeable future. Any future determination related to dividend policy will be made at the discretion of our Board of Directors and will depend on, amongother factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our Board ofDirectors may deem relevant.Stock PerformanceThe following graph compares cumulative total return of our common stock with the cumulative total return of (i) the Nasdaq Composite Index, and(ii) the Nasdaq Biotechnology Index. The graph assumes (a) $100 was invested on January 31, 2014 (the first day our stock was traded on the Nasdaq GlobalMarket) in each of our common stock, the stocks comprising the Nasdaq Composite Index and the stocks comprising the Nasdaq Biotechnology Index, and(b) the reinvestment of dividends. The comparisons shown in the graph are based on historical data and the stock price performance shown in the graph is notnecessarily indicative of, or intended to forecast, future performance of our stock. 73  Cumulative Total Return 1/31/2014 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Cara Therapeutics, Inc. 100 77.23 130.60 71.96 94.81 100.70 NASDAQ Biotechnology 100 123.71 137.83 107.94 130.67 118.48 NASDAQ Composite 100 115.40 122.02 131.17 168.22 161.68 This performance graph shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the ExchangeAct, or incorporated by reference into any filing of ours under the Securities Act of 1933, as amended, except as shall be expressly set forth by specificreference to such filing.Recent Sales of Unregistered Securities Not applicable.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNot applicable.Use of Proceeds Not applicable.74  Item 6. Selected Financial Data. The following selected financial data for the years ended December 31, 2018, 2017 and 2016 and as of December 31, 2018 and 2017 are derived fromour audited financial statements included elsewhere in this Annual Report on Form 10-K. The following selected financial data for the years ended December31, 2015 and 2014 and as of December 31, 2016, 2015 and 2014 have been derived from our audited financial statements not included in this report. Ourhistorical results for any prior periods are not necessarily indicative of results to be expected for any future period. The information set forth in the followingtable should be read in conjunction with Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and ourfinancial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Year Ended December 31, 2018 2017 2016 2015 2014 (in thousands, except share and per share data) Statement of Operations Data: Revenue: License and milestone fee revenue $13,436 $530 $— $1,710 $302 Collaborative revenue — 313 — 2,093 2,201 Clinical compound revenue 33 68 86 — 674 Total revenue (1) 13,469 911 86 3,803 3,177 Operating expenses: Research and development 75,531 48,524 49,253 21,221 15,068 General and administrative 15,320 11,872 9,233 7,770 6,181 Total operating expenses 90,851 60,396 58,486 28,991 21,249 Operating loss (77,382) (59,485) (58,400) (25,188) (18,072)Other income 2,980 1,156 652 101 126 Loss before benefit from income taxes (74,402) (58,329) (57,748) (25,087) (17,946)Benefit from income taxes 389 204 468 397 201 Net loss $(74,013) $(58,125) $(57,280) $(24,690) $(17,745)Net loss per share: Basic and Diluted $(2.06) $(1.86) $(2.10) $(1.00) $(0.85)Weighted average shares: Basic and Diluted 35,892,786 31,202,842 27,279,008 24,620,372 20,965,935 As of December 31, 2018 2017 2016 2015 2014 (in thousands) Balance Sheet Data: Cash and cash equivalents and marketable securities (2) $182,779 $92,569 $58,276 $106,740 $52,663 Total assets 190,823 97,004 63,828 110,897 55,934 Deferred revenue (3) 42,009 — — — 1,452 Total liabilities 57,193 10,224 13,103 5,853 4,272 Total stockholders' equity 133,630 86,780 50,725 105,044 51,662 (1)The changes in revenue for the years ended December 31, 2014 to December 31, 2015 and December 31, 2017 to December 31, 2018 reflect upfrontpayments in connection with continuing our collaborative work with Maruishi in 2014 and 2015, milestone payments earned under ourcollaborations with Maruishi in 2014 and 2015 and with CKDP in 2015, a sub-license fee payment received from Maruishi in 2017 and an upfrontpayment from VFMCRP related to the license agreement entered into in May 2018 (refer to the section titled “Management’s Discussion andAnalysis of Financial Condition and Results of Operations — Collaborations and License Agreements with VFMCRP, Maruishi and CKDP, Resultsof Operations” and Note 11 of Notes to Financial Statements, Collaboration and License Agreements, in this Annual Report on Form 10-K). 75  (2)The increases in cash and cash equivalents and marketable securities from December 31, 2017 to December 31, 2018, December 31, 2016 toDecember 31, 2017 and from December 31, 2014 to December 31, 2015 reflects the proceeds from our follow-on offering of our common stock inJuly 2018, the upfront payment from VFMCRP related to the license agreement entered into in May 2018, the proceeds from our follow-on offeringof our common stock in April 2017, and our follow-on offering of our common stock in August 2015, respectively (refer to Note 9 of Notes toFinancial Statements, Stockholders’ Equity, in this Annual Report on Form 10-K).(3)The increase in deferred revenue from December 31, 2017 to December 31, 2018 was due to the upfront payment from VFMCRP related to the licenseagreement entered into in May 2018 (refer to Note 12 of Notes to Financial Statements, Revenue Recognition, in this Annual Report on Form 10-K). 76  Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.You should read the following discussion and analysis of our financial condition and results of operations together with our financial statementsand the related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or setforth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing,includes forward-looking statements that involve risks and uncertainties. You should read “Cautionary Note Regarding Forward-Looking Statements” andItem 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from theresults described in or implied by the forward-looking statements contained in the following discussion and analysis.OverviewIntroductionWe are a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities with a primary focus onpruritus as well as pain by selectively targeting peripheral kappa opioid receptors. We are developing a novel and proprietary class of product candidates, ledby KORSUVA (CR845/difelikefalin), a first-in-class kappa opioid receptor agonist that targets the body’s peripheral nervous system, as well as certainimmune cells. In Phase 2 trials, KORSUVA (CR845/difelikefalin) injection (intravenous formulation) has demonstrated statistically significant reductions in itchintensity and concomitant improvement in pruritus-related quality of life measures in hemodialysis patients with moderate-to-severe CKD-aP, and iscurrently being investigated in Phase 3 trials in hemodialysis patients with CKD-aP. We have partnered with Vifor Fresenius Medical Care Renal PharmaLtd., or VFMCRP, a joint venture between Vifor Pharma Group and Fresenius Medical Care, to commercialize KORSUVA (CR845/difelikefalin) injection indialysis patients with CKD-aP worldwide, excluding the United States, Japan (Maruishi/sub-licensee Kissei Pharmaceutical Co. Ltd., or Kissei), and SouthKorea (collaboration agreement with CKDP). We retain all rights in the United States and will promote KORSUVA (CR845/difelikefalin) injection, ifapproved, with VFMCRP in U.S. Fresenius Medical Care North America, or FMCNA, dialysis clinics under a profit share agreement. CR845/difelikefalin has also demonstrated statistically significant pain reduction in clinical trials in patients with moderate-to-severe pain in thepost-operative setting, without inducing many of the undesirable side effects typically associated with currently available opioid pain therapeutics. We retainrights to all KORSUVA/CR845 formulations and indications worldwide, excluding KORSUVA (CR845/difelikefalin) injection in dialysis patients withCKD-aP under our agreement with VFMCRP for certain ex-U.S. territories and our other license agreements for CR845/difelikefalin in Japan (Maruishi/sub-licensee Kissei) and South Korea (CKDP). The U.S. Food and Drug Administration, or FDA, has conditionally accepted KORSUVA as the trade name for CR845/difelikefalin injection and itssafety and efficacy have not been fully evaluated by any regulatory authority.We commenced operations in 2004, and our primary activities to date have been organizing and staffing our company, developing our productcandidates, including conducting preclinical studies and clinical trials of CR845/difelikefalin-based product candidates and raising capital. To date, we havefinanced our operations primarily through sales of our equity and debt securities and payments from license agreements. We have no products currentlyavailable for sale, and substantially all of our revenue to date has been revenue from license agreements, although we have received nominal amounts ofrevenue under research grants.77  Recent DevelopmentsChief Medical OfficerEffective October 22, 2018, we appointed Joana Goncalves, M.D., as our new Chief Medical Officer, or CMO. Prior to joining us, Dr. Goncalves wasthe Vice President, Global Medical Affairs for Dermatology and Neurology at Celgene Corporation. Previously, she held various positions at LEO PharmaInc., the U.S. subsidiary of Leo Pharma A/S and at Novartis Pharmaceuticals. Dr. Goncalves received her M.D. from The University of Cape Town, SouthAfrica. On October 22, 2018, we entered into a Separation and Consulting Agreement with Joseph Stauffer, D.O., our former CMO, pursuant to which he willprovide consulting services to us for a period of up to nine months.Equity OfferingOn July 18, 2018, we entered into an underwriting agreement with Jefferies LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, asrepresentatives of the several underwriters named therein, relating to the issuance and sale by us of up to 5,175,000 shares of our common stock, including675,000 shares of common stock the underwriters had the option to purchase, at a public offering price of $19.00 per share. This offering was pursuant toRegistration Statement on Form S-3 (File No. 333-216657), filed with the SEC on March 13, 2017 and declared effective on March 24, 2017, and a relatedprospectus dated March 24, 2017 and prospectus supplement dated July 18, 2018, which was filed with the SEC on July 20, 2018. On July 23, 2018, we closed the offering, including the full exercise of the underwriters’ option to purchase 675,000 additional shares of commonstock. We received net proceeds of approximately $92.1 million, after deducting $6.3 million relating to underwriting discounts and commissions andoffering expenses.VFMCRP License AgreementOn May 17, 2018, we entered into a license agreement with VFMCRP (see Item 7. Management’s Discussion and Analysis of Financial Conditionand Results of Operations – Collaboration and License Agreements).Collaboration and License AgreementsIn May 2018, we entered into a license agreement, or the VFMCRP Agreement, with VFMCRP, a joint venture between Vifor Pharma Group andFresenius Medical Care, under which we granted VFMCRP a license to seek regulatory approval to commercialize, import, export, use, distribute, offer forsale, promote, sell and otherwise commercialize KORSUVA (CR845/difelikefalin) injection for all therapeutic uses to prevent, inhibit or treat itch associatedwith pruritus in hemodialysis and peritoneal-dialysis patients worldwide (excluding the United States, Japan and South Korea). We retain full developmentand commercialization rights for KORSUVA injection for the treatment of CKD-aP in the U.S. except in the dialysis clinics of Fresenius Medical Care NorthAmerica (FMCNA), where we and VFMCRP will promote KORSUVA injection under a profit-sharing arrangement.Upon entry into the VFMCRP Agreement, VFMCRP made a non-refundable, non-creditable $50 million upfront payment to us and Vifor(International) Ltd., or Vifor, purchased 1,174,827 shares of our common stock for $20 million, at a premium for the price of $17.024 per share. In addition,we are eligible to receive from VFMCRP regulatory and commercial milestone payments in the aggregate of up to $470 million, consisting of up to$30 million in regulatory milestones and up to $440 million in tiered commercial milestones, all of which are sales-related. We are also eligible to receivetiered double-digit royalty payments based on annual net sales, as defined, of KORSUVA (CR845/difelikefalin) injection in the licensed territories. In theUnited States, we and VFMCRP will promote KORSUVA (CR845/difelikefalin) injection in the dialysis clinics of FMCNA under a profit-sharingarrangement (subject to the terms and conditions of the VFMCRP Agreement) based on net FMCNA clinic sales recorded by us.78  In April 2013, we entered into a license agreement, or the Maruishi Agreement, with Maruishi Pharmaceutical Co., Ltd., or Maruishi, in Japan, underwhich we granted Maruishi an exclusive license, to develop, manufacture and commercialize drug products containing CR845/difelikefalin in Japan in theacute pain and uremic pruritus fields. We and Maruishi are each required to use commercially reasonable efforts, at our respective expense, to develop, obtainregulatory approval for and commercialize CR845/difelikefalin in the United States and Japan, respectively. In addition, we have provided Maruishi specificclinical development services for CR845/difelikefalin in Maruishi’s field of use between 2013 and 2015. Under the terms of the Maruishi Agreement, we received a non-refundable and non-creditable upfront license fee of $15.0 million and are eligible toreceive up to an aggregate of $6.0 million in clinical development milestones and $4.5 million in regulatory milestones. In August 2014, we received aclinical development milestone payment of $0.5 million upon completion by Maruishi of a Phase 1 clinical trial in Japan related to CR845/difelikefalin inacute post-operative pain. In October 2015, we received a $1.7 million milestone payment (net of contractual foreign currency exchange adjustments of $0.3million) related to the initiation by Maruishi of a Phase 2 clinical trial of CR845/difelikefalin in Japan for uremic pruritus. In March 2017, we received apayment of $0.8 million in connection with Maruishi entering into a sub-license agreement with Kissei for the development and sales/marketing ofCR845/difelikefalin for the treatment of uremic pruritus in dialysis patients in Japan. We are also eligible to receive tiered royalties, with percentages rangingfrom the low double digits to the low twenties, based on net sales of products containing CR845/difelikefalin in Japan, if any, and share in any sub-licensefees. In addition, in connection with the Maruishi Agreement, Maruishi purchased 842,105 shares of our common stock for an aggregate purchase price of$8.0 million.In April 2012, we entered into a license agreement, or the CKDP Agreement with Chong Kun Dang Pharmaceutical Corporation, or CKDP, in SouthKorea, under which we granted CKDP an exclusive license to develop, manufacture and commercialize drug products containing CR845/difelikefalin inSouth Korea. We and CKDP are each required to use commercially reasonable efforts, at our respective expense, to develop, obtain regulatory approval forand commercialize CR845/difelikefalin in the United States and South Korea, respectively.Under the terms of the CKDP Agreement, we received a non-refundable and non-creditable upfront license fee of $0.6 million and are eligible toreceive up to an aggregate of $2.3 million in clinical development milestones and $1.5 million in regulatory milestones. In addition, CKDP purchased,69,444 shares of our common stock in consideration for $0.4 million. During the year ended December 31, 2012, we received $0.6 million, net of foreigntaxes, from CKDP upon the completion of a Phase 2 trial of CR845/difelikefalin in pain in the United States and a Phase 1a trial of Oral CR845/difelikefalinfor uremic pruritus in the United States. During the year ended December 31, 2015, we met the milestone criteria, as set forth in the CKDP Agreement, forcompletion of a Phase 1b trial of Oral CR845/difelikefalin for uremic pruritus in the United States and for completion of a Phase 2 trial ofCR845/difelikefalin in uremic pruritus patients in the United States for which we received milestone payments totaling $0.6 million (net of South Koreanwithholding tax) from CKDP. We are also eligible to receive tiered royalties with percentages ranging from the high single digits to the high teens, based onnet sales of products containing CR845/difelikefalin in South Korea, if any, and share in any sub-license fees. Components of Operating ResultsRevenueTo date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeablefuture. Substantially all of our revenue recognized to date has consisted of upfront payments under license agreements with VFMCRP, Maruishi and CKDP,and milestone and sub-license payments under license agreements with CKDP and Maruishi for CR845/difelikefalin, some or all of which was deferred uponreceipt, as well as license agreements for CR665, our first-generation drug program for which development efforts have ceased and clinical compound salesfrom certain license agreements. To date, we have earned a total of $5.2 million in clinical development or regulatory milestone payments, sub-license feesunder our Maruishi and CKDP collaborations, net of contractual foreign currency adjustments and South Korean withholding taxes, and clinical compoundsales from certain license agreements. We have not yet received any milestone payments under the VFMCRP Agreement or royalties under any of ourcollaborations.79  Research and Development (R&D)Our R&D expenses relate primarily to the development of CR845/difelikefalin. R&D expenses consist of expenses incurred in performing R&Dactivities, including compensation and benefits for full-time R&D employees, clinical trial and related clinical manufacturing expenses, third-partyformulation expenses, fees paid to contract research organizations, or CROs, and other consultants, stock-based compensation for R&D employees andconsultants and other outside expenses. Our R&D expenses also included expenses related to preclinical activities for our earlier stage programs in priorperiods and may include such expenses in the future.R&D costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in R&D activities aredeferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Most of our R&D costs havebeen external costs, which we track on a program-by program basis. Our internal R&D costs are primarily compensation expenses for our full-time R&Demployees. We do not track internal R&D costs on a program-by-program basis. R&D activities are central to our business model. Product candidates in later stages of clinical development generally have higher development coststhan those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Based on our currentdevelopment plans, we presently expect that our R&D expenses for 2019 will increase over those for 2018. However, it is difficult to determine with certaintythe duration and completion costs of our current or future nonclinical programs and clinical trials of our product candidates, or if, when or to what extent wewill generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed inachieving regulatory approval for any of our product candidates.The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors including but notlimited to: •per patient trial costs; •the number of patients that participate in the trials; •the number of sites included in the trials; •the countries in which the trial is conducted; •the length of time required to enroll eligible patients; •the number of doses that patients receive; •the drop-out or discontinuation rates of patients; •potential additional safety monitoring or other studies requested by regulatory agencies; •the duration of patient follow-up; and •the efficacy and safety profile of the product candidate.In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capabilityand commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical successof each product candidate, as well as an assessment of each product candidate’s commercial potential.General and AdministrativeGeneral and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel inexecutive, finance, accounting, legal, business development and human resources functions. Other costs include facility costs not otherwise included in R&Dexpenses, legal fees, insurance costs, investor relations costs, patent costs and fees for accounting and consulting services.80  We anticipate that our general and administrative expenses for 2019 will generally approximate those for 2018 to support our continued R&Dactivities and potential commercialization of our product candidates. These expenses will likely include costs related to the hiring of additional personnel,fees to outside consultants, lawyers, accountants and investor relations firms. In addition, if I.V. CR845/difelikefalin, Oral CR845/difelikefalin or any futureproduct candidate obtains regulatory approval for marketing, we expect to incur expenses associated with building a sales and marketing team. Other IncomeOther income consists of interest and dividend income earned on our cash, cash equivalents, marketable securities and restricted cash and realizedgains and losses on the sale of marketable securities and property and equipment.Benefit from Income TaxesThe benefit from income taxes relates to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program,which permits qualified small businesses engaged in R&D activities within Connecticut to exchange their unused R&D tax credits for a cash amount equal to65% of the value of the exchanged credits.Results of OperationsComparison of the years ended December 31, 2018, 2017 and 2016Revenue Year Ended December 31, 2018 2017 2016 Dollar amounts in thousands % change % change License and milestone fees revenue $13,436 2436% $530 100% $— Collaborative revenue — -100% 313 100% — Clinical compound revenue 33 -51% 68 -21% 86 Total revenue $13,469 1379% $911 959% $86 License and milestone fee revenueLicense and milestone fee revenue of $13.4 million for the year ended December 31, 2018 was related to license fees earned by us during the periodin connection with the VFMCRP Agreement. License and milestone fees revenue for the year ended December 31, 2017 included $530 thousand of the $843thousand sub-license fee earned by us in connection with Maruishi’s sub-license agreement with Kissei that was allocated to the license fee deliverable underthe Maruishi Agreement. There was no license and milestone fee revenue for the year ended December 31, 2016 (see Note 11 of Notes to FinancialStatements, Collaboration and Licensing Agreements, in this Annual Report on Form 10-K).Collaborative revenueThere was no collaborative revenue for the years ended December 31, 2018 and 2016. Collaborative revenue for the year ended December 31, 2017included $313 thousand of the $843 thousand sub-license fee earned by us in connection with Maruishi’s sub-license agreement with Kissei that wasallocated to the R&D services deliverable under the Maruishi Agreement (see Note 11 of Notes to Financial Statements, Collaboration and LicensingAgreements, in this Annual Report on Form 10-K).81  Clinical compound revenueClinical compound revenue of $33, $68 and $86 for the years ended December 31, 2018, 2017 and 2016, respectively, related to the sale of clinicalcompound to Maruishi.Research and Development Expense Year Ended December 31, 2018 2017 2016 Dollar amounts in thousands % change % change Direct clinical trial costs $56,625 66% $34,075 -9% $37,257 Consultant services in support of clinical trials 3,406 74% 1,959 5% 1,860 Stock-based compensation 4,395 81% 2,433 87% 1,301 Depreciation and amortization 288 -31% 418 -50% 839 Other R&D operating expenses 10,817 12% 9,639 21% 7,996 Total R&D expense $75,531 56% $48,524 -1% $49,253 For the year ended December 31, 2018 compared to the year ended December 31, 2017, the net increase in direct clinical trial costs and relatedconsultant costs primarily resulted from increases totaling $37.7 million, mainly from activities related to the two Phase 3 studies of I.V. KORSUVA(CR845/difelikefalin) in CKD patients undergoing hemodialysis, the Phase 3 long-term safety study of I.V. KORSUVA (CR845/difelikefalin) in hemodialysispatients with CKD-aP, the Phase 2 trial of Oral CR845 in CKD-aP patients and the Phase 1 safety and PK trial of Oral CR845/difelikefalin in patients withliver disease. There was also an increase of $4.0 million in drug manufacturing costs. Those costs were partially offset by a decrease of $17.2 million, mainlyfrom the Phase 2b clinical trial of Oral CR845/difelikefalin in patients with osteoarthritis, the Phase 2/3 I.V. CR845/difelikefalin adaptive clinical trial inpostoperative pain, the Phase 2 clinical trial of I.V. KORSUVA (CR845/difelikefalin) in hemodialysis patients with moderate-to-severe uremic pruritus andthe Phase 1 safety and PK trial of multiple doses of Oral CR845/difelikefalin in hemodialysis patients, all of which are complete and no longer ongoing. Theincrease in stock-based compensation expense relates primarily to an increase in the number of options outstanding, which includes options granted to ournew CMO in October 2018, as well as the vesting of restricted stock units granted to our other R&D executive officers. The increase in other R&D operatingexpenses was primarily the result of an increase in payroll and related costs associated with R&D personnel, partially offset by lower costs associated withconferences. For the year ended December 31, 2017 compared to the year ended December 31, 2016, the net decrease in direct clinical trial costs and relatedconsultant costs primarily resulted from decreases totaling $7.0 million, mainly from the Phase 2b clinical trial of Oral CR845/difelikefalin in OA patientsand the Phase 2/3 I.V. KORSUVA (CR845/difelikefalin) clinical trial in patients with uremic pruritus, a decrease of $4.5 million of CR845/difelikefalin drugmanufacturing costs and a decrease of $3.7 million for the cost of toxicology studies. Those costs were partially offset by an increase of $12.1 million, mainlyfrom the Phase 2/3 I.V. CR845/difelikefalin adaptive pivotal clinical trial in postoperative pain, the Phase 1 safety and pharmacokinetic trial of multipledoses of Oral KORSUVA (CR845/difelikefalin) in CKD patients undergoing hemodialysis, the 52-week Phase 3 safety study of I.V. KORSUVA(CR845/difelikefalin) in hemodialysis patients with uremic pruritus, and start-up costs associated with the 12-week Phase 3 study of I.V. KORSUVA(CR845/difelikefalin) in CKD patients undergoing hemodialysis. The increase in stock-based compensation expense relates primarily to an increase in thenumber of options outstanding as a result of increased employee headcount and stock option awards granted to non-employee consultants, which are markedto market each quarter, and resulted from an increase in the market price of our common stock. The decrease in depreciation and amortization expenseprimarily reflects the acceleration of amortization of the leasehold improvements at our Shelton, Connecticut facility related to research and developmentactivities prior to the relocation of our corporate headquarters to Stamford, Connecticut in May 2016 (see Note 17 of Notes to Financial Statements,Commitments and Contingencies, in this Annual Report on Form 10-K). The increase in other R&D operating expenses was primarily the result of an increasein personnel-related costs, partially offset by a decrease in rent expense, primarily due to the recognition in 2016 of all of the remaining rent expenseallocable to research and development activities due during the remaining term of the Shelton operating lease.82  The following table summarizes our R&D expenses by product candidate for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Dollar amounts in thousands % change % change External research and development expenses: I.V. CR845 - Pruritus $35,781 373% $7,566 -31% $11,042 I.V. CR845 - Pain 6,386 -52% 13,226 8% 12,202 Oral CR845 - Pruritus 15,670 138% 6,594 28% 5,139 Oral CR845 - Pain 2,194 -75% 8,648 -19% 10,734 Internal research and development expenses 15,500 24% 12,490 23% 10,136 Total research and development expenses $75,531 56% $48,524 -1% $49,253 General and Administrative Expense Year Ended December 31, 2018 2017 2016 Dollar amounts in thousands % change % change Professional fees and public/investor relations $2,906 29% $2,252 11% $2,032 Stock-based compensation 5,700 46% 3,897 160% 1,499 Depreciation and amortization 82 6% 77 -88% 626 Other G&A operating expenses 6,632 17% 5,646 11% 5,076 Total G&A expense $15,320 29% $11,872 29% $9,233 For the year ended December 31, 2018 compared to the year ended December 31, 2017, the increase in professional fees and public/investor relationsexpenses was primarily the result of increased consultants’ costs and legal fees. The increase in stock-based compensation expense resulted from additionalstock option grants to employees as well as the vesting of restricted stock units granted to G&A executive officers. The increase in other G&A operatingexpenses was primarily the result of an increase in payroll and related costs associated with G&A personnel, partially offset by a decrease in rent, utilities andrelated costs. For the year ended December 31, 2017 compared to the year ended December 31, 2016, the increase in professional fees and public/investor relationswas due primarily to an increase in public/investor relations costs. The increase in stock-based compensation primarily resulted from increased employeeheadcount, including our current Chief Financial Officer, the acceleration of vesting of outstanding stock option awards upon the retirement of our formerChief Financial Officer, and stock option awards granted to non-employee consultants, which are marked to market each quarter, and resulted from anincrease in the market price of our common stock. The decrease in depreciation and amortization expense reflects the acceleration of amortization of ourleasehold improvements at our Shelton, Connecticut facility related to general and administrative activities prior to the relocation of our corporateheadquarters in May 2016. The increase in other G&A operating expenses was primarily the result of an increase in personnel-related costs, partially offset bya decrease in rent expense, primarily due to the recognition in 2016 of all of the remaining rent expense allocable to general and administrative activities dueduring the remaining term of the Shelton operating lease.Other Income Year Ended December 31, 2018 2017 2016 Dollar amounts in thousands % change % change Other income $2,980 158% $1,156 77% $65283  During the year ended December 31, 2018 compared to the year ended December 31, 2017, the increase in other income was primarily due to anincrease in dividend and interest income resulting from a higher average balance of our portfolio of investments in the 2018 period. For the year ended December 31, 2017 compared to the year ended December 31, 2016, the increase in other income was primarily due to an increasein dividend and interest income resulting from higher interest rates on a higher average balance of our portfolio of investments in the 2017 period. Benefit from Income TaxesFor the years ended December 31, 2018, 2017 and 2016, pre-tax losses were $74.4 million, $58.3 million and $57.7 million, respectively, and werecognized a benefit from income taxes of $389 thousand, $204 thousand and $468 thousand, respectively. The benefit from income taxes relates to state R&D tax credits exchanged for cash pursuant to the Connecticut R&D Tax Credit Exchange Program,as discussed above. We recognized a full valuation allowance against deferred tax assets at December 31, 2018, 2017 and 2016.Liquidity and Capital ResourcesSources of LiquiditySince our inception and through December 31, 2018, we have raised an aggregate of approximately $486.6 million to fund our operations, including(1) net proceeds of $309.8 million from the sale of shares of our common stock in four public offerings, including our initial public offering; (2) proceedsof $73.3 million from the sale of shares of our convertible preferred stock and from debt financings prior to our initial public offering; (3) payments of $88.9million under our license agreements, primarily with VFMCRP, Maruishi, CKDP and an earlier product candidate for which development efforts ceased in2007; and (4) net proceeds of $14.6 million from the purchase of our common stock in relation to the license agreement with VFMCRP (see Note 11 of Notesto Financial Statements, Collaboration and Licensing Agreements, in this Annual Report on Form 10-K). In order to fund future operations, including our planned clinical trials, we filed a shelf registration statement on Form S-3 (File No. 333-216657),which the Securities and Exchange Commission, or SEC, declared effective on March 24, 2017. The shelf registration statement provides for aggregateofferings of up to $250 million of common stock, preferred stock, debt securities, warrants or any combination thereof. The securities registered under thisshelf registration statement include unsold securities that had been registered under our previous shelf registration statement (File No. 333-203072) that wasdeclared effective on May 13, 2015.On April 5, 2017, we completed a public offering of 5,117,500 shares of our common stock, including 667,500 shares sold upon the full exercise bythe underwriters of their option to buy additional shares pursuant to our shelf registration statement. We received net proceeds of $86.2 million afterdeducting the underwriting discounts and commissions and offering expenses paid by us. The proceeds of the offering are/were being used to fund ourclinical and research development activities, including the ongoing Phase 3 program for I.V. KORSUVA (CR845/difelikefalin) in CKD-aP or uremic pruritus,additional trials of Oral CR845/difelikefalin in other diseases associated with pruritus, the recently completed Phase 2/3 I.V. CR845/difelikefalin adaptiveclinical trial in postoperative pain, as well as for working capital and general corporate purposes.84  On July 18, 2018, we entered into an underwriting agreement with Jefferies LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, asrepresentatives of the several underwriters named therein, relating to the issuance and sale by us of up to 5,175,000 shares of our common stock, including675,000 shares of common stock the underwriters had the option to purchase, at a public offering price of $19.00 per share. This offering was made bypursuant to our Registration Statement on Form S-3 (File No. 333-216657), filed with the SEC on March 13, 2017 and declared effective on March 24, 2017,and a related prospectus dated March 24, 2017 and a prospectus supplement dated July 18, 2018, which was filed with the SEC on July 20, 2018. On July 23, 2018, we closed the offering, including the full exercise of the underwriters’ option to purchase 675,000 additional shares of commonstock. We received net proceeds of approximately $92.1 million, after deducting $6.3 million relating to underwriting discounts and commissions andoffering expenses. We intend to use the net proceeds from this most recent underwritten offering to fund our clinical and research development activities, including thecompletion of our Phase 3 programs and submission of a new drug application to the FDA for KORSUVA (CR845/difelikefalin) injection for the treatment ofCKD-aP in hemodialysis patients, the advancement of Oral KORSUVA (CR845/difelikefalin) into Phase 2 trials for the treatment of CKD-aP in Stage III-Vpatients and CLD patients, the expansion of our Oral KORSUVA program into certain dermatologic conditions and the exploration of further development ofCR845/difelikefalin injection in the post-operative setting after consultation with the FDA, as well as for working capital and other general corporatepurposes.We may offer additional securities under our shelf registration statement from time to time in response to market conditions or other circumstances ifwe believe such a plan of financing is in the best interests of our stockholders. We believe that the use of a shelf registration statement provides us with theflexibility to raise additional capital to finance our operations as needed. As of December 31, 2018, we had $182.8 million in unrestricted cash and cash equivalents and available-for-sale marketable securities. We believeour current unrestricted cash and cash equivalents and available-for-sale marketable securities will be sufficient to fund our currently anticipated operatingexpenses and capital expenditures into 2021, without giving effect to any potential milestone payments we may receive under our licensing andcollaboration agreements with VFMCRP, Maruishi and CKDP. Our anticipated operating expenses include contractually committed costs as well as non-contractually committed clinical trial costs for trials that may be delayed or not initiated and other non-committed controllable costs. Under the VFMCRP Agreement, we are eligible to receive regulatory and commercial milestone payments in the aggregate of up to $470 million,consisting of up to $30 million in regulatory milestones and up to $440 million in tiered commercial milestones, all of which are sales-related. We are alsoeligible to receive tiered double-digit royalty payments based on annual net sales, as defined in the VFMCRP Agreement, of CR845/difelikefalin injection inthe Licensed Territories.Under the Maruishi Agreement, we are also potentially eligible to earn up to an aggregate of $6.0 million in clinical development milestones and$4.5 million in regulatory milestones, before any foreign exchange adjustment, as well as tiered royalties, with percentages ranging from the low doubledigits to the low twenties, based on net sales of products containing CR845/difelikefalin in Japan, if any, and share in any sub-license fees. As of December31, 2018, we have received milestone payments of $2.5 million before contractual foreign currency exchange adjustments.During the first quarter of 2017, Maruishi entered into a sub-license agreement with another Japanese pharmaceutical company for the developmentand sales/marketing of CR845/difelikefalin in patients with uremic pruritus in Japan, as a result of which we received a payment of $843 thousand.Under the CKDP Agreement, we are potentially eligible to earn up to an aggregate of $2.3 million in clinical development milestones and$1.5 million in regulatory milestones, before South Korean withholding tax, as well as tiered royalties with percentages ranging from the high single digits tothe high teens, based on net sales of products containing CR845/difelikefalin in South Korea, if any, and share in any sub-license fees. As of December 31,2018, we have received milestone payments of $1.5 million before South Korean withholding tax.85  The next potential milestone that could result in us receiving payment under the CKDP Agreement will be for a clinical development milestone forthe completion by us in the United States of a Phase 3 trial of CR845/difelikefalin in uremic pruritus. If achieved, this milestone will result in a payment of$750 thousand, before South Korean withholding tax, being due to us. Our ability to earn these payments and their timing is dependent upon the outcome of I.V. and Oral CR845/difelikefalin development activities and,potentially, commercialization. However, our receipt of any further such amounts is uncertain at this time and we may never receive any more of theseamounts. Funding RequirementsOur primary uses of capital have been, and we expect will continue to be, compensation and related expenses, third-party clinical R&D services andclinical costs. In the past, we have also previously used capital for laboratory and related supplies.Since inception, we have incurred significant operating and net losses. Our net losses were $74.0 million, $58.1 million and $57.3 million for theyears ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had an accumulated deficit of $294.4 million. We expect tocontinue to incur significant expenses and operating and net losses in the near future. Our net losses may fluctuate significantly from quarter to quarter andyear to year, depending on the timing of our clinical trials, the receipt of additional milestone payments, if any, under our licensing and collaborations withVFMCRP, Maruishi and CKDP, the receipt of payments under any future collaborations and/or licensing agreements we may enter into, and our expenditureson other R&D activities.We anticipate that our expenses will increase as we: •continue the development of KORSUVA (CR845/difelikefalin) injection for CKD-aP in dialysis patients; •continue the development of Oral KORSUVA (CR845/difelikefalin) for CKD-aP and other diseases associated with pruritus, such as CLD-aP; •explore the potential to further develop I.V. CR845/difelikefalin in the post-operative setting; •conduct R&D of any potential future product candidates; •seek regulatory approvals for I.V. CR845/difelikefalin and any product candidates that successfully complete clinical trials; •establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any productsfor which we may obtain regulatory approval; •maintain, expand and protect our global intellectual property portfolio; •hire additional clinical, quality control and scientific personnel; and •add operational, financial and management information systems and personnel, including personnel to support our drug development andpotential future commercialization efforts.The successful development of any of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know thenature, timing and costs of the efforts that will be necessary to complete the development of I.V. CR845/difelikefalin, Oral CR845/difelikefalin or our othercurrent and future programs. We are also unable to predict when, if ever, we will generate any further material net cash inflows from CR845/difelikefalin. Thisis due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of: •successful enrollment in, and completion of clinical trials; •receipt of marketing approvals from applicable regulatory authorities;86  •establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; •obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; •launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; •achieving meaningful penetration in the markets which we seek to serve; and •obtaining adequate coverage or reimbursement by third parties, such as commercial payers and government healthcare programs, includingMedicare and Medicaid.A change in the outcome of any of these variables with respect to the development of I.V. CR845/difelikefalin, Oral CR845/difelikefalin or any ofour future product candidates would significantly change the costs and timing associated with the development of that product candidate.Because our product candidates are still in clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amountsnecessary to successfully complete the development and commercialization of all our product candidates or whether, or when, we may achieve profitability.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debtfinancings and collaboration arrangements, including our existing licensing and collaboration agreements with VFMCRP, Maruishi and CKDP.We will require additional capital beyond our current balances of cash and cash equivalents and available-for-sale marketable securities andanticipated amounts as described above, and this additional capital may not be available when needed, on reasonable terms, or at all. In particular, becausewe do not have sufficient financial resources to meet all of our development objectives, especially the completion of our planned development of I.V. andOral CR845/difelikefalin for the treatment of pruritus, we will need to raise additional capital. If we are not able to do so, we could be required to postpone,scale back or eliminate some, or all, of these objectives. To the extent that we raise additional capital through the future sale of equity or convertible debt, theownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect therights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants thatwould restrict our operations. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to ourtechnologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additionalfunds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or futurecommercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. OutlookBased on timing expectations and projected costs for our current clinical development plans, which include completing our Phase 3 trials ofKORSUVA (CR845/difelikefalin) injection in hemodialysis patients suffering from moderate-to-severe CKD-aP to enable an NDA submission, andconducting Phase 1 and Phase 2 trials of Oral (CR845/difelikefalin) in patients with CKD-aP, CLD-aP and certain dermatologic conditions, we expect thatour existing cash and cash equivalents and available-for-sale marketable securities as of December 31, 2018 will be sufficient for us to fund our currentlyanticipated operating expenses and capital expenditures into 2021, without giving effect to any potential milestone payments we may receive under ourcollaboration agreements with VFMCRP, Maruishi and CKDP. Our anticipated operating expenses include contractually committed costs as well as non-contractually committed clinical trial costs for trials that may be delayed or not initiated and other non-committed controllable costs. Because the process oftesting product candidates in clinical trials is costly and the timing of progress in these trials is uncertain, it is possible that the assumptions upon which wehave based this estimate may prove to be wrong, and we could use our capital resources sooner than we presently expect.87  The Tax Cuts and Jobs Act of 2017On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Act, was enacted in the United States. Under generally accepted accountingprinciples in the United States, or GAAP, the effect of a change in tax rates and tax law is recorded discretely as a component of the income tax provisionrelated to continuing operations in the period of enactment. Under the Act, among other provisions, the maximum Federal corporate tax rate is reduced from35% to 21% for tax years beginning after December 31, 2017.Accounting Standards Codification, or ASC, section 740, Income Taxes, requires deferred tax assets and liabilities to be measured at the enacted taxrate expected to apply when temporary differences are to be realized or settled. Therefore, at the date of enactment, we reduced deferred tax assets by $25.9million based on the revised tax rate, which required a re-assessment of the related valuation allowance. Based on expected net losses into the foreseeablefuture, we will currently continue to record a 100% valuation allowance against our deferred tax assets. The corresponding reduction in the valuationallowance as a result of the re-measurement of deferred tax assets and liabilities was also recorded to continuing operations in the tax provision.In addition, net operating losses, or NOLs, arising after December 31, 2017, can be carried forward indefinitely but carryback is generally prohibited.The use of such NOL carryforwards is limited to 80% of taxable income. NOLs generated before January 1, 2018 will not be subject to the taxable incomelimitation and will continue to have a two-year carryback and 20-year carryforward period.Cash FlowsThe following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities for the years endedDecember 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Amounts in thousands Net cash used in operating activities $(22,301) $(54,827) $(47,381)Net cash (used in) provided by investing activities (82,819) (36,500) 45,018 Net cash provided by financing activities 110,813 87,923 123 Net increase (decrease) in cash, cash equivalents and restricted cash $5,693 $(3,404) $(2,240) Net cash used in operating activitiesNet cash used in operating activities for the year ended December 31, 2018 consisted primarily of a net loss of $74.0 million, partially offset by a$50.5 million cash inflow from net non-cash charges and a $1.2 million inflow from net changes in operating assets and liabilities. Net non-cash chargesprimarily consisted of an increase in deferred revenue of $42.0 million related to the VFMCRP Agreement and stock-based compensation expense of $10.1million (which includes $1.7 million related to the vesting of restricted stock units), partially offset by $1.8 million related to amortization/accretion ofavailable-for-sale securities. The net change in operating assets and liabilities primarily consisted of a cash inflow of $5.1 million from an increase inaccounts payable and accrued expenses, partially offset by cash outflows of $3.2 million from an increase in prepaid expense, primarily related to an increasein prepaid clinical costs, and cash outflows of $0.8 million related to an increase in other receivables.Net cash used in operating activities for the year ended December 31, 2017 consisted primarily of a net loss of $58.1 million, a $3.0 million outflowfrom net changes in operating assets and liabilities and a $6.3 million cash inflow from net non-cash charges. The net change in operating assets andliabilities primarily consisted of cash outflows of $3.0 million from a decrease in accounts payable and accrued expenses. Net non-cash charges primarilyconsisted of stock-based compensation expense of $6.3 million and depreciation and amortization expense of $0.5 million, partially offset byaccretion/amortization on available-for-sale securities of $0.6 million.88  Net cash used in operating activities for the year ended December 31, 2016 consisted primarily of a net loss of $57.3 million, a $6.0 million inflowfrom net changes in operating assets and liabilities and a $3.9 million cash inflow from net non-cash charges. The net change in operating assets andliabilities primarily consisted of cash inflows of $6.3 million from an increase in accounts payable and accrued expenses and $0.2 million from a decrease inprepaid expense, primarily related to a decrease in prepaid clinical costs. Those cash inflows were partially offset by cash outflows of $0.5 million due to anincrease in income tax receivable from the State of Connecticut under the Connecticut R&D Tax Credit Exchange Program. Net non-cash charges primarilyconsisted of depreciation and amortization expense of $1.5 million and stock-based compensation expense of $2.8 million, partially offset by deferred rentcosts of $0.1 million and accretion/amortization on available-for-sale marketable securities of $0.2 million. Net cash (used in) provided by investing activities Net cash used in investing activities was $82.8 million for the year ended December 31, 2018, which primarily included cash outflows of $337.9million for the purchase of available-for-sale marketable securities, partially offset by cash inflows of $175.3 million from maturities of available-for-salemarketable securities and $79.8 million from the sale of available-for-sale marketable securities.Net cash used in investing activities for the year ended December 31, 2017, primarily included cash outflows of $127.4 million from the purchase ofavailable-for-sale securities. Those cash outflows were partially offset by cash inflows of $82.2 million from maturities of available-for-sale securities and$8.8 million from the sale of available-for-sale securities. Net cash provided by investing activities for the year ended December 31, 2016, primarily included cash inflows of $80.4 million from maturities ofavailable-for-sale marketable securities and $34.0 million from the sale of available-for-sale marketable securities. Those cash inflows were partially offset bycash outflows of $68.6 million from the purchase of available-for-sale marketable securities and $0.7 million of cash paid for purchase of property andequipment. Net cash provided by financing activitiesNet cash provided by financing activities for the year ended December 31, 2018 consisted of gross proceeds of $98.3 million from our issuance andsale of our common stock in July 2018, partially offset by $6.3 million of underwriting discounts and commissions and offering expenses paid by us duringthe year ended December 31, 2018, proceeds of $14.6 million from the sale of our common stock relating to the VFMCRP Agreement and $4.2 millionreceived from the exercise of stock options.Net cash provided by financing activities for the year ended December 31, 2017 consisted primarily of gross proceeds of $92.1 million from ourfollow-on offering of common stock, partially offset by $5.9 million of underwriting discounts and commissions and offering expenses paid by us during theyear ended December 31, 2017, and proceeds of $1.7 million received from stock option exercises.Net cash provided by financing activities for the year ended December 31, 2016 consisted primarily of proceeds of $123 thousand received from theexercise of stock options. Contractual ObligationsThe following table summarizes our significant contractual obligations as of December 31, 2018 (in thousands): Payment Due for the Year Ending December 31, 2019 2020 2021 2022 2023 Total Stamford operating lease $1,215 $1,240 $1,264 $1,288 $1,164 $6,171 89  See Note 17 of Notes to Financial Statements, Commitments and Contingencies, in this Annual Report on Form 10-K for details about our operatinglease obligations.We have no material non-cancelable purchase commitments with contract manufacturers or service providers, as we have generally contracted on acancelable purchase order basis.Off-Balance Sheet ArrangementsWe did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.Critical Accounting Policies and Significant Judgments and EstimatesOur management’s discussion and analysis of financial condition and results of operations is based upon our financial statements, which have beenprepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheets and the reported amounts ofrevenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to bereasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments andassumptions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates arereflected in the financial statements prospectively from the date of the change in estimate.We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make subjectiveestimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as wellas the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statementswhich require significant estimates and judgments are as follows:Revenue RecognitionOn January 1, 2018, we adopted Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606,as amended by ASU 2016-08, 2016-10, 2016-12 and 2016-20 using the full retrospective method. Under ASC 606, we recognize revenue in an amount thatreflects the consideration to which we expect to be entitled in exchange for the transfer of promised goods or services to customers. To determine revenuerecognition for contracts with customers that are within the scope of ASC 606, we perform the following steps: (1) identify the contract with the customer, (2)identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations inthe contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We have concluded that upon adoption of ASC 606, asamended, there was no impact on our results of operations, financial position or cash flows for any period presented from our only two revenue-relatedcontracts, which were in effect at that time: the CKDP Agreement or the Maruishi Agreement.We have entered into agreements to license our intellectual property, or IP, related to CR845/difelikefalin to develop, manufacture and/orcommercialize drug products. These agreements typically contain multiple performance obligations, including licenses of IP and R&D services. Payments tous under these agreements may include nonrefundable license fees, payments for research activities, payments based upon the achievement of certainmilestones and royalties on any resulting net product sales.We identify agreements as contracts that create enforceable rights and obligations when the agreement is approved by the parties, identifies the rightsof the parties and the payment terms, has commercial substance and it is probable that we will collect the consideration to which we will be entitled inexchange for the goods and services that will be transferred to the customer. The counterparty is considered to be a customer when it has contracted with us toobtain goods and services that are the output of our ordinary activities (i.e., development of pharmaceutical products) in exchange for consideration.90  A performance obligation is a promise to transfer distinct goods or services to a customer. Performance obligations that are both capable of beingdistinct and distinct within the context of the contract are considered to be separate performance obligations. Performance obligations are capable of beingdistinct if the counterparty is able to benefit from the good or service on its own or together with other resources that are readily available to it. Performanceobligations are distinct within the context of the contract when each performance obligation is separately identifiable from each other; i.e., we are not usingthe goods or services as inputs to produce or deliver the combined output or outputs specified by the customer; one or more of the goods or services does notsignificantly modify or customize one of the other goods or services in the contract; and goods or services are not highly interdependent or not highlyinterrelated. Performance obligations that are not distinct are accounted for as a single performance obligation over the period that goods or services aretransferred to the customer. The determination of whether performance obligations in a contract are distinct may require significant judgment.The transaction price is the amount of consideration that we expect to be entitled to in exchange for transferring promised goods or services to thecustomer based on the contract terms at inception of a contract. There is a constraint on inclusion of variable consideration related to licenses of IP, such asmilestone payments or sales-based royalty payments, in the transaction price if there is uncertainty at inception of the contract as to whether suchconsideration will be recognized in the future because it is probable that there will be a significant reversal of revenue in the future when the uncertainty isresolved. The determination of whether or not it is probable that a significant reversal of revenue will occur in the future depends on the likelihood andmagnitude of the reversal. Factors that could increase the likelihood or magnitude of a reversal of revenue include (a) the susceptibility of the amount ofconsideration to factors outside the entity’s influence, such as the outcome of clinical trials, the timing of initiation of clinical trials by the counterparty andthe approval of drug product candidates by regulatory agencies, (b) situations in which the uncertainty is not expected to be resolved for a long period oftime, and (c) level of our experience in the field. When it becomes probable that events will occur, for which variable consideration was constrained atinception of the contract, we allocate the related consideration to the separate performance obligations in the same manner as described below. At inception of a contract, we allocate the transaction price to the distinct performance obligations based upon their relative standalone sellingprices. Standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. The best evidence ofstandalone selling price is an observable price of a good or service when sold separately by an entity in similar circumstances to similar customers. Since wetypically do not have such evidence, we estimate standalone selling price so that the amount that is allocated to each performance obligation equals theamount that we expect to receive for transferring goods or services. The methods that we use to make such estimates include (1) the adjusted marketassessment approach, under which we forecast and analyze CR845/difelikefalin in the appropriate market, the phase of clinical development as well asconsidering recent similar license arrangements within the same phase of clinical development, therapeutic area, type of agreement, etc. and (2) the expectedcost of satisfying the performance obligations plus a margin, or the expected cost plus a margin approach.We recognize revenue when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer and the customerobtains control of the good or service. Revenue related to the grant of a license that is a distinct performance obligation and that is deemed to be functionalIP is recognized at the point in time that we have the right to payment for the license, the customer has legal title to the license and can direct the use of thelicense (for example, to grant sublicenses), the customer has the significant risks and rewards of ownership of the license and the customer has accepted theasset (license) by signing the license agreement.Recognition of revenue related to R&D services that are a distinct performance obligation or that are combined with granting of a license as a singleperformance obligation is deferred at inception of a contract and is recognized as those services are performed based on the costs incurred as a percentage ofthe estimated total costs to be incurred to complete the performance obligation.Milestone payments are considered to be variable consideration and are not included in the transaction price at inception of the contract if it isuncertain that the milestone will be achieved. Rather, when it becomes probable that the milestone will be achieved and, therefore, there will not be asignificant reversal of revenue in future periods, the respective amount to be earned is included in the transaction price, allocated to the distinct performanceobligations based on their relative standalone selling price and recognized as revenue, as described above. Sales milestones and sales-based royaltypayments related to a license of IP are recognized as revenue when the respective sales occur.91  Stock-Based CompensationWe grant stock options to employees, non-employee directors and non-employee consultants as compensation for services performed. Employee andnon-employee members of the Board of Directors’ awards of stock-based compensation are accounted for in accordance with ASC 718, Compensation - StockCompensation, or ASC 718. ASC 718 requires all share-based payments to employees and non-employee directors, including grants of stock options, to berecognized in the Statements of Comprehensive Loss based on their grant date fair values. The grant date fair value of stock options is estimated using theBlack-Scholes option valuation model.Using this model, fair value is calculated based on assumptions with respect to (i) the fair value or market price of our common stock on the grantdate; (ii) expected volatility of our common stock price, (iii) the periods of time over which employees and non-employee directors are expected to hold theiroptions prior to exercise (expected term), (iv) expected dividend yield on our common stock, and (v) risk-free interest rates.Our common stock has been traded on a public exchange only since January 31, 2014. Since that time, exercises of stock options have been limiteddue to various factors, including fluctuations in our stock price to below the exercise prices of awards, blackout periods during which exercises are notallowed, among others. Therefore, we believe that as of December 31, 2018, we do not have sufficient company-specific information available to determinethe expected term based on our historical data. As a result, the expected term of stock options granted to employees and members of our Board of Directors isdetermined using the average of the vesting period and term (6.25 years), an accepted method for our option grants under the SEC’s Staff AccountingBulletin No. 110, Share-Based Payment.Similarly, because we do not have sufficient company-specific information available to calculate the volatility of our common stock during theperiods of the expected term of stock option grants (as noted above), expected volatility is based on an analysis of guideline companies in accordance withASC 718. Volatility calculated in this manner has been in the range of 83% - 93% and 75% - 85% during the years ended December 31, 2018 and 2017,respectively. The actual volatility of our common stock from January 31, 2014 to December 31, 2018 and 2017 was 75% and 79%, respectively. A highervolatility input to the Black-Scholes option valuation model increases the resulting compensation expense, while a shorter expected term would result in alower compensation expense. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future. Risk-freeinterest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the option’s expected term. For all share-based paymentsgranted to employees and non-employees, compensation cost relating to awards with service-based graded vesting schedules is recognized using the straight-line method over the requisite service period.On the grant date of each stock option award prior to January 1, 2017, we applied a forfeiture rate in order to accrue share-based compensationexpense based on an estimate of the number of stock options that are expected to vest. Estimated forfeiture rates were based upon historical data of awardsthat were cancelled prior to vesting. We adjusted the total amount of compensation cost recognized for each award, in the period in which each award vested,to reflect the actual forfeitures related to that award. To the extent that the actual forfeiture rate for an award was lower than the estimated forfeiture rate,additional compensation expense was recorded in the period that the award vested. Changes in our estimated forfeiture rate resulted in changes in the rate atwhich compensation cost for an award was recognized over its vesting period. As of January 1, 2017, we adopted ASU 2016-09, Improvements to EmployeeShare-Based Payment Accounting, or ASU 2016-09. On the date of adoption of ASU 2016-09, we began to account for forfeitures of unvested stock optionsas they occur rather than estimate forfeiture rates that were applied to unvested stock option awards, as under the previous accounting guidance. Accordingly,on the date of adoption, we recorded a cumulative effect adjustment to stockholders’ equity of $45 thousand for all stock option awards that were unvested asof that date. We account for stock options issued to non-employee consultants under ASC 505, Equity-Based Payments to Non-Employees. As such, we estimatethe fair value of each such option using the Black-Scholes model, with the expected term of stock options granted to non-employees initially equal to theoptions’ maximum contractual life of ten years, at issuance, and then revalue the stock option on each reporting date until performance is complete. UnderASC 505-50, upon re-measurement of each award, income or expense is recognized during its vesting term.92  On January 1, 2019, we will adopt ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Non-employee Share-Based Payment Accounting, or ASU 2018-07, which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods andservices from non-employees. As a result, the fair value of all outstanding unvested stock options that had been granted to non-employees as of January 1,2019 will be remeasured through a cumulative-effect adjustment to equity (see Note 2 of Notes to Financial Statements, Summary of Significant AccountingPolicies, in this Annual Report on Form 10-K).The assumptions used in computing the fair value of option awards reflect our best estimates but involve uncertainties related to market and otherconditions, many of which are outside of our control. Changes in any of these assumptions may materially affect the fair value of stock options granted andthe amount of stock-based compensation recognized in future periods.Marketable SecuritiesWe invest our excess cash in various types of securities, including money market funds, corporate bonds, commercial paper, municipal bonds andobligations of the U.S. government and U.S. government-sponsored entities. We deem certain of those investments to be marketable securities if theinvestment, or in the case of money market funds, the securities underlying the money market fund, meets the definition of a debt security in ASC section320-10-20. We consider our marketable securities to be available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gainsand losses generally recorded in Accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. All available-for-salemarketable securities are reported in Marketable securities in the Balance Sheets.We review each of our available-for-sale marketable securities for other-than-temporary impairment declines in fair value below its amortized costbasis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation is basedon a number of factors, including the length of time and the extent to which the fair value has been below its cost basis and adverse conditions relatedspecifically to the security, including any changes to the credit rating of the security, and the intent to sell, or whether we will more likely than not berequired to sell, the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could changein the future due to new developments or changes in assumptions related to any particular security.If a decline in the fair value of an available-for-sale marketable debt security in our investment portfolio is deemed to be other-than-temporary, wewrite down the security to its current fair value. If we intend to sell the security or it is more likely than not that we will be forced to sell the security beforerecovery of the amortized cost of the security, the loss is recognized in net income. Otherwise, the loss is separated into a portion representing a credit loss,which is recorded in net income, and the remainder is recorded in Other Comprehensive Income (Loss), net of taxes. Credit losses are identified where we donot expect to receive cash flows sufficient to recover the amortized cost basis of a security.Fair Value of Financial InstrumentsWe apply fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on arecurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fairvalue, we consider the principal or most advantageous market in which it would transact and the market-based risk measurements or assumptions that marketparticipants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks.Our financial instruments consist of cash, cash equivalents, available-for-sale marketable securities, prepaid expenses, restricted cash, accountspayable and accrued liabilities. The fair values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate theircarrying values due to the short-term nature of these financial instruments. Marketable securities are reported at their fair values, based upon pricing ofsecurities with the same or similar investment characteristics as provided by pricing services, as described below.93  In accordance with the accounting standard for fair value measurements, we have classified our financial instruments as level 1 or level 2 within thefair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. Fair values determined byLevel 1 inputs utilize quoted prices in active markets for identical assets and liabilities. Fair values determined by Level 2 inputs use observable inputs otherthan the quoted prices in active markets for identical assets and liabilities – such as quoted prices for similar instruments, quoted prices for identical or similarinstruments in inactive markets, or other inputs that are observable or can be corroborated by observable market data. We did not have any financialinstruments classified as Level 3 during the years ended December 31, 2018, 2017 or 2016.We estimate the fair values of our financial instruments categorized as level 2 in the fair value hierarchy, including U.S. Treasury securities, U.S.government agency obligations, corporate bonds, municipal bonds and commercial paper by taking into consideration valuations obtained from third-partypricing services. The pricing services use industry standard valuation models, including both income- and market-based approaches, for which all significantinputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same orsimilar securities, benchmark yields, issuer credit spreads, benchmark securities, and other observable inputs. We obtain a single price for each financialinstrument and do not adjust the prices obtained from the pricing service.We validate the prices provided by our third-party pricing services by reviewing their pricing methods, obtaining market values from other pricingsources and comparing them to the share prices presented by the pricing service. After completing our validation procedures, we did not adjust or overrideany fair value measurements provided by our pricing services as of December 31, 2018 or 2017. While we believe that the valuation methodologies areappropriate, the use of valuation methodologies is highly judgmental and changes in methodologies can have a material impact on our results of operations.R&D ExpensesOur R&D expenses relate primarily to the development of CR845/difelikefalin. R&D expenses consist of expenses incurred in performing R&Dactivities, including compensation and benefits for full-time R&D employees, clinical trial and related clinical manufacturing expenses, third-partyformulation expenses, fees paid to CROs and other consultants, stock-based compensation for R&D employees and consultants and other outside expenses.Some expenses are based on estimates regarding the percentage of completion of a project. Our R&D expenses also included expenses related to preclinicalactivities for our earlier stage programs in prior periods and may include such expenses in the future.R&D costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in R&D activities aredeferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Most of our R&D costs havebeen external costs, which we track on a program-by program basis. Our internal R&D costs are primarily compensation expenses for our full-time R&Demployees. We do not track internal R&D costs on a program-by-program basis. Accounting Pronouncements Recently Adopted; Recent Accounting Pronouncements Not Yet AdoptedPlease refer to Note 2 of Notes to Financial Statements, Summary of Significant Accounting Policies, in this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate RiskWe invest a majority of our cash reserves in a variety of available-for-sale marketable securities, including money market funds and investment-gradedebt instruments, principally corporate bonds, commercial paper, municipal bonds and direct obligations of the U.S. government and U.S. government-sponsored entities, and in cash equivalents. See Note 3 of Notes to Financial Statements, Available-for-Sale Marketable Securities, in this Annual Report onForm 10-K for details about our available-for-sale marketable securities. 94  As of December 31, 2018, we had invested $167.7 million of our cash reserves in such marketable securities. Those marketable securities include$167.7 million of investment grade debt instruments with a yield of approximately 2.64% and maturities through November 2020. As of December 31, 2017,we have invested $83.2 million of our cash reserves in such marketable securities. Those marketable securities include $43.2 million of investment gradedebt instruments with a yield of approximately 1.70% and maturities through July 2018 and $40.0 million of money market funds with an average annualreturn of 1.32%.We maintain an investment portfolio in accordance with our investment policy, which includes guidelines on acceptable investment securities,minimum credit quality, maturity parameters, and concentration and diversification. The primary objectives of our investment policy are to preserveprincipal, maintain proper liquidity and to meet operating needs. Our investments are subject to interest rate risk and will decrease in value if market interestrates increase. However, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated.Duration is a sensitivity measure that can be used to approximate the change in the fair value of a security that will result from a change in interestrates. Applying the duration model, a hypothetical 1% increase in interest rates as of December 31, 2018 and 2017, would have resulted in immaterialdecreases in the fair values of our portfolio of marketable securities at those dates. We do not currently use interest rate derivative instruments to manageexposure to interest rate changes. Credit Quality RiskAlthough our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amountof credit exposure from any single issue, issuer or type of investment. Nonetheless, deterioration of the credit quality of an investment security subsequent topurchase may subject us to the risk of not being able to recover the full principal value of the security. Item 8. Financial Statements and Supplementary Data.The information required by this Item 8 of Part II is incorporated by reference to the Financial Statements filed with this Annual Report on Form 10-K.See Item 15. Exhibits, Financial Statement Schedules in this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None. Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2018. Based on suchevaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2018, our disclosure controls and procedureswere effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is(1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and (2) accumulated andcommunicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisionsregarding required disclosures. 95  Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Our management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) to conduct an assessment of the effectiveness of our internal control over financial reporting as ofDecember 31, 2018. Based on the assessment, management has concluded that, as of December 31, 2018, our internal control over financial reporting waseffective.This Annual Report on Form 10-K does not include an audit or attestation report from our registered public accounting firm regarding our internalcontrol over financial reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm pursuant to rules ofthe SEC that permit us to provide only management’s report in this annual report for so long as we remain an “emerging growth company” under theJumpstart Our Business Startups Act. Changes in Internal Control Over Financial ReportingThere was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect,our internal control over financial reporting. Limitations on Controls and ProceduresManagement, including our Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluatingthe cost benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls andprocedures can provide absolute assurance that all control issues and instances of fraud, if any, within Cara have been detected. Item 9B. Other Information.None.96  PART IIIItem 10. Directors, Executive Officers and Corporate Governance.The following table sets forth information concerning our executive officers as of March 1, 2019. Name Age Position(s)Derek Chalmers, Ph.D., D.Sc. 54 President, Chief Executive Officer and DirectorMani Mohindru, Ph.D. 47 Chief Financial Officer and Chief Strategy OfficerFrédérique Menzaghi, Ph.D. 52 Chief Scientific Officer and Senior Vice President, R&DJoana Goncalves, M.D. 45 Chief Medical OfficerScott Terrillion 56 General Counsel, Secretary and Chief Compliance Officer Derek Chalmers, Ph.D., D.Sc. Dr. Chalmers, one of our founders, has served as our President and Chief Executive Officer since September 2004 andhas served as a member of our Board of Directors since July 2004. Dr. Chalmers has over 25 years’ experience in the biotechnology industry with increasinglevels of corporate and business responsibilities. Prior to founding Cara, Dr. Chalmers co-founded Arena Pharmaceuticals, Inc. (Nasdaq: ARNA), a drugdiscovery and development company, and served as its Vice President and Executive Director from June 1997 until May 2004. Dr. Chalmers holds a D.Sc.and Ph.D. in Pharmacology from the University of Glasgow. Dr. Chalmers’ qualifications to sit on our Board of Directors include his leadership, executive,managerial and business experience, historical knowledge of our company and his background and experience in the biotechnology industry, includinghaving been a founder of a prior biotechnology company. Mani Mohindru, Ph.D. Dr. Mohindru has served as our Chief Financial Officer and Chief Strategy Officer since August 2017. Prior to joining Cara,Dr. Mohindru served as Senior Vice President and Chief Strategy Officer at Curis, Inc., a biotechnology company, from March 2016 to July 2017. From April2015 to February 2016, Dr. Mohindru served as Senior Vice President of Corporate Strategy and Investor Relations and from June 2013 to March 2015, Dr.Mohindru served as Vice President of Corporate Strategy and Investor Relations, each at Curis, Inc. From October 2012 to March 2016, Dr. Mohindru was theco-founder of ImmTox, Inc., a biotechnology company. From June 2011 to September 2012, Dr. Mohindru was a Senior Biotechnology Analyst atThinkEquity, LLC, a research and investment banking firm. Previously, from June 2009 to May 2011, Dr. Mohindru was a Partner at Axon HealthcareCompany, a strategic pharmaceutical and biotechnology consultancy firm that she co-founded. Dr. Mohindru was also a Managing Director at CapstoneInvestments in its investment banking division, a Vice President at Credit Suisse, and an Associate Research Analyst at global financial services firm, UBS.Dr. Mohindru completed her Ph.D. in Neurosciences at Northwestern University and she received both her B.S. in Human Biology and Masters inBiotechnology from the All India Institute of Medical Sciences, New Delhi, India. Frédérique Menzaghi, Ph.D. Dr. Menzaghi, one of our founders, has led our preclinical research and pruritic clinical program since 2004. Since2017, she has served as our Senior Vice President, Research and Development and was promoted to Chief Scientific Officer on March 6, 2019. Dr. Menzaghihas over 25 years of drug development and management experience in biotechnology in the field of ion channels and G protein-coupled receptors. Herexpertise ranges from exploratory non-clinical research through clinical development. From 2003 to 2004, she served as Vice President, Pharmacology andBusiness Development at Psychogenics Inc., a preclinical contract research organization. From 1999 to 2003, she was the Research Director of In VivoPharmacology at Arena Pharmaceuticals, Inc. (Nasdaq: ARNA), leading a multidisciplinary research team. Prior to that, Dr. Menzaghi established and directeda preclinical research laboratory at SIBIA Neurosciences (acquired by Merck). Her research expertise ranged from the development of small molecules tosmall peptides. She has extensive experience with corporate partnering with large U.S. and Asian pharmaceutical companies including Eli Lilly, Merck andJ&J. Dr. Menzaghi received her Ph.D. in Neurosciences from the University of Louis Pasteur, Strasbourg, France and her M.Sc. in clinical psychology from theUniversity of Nancy, France, after which she conducted her post-doctoral research at the Scripps Research Institute, San Diego, California. She has over 55peer-reviewed publications and book chapters, 100 international meeting presentations and is listed as an inventor on numerous patents. 97  Joana Goncalves, M.D. Dr. Goncalves has served as our Chief Medical Officer since October 2018. Prior to joining Cara, Dr. Goncalves worked atCelgene Corporation from April 2014 to October 2018, where she most recently served as Vice President, Medical Affairs for Dermatology and Neurologyand was instrumental in planning and executing medical support activities for a number of programs, including OTEZLA® for psoriasis. Previously, Dr.Goncalves held the position of Vice President, Medical Strategy and Scientific Affairs at LEO Pharma Inc., the U.S. subsidiary of LEO Pharma A/S, a globalhealthcare company specializing in dermatology and critical care, from February 2012 to April 2014. She began her pharmaceutical career at NovartisPharmaceuticals, working on a range of products across various therapeutic areas from 2001 to 2012. Dr. Goncalves received her M.D. from the University ofCape Town, South Africa. Scott M. Terrillion. Mr. Terrillion has served as our General Counsel, Secretary and Chief Compliance Officer since November 2016. Mr. Terrillionbrings over 20 years of diverse pharmaceutical industry experience from varying legal and business roles in the public, private and not-for-profit sectors. Mr.Terrillion spent 15 years at Boehringer Ingelheim Pharmaceuticals, Inc., a research-driven pharmaceutical company, where he served as Vice President,Associate General Counsel. At Boehringer, Mr. Terrillion built and led the legal team supporting the global company’s U.S. human pharmaceutical businessduring a period of rapid, industry-leading growth. Mr. Terrillion also spent two years at Mesoblast, Inc., a publicly traded emerging biotech, as thecompany’s Vice President, Associate General Counsel and Head of Compliance. Mr. Terrillion began his legal career at Nixon, Hargrave, Devans & Doyle(now Nixon Peabody LLP), a large general practice law firm, where he was an associate in the Health Care and Technology/Intellectual Property Practicegroups. A licensed pharmacist, Mr. Terrillion began his professional career as a community pharmacist and later served as Director of Pharmacy for PreferredCare, Inc., an HMO insurance provider. Mr. Terrillion received his B.S. in Pharmacy from the Albany College of Pharmacy and Health Sciences, where heserves on the Board of Trustees, and a Juris Doctor, magna cum laude, from Albany Law School. He is a member of the New York bar and authorized housecounsel in Connecticut. The following table sets forth certain information with respect to our non-employee directors as of March 1, 2019: Name Age PositionMartin Vogelbaum 55 DirectorHarrison M. Bains, Jr. 75 DirectorJeffrey Ives, Ph.D. 68 DirectorChristopher Posner 49 Director Martin Vogelbaum. Mr. Vogelbaum has served as a member of our Board of Directors since July 2010. He currently serves as Managing Partner ofInning One Ventures, a life science venture capital fund. Previously, Mr. Vogelbaum served as Corporate Vice President, Business Development at CelgeneCorporation from 2015 to 2017. Mr. Vogelbaum served as a partner of Rho Ventures from 2005 until 2015 and again from 2017 to 2018, where he focused oninvestments in biotechnology, biopharmaceuticals and medical devices. He has more than 25 years of experience investing in the life sciences sector, havingbeen involved with companies at all stages of development, including co-founding more than a half dozen companies. Prior to his venture capital career, hewas a research associate in the bone marrow transplantation unit at Memorial-Sloan Kettering Hospital, where he conducted research in graft-versus-host-disease. Mr. Vogelbaum previously served as a director of Inotek Pharmaceuticals Corporation (Nasdaq: ITEK) from 2010 to 2016 and NephroGenex, Inc.(Nasdaq: NRX) from 2013 to 2014. He currently serves on the Healthcare Advisory Board for the Partnership Fund for New York City as well as the ScientificAdvisory Committee for Weill Cornell Medical College’s Daedalus Fund for Innovation. Mr. Vogelbaum received his A.B. in biology and history fromColumbia University. Mr. Vogelbaum’s experience in the life sciences industry as a venture capitalist provides him with the qualifications and skills to serveon our Board of Directors. 98  Harrison M. Bains, Jr. Mr. Bains has served as a member of our Board of Directors since July 2014. Mr. Bains served in multiple roles at BristolMyers Squibb Company, including Vice President, Treasurer and acting Chief Financial Officer from 1988 through his retirement in 2004. Mr. Bains’s careeralso includes serving as Senior Vice President of the Primary Industries group at Chase Manhattan Bank and 11 years with RJR Nabisco and two of itspredecessor companies as Senior Vice President and Treasurer. He currently serves as a director and chair of the Audit Committee of the Mercer Funds, Inc., aregistered investment company. He has served as a member of the board of trustees of the Park Avenue Armory since October 2007 and the Civil War Trustsince September 2007, and previously served as a member of the board of trustees of the University of Redlands from October 1989 to May 2013, as amember of the board of directors of BG Medicine, Inc. from 2007 to 2015, and as a member of the Board of Directors of Bank of America Funds from 2010 to2016. Mr. Bains earned an M.B.A from the University of California, Berkeley and a B.A. in economics from the University of Redlands. He also completedthe Advanced Management Program at Harvard Business School. His extensive experience in the biotechnology industry provides him with thequalifications to serve on our Board of Directors.Jeffrey L. Ives, Ph.D. Dr. Ives has served as a member of our Board of Directors since July 2014. Dr. Ives currently is a Venture Partner at New LeafVenture Partners, healthcare technology venture firm, and a Principal at NeuroPharma Advisors, LLC., an advisory group focused on companies developingtherapeutics for the CNS. Dr. Ives is also currently a director at private pharmaceutical and biotechnology companies, Astrocyte Pharmaceuticals Inc.,Acumen Pharmaceuticals, Inc., Pinteon Therapeutics Inc. and Orthogonal Neurosciences, private. Previously, Dr. Ives served as the Chief Executive Officer ofSatori Pharmaceuticals, Inc., a neurodegenerative disease company focused on discovery and development of breakthrough therapies for the treatment andprevention of Alzheimer’s disease from 2008 until 2013. Prior to Satori, Dr. Ives led the CNS, pain and oncology research teams at Pfizer for over two decadesand, from 2001 to 2007, he served as a Senior Vice President leading the global Pharmacokinetics, Dynamics and Metabolism organization. Dr. Ives receivedhis doctorate and master degrees from Yale University and received his bachelor of arts degree from Colgate University. His extensive experience leadingresearch and drug development provides him with the qualifications to serve on our Board of Directors.Christopher Posner. Mr. Posner has served as a member of our Board of Directors since August 2018. Mr. Posner has broad experience in commercialand marketing operations and product management at both large and specialty pharmaceutical companies, where he has focused on products for autoimmune,inflammatory and pain conditions, including Xeljanz® and Enbrel®. Since July 2017, he has been the Chief Executive Officer of LEO Pharma, Inc. US, asubsidiary of LEO Pharma A/S, a global healthcare company specializing in dermatology and critical care, including such conditions as psoriasis and atopicdermatitis. Prior to joining LEO, he was the Head of Worldwide Commercial Operations at R-Pharma-US, LLC, a specialty pharmaceutical company focusedon oncology and chronic immune disorders, from 2014 until 2017. Previously, Mr. Posner held a variety of senior management positions in commercial andmarketing operations at Bristol-Myers Squibb Company, Pfizer Inc., Wyeth Pharmaceuticals, Inc. and Endo Pharmaceuticals plc. Mr. Posner holds an M.B.A.from Fuqua School of Business, Duke University and a B.A. in Economics from Villanova University. Mr. Posner’s extensive experience in thepharmaceutical industry, including in commercial and marketing operations, provides him with the qualifications to serve on our Board of Directors.Audit CommitteeThe Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Exchange Act, to overseeour corporate accounting and financial reporting processes and audits of our financial statements. For this purpose, the Audit Committee performs severalfunctions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines and approves theengagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage newindependent auditors; reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors therotation of partners of the independent auditors on our audit engagement team as required by law; reviews and approves or rejects transactions between usand any related persons; confers with management and the independent auditors regarding the effectiveness of internal controls over financial reporting, theobjectivity of our financial reporting and our accounting policies and practices; establishes procedures, as required under applicable law, for the receipt,retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential andanonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review our annual audited financialstatements and quarterly financial statements with management and the independent auditor, including a review of our disclosures under “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”99  The Audit Committee is composed of three directors: Mr. Vogelbaum, Mr. Bains and Mr. Posner. In 2018, Dr. Ives also served on the AuditCommittee from January through August. Upon joining our Board of Directors in August 2018, Mr. Posner was appointed and replaced Dr. Ives as a memberof the Audit Committee. The Audit Committee met four times during the fiscal year ended December 31, 2018.The Board of Directors reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and hasdetermined that all members of our Audit Committee are independent, as defined in Rule 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards and Rule10A-3 of the Exchange Act, and that each such member meets the financial literacy requirements of Nasdaq.The Board of Directors has also determined that Mr. Bains qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. TheBoard made a qualitative assessment of Mr. Bains’s level of knowledge and experience based on a number of factors, including his formal education andexperience as acting chief financial officer for a public reporting company.Code of Ethics and Business ConductOur Board of Directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code ofBusiness Conduct and Ethics is available on our website at www.caratherapeutics.com in the News & Investors section under Corporate Governance. If wemake any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a provision of the Code to any executive officer ordirector, we will promptly disclose the nature of the amendment or waiver on our website. Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class ofour equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equitysecurities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) formsthey file.To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports wererequired, during the fiscal year ended December 31, 2018, all Section 16(a) filing requirements applicable to our officers, directors and greater than tenpercent beneficial owners were complied with.Item 11. Executive Compensation.Cara is an “emerging growth company,” as defined in Section 101(a)(19)(C) of the JOBS Act. As an emerging growth company, under SEC rules, weare not required to include a Compensation Discussion and Analysis section in this Item 11 and have elected to comply with reduced compensationdisclosure requirements, as permitted under the JOBS Act.100  2018 Summary Compensation TableThe following table shows for the fiscal years ended December 31, 2018, 2017 and 2016, compensation awarded to or paid to, or earned by, our ChiefExecutive Officer, our two other most highly compensated executive officers at December 31, 2018 and our former Chief Medical Officer. We refer to theseindividuals as our Named Executive Officers. Name and Principal Position Year Salary Bonus (1) StockAwards (2) OptionAwards (3) Non-EquityIncentive PlanCompensation (4) All OtherCompensation (5) TotalCompensation Derek Chalmers, Ph.D., D.Sc. (6) 2018 $542,100 $— $— $1,997,623 $238,524 $10,799 $2,789,046 President and Chief Executive Officer 2017 526,300 — — 2,753,848 233,400 8,100 $3,521,648 2016 511,000 — — 736,837 204,400 7,950 1,460,187 Joana Goncalves, M.D. (7) 2018 82,639 60,000 — 3,560,536 32,603 413 3,736,191 Chief Medical Officer Frédérique Menzaghi, Ph.D. 2018 400,000 — — 615,428 212,000 10,799 1,238,227 Chief Scientific Officer and SeniorVice President, R&D 2017 379,935 — — 917,949 200,000 8,100 1,505,984 2016 357,000 — — 246,878 168,682 7,950 780,510 Joseph Stauffer, D.O. (8) 2018 368,900 141,895 — 615,428 — 567,627 1,693,850 Former Chief Medical Officer 2017 426,000 — — 917,949 170,400 8,875 1,523,224 2016 414,000 — — 250,676 223,560 8,199 896,435 (1)The amount disclosed in this column represent a one-time bonus, payable on the first regularly scheduled payroll date following the executiveofficer’s start date.(2)In accordance with SEC rules, these amounts reflect the grant date fair values of the restricted stock units, or RSUs, granted to each of Drs. Chalmers,Menzaghi and Stauffer in 2018, calculated in accordance with ASC Topic 718 for stock-based compensation transactions, based on the probableoutcome of the vesting conditions of these RSUs as of the grant date. Each RSU represented the contingent right to receive one share of our commonstock upon the achievement of certain performance targets through the first quarter of 2019, subject to the recipient’s continuous service through thevesting events. As of the grant date, the performance vesting condition was considered not probable of occurring and, as a result, the grant date fairvalue of the RSUs, for purposes of this table, is $0. Assuming that the performance vesting condition of these RSUs was met as of the grant date, thevalue of these RSUs would have been $772,446 for Dr. Chalmers and $238,054 for each of Drs. Menzaghi and Stauffer. The performance vestingcondition for these RSUs was met in December 2018, and the actual value of these RSUs upon vesting in full was $495,344 for Dr. Chalmers and$152,656 for each of Drs. Menzaghi and Stauffer. See Note 13 to our financial statements included in this Annual Report on Form 10-K for a furtherdescription of our valuation methodology for equity awards.(3)The amounts disclosed in this column are the fair value on the grant date of each award granted under our 2014 Plan, computed in accordance withASC 718, using the valuation methodology for equity awards set forth in Note 13 of our financial statements included in this Annual Report on Form10-K. All of the options awards reported in the table above were granted under our 2014 Plan and have a term of ten years from the date of grant.Stock options granted to officers and employees in 2018, 2017 and 2016, who had previously been granted stock options, vest monthly over a four-year period from the grant date. The initial grant of stock options to officers and employees vests 25% after the first year and ratably thereafter duringthe following 36 months.101  (4)The amounts disclosed in this column represent the annual cash incentive bonus earned by the named executive officer for services performed in2018, 2017 and 2016. The 2018 annual incentive bonus will be paid in March 2019. The 2017 annual incentive bonus was paid in February 2018.The 2016 annual incentive bonus was paid in March 2017. The annual cash incentive bonus for each executive officer is based on the Board’sassessment of each such officer’s individual performance and our overall performance against objectives determined by our Board and communicatedto such officer. For the fiscal years ended December 31, 2018, 2017 and 2016, the annual cash incentive bonuses were based on our achievement ofclinical, regulatory, financial and operational objectives. See “—Executive Employment Arrangements and Potential Payments upon Termination orChange in Control” below for additional information regarding assigned bonus targets, expressed as a percentage of each executive officer’s basesalary.(5)All other compensation for 2017 and 2016 includes $8,100 and $7,950, respectively, for 401(k) Employee Benefit Plan contributions we made to theaccount of each of Drs. Chalmers, Menzaghi and Stauffer under the ERISA Safe Harbor Rules, representing the same percentage of salary ascontributed to all employee accounts, up to a maximum amount of salary. For 2017 and 2016, all other compensation also includes $775 and $249for tax gross-ups for Dr. Stauffer related to hotel accomodations close to our headquarters for 2017 and 2016. For our named executive officers otherthan Dr. Stauffer, this column also includes the following for 2018: (i) $8,250 for 401(k) Employee Benefit Plan contributions we made to theaccount of each of Drs. Chalmers and Menzaghi under the ERISA Safe Harbor Rules; (ii) $1,800 for parking for each of Dr. Chalmers and Dr.Menzaghi; (iii) $300 for parking for Dr. Goncalves; (iv) $749 for life insurance payments for each of Dr. Chalmers and Dr. Menzaghi; and (v) $113 forlife insurance payments for Dr. Goncalves.(6)Dr. Chalmers is also a member of our Board of Directors but does not receive any additional compensation in his capacity as a director.(7)Dr. Goncalves joined Cara on October 22, 2018. For the year ended December 31, 2018, the amounts reported as salary and non-equity incentive plancompensation, represents Dr. Goncalves’s base salary paid from October 22, 2018 to December 31, 2018 and her prorated annual cash incentivebonus.(8)Dr. Stauffer served as our Chief Medical Officer until October 22, 2018 (the “Separation Date”). Salary reported for Dr. Stauffer for 2018 represents hissalary earned through the Separation Date. Bonus reported for Dr. Stauffer for 2018 represents the prorated amount of his 2018 target bonus, whichwas payable pursuant to the Separation and Consulting Agreement we entered into with Dr. Stauffer as of the Separation Date. All othercompensation for Dr. Stauffer for 2018 includes: (i) the intrinsic value of stock options for which vesting was accelerated to the Separation Date inthe amount of $465,432; (ii) $85,000 of consulting fees payable to Dr. Stauffer for services provided to us from the Separation Date throughDecember 31, 2018; (iii) $5,968 of COBRA insurance premium reimbursements; (iv) $8,250 for 401(k) Employee Benefit Plan contributions wemade to the account of Dr. Stauffer under the ERISA Safe Harbor Rules; (v) $1,500 for parking; (vi) $624 for life insurance payments and (vii) $853for tax gross-ups for Dr. Stauffer related to hotel accommodations close to our headquarters for 2018. 102  Outstanding Equity Awards at December 31, 2018The following table shows certain information regarding outstanding equity awards held by our Named Executive Officers at December 31, 2018. Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable OptionExercisePrice OptionExpirationDateDerek Chalmers, Ph.D., D.Sc. 80,000 — (1) $11.00 1/30/2024President and Chief Executive Officer 158,125 6,875 (2) 10.82 6/15/2025 130,375 60,625 (2) 6.00 3/30/2026 98,437 126,563 (2) 17.41 3/8/2027 35,156 152,344 (2) 14.39 3/9/2028 Joana Goncalves, M.D. — 250,000 (1) 19.27 10/22/2028Chief Medical Officer Frédérique Menzaghi, Ph.D. Chief Scientific Officer and Senior Vice President, R&D 40,000 — (1) 11.00 1/30/2024 57,500 2,500 (2) 10.82 6/15/2025 44,687 20,313 (2) 6.00 3/30/2026 32,812 42,188 (2) 17.41 3/8/2027 10,828 46,922 (2) 14.39 3/9/2028 Joseph Stauffer, D.O. 180,000 — 8.74 12/1/2024(4)Former Chief Medical Officer 66,000 — 6.00 3/30/2026(4) 64,008 10,992 (3) 17.41 3/8/2027(4) 10,827 46,923 (3) 14.39 3/9/2028(4) (1)Shares underlying these stock options vest over a four-year period as follows: 25% of the shares underlying the option vest on the first anniversary ofthe date of grant, with the remainder vesting in equal monthly installments over the 36 months thereafter. (2)Shares underlying these stock options vest monthly over a four-year period from the grant date.(3)The exercisable shares give effect to the acceleration of vesting of certain stock options in connection with Dr. Stauffer’s separation as our ChiefMedical Officer during 2018. The remaining unvested shares underlying these options continue vesting during the term of Dr. Stauffer’s consultingagreement with us, which we expect will end on July 22, 2019, in accordance with the original vesting terms of the award, with 1/48th of the totalshares subject to each grant vesting on a monthly basis through the termination of Dr. Stauffer’s consulting term. See “--Executive EmploymentArrangements and Potential Payments upon Termination or Change in Control—Separation With Dr. Stauffer.” (4)Based on the term of Dr. Stauffer’s consulting agreement, it is expected that these awards will expire on October 22, 2019, three months after theexpected conclusion of his consulting term, if not previously exercised.103  Executive Employment Arrangements and Potential Payments upon Termination or Change in ControlWe have entered into employment agreements with each of Drs. Chalmers, Goncalves and Menzaghi. Under these employment agreements, theexecutive officers’ respective initial annual salaries and target annual bonuses are subject to review and adjustment from time to time by the Board ofDirectors in its sole discretion.For the year ended December 31, 2018, our Named Executive Officers’ respective annual salaries and target annual bonuses were: Executive Officer 2018Base Salary Target Bonus(as a % ofBase Salary) Dr. Chalmers $542,100 55% Dr. Goncalves 425,000 40% Dr. Menzaghi 400,000 40% Dr. Stauffer 439,200 40% Under these employment agreements, each executive officer is eligible for severance benefits in specified circumstances. Under the terms of theagreements, upon execution and effectiveness of a general release of claims, each executive officer will be entitled to severance payments if we terminate hisor her employment without cause, or in the case of Dr. Chalmers, the employee terminates employment with us for good reason. The following definitionshave been adopted in these employment agreements: •“cause” means that we have determined in our sole discretion that any of the following occurred: (a) the executive officer’s commission of afelony; (b) the executive officer’s act or omission constituting dishonesty, fraud, immoral, or disreputable conduct that causes material harmto us; (c) the executive officer’s violation of a company policy that causes material harm to us; (d) the executive officer’s material breach ofthe employment agreement, or of any provision of any other agreement between the executive officer and us which, if curable, is not curedwithin 30 days after notice thereof is given to the executive officer, or (e) the executive officer’s breach of fiduciary duty; •“good reason” means any of the following without the executive officer’s prior written consent: (a) the assignment to the executive officer ofduties or responsibilities that would result in the material diminution of the executive officer’s then-current position, with the exception ofcertain situations involving the acquisition of us; (b) a reduction of the executive officer’s annual base salary by greater than 30%, except ina situation in which the base salaries of other similarly situated employees are accordingly reduced; or (c) any request that the executiveofficer relocate to a new principal base of operations that would increase the executive officer’s one-way commute distance by more than 100miles, unless the executive officer accepts the relocation opportunity. •“change in control” means any of the following: (a) any person becomes the owner, directly or indirectly, of securities representing more than50% of our combined voting power other than through a merger, consolidation or similar transaction, subject to specified exceptions; (b) amerger or consolidation, unless the holders of our outstanding voting stock immediately prior to such transaction own, immediately aftersuch transaction, securities representing more than 50% of our voting power or other entity surviving such transaction, subject to specifiedexceptions; (c) a sale, lease, exclusive license or other disposition of all or substantially all of our assets, other than the transfer of our assetsto an entity of which our stockholders own more than 50% of the voting power, subject to specified exceptions; or (d) the directors at thetime of our initial public offering, or the incumbent board, cease to constitute at least a majority of the Board of Directors, provided, that newdirectors that are approved or recommended by the majority of the incumbent board will be considered to be a member of the incumbentboard for this purpose.104  The following table summarizes the schedule of severance payments and acceleration of unvested equity awards our Named Executive Officerswould receive in the event of a qualifying termination: Scenario and Executive Salary (1) Payment ofEmployerHealth InsuranceContinuation (1) Bonus (1) Acceleration ofUnvested EquityAwardsOther Than Within 12 Months Following a Change in Control: Dr. Chalmers 12 months 12 months Prorated Target Bonus NoneDr. Goncalves 9 months 9 months 50% of Target Bonus NoneDr. Menzaghi 6 months 6 months Prorated Target Bonus NoneWithin 12 Months Following a Change in Control: Dr. Chalmers 12 months 12 months Prorated Target Bonus 100% Acceleration (2)Dr. Goncalves 9 months 9 months 50% of Target Bonus 50%-100% Acceleration (3)Dr. Menzaghi 6 months 6 months Prorated Target Bonus 100% Acceleration (2) (1)Subject to the execution of a general release by the relevant executive officer, on the 60th day following termination without cause or, in the case ofDr. Chalmers, resignation for good reason, we will pay such payments relating to base salary, target bonus and health insurance premiums in a lumpsum that this executive officer would have received on or prior to such date under the original schedule (less applicable withholdings anddeductions), with the balance of such payments being paid as originally scheduled.(2)The executive officer will receive accelerated vesting of 100% of his or her then unvested equity awards, if any, upon a qualifying termination thatoccurs within 12 months of the change in control.(3)The executive officer will receive accelerated vesting of (a) 50% of her then unvested equity awards, if any, upon a qualifying termination that occurswithin six months following the change in control and (b) 100% of her then unvested equity awards, if any, upon a qualifying termination that occursbetween six and twelve months of the change in control. Separation With Dr. StaufferWe entered into a Separation and Consulting Agreement with Dr. Stauffer, effective October 22, 2018, in connection with his separation as ChiefMedical Officer. Pursuant to the terms of our separation with Dr. Stauffer, he received a prorated target bonus for 2018 and accelerated vesting of 63,446stock options (representing 50% of his outstanding unvested stock options as of October 22, 2018). We also engaged Dr. Stauffer as a consultant for a nine-month period, during which he is providing consulting services related to our programs in postoperative pain and PONV in return for a consulting fee of$36,600 per month. Pursuant to our separation agreement with Dr. Stauffer, we also agreed to reimburse COBRA insurance premium payments made by Dr.Stauffer for up to nine months. 2014 Equity Incentive PlanOur Board of Directors and our stockholders approved and adopted our 2014 Equity Incentive Plan, or the 2014 Plan, in January 2014. The 2014Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciationrights, performance stock awards and other forms of equity compensation, or collectively, stock awards. Additionally, the 2014 Plan provides for the grant ofperformance cash awards. Incentive stock options may be granted only to employees. All other awards may be granted to employees, including officers, non-employee directors and consultants.105  Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2014 Plan was 1,600,000 shares.Additionally, the number of shares of our common stock reserved for issuance under the 2014 Plan has automatically increased on January 1 of each year,beginning on January 1, 2015 and continuing through and including January 1, 2024, by 3% of the total number of shares of our capital stock outstandingon December 31 of the preceding calendar year, or a lesser number of shares determined by our Board of Directors. On January 1, 2019, the aggregate numberof shares of common stock that may be issued pursuant to stock awards under our 2014 Equity Incentive Plan automatically increased to 6,086,907. Themaximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 30,000,000 shares.2004 Stock Incentive PlanOur Board of Directors adopted, and our stockholders subsequently approved, the Cara Therapeutics 2004 Stock Incentive Plan, or the 2004 Plan, inSeptember 2004. The 2004 Plan provides for the grant to our officers, directors, employees, consultants and advisors of incentive and nonqualified stockoptions to purchase our common stock, and also provides for the outright issuance of our common stock through restricted share awards. Since theeffectiveness of the 2014 Plan in January 2014, no further awards have been allowed to be granted under the 2004 Plan. 401(k) PlanWe maintain the Cara Therapeutics Savings and Retirement 401(k) Plan, or the 401(k) Plan, a tax-qualified retirement plan that provides eligible U.S.employees with an opportunity to save for retirement on a tax advantaged basis. All employees over the age of 21 are eligible to participate in the plan at thebeginning of the calendar quarter after three consecutive months of service. Employees are able to defer a portion of their pay into the plan on the first day ofthe quarter on or after the day all age and service requirements have been met. All eligible employees receive an employer contribution equal to 3% of theirsalary up to the annual Internal Revenue Code limit. Pre-tax contributions are allocated to each participant’s individual account and are then invested inselected investment alternatives according to the participant’s directions. Contributions that we may make are subject to a vesting schedule; employees areimmediately and fully vested in their contributions. The 401(k) Plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As a tax-qualifiedretirement plan, contributions to the 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) Planand all contributions are deductible by us when made. Director CompensationThe following table shows certain information with respect to the compensation of all of our non-employee directors for the fiscal year endedDecember 31, 2018: Director Fees paidin cash (1) Optionawards (2) Total Martin Vogelbaum $108,000 $224,261 $332,261 Harrison M. Bains, Jr. $60,000 $224,261 $284,261 Jeffrey Ives, Ph.D. $57,000 $224,261 $281,261 Christopher Posner (3) $24,000 $470,289 $494,289 Dean Slagel (4) $10,000 $— $10,000 (1)This column includes the annual fees paid to all non-employee directors for their service on the Board of Directors as well as for their committeemembership and chairmanship.106  (2)The amounts disclosed in this column represent the aggregate grant date fair value of the stock options granted, computed in accordance with FASBASC Topic 718, using the valuation methodology for equity awards set forth in Note 13 of our financial statements included in this Annual Reporton Form 10-K. The options granted to Mr. Vogelbaum, Mr. Bains and Dr. Ives have an exercise price per share of $16.07 and were granted on June 6,2018 in connection with our 2018 Annual Meeting of Stockholders. The options granted to Mr. Posner have an exercise price of $17.94 and weregranted on August 2, 2018 in connection with his appointment to our Board of Directors. (3)Mr. Posner was appointed to the Board of Directors, effective August 2, 2018.(4)Mr. Slagel resigned from the Board of Directors, effective March 7, 2018.The options for Mr. Vogelbaum, Mr. Bains and Dr. Ives described in the table above vest on the one-year anniversary of the grant date, subject to thedirector’s continued service as a director through such date. The options for Mr. Posner described in the table above vest over a three-year period in equalinstallments from the date of the grant, subject to Mr. Posner’s continued service as a director through each such vesting date. As of December 31, 2018,options to purchase 81,500 shares of common stock were held by Mr. Vogelbaum, Mr. Bains and Dr. Ives, of which 63,500 underlying shares were vested andimmediately exercisable, and an option to purchase 35,000 shares of common stock was held by Mr. Posner, of which none of the underlying shares werevested or immediately exercisable.Directors who are also full-time officers or employees of Cara do not receive any additional compensation for serving as directors. Therefore,Dr. Chalmers, our Chief Executive Officer and one of our directors, does not receive any additional compensation for his service as a director. Dr. Chalmers’compensation as an executive officer is set forth above under “2018 Summary Compensation Table.”Our Board of Directors has adopted a non-employee director compensation policy. Under our director compensation policy, we will pay each of ournon-employee directors a cash retainer for service on our Board of Directors and for service on each committee on which the director is a member. Theseretainers are payable in arrears in four equal quarterly installments on the last day of each quarter, provided that the amount of such payment will be proratedfor any portion of such quarter that the director is not serving on our Board of Directors. The retainers paid during 2018 to non-employee directors for serviceon our Board of Directors and for service on each committee of our Board of Directors on which the director is a member were as follows: MemberAnnual ServiceRetainer ChairmanAdditionalAnnual ServiceRetainerBoard of Directors $40,000 $35,000 (1)Audit Committee $10,000 $10,000 Compensation Committee $7,500 $7,500 Nominating and Corporate Governance Committee $4,000 $4,000 (1)During the year ended December 31, 2018, our Board of Directors had a Lead Independent Director rather than a Chairman. For the year endedDecember 31, 2018, the Lead Independent Director received an additional retainer of $35,000.107  We also reimburse our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending our Board ofDirectors and committee meetings. In addition, under our director compensation policy, upon initial election to the Board of Directors, each non-employeedirector will receive an option to purchase 35,000 shares with an exercise price equal to the fair market value of our common stock on the date of grant. Suchoption vests over three years in equal annual installments, subject to the director’s continued service as a director through each such vesting date. Further, onthe date of each annual meeting of stockholders, each non-employee director that continues to serve as a non-employee member on our Board of Directorswill receive an option to purchase 18,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the dateof grant. Such option will vest on the earlier of the first-year anniversary of the date of grant and our next annual meeting of stockholders, subject to thedirector’s continued service as a director through such vesting date. This policy is intended to provide a total compensation package that enables us to attract and retain qualified and experienced individuals to serveas directors and to align our directors’ interests with those of our stockholders. Compensation Committee Interlocks and Insider ParticipationThe Compensation Committee is composed of three directors: Mr. Vogelbaum, Dr. Ives and Mr. Posner. None of the current members of theCompensation Committee has at any time during the past three years been one of our officers or employees. None of our executive officers currently serves orin the prior three years has served as a member of the board of directors or compensation committee of any entity that has one or more executive officersserving on the Board or Compensation Committee. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The following table sets forth certain information regarding the ownership of our common stock as of March 1, 2019 by: (i) each director; (ii) each ofthe individuals named in the 2018 Summary Compensation Table; (iii) all of our current executive officers and directors as a group; and (iv) all those knownby us to be beneficial owners of more than five percent of our common stock. Name of beneficial owner Number of Shares BeneficiallyOwned Percentage of SharesBeneficially Owned 5% stockholders: Rho Ventures VI, LP (1) 3,568,057 9.0%Blackrock, Inc. (2) 2,800,605 7.1 T. Rowe Price (3) 2,415,491 6.1 State Street Corporation (4) 2,123,225 5.4 Directors and named executive officers: Derek Chalmers, Ph.D., D.Sc. (5) 1,513,297 3.8 Joana Goncalves, M.D. — * Frédérique Menzaghi, Ph.D (6) 349,085 * Joseph Stauffer, D.O. (7) 371,378 * Martin Vogelbaum (8) 63,500 * Harrison M. Bains, Jr. (8) 63,500 * Jeffrey Ives, Ph.D. (8) 63,500 * Christopher Posner — * All current executive officers and directors as a group (9 persons) (9) 2,289,781 5.6% *Less than one percent.108  This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13G filed with the SEC. Unlessotherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders namedin this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on39,547,558 shares outstanding on March 1, 2019. In computing the number of shares of common stock beneficially owned by a person and the percentageownership of that person, we have deemed outstanding shares of common stock subject to options held by that person that are exercisable within 60 daysafter March 1, 2019. We have not deemed these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.Except as otherwise noted below, the address for each person or entity listed in the table is c/o Cara Therapeutics, Inc., 4 Stamford Plaza, 107 ElmStreet, Stamford, Connecticut 06902. (1)Based solely on Schedule 13G filed on February 9, 2018 by Rho Ventures VI, L.P. The general partner of Rho Ventures VI, L.P. (“RV VI”) isRMV VI, L.L.C., a Delaware limited liability company, and the managing member of RMV VI, L.L.C. is Rho Capital Partners LLC, aDelaware limited liability company (“RCP LLC”). Each of Habib Kairouz, Mark Leschly and Joshua Ruch is a managing member of RCPLLC, and in their capacity as such may be deemed to exercise voting and investment power over the shares held by the Rho Funds. MartinVogelbaum is one of our directors and is a non-managing member of RMV VI, L.L.C. The address of Rho Capital Partners, LLC, RMV VI,L.L.C. and RV VI is 152 West 57th Street, 23rd Floor, New York, NY 10019. (2)Based solely on Schedule 13G filed by BlackRock, Inc. on February 4, 2019. BlackRock, Inc. has sole voting power as to 2,733,548 of theshares and sole dispositive power as to all of the shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. (3)Based solely on Schedule 13G filed by T. Rowe Price Associates, Inc. on February 14, 2019. T. Rowe Price Associates, Inc. has sole votingpower as to 323,875 of the shares and sole dispositive power as to all of the shares. The address of T. Rowe Price Associates, Inc. is 100 E.Pratt Street, Baltimore, MD 21202. (4)Based solely on Schedule 13G filed by State Street Corporation on February 14, 2019. State Street Corporation has sole voting power as tonone of the shares and sole dispositive power as to none of the shares. The address of State Street Corporation is State Street Financial Center,One Lincoln Street, Boston, MA 02111. (5)Consists of 953,788 shares held directly by Dr. Chalmers and 559,509 shares of common stock underlying options that are vested andexercisable within 60 days of March 1, 2019. (6)Consists of 144,279 shares held directly by Dr. Menzaghi and 204,806 shares of common stock underlying options that are vested andexercisable within 60 days of March 1, 2019. (7)Consists of 13,779 shares of common stock held directly by Dr. Stauffer and 357,599 shares of common stock underlying options that arevested and exercisable within 60 days of March 1, 2019. (8)Consists of 63,500 shares of common stock underlying options that are vested and exercisable within 60 days of March 1, 2019. (9)Consists of the shares listed in footnotes (5), (6) and (8); also includes (i) 8,026 shares held directly by Mani Mohindru, Ph.D., our ChiefFinancial Officer and 128,332 shares of common stock underlying options held by Dr. Mohindru that are vested and exercisable within 60days of March 1, 2019 and (ii) 6,386 shares held directly by Scott Terrillion, our General Counsel, Secretary and Chief Compliance Officer,and 94,155 shares of common stock underlying options held by Mr. Terrillion that are vested and exercisable within 60 days of March 1,2019. 109  Securities Authorized for Issuance under Equity Compensation PlansThe following table summarizes our equity compensation plan information as of December 31, 2018. Information is included for equitycompensation plans approved by our stockholders. We do not have any equity compensation plans not approved by our stockholders. Plan Category Number of shares ofcommon stock to beissued upon exerciseof outstandingoptions (a)(1) Weighted-averageexercise price ofoutstandingoptions (b)(2) Number of shares ofcommon stockremaining availablefor future issuanceunder equitycompensation plans(excluding sharesof common stockreflected incolumn (a)) (c)(3) Equity compensation plans approved by stockholders (1) (2) 4,004,422 $13.34 236,182 Equity compensation plans not approved by stockholders — — — Total 4,004,422 236,182 (1)Columns (a) and (b) relate to options granted under the 2014 Plan and the 2004 Plan. Since the effectiveness of the 2014 Plan in January 2014, nofurther awards have been allowed to be granted under the 2004 Plan. The number of securities in column (c) relates only to the 2014 Plan.(2)The weighted average exercise price is calculated based solely on outstanding stock options, and does not take into account stock underlyingrestricted stock units, which have no exercise price.(3)The aggregate number of shares of common stock reserved for issuance under the 2014 Plan has automatically increased on January 1 of each year,beginning on January 1, 2015 and will continue to increase on January 1 of each year through and including January 1, 2024, by 3% of the totalnumber of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by ourBoard of Directors. Accordingly, on January 1, 2019, the number of shares of common stock available for issuance under our 2014 Plan increased by1,186,426 shares pursuant to this provision. This increase is not reflected in the table above. Item 13. Certain Relationships and Related Transactions and Director Independence.Related Person Transactions Policy and ProceduresIn 2014, we adopted a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification, review,consideration and approval or ratification of “related-persons transactions.” For purposes of our policy only, a “related-person transaction” is a transaction,arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participantsinvolving an amount that exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similarcapacity by a related person are not covered by this policy. A related person is any of our executive officers, directors, or more than 5% stockholders,including any of their immediate family members, and any entity owned or controlled by such persons.110  Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding theproposed related-person transaction to the Audit Committee (or, where Audit Committee approval would be inappropriate, to another independent body ofthe Board) for consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests,direct and indirect, of the related persons, the benefits to us of the transaction and whether any alternative transactions were available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In consideringrelated-person transactions, the Committee takes into account the relevant available facts and circumstances including, but not limited to (a) the risks, costsand benefits to us, (b) the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entitywith which a director is affiliated, (c) the terms of the transaction, (d) the availability of other sources for comparable services or products and (e) the termsavailable to or from, as the case may be, unrelated third parties or to or from employees generally. In the event a director has an interest in the proposedtransaction, the director must recuse himself or herself from the deliberations and approval. The policy requires that, in determining whether to approve,ratify or reject a related-person transaction, the Committee consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with,our best interests and our stockholders, as the Committee determines in the good faith exercise of its discretion. Certain Related Person TransactionsThere were no transactions since January 1, 2017 in which we have participated in which the amount exceeded or will exceed $120,000, and inwhich any of our directors, executive officers or holders of more than 5% of our capital stock or any members of their immediate family had or will have adirect or indirect material interest, other than compensation arrangements which are described under “Executive Compensation” and “DirectorCompensation.” Indemnification AgreementsOur amended and restated certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware lawprovides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liabilityfor any: •breach of their duty of loyalty to the corporation or its stockholders; •act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; •unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware GeneralCorporation Law; or •transaction from which the directors derived an improper personal benefit.Our amended and restated certificate of incorporation does not eliminate a director’s duty of care and, in appropriate circumstances, equitableremedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. These limitations also do not affect a director’sresponsibilities under any other laws, such as the federal securities laws or other state or federal laws. Our amended and restated bylaws provide that we willindemnify our directors and executive officers, and may indemnify other officers, employees and other agents, to the fullest extent permitted by law. Ouramended and restated bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition ofany action or proceeding and also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of hisor her actions in connection with their services to us, regardless of whether our amended and restated bylaws permit such indemnification. We have obtaineda directors’ and officers’ liability insurance policy.111  We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition tothe indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors andexecutive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in anyaction or proceeding arising out of their services as one of our directors or executive officers, or any of our subsidiaries or any other company or enterprise towhich the person provides services at our request. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retainqualified persons as directors and officers.The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylawsmay discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivativelitigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A Stockholder’s investment may beharmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required orpermitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification. Independence of the Board of DirectorsAs required under the Nasdaq listing standards, a majority of the members of our Board of Directors must qualify as “independent,” as affirmativelydetermined by the Board of Directors. The Board of Directors consults with our counsel to ensure that the Board’s determinations are consistent with relevantsecurities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq, as ineffect from time to time.Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or herfamily members, and us, our senior management and our independent auditors, the Board of Directors has affirmatively determined that the following fourdirectors are independent directors within the meaning of the applicable Nasdaq listing standards: Mr. Vogelbaum, Mr. Bains, Dr. Ives and Mr. Posner. Inmaking this determination, the Board of Directors found that none of these directors or nominees for director had a material or other disqualifyingrelationship with us.Item 14. Principal Accountant Fees and Services.The following table represents aggregate fees billed to us for the fiscal years ended December 31, 2018 and 2017, by Ernst & Young LLP, ourprincipal accountant: Year Ended December 31, 2018 2017 (Dollars in thousands)Audit fees $361 (a) $348 (a)Audit-related fees 35 (b) 15 (b)Tax fees — — All other fees — — Total $396 $363 (a)Audit fees for the years ended December 31, 2018 and 2017 consist of the aggregate fees billed for professional services rendered for (i) the audit ofour Annual Report on Form 10-K for that year; (ii) the review of our Quarterly Reports on Form 10-Q for each of the first three quarters of that year;(iii) accounting consultations and (iv) procedures in connection with the filing of Form S-3 with the Securities and Exchange Commission for ourfollow-on offering of our common stock. See “Equity Compensation Plan Compensation” above.112  (b)Audit-related fees for the year ended December 31, 2018 include fees billed for review of the accounting for the VFMCRP license agreement. Audit-related fees for the year ended December 31, 2017 include fees billed for review of the preparation and disclosure of our adoption of AccountingStandards Codification Topic 606, Revenue from Contracts with Customers.All fees described above for the years ended December 31, 2018 and 2017 were pre-approved by the Audit Committee. Pre-Approval Policies and Procedures The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independentregistered public accounting firm, Ernst & Young LLP. The policy generally pre-approves specified services in the defined categories of audit services,audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of theengagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent auditor is engaged to provide each service.The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full AuditCommittee at its next scheduled meeting.The Audit Committee has determined that the rendering of services other than audit services by Ernst & Young LLP is compatible with maintainingthe principal accountant’s independence.113  PART IVItem 15. Exhibits, Financial Statement Schedules. (a)(1) The Financial Statements of Cara Therapeutics, Inc. PAGE Report of Independent Registered Public Accounting Firm F-1 Balance Sheets as of December 31, 2018 and 2017 F-2 Statements of Comprehensive Loss for the years ended December 31, 2018, 2017 and 2016 F-3 Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016 F-4 Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 F-5 Notes to Financial Statements F-6(a)(2) Financial Statement Schedules.All schedules for which provision is made in the applicable accounting regulations of the SEC which are not included with this additional financialdata have been omitted because they are not applicable or the required information is shown in the Financial Statements or Notes thereto.(a)(3) List of Exhibits Exhibit No. Description of Exhibit 3.1(1) Amended and Restated Certificate of Incorporation. 3.2(2) Amended and Restated Bylaws. 4.1(3) Form of Common Stock Certificate. 10.1+(3) Form of Indemnity Agreement. 10.2+(4) 2004 Stock Incentive Plan, as amended, and forms of Stock Option Agreement thereunder. 10.3+(3) 2014 Equity Incentive Plan. 10.3.1(3) Form of Stock Option Agreement under 2014 Equity Incentive Plan. 10.3.2(3) Form of Restricted Stock Unit Award under 2014 Equity Incentive Plan. 10.4(4) Fourth Amended and Restated Investors Rights Agreement dated April 25, 2013 among the Registrant and certain of itsstockholders, as amended. 10.5(4) Lease Agreement dated September 18, 2006 between the Registrant and Shelton Parrott Associates, L.L.C., as amended. 10.6*(4) License Agreement dated April 4, 2013 by and between the Registrant and Maruishi Pharmaceutical Co., Ltd. 10.7*(4) License and API Supply Agreement effective as of April 16, 2012 by and between the Registrant and Chong Kun Dang PharmaceuticalCorp. 10.8(4) Amendment to License and API Supply Agreement effective as of May 1, 2012 by and between the Registrant and Chong Kun DangPharmaceutical Corp. 10.9+(5) Employment Agreement with Derek Chalmers. 114  Exhibit No. Description of Exhibit 10.10+(6) Employment Agreement with Frédérique Menzaghi. 10.11+† Employment Agreement with Joana Goncalves. 10.12+(3) Non-Employee Director Compensation Policy. 10.13+(8) Employment Agreement with Joseph Stauffer. 10.14+**† Separation and Consulting Agreement with Joseph Stauffer. 10.15 (9) Lease Agreement dated December 21, 2015 between the Registrant and Four Stamford Plaza Owner L.L.C. 10.16 (10) Employment Agreement with Mani Mohindru, Ph.D. 10.17*(11) License Agreement by and between Cara Therapeutics, Inc. and Vifor Fresenius Medical Care Renal Pharma Ltd. 23.1† Consent of Ernst & Young, LLP, independent registered public accounting firm. 31.1† Certification of Chief Executive Officer of Cara Therapeutics, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Actof 1934. 31.2† Certification of Chief Financial Officer of Cara Therapeutics, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of1934. 32.1 Certifications of Chief Executive Officer and Chief Financial Officer of Cara Therapeutics, Inc. pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith). 101.CAL XBRL Taxonomy Extension Calculation Linkbase. 101.INS XBRL Instance Document. 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase. 101.SCH XBRL Taxonomy Extension Schema Linkbase 101.DEF XBRL Definition Linkbase Document. +indicates management contract or compensatory plan.*Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with theSecurities and Exchange Commission.**Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with theSecurities and Exchange Commission.†Filed herewith(1)Filed as exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onFebruary 7, 2014 and incorporated herein by reference.(2)Filed as exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onFebruary 7, 2014 and incorporated herein by reference.(3)Filed as an exhibit (having the same exhibit number) to Pre-effective Amendment No. 2 to the Registrant’s Registration Statement on Form S-1(Registration No. 333-192230) filed with the Securities and Exchange Commission on January 17, 2014 and incorporated herein by reference.115  (4)Filed as an exhibit (having the same exhibit number) to the Registration Statement on Form S-1 Registration No. 333-192230) filed with theSecurities and Exchange Commission on November 8, 2013 and incorporated herein by reference.(5)Filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onFebruary 7, 2014 and incorporated herein by reference.(6)Filed as exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onFebruary 7, 2014 and incorporated herein by reference.(7)Filed as exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onFebruary 7, 2014 and incorporated herein by reference.(8)Filed as exhibit 10.14 to the Registrant’s Annual Report on Form 10-K (File No. 001-36279) filed with the Securities and Exchange Commission onMarch 27, 2015 and incorporated herein by reference.(9)Filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onDecember 23, 2015 and incorporated herein by reference.(10)Filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36279) filed with the Securities and Exchange Commission onAugust 4, 2017 and incorporated herein by reference.(11)Filed as exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36279) filed with the Securities and Exchange Commission onAugust 7, 2018 and incorporated herein by reference. 116  SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized on this 12th day of March 2019. CARA THERAPEUTICS, INC. By: /s/ DEREK CHALMERSName: Derek Chalmers, Ph.D., D.Sc.Title: President and Chief Executive Officer Signature Title Date /s/ DEREK CHALMERS President, Chief Executive Officer and Director(Principal Executive Officer) March 12, 2019Derek Chalmers, Ph.D., D.Sc. /s/ MANI MOHINDRUMani Mohindru, Ph.D. Chief Financial Officer(Principal Financial and Accounting Officer) March 12, 2019 /s/ MARTIN VOGELBAUMMartin Vogelbaum Director March 12, 2019 /s/ HARRISON M. BAINS, JR.Harrison M. Bains, Jr. Director March 12, 2019 /s/ JEFFREY IVESJeffrey Ives, Ph.D. Director March 12, 2019 /s/ CHRISTOPHER POSNERChristopher Posner Director March 12, 2019 117  Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Cara Therapeutics Inc. Opinion on the Financial StatementsWe have audited the accompanying balance sheets of Cara Therapeutics Inc. (the “Company”) as of December 31, 2018 and 2017, and the related statementsof comprehensive loss, and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position ofthe Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December31, 2018, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2006. Stamford, Connecticut March 12, 2019 F-1  CARA THERAPEUTICS, INC.BALANCE SHEETS(amounts in thousands, except share and per share data) December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $15,081 $9,388 Marketable securities 146,302 83,181 Income tax receivable 664 731 Other receivables 926 123 Prepaid expenses 4,805 1,635 Restricted cash, current 361 — Total current assets 168,139 95,058 Marketable securities, non-current 21,396 — Property and equipment, net 880 1,177 Restricted cash 408 769 Total assets $190,823 $97,004 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $13,622 $8,506 Current portion of deferred revenue 26,825 — Total current liabilities 40,447 8,506 Deferred revenue, non-current 15,184 — Deferred lease obligation 1,562 1,718 Commitments and contingencies (Note 17) — — Stockholders’ equity: Preferred stock; $0.001 par value; 5,000,000 shares authorized at December 31, 2018 and December 31, 2017; zero shares issued and outstanding at December 31, 2018 and December 31, 2017 — — Common stock; $0.001 par value; 100,000,000 shares authorized at December 31, 2018 and December 31, 2017; 39,547,558 shares and 32,662,255 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively 39 33 Additional paid-in capital 428,059 307,158 Accumulated deficit (294,354) (220,341)Accumulated other comprehensive loss (114) (70)Total stockholders’ equity 133,630 86,780 Total liabilities and stockholders’ equity $190,823 $97,004 See Notes to Financial Statements.F-2  CARA THERAPEUTICS, INC.STATEMENTS OF COMPREHENSIVE LOSS(amounts in thousands, except share and per share data) Year Ended December 31, 2018 2017 2016 Revenue: License and milestone fees $13,436 $530 $— Collaborative revenue — 313 — Clinical compound revenue 33 68 86 Total revenue 13,469 911 86 Operating expenses: Research and development 75,531 48,524 49,253 General and administrative 15,320 11,872 9,233 Total operating expenses 90,851 60,396 58,486 Operating loss (77,382) (59,485) (58,400)Other income 2,980 1,156 652 Loss before benefit from income taxes (74,402) (58,329) (57,748)Benefit from income taxes 389 204 468 Net loss $(74,013) $(58,125) $(57,280)Net loss per share: Basic and Diluted $(2.06) $(1.86) $(2.10)Weighted average shares: Basic and Diluted 35,892,786 31,202,842 27,279,008 Other comprehensive income (loss), net of tax of $0: Change in unrealized gains (losses) on available for sale marketable securities (44) (73) 38 Total comprehensive loss $(74,057) $(58,198) $(57,242) See Notes to Financial Statements. F-3  CARA THERAPEUTICS, INC.STATEMENTS OF STOCKHOLDERS’ EQUITY(amounts in thousands, except share and per share data) Common Stock AdditionalPaid-in Accumulated AccumulatedOtherComprehensive TotalStockholders' Shares Amount Capital Deficit Income (Loss) Equity Balance at December 31, 2015 27,254,863 $27 $209,943 $(104,891) $(35) $105,044 Stock-based compensation expense — — 2,800 — — 2,800 Shares issued upon exercise of stock options 42,000 — 123 — — 123 Net loss — — — (57,280) — (57,280)Other comprehensive income — — — — 38 38 Balance at December 31, 2016 27,296,863 27 212,866 (162,171) 3 50,725 Sale of common stock in a follow-on public offering ($18.00 per share), net of underwriting discounts and commissions and offering expenses of $5,891 5,117,500 5 86,219 — — 86,224 Stock-based compensation expense — — 5,793 — — 5,793 Modification of equity awards — — 537 — — 537 Shares issued upon exercise of stock options 247,892 1 1,698 — — 1,699 Cumulative effect adjustment upon adoption of ASU 2016-09 — — 45 (45) — — Net loss — — — (58,125) — (58,125)Other comprehensive loss — — — — (73) (73)Balance at December 31, 2017 32,662,255 33 307,158 (220,341) (70) 86,780 Sale of common stock under license agreement 1,174,827 1 14,555 — — 14,556 Sale of common stock in a follow-on public offering ($19.00 per share), net of underwriting discounts and commissions and offering expenses of $6,262 5,175,000 5 92,058 — — 92,063 Stock-based compensation expense — — 7,785 — — 7,785 Modification of equity awards — — 616 — — 616 Shares issued upon vesting of performance- based restricted stock units 83,791 — 1,693 — — 1,693 Shares issued upon exercise of stock options 451,685 — 4,194 — — 4,194 Net loss — — — (74,013) — (74,013)Other comprehensive loss — — — — (44) (44)Balance at December 31, 2018 39,547,558 $39 $428,059 $(294,354) $(114) $133,630 See Notes to Financial Statements. F-4  CARA THERAPEUTICS, INC.STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2018 2017 2016 Operating activities Net loss $(74,013) $(58,125) $(57,280)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 9,478 5,793 2,800 Modification of equity awards 616 537 — Depreciation & amortization 370 495 1,465 Amortization/accretion of available-for-sale marketable securities (1,820) (582) (218)Realized gain on sale of available-for-sale marketable securities 5 (5) (23)Realized gain on sale of property and equipment — (41) — Deferred rent costs (156) 148 (114)Deferred revenue 42,009 — — Changes in operating assets and liabilities: Income tax receivable 67 121 (468)Other receivables (803) (36) (7)Prepaid expenses (3,170) (105) 199 Accounts payable and accrued expenses 5,116 (3,027) 6,265 Net cash used in operating activities (22,301) (54,827) (47,381)Investing activities Proceeds from maturities of available-for-sale marketable securities 175,300 82,156 80,380 Proceeds from sale of available-for-sale marketable securities 79,808 8,755 34,003 Purchase of available-for-sale marketable securities (337,854) (127,394) (68,648)Purchases of property and equipment (73) (58) (717)Proceeds from sale of property and equipment — 41 — Net cash (used in) provided by investing activities (82,819) (36,500) 45,018 Financing activities Proceeds from sale of common stock in a follow-on public offering, net of issuance costs 92,063 86,224 — Proceeds from the sale of common stock under license agreement 14,556 — — Proceeds from the exercise of stock options 4,194 1,699 123 Net cash provided by financing activities 110,813 87,923 123 Net increase (decrease) in cash, cash equivalents and restricted cash 5,693 (3,404) (2,240)Cash, cash equivalents and restricted cash at beginning of period 10,157 13,561 15,801 Cash, cash equivalents and restricted cash at end of period $15,850 $10,157 $13,561 Noncash financing activities Tenant improvements paid by landlord $— $— $1,094 See Notes to Financial Statements. F-5 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data)1. BusinessCara Therapeutics, Inc., or the Company, is a clinical-stage biopharmaceutical corporation formed on July 2, 2004. The Company is focused ondeveloping and commercializing new chemical entities with a primary focus on pruritus as well as pain by selectively targeting peripheral kappa opioidreceptors. The Company’s primary activities to date have been organizing and staffing the Company, developing its product candidates, includingconducting preclinical studies and clinical trials of CR845/difelikefalin-based product candidates and raising capital.As of December 31, 2018, the Company has raised aggregate net proceeds of $383,200 from several rounds of equity financing, including its initialpublic offering, or IPO, which closed in February 2014 and three follow-on public offerings of common stock, which closed in July 2018, April 2017 andAugust 2015, respectively, and the issuance of convertible preferred stock and debt prior to the IPO. The Company had also received $88,900 under itslicense 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 stockto Vifor (International) Ltd., or Vifor, in connection with the Company’s license agreement with VFMCRP (see Note 11, Collaboration and LicensingAgreements).As of December 31, 2018, the Company had unrestricted cash and cash equivalents and marketable securities of $182,779 and an accumulated deficitof $294,354. The Company has incurred substantial net losses and negative cash flows from operating activities in nearly every fiscal period since inceptionand expects this trend to continue for the foreseeable future. The Company recognized a net loss of $74,013 and had net cash used in operating activities of$22,301 for the year ended December 31, 2018.The Company is subject to risks common to other life science companies including, but not limited to, uncertainty of product development andcommercialization, 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 andDrug Administration, or FDA, and other government regulations. If the Company does not successfully commercialize any of its product candidates, it will beunable to generate recurring product revenue or achieve profitability.2. Summary of Significant Accounting PoliciesBasis of PresentationCertain amounts in the prior years’ financial statements have been reclassified to conform to the current-year presentation due to the adoption ofcertain accounting standards (see Note 2, Other Accounting Pronouncements Recently Adopted: ASU 2016-18, Statement of Cash Flows (Topic 230),Restricted Cash).F-6 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Use of EstimatesThe preparation of financial statements in conformity with generally-accepted accounting principles in the United States or GAAP, requires theCompany to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as ofthe date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differmaterially from the Company’s estimates and assumptions. Estimates include the fair value of marketable securities that are classified as level 2 of the fairvalue hierarchy, useful lives of fixed assets, the periods over which certain revenues will be recognized, including licensing and collaborative revenuerecognized from non-refundable up-front and milestone payments, the determination of prepaid research and development, or R&D, clinical costs andaccrued research projects, the amount of non-cash compensation costs related to share-based payments to employees and non-employees and the periods overwhich those costs are expensed and the likelihood of realization of deferred tax assets. Concentrations of Credit RiskFinancial instruments, which potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents andmarketable securities. The Company invests its cash reserves in money market funds or high-quality marketable securities in accordance with its investmentpolicy. The stated objectives of its investment policy are to preserve capital, provide liquidity consistent with forecasted cash flow requirements, maintainappropriate diversification and generate returns relative to these investment objectives and prevailing market conditions. The Company’s investment policyincludes guidelines on acceptable investment securities, limits interest-bearing security investments to certain types of debt and money market instrumentsissued by the U.S. government and institutions with investment grade credit ratings and places restrictions on maturities and concentration by asset class andissuer. The Company's cash and cash equivalents and marketable securities are held by three major financial institutions. In accordance with the Company'spolicies, the Company monitors exposure with its counterparties. The Company also maintains deposits in federally insured financial institutions in excess offederally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed tosignificant credit risk due to the financial position of the depository institutions in which those deposits are held. Cash and Cash EquivalentsCash and cash equivalents include cash on hand, demand deposits, deposits with banks and highly liquid money market funds with holdings of cashand other investments with original maturities of three months or less.Marketable SecuritiesThe Company deems certain of its investments to be marketable securities if the investment, or in the case of money market funds, the securitiesunderlying the money market fund, meet the definition of a debt security in Accounting Standards Codification, or ASC, section 320-10-20. The Companyconsiders its marketable securities to be available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and lossesrecorded in Accumulated other comprehensive income (loss), or AOCI, as a separate component of stockholders’ equity. Available-for-sale marketablesecurities are reported as Marketable securities, current and Marketable Securities, noncurrent in the Balance Sheets. Other income includes interest anddividends, realized gains and losses on sales of securities and other-than-temporary impairment, or OTTI, declines in the fair value of securities, if any. Thecost of securities sold is based on the specific identification method. F-7 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Company reviews its available-for-sale marketable securities for OTTI declines in fair value below its cost basis each quarter and wheneverevents or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation is based on a number of factors, includingthe length of time and the extent to which the fair value has been below its cost basis and adverse conditions related specifically to the security, includingany changes to the credit rating of the security, and the intent to sell, or whether the Company will more likely than not be required to sell, the security beforerecovery of its amortized cost basis. The Company’s assessment of whether a security is other-than-temporarily impaired could change in the future due tonew developments or changes in assumptions related to any particular security.If a decline in the fair value of an available-for-sale marketable debt security in the Company's investment portfolio is deemed to be other-than-temporary, the Company writes down the security to its current fair value. If the Company intends to sell the security or it is more likely than not that theCompany will be forced to sell the security before recovery of the amortized cost of the security, the loss is recognized in net income. Otherwise, the loss isseparated into a portion representing a credit loss, which is recorded in net income, and the remainder is recorded in Other comprehensive income, or OCI, netof taxes. See Note 3, Available-for-Sale Marketable Securities, and Note 10, Fair Value Measurements.Fair Value of Financial InstrumentsThe Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financialstatements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which arerequired to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and the market-based riskmeasurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transferrestrictions and credit risks.The Company’s financial instruments consist of cash, cash equivalents, available-for-sale marketable securities, prepaid expenses, restricted cash,accounts payable and accrued liabilities. The fair values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximatetheir carrying values due to the short-term nature of these financial instruments. Marketable securities are reported at their fair values, based upon pricing ofsecurities with the same or similar investment characteristics as provided by 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 requirescertain 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 inputsthat 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 valuemeasurements and related disclosures. The fair value hierarchy is divided into three levels based on the source of inputs as follows: •Level 1 – Observable inputs – quoted prices in active markets for identical assets and liabilities. •Level 2 – Observable inputs other than the quoted prices in active markets for identical assets and liabilities – such as quoted prices forsimilar instruments, quoted prices for identical or similar instruments in inactive markets, or other inputs that are observable or can becorroborated by observable market data. •Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable andrequire the Company to develop relevant assumptions.F-8 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Company records transfers between levels in the hierarchy by assuming that the transfer occurred at the end of the quarter or year-to-date period.Valuation Techniques - Level 2 InputsThe Company estimates the fair values of its financial instruments categorized as level 2 in the fair value hierarchy, including U.S. Treasurysecurities, U.S. government agency obligations, corporate bonds, municipal bonds, commercial paper and money market funds with similar underlyinginvestments 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, benchmarksecurities, and other observable inputs. The Company obtains a single price for each financial instrument and does not adjust the prices obtained from thepricing service. The Company validates the prices provided by its third-party pricing services by reviewing their pricing methods, obtaining market values fromother pricing sources and comparing them to the share prices presented by the third-party pricing services. After completing its validation procedures, theCompany did not adjust or override any fair value measurements provided by its pricing services as of December 31, 2018 or December 31, 2017.Property and EquipmentProperty and equipment (consisting of computer, office and laboratory equipment, furniture and fixtures and leasehold improvements) are stated atcost, net of accumulated depreciation and amortization of leasehold improvements. Depreciation and amortization are calculated using the straight-linemethod over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the lesser of their useful lives or the life of thelease. Asset Category Useful LivesComputer and office equipment 5 yearsShort-term laboratory equipment 2 yearsFurniture and fixtures 7 yearsLeasehold improvements lesser of useful life of asset or life of lease(Stamford - 7 years) ASC 360, Property, Plant and Equipment, addresses the financial accounting and reporting for impairment or disposal of long-lived assets. TheCompany reviews the recorded values of property and equipment for impairment whenever events or changes in business circumstances indicate that thecarrying amount of an asset or group of assets may not be fully recoverable.Revenue RecognitionOn January 1, 2018, the Company adopted Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606), orASC 606, as amended by ASU 2016-08, 2016-10, 2016-12 and 2016-20 using the full retrospective method. Under ASC 606, the Company recognizesrevenue in an amount that reflects the consideration to which it expects to be entitled in exchange for the transfer of promised goods or services to customers.To determine revenue recognition for contracts with customers that are within the scope of ASC 606, the Company performs the following steps: (1) identifiesthe contract with the customer, (2) identifies the performance obligations in the contract, (3) determines the transaction price, (4) allocates the transactionprice to the performance obligations in the contract, and (5) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company hasconcluded that upon adoption of ASC 606, as amended, there was no impact on its results of operations, financial position or cash flows for any periodpresented from its only two revenue-related contracts, which were in effect at that time: the CKDP Agreement or the Maruishi Agreement (see Note 11,Collaboration and Licensing Agreements and Note 12, Revenue Recognition).F-9 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Company has entered into agreements to license its intellectual property, or IP, related to CR845/difelikefalin to develop, manufacture and/orcommercialize drug products. These agreements typically contain multiple performance obligations, including licenses of IP and R&D services. Payments tothe Company under these agreements may include nonrefundable license fees, payments for research activities, payments based upon the achievement ofcertain milestones and royalties on any resulting net product sales.The Company identifies agreements as contracts that create enforceable rights and obligations when the agreement is approved by the parties,identifies the rights of the parties and the payment terms, has commercial substance and it is probable that the Company will collect the consideration towhich it will be entitled in exchange for the goods and services that will be transferred to the customer. The counterparty is considered to be a customer whenit has contracted with the Company to obtain goods and services that are the output of the Company’s ordinary activities (i.e., development ofpharmaceutical products) in exchange for consideration.A performance obligation is a promise to transfer distinct goods or services to a customer. Performance obligations that are both capable of beingdistinct and distinct within the context of the contract are considered to be separate performance obligations. Performance obligations are capable of beingdistinct if the counterparty is able to benefit from the good or service on its own or together with other resources that are readily available to it. Performanceobligations are distinct within the context of the contract when each performance obligation is separately identifiable from each other; i.e., the Company isnot using the goods or services as inputs to produce or deliver the combined output or outputs specified by the customer; one or more of the goods or servicesdoes not significantly modify or customize one of the other goods or services in the contract; and goods or services are not highly interdependent or nothighly interrelated. Performance obligations that are not distinct are accounted for as a single performance obligation over the period that goods or servicesare transferred to the customer. The determination of whether performance obligations in a contract are distinct may require significant judgment.The transaction price is the amount of consideration that the Company expects to be entitled to in exchange for transferring promised goods orservices to the customer based on the contract terms at inception of a contract. There is a constraint on inclusion of variable consideration related to licensesof IP, such as milestone payments or sales-based royalty payments, in the transaction price if there is uncertainty at inception of the contract as to whethersuch consideration will be recognized in the future because it is probable that there will be a significant reversal of revenue in the future when the uncertaintyis resolved. The determination of whether or not it is probable that a significant reversal of revenue will occur in the future depends on the likelihood andmagnitude of the reversal. Factors that could increase the likelihood or magnitude of a reversal of revenue include (a) the susceptibility of the amount ofconsideration to factors outside the entity’s influence, such as the outcome of clinical trials, the timing of initiation of clinical trials by the counterparty andthe approval of drug product candidates by regulatory agencies, (b) situations in which the uncertainty is not expected to be resolved for a long period oftime, and (c) level of the Company’s experience in the field. When it becomes probable that events will occur, for which variable consideration wasconstrained at inception of the contract, the Company allocates the related consideration to the separate performance obligations in the same manner asdescribed below. At inception of a contract, the Company allocates the transaction price to the distinct performance obligations based upon their relative standaloneselling prices. Standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. The best evidence ofstandalone selling price is an observable price of a good or service when sold separately by an entity in similar circumstances to similar customers. Since theCompany typically does not have such evidence, it estimates standalone selling price so that the amount that is allocated to each performance obligationequals the amount that the Company expects to receive for transferring goods or services. The methods that the Company uses to make such estimatesinclude (1) the adjusted market assessment approach, under which the Company forecasts and analyzes CR845/difelikefalin in the appropriate market, thephase of clinical development as well as considering recent similar license arrangements within the same phase of clinical development, therapeutic area,type of agreement, etc. and (2) the expected cost of satisfying the performance obligations plus a margin, or the expected cost plus a margin approach.The Company recognizes revenue when, or as, it satisfies a performance obligation by transferring a promised good or service to a customer and thecustomer obtains control of the good or service. Revenue related to the grant of a license that is a distinct performance obligation and that is deemed to befunctional IP is recognized at the point in time that the Company has the right to payment for the license, the customer has legal title to the license and candirect the use of the license (for example, to grant sublicenses), the customer has the significant risks and rewards of ownership of the license and the customerhas accepted the asset (license) by signing the license agreement.F-10 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Recognition of revenue related to R&D services that are a distinct performance obligation or that are combined with granting of a license as a singleperformance obligation is deferred at inception of a contract and is recognized as those services are performed based on the costs incurred as a percentage ofthe estimated total costs to be incurred to complete the performance obligation.Milestone payments are considered to be variable consideration and are not included in the transaction price at inception of the contract if it isuncertain that the milestone will be achieved. Rather, when it becomes probable that the milestone will be achieved and, therefore, there will not be asignificant reversal of revenue in future periods, the respective amount to be earned is included in the transaction price, allocated to the distinct performanceobligations based on their relative standalone selling price and recognized as revenue, as described above. Sales milestones and sales-based royaltypayments related to a license of IP are recognized as revenue when the respective sales occur. Research and Development ExpensesResearch and development, or R&D, costs are charged to expense as incurred. Costs incurred under agreements with third parties are charged toexpense as incurred in accordance with the specific contractual performance terms of such agreements. R&D expenses include, among other costs,compensation and other personnel-related costs, including consultant costs, and costs to conduct clinical trials using Clinical Research Organizations, orCRO’s, which include upfront, milestone and monthly expenses as well as reimbursement for pass through costs. The amount of clinical trial expenserecognized in any period varies depending on the duration and progress of each clinical trial, including the required level of patient enrollment, the rate atwhich patients actually enroll in and drop-out of the clinical trial, and the number of sites involved in the trial as well as the activities to be performed by thesites each period. R&D costs also include costs to manufacture product candidates and clinical supplies, laboratory supplies costs, facility-related costs andstock-based compensation for R&D personnel. Non-refundable R&D advance payments are deferred and capitalized as prepaid R&D expense. Thecapitalized amounts are expensed as the related goods are delivered or services are performed. As of December 31, 2018 and 2017, the Company recorded$4,377 and $1,287 as prepaid R&D expense, respectively.Income TaxesThe Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determinedbased on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will bein effect when the differences are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when managementdetermines it is more likely than not that some or all of the tax benefits will not be realized.The Company applies the provisions of ASC 740, Income Taxes, which prescribes a comprehensive model for how a company should recognize,measure, present and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. There were no materialuncertain tax positions taken as of December 31, 2018 and December 31, 2017. The Company does not have any interest or penalties accrued related to taxpositions as it does not have any unrecognized tax benefits. In the event the Company determines that accrual of interest or penalties are necessary in thefuture, the amount will be presented as a component of interest expense.Stock-Based Compensation The Company grants stock options to employees, non-employee members of the Company’s Board of Directors and non-employee consultants ascompensation for services performed. Employee and non-employee members of the Board of Directors’ awards of stock-based compensation are accounted forin accordance with ASC 718, Compensation - Stock Compensation or ASC 718. ASC 718 requires all share-based payments to employees and non-employeedirectors, including grants of stock options, to be recognized based on their grant date fair values. The grant date fair value of stock options is estimatedusing the Black-Scholes option valuation model.F-11 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Using this model, fair value is calculated based on assumptions with respect to (i) the fair value or market price of the Company’s common stock onthe grant date; (ii) expected volatility of the Company’s common stock price, (iii) the periods of time over which employees and members of the Company’sBoard of Directors are expected to hold their options prior to exercise (expected term), (iv) expected dividend yield on the Company’s common stock, and (v)risk-free interest rates.The Company’s common stock has been traded on a public exchange only since January 31, 2014. Since that time, exercises of stock options havebeen limited due to various factors, including fluctuations in the Company’s stock price to below the exercise prices of awards and blackout periods duringwhich exercises are not allowed, among others. Therefore, the Company believes that as of December 31, 2018, it does not have sufficient company-specificinformation available to determine the expected term based on its historical data. As a result, the expected term of stock options granted to employees andmembers of the Company’s Board of Directors is determined using the average of the vesting period and term (6.25 years), an accepted method for theCompany’s option grants under the SEC’s Staff Accounting Bulletin No. 110, Share-Based Payment.Similarly, because the Company does not have sufficient company-specific information available to calculate the volatility of its common stockduring the periods of the expected term of stock option grants (as noted above), expected volatility is based on an analysis of guideline companies, inaccordance with ASC 718. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future.Risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the option’s expected term.On the grant date of each stock option award prior to January 1, 2017, the Company applied a forfeiture rate in order to accrue share-basedcompensation expense based on an estimate of the number of stock options that are expected to vest. Estimated forfeiture rates were based upon historicaldata of awards that were cancelled prior to vesting. The Company adjusted the total amount of compensation cost recognized for each award, in the period inwhich each award vested, to reflect the actual forfeitures related to that award. To the extent that the actual forfeiture rate for an award was lower than theestimated forfeiture rate, additional compensation expense was recorded in the period that the award vested. Changes in the Company’s estimated forfeiturerate resulted in changes in the rate at which compensation cost for an award was recognized over its vesting period. As of January 1, 2017, the Companyadopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. On the date of adoption of ASU 2016-09, the Company began toaccount for forfeitures of unvested stock options as they occur rather than estimate forfeiture rates that were applied to unvested stock option awards, as underthe previous accounting guidance (see Note 13, Stock-Based Compensation). The Company accounts for options granted to non-employee consultants under ASC 505-50, Equity-Based Payments to Non-Employees. As such, theCompany estimates the fair value of each option to non-employees using the Black-Scholes model, with the expected term of stock options granted to non-employees initially equal to the options’ maximum contractual life of ten years, at issuance. On each subsequent reporting date until performance iscomplete, the Company revalues all outstanding options granted to non-employee consultants during the vesting period of each tranche. Under ASC 505-50,upon re-measurement of each award, income or expense is recognized during its vesting term. As of January 1, 2019, the Company will adopt ASU 2018-07,Compensation – Stock Compensation (Topic 718), Improvements to Non-employee Share-Based Payment Accounting, which expands the scope of ASC 718to include share-based payment transactions for acquiring goods and services from non-employees. As a result, the fair value of all outstanding unvestedstock options that had been granted to non-employees as of January 1, 2019 will be remeasured under ASC 718 (see Note 2, Recent AccountingPronouncements Not Yet Adopted). For all share-based payments granted to employees and non-employees, compensation cost relating to awards withservice-based graded vesting schedules is recognized using the straight-line method over the requisite service period.F-12 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Income (Loss) Per Share The Company computes basic net income (loss) per share by dividing net income (loss) by the weighted average number of shares of common stockoutstanding. Diluted net income per share includes the potential dilutive effect of common stock equivalents as if such securities were exercised during theperiod, when the effect is dilutive. Common stock equivalents may include outstanding stock options, which are included under the treasury stock methodwhen dilutive. For each of the years ended December 31, 2018, 2017 and 2016, the Company excluded the effects of potentially dilutive shares that wereoutstanding during those respective periods from the denominator as their inclusion would be anti-dilutive due to the Company’s net losses during thoseperiods.Segment ReportingOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation bythe chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations andmanages its business as one operating segment, which includes all activities related to the discovery and development of novel therapeutics to treat seriousmedical conditions, including pruritus and pain.LeasesThe Company recognizes rent expense for operating leases on a straight-line basis over the term of the lease, beginning on the date the Companytakes possession of the property. Rent expense includes the base amounts stated in the lease agreement as well as the effect of reduced or free rent and rentescalations. At lease inception, the Company determines the lease term by assuming the exercise of those renewal options that are reasonably assured becauseof the significant economic penalty that exists for not exercising those options. The exercise of renewal options is at the Company’s sole discretion. Theexpected lease term is one of the factors used to determine whether a lease is classified as operating or capital and is used to calculate the straight-line rentexpense. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rentand classified within long-term liabilities. Lease incentives made by landlords to or on behalf of the Company for leasehold improvements are recorded asdeferred rent and classified as long-term liabilities. Deferred rent related to landlord incentives is amortized using the straight-line method over the lease termas an offset to rent expense. Penalties paid to landlords to terminate a lease before the contractual end date of the lease are recognized on an undiscountedbasis in the Statements of Comprehensive Loss. On January 1, 2019, the Company will adopt ASU No. 2016-02, Leases (Topic 842), which amends theprevious guidance for accounting and disclosure of leases (ASC 840) for both lessees and lessors. The primary effect of adoption will be the requirement torecord a right-of-use asset and a corresponding lease obligation for the Stamford operating lease (see Note 2, Recent Accounting Pronouncements Not YetAdopted). Litigation ReservesFrom time to time, the Company may become subject to arbitration, litigation or claims arising in the ordinary course of its business. Accruals arerecorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Company reviews thesereserves at least quarterly and adjusts these reserves to reflect current law, progress of each case, opinions and views of legal counsel and other advisers, theCompany’s experience in similar matters and intended response to the litigation. The Company expenses amounts for administering or litigating claims asincurred. Accruals for legal proceedings, if any, are included in Accounts payable and accrued expenses in the Balance Sheets. F-13 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Other Accounting Pronouncements Recently AdoptedIn August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update andSimplification. These amendments eliminate, modify, or integrate into other SEC requirements certain disclosure rules. Among the amendments is therequirement to present an analysis of changes in stockholders’ equity in the interim financial statements included in quarterly reports on Form 10-Q. Theanalysis, which can be presented as a footnote or separate statement, is required for the current and comparative quarter and year-to-date interim periods. Theamendments are effective for all filings made on or after November 5, 2018. In light of the anticipated timing of effectiveness of the amendments andexpected proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC’s Division of Corporate Finance issued a Compliance andDisclosure Interpretation related to Exchange Act Forms, or CDI – Question 105.09, that provides transition guidance related to this disclosure requirement.CDI – Question 105.09 states that the SEC would not object if the filer’s first presentation of the changes in stockholders’ equity is included in its Form 10-Qfor the quarter that begins after the effective date of the amendments. As such, the Company adopted these SEC amendments on November 5, 2018 and willpresent the analysis of changes in stockholders’ equity in its interim financial statements in the Company’s Quarterly Report on Form 10-Q for the quarterending March 31, 2019. The adoption of these SEC amendments will not have a material effect on the Company’s financial position, results of operations,cash flows or stockholders’ equity. As of January 1, 2018, the Company adopted ASU No. 2017-09, Compensation – Stock Compensation (Topic 718) - Scope of ModificationAccounting, or ASU 2017-09, which clarifies that a change to the terms or conditions of a share-based payment award should be accounted for as amodification only if the fair value, vesting conditions or classification (as equity or liability) of the award changes as a result of the change in terms orconditions. Modification of a share-based payment award may result in the Company recognizing additional compensation expense. The Company does notexpect to frequently modify, the fair value, vesting conditions or classification of its share-based payment awards. The Company does not expect thisguidance to have a material effect on its financial position, results of operations or cash flows. However, if and when modifications occur, their effect could bematerial to the Company’s financial position, results of operations or cash flows. As of January 1, 2018, the Company adopted ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, or ASU2017-01, that clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals)of assets or businesses. ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the gross assets acquired or disposed of isconcentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. ASU 2017-01 also requires a business to include at least an input and one substantive process that together significantly contribute to the ability to create output andremoves the evaluation of whether a market participant could replace missing elements. The adoption of ASU 2017-01 did not have a material effect on theCompany’s financial position, results of operations or cash flows.As of January 1, 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (a consensus of the EmergingIssues Task Force), or ASU 2016-18, which changes the presentation of the cash flow statement to include amounts generally described as restricted cash orrestricted cash equivalents, together with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period amounts shown on thestatement of cash flows. ASU 2016-18 also requires additional disclosures concerning the nature of the restrictions on cash and cash equivalents and areconciliation between amounts of cash, cash equivalents and restricted cash on the balance sheet and statement of cash flows for each period presented.Upon adoption, ASU 2016-18 was applied retrospectively to all periods presented. The Company historically presented changes in restricted cash as aninvesting activity in the statement of cash flows. Upon adoption of ASU 2016-18, such changes are reflected in the beginning and ending balances of cash,cash equivalents and restricted cash for all periods presented (see Note 7, Restricted Cash).F-14 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Recent Accounting Pronouncements Not Yet AdoptedIn November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 andTopic 606, or ASU 2018-18, which clarifies the interaction between Topic 808 and Topic 606 by (1) clarifying that certain transactions betweencollaborative arrangement participants should be accounted for under Topic 606; (2) adding unit-of-account guidance in Topic 808 to align with theguidance in Topic 606; and (3) clarifying presentation guidance for transactions with a collaborative arrangement participant that are not accounted forunder Topic 606. ASU 2018-18 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within thosefiscal years. Early adoption is permitted, including adoption in any interim period. The Company has determined that ASU 2018-18 will not have any effecton 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 11, Collaboration and Licensing Agreements and Note 12, Revenue Recognition).In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the DisclosureRequirements for Fair Value Measurement, or ASU 2018-13, which modifies the disclosure requirements on fair value measurements in Topic 820 to removethe 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 thevaluation processes for Level 3 fair value measurements. ASU 2018-13 also amends Topic 820 to clarify that the measurement uncertainty disclosure is tocommunicate information about the uncertainty in measurement as of the reporting date. ASU 2018-13 also requires additional disclosure for changes inunrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of thereporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes inunrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and thenarrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initialfiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permittedupon 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 adoptionof ASU 2018-13 will have a material effect on its results of operations, financial position, cash flows or footnote disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718), Improvements to Nonemployee Share-BasedPayment Accounting, or ASU 2018-07, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and servicesfrom 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 agrantor’s own operations by issuing share-based payment awards. Accordingly, under ASU 2018-07, the fair value of stock options granted to nonemployeeswill be measured only on the grant date, the amount of which will be recognized as compensation expense over the nonemployee’s service (vesting) period inthe 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 paymentawards. 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 anonemployee award to satisfy the measurement objective. Prior guidance under Subtopic 505-50 required the fair value of nonemployee stock options to bemarked to market at each reporting period during the service period, which resulted in volatility of compensation expense during that period. ASU 2018-07 iseffective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier thanan entity’s adoption date of Topic 606. The Company will adopt ASU 2018-07 on January 1, 2019 on a modified retrospective basis and will remeasure, onthat date, the fair value of all outstanding unvested stock options that had been granted to nonemployees. The Company expects that the adoption of ASU2018-07 will not have a material effect on its results of operations, financial position or cash flows because grants of stock options to nonemployees havebeen insignificant. F-15 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on FinancialInstruments, or ASU 2016-13, which replaces the incurred loss impairment methodology in current GAAP, that delays recognition of a credit loss until it isprobable that such loss has been incurred, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonableand supportable information to inform credit loss estimates. ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debtsecurities by requiring (1) estimating expected credit losses only when the fair value is below the amortized cost of the asset; (2) recording a credit losswithout 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 differencebetween 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 theCompany 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 yearsbeginning 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.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or ASU 2016-02, which amends the current guidance for the accountingand disclosure of leases (ASC 840) for both lessees and lessors. The Company has completed its review of existing contracts and has identified one materialcontract that contains a lease. The primary effect of adoption will be the requirement to record a right-of-use asset and a corresponding lease obligation forthe Stamford operating lease (see Note 17, Commitments and Contingencies). ASU 2016-02 is effective for interim and annual periods beginning afterDecember 31, 2018 but may be adopted earlier. ASU 2016-02 requires modified retrospective adoption. However, the FASB issued ASU 2018-11, Leases(Topic 842): Targeted Improvements, or ASU 2018-11, which allows entities to elect an optional transition method by continuing to apply the guidance inASC 840, including its disclosure requirements, in the comparative periods presented in the year that they adopt the new leases guidance in ASC 842.Entities that elect this optional transition method would record the cumulative effect of adoption on the effective date rather than at the beginning of theearliest comparative period presented. The Company will adopt ASU 2016-02 and ASU 2018-11 on January 1, 2019 using the optional transition methodfrom ASU 2018-11. The Company expects that the adoption of ASU 2016-02 or ASU 2018-11 will not have a material impact on its Statements ofComprehensive Loss or its Statements of Cash Flows, but it expects that the lease liability recorded on the Balance Sheet beginning on January 1, 2019 willbe between $5,000 and $6,000. 3. Available-for-Sale Marketable SecuritiesAs of December 31, 2018, and 2017, the Company’s available-for-sale marketable securities consisted of debt securities issued by U.S. government-sponsored entities and by investment grade institutions. As of December 31, 2018, the Company’s available-for-sale marketable securities also included debtsecurities issued by the U.S. Treasury and municipal bonds. As of December 31, 2017, the Company’s available-for-sale securities also included a moneymarket fund. The following tables summarize the Company's available-for-sale marketable securities by major type of security as of December 31, 2018, and 2017:As of December 31, 2018 Gross Unrealized Estimated Fair Type of Security Amortized Cost Gains Losses 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) $167,698F-16 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) As of December 31, 2017 Gross Unrealized Estimated Fair Type of Security Amortized Cost Gains Losses Value Money market funds $39,988 $— $(37) $39,951 U.S. government agency obligations 7,799 — (5) 7,794 Corporate bonds 15,919 — (12) 15,907 Commercial paper 19,545 — (16) 19,529 Total available-for-sale marketable securities $83,251 $— $(70) $83,181 All available-for-sale marketable securities are classified as Marketable securities, current or Marketable Securities, non-current depending on thecontractual maturity date of the individual available-for-sale security.The Company classifies its marketable debt securities based on their contractual maturity dates. As of December 31, 2018, the Company’s marketabledebt securities mature at various dates through November 2020. The amortized cost and fair values of marketable debt securities by contractual maturity wereas follows. The table does not include money market funds that are classified as available-for sale marketable securities as of December 31, 2017. As of December 31, 2018 2017 Contractual maturity Amortized Cost Fair Value Amortized Cost Fair Value Less than one year $146,363 $146,302 $43,263 $43,230 One year to two years 21,449 21,396 — — Total $167,812 $167,698 $43,263 $43,230 During the years ended December 31, 2018 and 2017, the Company sold shares of its investments in available-for-sale marketable securities withtotal fair values of $79,808 and $8,755, respectively. The cost of the available-for-sale marketable securities that were sold was determined by specificidentification. The sales of the investments in available-for-sale marketable securities during each year resulted in realized (losses) gains, totaling $(5) and$5, respectively.The following tables show the fair value of the Company's available-for-sale marketable securities that have unrealized losses and that are deemed tobe only temporarily impaired, aggregated by investment category and length of time that the individual investments have been in a continuous unrealizedloss position. Less than 12 Months 12 Months or Greater Total Gross Gross Gross Unrealized Unrealized Unrealized As of December 31, 2018 Fair Value Losses Fair Value Losses Fair Value 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) F-17 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Less than 12 Months 12 Months or Greater Total Gross Gross Gross Unrealized Unrealized Unrealized As of December 31, 2017 Fair Value Losses Fair Value Losses Fair Value Losses Money market funds $39,951 $(37) $— $— $39,951 $(37)U.S. government agency obligations 7,794 (5) — — 7,794 (5)Corporate bonds 15,907 (12) — — 15,907 (12)Commercial paper 19,031 (16) — — 19,031 (16)Total $82,683 $(70) $— $— $82,683 $(70) As of December 31, 2018, and 2017, the Company held a total of 69 out of 84 positions and 30 out of 31 positions, respectively, that were in anunrealized 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-temporaryimpairments on these securities as of December 31, 2018, or 2017. The Company does not intend to sell these debt securities before maturity and theCompany 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 bematurity. 4. Accumulated Other Comprehensive Income (Loss)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 years ended December 31, 2018, 2017 and 2016. Total AccumulatedOther ComprehensiveIncome (Loss) Balance, December 31, 2015 $(35)Other comprehensive income before reclassifications 61 Amount reclassified from accumulated other comprehensive income (23)Net current period other comprehensive income 38 Balance, December 31, 2016 3 Other comprehensive loss before reclassifications (68)Amount reclassified from accumulated other comprehensive income (5)Net current period other comprehensive loss (73)Balance, December 31, 2017 (70)Other comprehensive loss before reclassifications (49)Amount reclassified from accumulated other comprehensive loss 5 Net current period other comprehensive loss (44)Balance, December 31, 2018 $(114) The reclassifications out of AOCI and into net loss were as follows: Year Ended December 31, Affected Line Item in theStatements ofComponent of AOCI 2018 2017 2016 Comprehensive LossUnrealized gains (losses) on available-for- sale marketable securities Realized (losses) gains on sale of securities $(5) $5 $23 Other income — — — Income tax benefit $(5) $5 $23 F-18 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The amounts reclassified out of AOCI into net loss were determined by specific identification. 5. Prepaid ExpensesAs of December 31, 2018, the amount of prepaid expenses was $4,805, consisting of $4,377 of prepaid R&D clinical costs, $245 of prepaid insuranceand $183 of other costs. As of December 31, 2017, the amount of prepaid expenses was $1,635, consisting of $1,287 of prepaid R&D clinical costs, $124 ofprepaid insurance and $224 of other costs.6. Property and Equipment, NetProperty and equipment, net consists of the following: December 31, 2018 2017 Computer and office equipment $211 $158 Laboratory equipment 628 628 Furniture and fixtures 47 27 Leasehold improvements 1,128 1,128 $2,014 $1,941 Less accumulated depreciation and amortization 1,134 764 Property and equipment, net $880 $1,177 Depreciation and amortization expense included in R&D expense and General and administrative expense was $370, $495 and $1,465 for the yearsended December 31, 2018, 2017 and 2016, respectively.In connection with the Company’s relocation of its operating facility from Shelton, Connecticut to Stamford, Connecticut, the Company acceleratedthe amortization of the Shelton leasehold improvements during the period from December 2015 (signing of the Stamford lease) to May 2016 (the date thatthe Shelton facility was vacated) (see Note 17, Commitments and Contingencies). In addition, during the years ended December 31, 2017 and 2016, theCompany wrote-off $7,816 and $397, respectively, of fully-depreciated Shelton property and equipment, including leasehold improvements, that was not re-located to the Stamford headquarters. During the year ended December 31, 2017, the Company sold fully-depreciated Shelton property and equipment for netproceeds of $41.7. Restricted CashThe Company is required to maintain a stand-by letter of credit as a security deposit under its lease for its office space in Stamford, Connecticut (referto Note 17, Commitments and Contingencies). The fair value of the letter of credit approximates its contract value. The Company’s bank requires theCompany to maintain a restricted cash balance to serve as collateral for the letter of credit issued to the landlord by the bank. As of December 31, 2018, therestricted cash balance for the Stamford lease was invested in a commercial money market account.The letter of credit balance for the Stamford lease is required to remain at $769 through May 2019 and may, upon request from the Company,thereafter be reduced to $408 through the end of the lease term in November 2023. The reduction in the balance of the letter of credit for the Stamford lease iscontingent upon the Company not being in default of any provisions of that lease prior to request for the reduction. As of December 31, 2018, the Companyhad $361 of restricted cash related to the Shelton lease in current assets and $408 in long-term assets. As of December 31, 2017, the Company had $769 ofrestricted cash related to the Stamford lease in long-term assets.F-19 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Balance Sheets that sum to the total ofthe same such amounts shown in the Statements of Cash Flows. December 31, 2018 2017 Cash and cash equivalents $15,081 $9,388 Restricted cash, current assets 361 — Restricted cash, long-term assets 408 769 Total cash, cash equivalents, and restricted cash shown in the Statements of Cash Flows $15,850 $10,157 8. Accounts Payable and Accrued ExpensesAccounts payable and accrued expenses consist of the following: December 31, 2018 2017 Accounts payable $4,371 $3,829 Accrued research projects 6,079 2,356 Accrued professional fees 802 384 Accrued compensation and benefits 2,370 1,864 Accrued other — 73 $13,622 $8,506 9. Stockholders’ EquityThe Company’s Board of Directors has authorized 100,000,000 shares of the Company’s common stock, par value $0.001 per share, and 5,000,000shares of undesignated preferred stock, par value $0.001 per share, that may be issued from time to time by the Board of Directors of the Company in one ormore series. As of December 31, 2018, there were 39,547,558 shares of common stock and no shares of preferred stock issued and outstanding.Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholdersare entitled to dividends when and if declared by the Board of Directors, subject to the preferential rights of the holders of preferred stock, if any.On March 30, 2017, the Company entered into an underwriting agreement with Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated, asrepresentatives of the several underwriters named therein, relating to the issuance and sale by the Company of 5,117,500 shares of its common stock,including 667,500 shares of common stock the underwriters had the option to purchase, at a public offering price of $18.00 per share, or the 2017Offering. The 2017 Offering was made pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-216657), filed with the SEC on March13, 2017 and declared effective on March 24, 2017, and a related prospectus supplement dated March 30, 2017, which was filed with the SEC on March 31,2017.On April 5, 2017, the Company closed the 2017 Offering, including the full exercise of the underwriters’ option to purchase 667,500 additionalshares of common stock. The Company received net proceeds of $86,224, after deducting $5,891 relating to underwriting discounts and commissions andoffering expenses. On May 17, 2018, the Company issued 1,174,827 shares of its common stock to Vifor in connection with the license agreement entered into withVFMCRP (refer to Note 11, Collaboration and Licensing Agreements). F-20 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) On July 18, 2018, the Company entered into an underwriting agreement with Jefferies LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated,as representatives of the several underwriters named therein, relating to the issuance and sale by the Company of up to 5,175,000 shares of its common stock,including 675,000 shares of common stock the underwriters had the option to purchase, at a public offering price of $19.00 per share. This offering was madepursuant to the Company’s Registration Statement on Form S-3 (File No. 333-216657), filed with the SEC on March 13, 2017 and declared effective onMarch 24, 2017, and a related prospectus dated March 24, 2017 and prospectus supplement dated July 18, 2018, which was filed with the SEC on July 20,2018.On July 23, 2018, the Company closed the offering, including the full exercise of the underwriters’ option to purchase 675,000 additional shares ofcommon stock. The Company received net proceeds of $92,063, after deducting $6,262 relating to underwriting discounts and commissions and offeringexpenses.In December 2018, as a result of the achievement of a clinical performance target, restricted stock units of various executive officers vested and wereconverted into 83,791 shares of the Company’s common stock (see Note 13, Stock-Based Compensation). 10. Fair Value MeasurementsThe following tables summarize the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2018 and 2017 and bylevel within the fair value hierarchy:Fair value measurement as of December 31, 2018: 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 $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 50,390 — 50,390 — Municipal bonds 4,000 — 4,000 — Restricted cash: Commercial money market account 769 769 — — Total financial assets $183,548 $15,850 $167,698 $— F-21 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Fair value measurement as of December 31, 2017: 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 fund and checking accounts $9,388 $9,388 $— $— Available-for-sale marketable securities: Money market fund 39,951 — 39,951 — U.S. government agency obligations 7,794 — 7,794 — Corporate bonds 15,907 — 15,907 — Commercial paper 19,529 — 19,529 — Restricted cash: Commercial money market account 769 769 — — Total financial assets $93,338 $10,157 $83,181 $— There were no purchases, sales or maturities of Level 3 financial assets and no unrealized gains or losses related to Level 3 available-for-salemarketable securities for the years ended December 31, 2018, 2017 and 2016. There were no transfers of financial assets between Levels 1, 2, or 3classifications during the years ended December 31, 2018, 2017 and 2016. 11. Collaboration and Licensing Agreements Vifor Fresenius Medical Care Renal Pharma Ltd. On May 17, 2018, the Company entered into a license agreement, or the VFMCRP Agreement, with VFMCRP under which the Company grantedVFMCRP an exclusive, royalty-bearing license, or the VFMCRP License, to seek regulatory approval to commercialize, import, export, use, distribute, offerfor sale, promote, sell and otherwise commercialize CR845/difelikefalin injection, or the Licensed Product, for all therapeutic uses to prevent, inhibit or treatitch associated with pruritus in hemodialysis and peritoneal-dialysis patients, or the Field, worldwide (excluding the United States, Japan and South Korea),or the Territory. VFMCRP cannot perform development activities on their own unless specifically allocated to VFMCRP by the Joint DevelopmentCommittee, or JDC, and Joint Steering Committee, or JSC. The Company’s membership on the JSC or JDC is at its sole discretion and is not its obligation. The Company is responsible, at its own cost, to undertake clinical and non-clinical development, or the R&D services. The Company is alsoresponsible to provide all content and subject matter expertise required for registration with the European Medicines Agency, or EMA, in the EuropeanUnion, or the EU, that will be needed by VFMCRP for such registration, including participation in regulatory meetings, as needed. If third-party costsincurred by the Company with respect to its clinical development for the EMA registration exceed $20,000, such excess costs will be shared equally by theCompany and VFMCRP. VFMCRP will contribute, at its own cost, its clinical development expertise as reasonably useful for such development activities,such as preparing the clinical results that the Company presents to it in a format acceptable to the EMA to obtain marketing approval in the EU. F-22 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Company has identified two performance obligations under ASC 606: (1) granting of the VFMCRP License and (2) the R&D services. TheCompany has determined that these two performance obligations are not capable of being distinct (i.e., do not have standalone value for VFMCRP) becauseVFMCRP cannot benefit (derive potential cash flows) from either one on its own or together with other resources that are readily available to it sinceVFMCRP is relying on the Company’s expertise in investigating chronic kidney disease-associated pruritus, or CKD-aP, and its know-how obtained frommultiple years of pre-clinical and clinical development, and years of interactions with the FDA which other companies or CROs would not have. TheVFMCRP License does not provide benefit to VFMCRP until and unless the Company conducts the pivotal clinical trials and other supportive trials in CKD-aP to gather sufficient clinical data for VFMCRP to obtain marketing approval in the Territory. Furthermore, VFMCRP does not have the right to performdevelopment activities on its own unless specifically allocated by the JDC or JSC. The two identified performance obligations are also not distinct within the context of the contract, (i.e., are not separately identifiable from eachother) because of the nature of the promise within the context of the contract. The nature of the promise is to transfer a combined deliverable to VFMCRPbased on the agreement (to support the ability of VFMCRP to commercialize the Licensed Product) and the Company determined that the VFMCRP Licenseand the R&D services are inputs rather than a transfer of each of these goods and services individually. In addition, the two identified performanceobligations are highly interrelated and interdependent because satisfaction of both performance obligations is required for VFMCRP to derive benefit fromthe VFMCRP Agreement for commercialization of the Licensed Product in the Territory. Therefore, the two performance obligations are not distinct fromeach other and are accounted for as a single performance obligation. Upon entry into the VFMCRP Agreement, VFMCRP made a non-refundable, non-creditable $50,000 upfront payment to the Company and Viforpurchased 1,174,827 shares of the Company’s common stock, or the Vifor Shares, for $20,000 at a price of $17.024 per share, which represents a premiumover a pre-determined average closing price of the Company’s common stock. The purchase of the Company’s common stock was governed by a separatestock purchase agreement. The excess of the stock purchase price over the cost of the Vifor Shares at the closing price of the Company’s common stock on thepurchase date of $5,444 was added to the upfront payment for accounting purposes. The Company is eligible to receive from VFMCRP regulatory and commercial milestone payments in the aggregate of up to $470,000, consisting ofup to $30,000 in regulatory milestones and up to $440,000 in tiered commercial milestones, all of which are sales-related. The Company is also eligible toreceive tiered double-digit royalty payments based on annual net sales, as defined in the VFMCRP Agreement, of CR845/difelikefalin injection in theLicensed Territories. The Company retains full commercialization rights for CR845/difelikefalin injection for the treatment of CKD-aP in the United Statesexcept in the dialysis clinics of Fresenius Medical Care North America, or FMCNA, where VFMCRP and the Company will promote CR845/difelikefalininjection under a profit-sharing arrangement (subject to the terms and conditions of the VFMCRP Agreement) based on net FMCNA clinic sales recorded bythe Company. At inception of the VFMCRP Agreement, there was significant uncertainty as to whether marketing approval would be obtained in the Territory forthe Licensed Product. Therefore, at that time, there was a significant probability that any potential revenue from sales of the Licensed Product that would beincluded in the transaction price would be reversed when the uncertainty is resolved. Consequently, any sales royalties and sales milestones are constrainedfrom the transaction price at inception of the VFMCRP Agreement and will be recognized as revenue if, and when, such sales transactions occur in the future. At inception of the VFMCRP Agreement, the transaction price of $55,444 was allocated entirely to the one combined performance obligation, asdescribed above, and was initially recorded as deferred revenue. License and milestone revenue will be recognized proportionately as the R&D services areconducted (i.e., prior to submission of an NDA). F-23 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The license also requires VFMCRP to promote and take orders in the U.S. for sale by the Company to FMC U.S. Dialysis Clinics and allows VFMCRPto grant sub-licenses, which, in certain cases, requires the Company’s prior written consent. The Company retains the rights to import, distribute, promote, selland otherwise commercialize the Licensed Product outside of the Field and outside of the Territory. The Company retains the rights to make and have made the Licensed Product in the Territory for commercial sale by VFMCRP in the Field in oroutside the Territory and for supply of Licensed Product to VFMCRP under the terms of a supply agreement, or the Supply Agreement. The supply price willbe the Company’s cost of goods sold, as calculated under U.S. GAAP, plus an agreed upon margin. The Supply Agreement will co-terminate with theVFMCRP Agreement. In regards to a supply agreement, the VFMCRP Agreement only includes a requirement for the Company to negotiate in good faithwith VFMCRP. After the execution of the VFMCRP Agreement, a separate agreement to supply them with the Licensed Product would be entered into,although the Company has no obligation to execute a supply agreement. In the event that the parties fail to enter into a Supply Agreement or if the Companyfails to provide Licensed Product on a timely basis, VFMCRP has the right to manufacture or have manufactured the Licensed Product in and outside theTerritory. The Supply Agreement will be accounted for as a customer option that is not a material right because the selling price of the Licensed Product underthe Supply Agreement is the Company’s cost of goods sold plus an agreed upon margin, which is commensurate with the “cost of goods sold plus” modelthat the Company would charge other parties under similar agreements (the standalone selling price) and not at a discount. Therefore, the sale of clinicalcompound to VFMCRP is not a performance obligation under the VFMCRP Agreement but rather the Supply Agreement is a separate agreement from theVFMCRP Agreement. The only performance obligation under the Supply Agreement is the delivery of the Licensed Product to VFMCRP forcommercialization. Revenue from the sale of the Licensed Product to VFMCRP will be recognized as Clinical Supply revenue in the Company’s Statementsof Comprehensive Loss as sales of the Licensed Product occur. As of December 31, 2018, no supply agreement has been entered into between the Companyand VFMCRP. The VFMCRP Agreement terminates upon the expiration of all royalty terms with respect to the Licensed Products, which expire on a Product-by-Product and country-by-country basis, at the latest of (a) the expiration of all patent rights licensed to VFMCRP covering such Licensed Product; (b) theexpiration of all regulatory and data exclusivity applicable to such Licensed Product in such country and (c) the tenth anniversary of the first commercial saleof such Product in such country.The VFMCRP Agreement may be terminated earlier by either party for material breach that is not cured within 60 days, bankruptcy by either partyand by both parties upon mutual written consent. The Company may terminate the VFMCRP Agreement if VFMCRP challenges the validity of any licensedpatent rights, except if such patent challenge results from the Company’s action against VFMCRP for infringement of any licensed patent in the Territory. Inaddition, upon the earlier of (1) the acceptance for filing of an NDA covering Licensed Product filed with the FDA (after completion of the Phase 3 program)or (2) the third anniversary of the Effective Date, the VFMCRP Agreement may be terminated by VFMCRP in its entirety or with respect to any countrieswithin the Territory upon written notice to the Company. Such termination will be effective twelve months following the date of such notice. If the VFMCRP Agreement terminates early for any reason stated above, VFMCRP’s licenses will terminate, VFMCRP’s rights to use the Company’sconfidential information and the Company’s know-how will revert to the Company and VFMCRP will assign and transfer to the Company all right, title andinterest in all regulatory applications (IND’s and NDA’s), regulatory approval applications and regulatory approvals in the Territory covering LicensedProduct. F-24 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Maruishi Pharmaceutical Co., Ltd.In April 2013, the Company entered into a license agreement with Maruishi, or the Maruishi Agreement, under which the Company granted Maruishian exclusive license to develop, manufacture, and commercialize drug products containing CR845/difelikefalin for acute pain and/or uremic pruritus inJapan. Maruishi has the right to grant sub-licenses in Japan, which entitles the Company to receive sub-license fees, net of prior payments made by Maruishito the Company. Under the Maruishi Agreement, the Company and Maruishi are required to use commercially reasonable efforts, at their own expense, todevelop, obtain regulatory approval for and commercialize CR845/difelikefalin in the United States and Japan, respectively. In addition, the Companyprovided Maruishi specific clinical development services for CR845/difelikefalin used in Maruishi’s field of use.Under the Maruishi Agreement, the Company identified two performance obligations in accordance with ASC 606: (1) the license; and (2) the R&Dservices specific to the uremic pruritus field of use (specified as Phase 1 and proof-of-concept clinical trials), both of which were determined to havestandalone value. The Company determined that these performance obligations had standalone value due to the fact that Maruishi obtained the right todevelop the compound on its own and the Company was specifically contracted to perform specific R&D services as noted above. The Company believesthat these early stage R&D services performed by the Company did not require any specific expertise or know-how, but rather could have been completed byoutside third parties, therefore providing standalone value to Maruishi.In March 2017, Maruishi entered into a sub-license agreement with Kissei Pharmaceutical Co. Ltd., or Kissei, for the development andsales/marketing of CR845/difelikefalin (called MR13A9 by Maruishi) for the treatment of uremic pruritus in dialysis patients in Japan. Consequently, for theyear ended December 31, 2017, the Company recognized revenue of $843 related to the sub-license fee. The Company allocated the amount of the sub-license fee to each of the two identified performance obligations in the same proportion as the upfront license fee that the Company received at inception ofthe Maruishi Agreement. Accordingly, $530 was recognized as license and milestone fees revenue and $313 was recognized as collaborative revenue.Under the terms of the Maruishi Agreement, the Company is eligible to receive milestone payments upon the achievement of defined clinical andregulatory events as well as tiered, low double-digit royalties with respect to any sales of the licensed product sold in Japan by Maruishi, if any, and share inany sub-license fees.During the years ended December 31, 2018, 2017 and 2016, the Company recognized clinical compound revenue of $33, $68 and $86, respectively,from the sale of clinical compound to Maruishi.The Company incurred R&D expense related to the Maruishi Agreement of $30, $61 and $78 (all related to the cost of clinical compound sold toMaruishi) during the years ended December 31, 2018, 2017 and 2016, respectively.Chong Kun Dang Pharmaceutical CorporationIn April 2012, the Company entered into a license agreement, or the CKDP Agreement, with Chong Kun Dang Pharmaceutical Corporation, or CKDP,in South Korea, under which the Company granted CKDP an exclusive license to develop, manufacture and commercialize drug products containingCR845/difelikefalin in South Korea. The Company and CKDP are each required to use commercially reasonable efforts, at their respective expense, todevelop, obtain regulatory approval for and commercialize CR845/difelikefalin in the United States and South Korea, respectively. The Company identifiedthe granting of the license as its only performance obligation under the CKDP Agreement.Under the terms of the CKDP Agreement, the Company is eligible to receive milestone payments upon the achievement of defined clinical andregulatory events as well as tiered royalties, with percentages ranging from the high single digits to the high teens, based on net sales of products containingCR845/difelikefalin in South Korea, if any, and share in any sub-license fees.F-25 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) 12. Revenue RecognitionThe Company currently recognizes revenue in accordance with ASC 606, as amended, for the VFMCRP, Maruishi and CKDP agreements (see Note11, Collaboration and Licensing Agreements). Under each of these agreements, the Company has recognized revenue from upfront payments and, under theMaruishi Agreement and the CKDP Agreement, from clinical development milestone payments. The Company has also recognized revenue from a sub-license payment earned under the Maruishi Agreement. Under the Maruishi Agreement and the CKDP Agreement, the Company may earn additional futuremilestone payments upon the achievement of defined clinical events, and under the VFMCRP Agreement, the Maruishi Agreement and the CKDP Agreementupon the achievement of defined regulatory events and, under the VFMCRP Agreement and the Maruishi Agreement, from sales milestones. The Companymay also recognize revenue in the future from royalties on net sales under all three agreements. In addition, the Company has recognized revenue upon thedelivery of clinical compound to Maruishi in accordance with separate supply agreements.Contract balancesAs of December 31, 2018, the Company had deferred revenue, current of $26,825 and deferred revenue, non-current of $15,184 related to theperformance obligations from the VFMCRP Agreement and had no balances of receivables or other assets related to the VFMCRP Agreement. There were nobalances of receivables, other assets or deferred revenue relating to the Maruishi and CKDP agreements as of December 31, 2018. As of December 31, 2017,the Company had no balances of receivables, other assets or deferred revenue related to the Maruishi and CKDP Agreements.Performance obligationsUnder the VFMCRP Agreement, the Company’s performance obligations of granting a license to allow VFMCRP to commercializeCR845/difelikefalin injection worldwide, except in the United States, Japan and South Korea, which occurred at inception of the contract in May 2018, andperforming R&D services by the Company to obtain sufficient clinical data which will be shared with VFMCRP to allow them to receive regulatory approvalto sell CR845/difelikefalin in the licensed territory, are not distinct, and are accounted for as a single performance obligation during the period that the R&Dservices are rendered (see Note 11, Collaboration and Licensing Agreements).The Company’s distinct performance obligations under the Maruishi Agreement include transfer of the license to the Company’s IP, which allowedMaruishi to develop and commercialize CR845/difelikefalin, for acute pain and uremic pruritus indications in Japan, which occurred at inception of thecontract in 2013, and performance of R&D services, which occurred from 2013 to 2015, as those services were rendered. The Company agreed to conductlimited work on an oral tablet formulation of CR845/difelikefalin and to conduct Phase 1 and proof-of-concept Phase 2 clinical trials of an intravenousformulation of CR845/difelikefalin to be used to treat patients with uremic pruritus. The Company agreed to transfer the data and information from suchdevelopment to Maruishi for its efforts to obtain regulatory approval in Japan. These activities are referred to as R&D services.The Company’s only performance obligation under the supply agreement with Maruishi is to deliver clinical compound to Maruishi in accordancewith the receipt of purchase orders. If and when the Company enters into a supply agreement with VFMCRP, the Company’s only performance obligationunder this supply agreement would be to deliver CR845/difelikefalin injection to VFMCRP in accordance with the receipt of purchase orders.Under the CKDP Agreement, the Company’s only performance obligation is to transfer the license to the Company’s IP related toCR845/difelikefalin, which occurred at inception of the contract in 2012.Upon execution of the VFMCRP Agreement, the Maruishi Agreement and the CKDP Agreement, the Company received a single fixed payment fromeach counterparty in exchange for granting the respective licenses and performing its other obligations. In addition, each of the counterparties made anequity investment in the Company’s common stock.F-26 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Transaction price allocated to the remaining performance obligations At inception of the VFMCRP Agreement, the entire transaction price of $55,444 was allocated to the one combined performance obligation, asdescribed above. As of December 31, 2018, $13,436 of that amount was recognized as license and milestone fees revenue based on the percentage of R&Dservices that had been completed. As of December 31, 2018, there were no remaining performance obligations under either the Maruishi Agreement or theCKDP Agreement, although the Company is eligible to receive milestone payments and sales royalties in the future. Significant judgmentsIn applying ASC 606, as amended, to its three contracts, the Company made the following judgments that significantly affect the timing and amountof revenue recognition: 1.Determination of the number of distinct performance obligations in a contractThe VFMCRP Agreement contains one combined performance obligation, which includes the Company’s two performance obligations to grant alicense to VFMCRP and conduct R&D services. Both of those performance obligations are inputs to the promise, within the context of the contract, totransfer a combined output for which VFMCRP has contracted (the ability of VFMCRP to commercialize the Licensed Product) (see Note 11, Collaborationand Licensing Agreements, for further discussion).The Maruishi Agreement contains two distinct performance obligations: the granting of the license and the promise to deliver defined R&D services.Under the Maruishi Agreement, the license and the R&D services represent distinct goods or services from each other because Maruishi is able to benefit fromthe license on its own or together with other resources that are readily available to it (i.e., capable of being distinct). Maruishi’s ability to benefit from thelicense without the R&D services is indicated by its ability to conduct clinical trials of CR845/difelikefalin on its own and by the provision in the MaruishiAgreement whereby if the Company suspends or discontinues its development activity, the Company will provide information regarding its developmentefforts up to that point so that Maruishi may continue development and commercialization of the product in Japan. Therefore, the R&D services do notsignificantly affect Maruishi’s ability to use and benefit from the license.In addition, the Company’s promise in the Maruishi contract to transfer the license is separately identifiable from the promise to provide definedR&D services (i.e., distinct within the context of the contract) because the Company is not using the goods or services as inputs to produce or deliver thecombined output or outputs specified by the customer. The combined output specified by Maruishi is its right to conduct development activities related toCR845/difelikefalin in Japan, which could result in regulatory approval in Japan. That right is derived from the Company’s grant of the license. Maruishi isconducting clinical trials on its own and does not require the R&D services provided by the Company. Furthermore, the R&D services do not significantlymodify or customize the license and vice versa. Finally, the license and R&D services are not highly interdependent or highly interrelated because theCompany is able to fulfill its promise to transfer the initial license independently from its promise to subsequently provide the R&D services, which Maruishican obtain on its own.The only performance obligation in the CKDP Agreement is the granting of the license. 2.Determination of the transaction price, including whether any variable consideration is included at inception of the contractThe transaction price is the amount of consideration that the Company expects to be entitled to in exchange for transferring promised goods orservices to the customer. The transaction price must be determined at inception of a contract and may include amounts of variable consideration. However,there is a constraint on inclusion of variable consideration, such as milestone payments or sales-based royalty payments, in the transaction price related tolicenses of IP, if there is uncertainty at inception of the contract as to whether such consideration will be recognized in the future (see Note 2, SignificantAccounting Policies: Revenue Recognition). F-27 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The decision as to whether or not it is probable that a significant reversal of revenue will occur in the future, depends on the likelihood andmagnitude of the reversal and is highly susceptible to factors outside the entity’s influence (for example, the Company cannot determine the outcome ofclinical trials; the Company cannot determine if or when they or the counterparty will initiate or complete clinical trials; and the Company’s ability to obtainregulatory approval is difficult). In addition, the uncertainty is not expected to be resolved for a long period of time (in the order of years) and finally, theCompany has limited experience in the field.Therefore, at inception of the VFMCRP Agreement, the Maruishi Agreement and the CKDP Agreement, milestones and sales-based royalty paymentswere not included in the transaction price based on the factors noted above.Under the VFMCRP Agreement, the single combined performance obligation will be satisfied as the R&D services are rendered and the transactionprice, including the upfront payment of $50,000 and the premium on the common stock purchased by VFMCRP of $5,444, will be recognized as revenue asthe R&D services are performed based on the costs incurred as a percentage of the estimated total costs to be incurred to complete the performance obligation.The remaining potential consideration was considered to be variable consideration and was constrained at inception of the contract, including regulatory andsales milestones and sales royalties (see Note 11, Collaboration and Licensing Agreements).All performance obligations under the Maruishi Agreement and the CKDP Agreement were satisfied by the end of 2015. In the future, any milestoneevent will be recognized in accordance with Note 2, Significant Accounting Polices: Revenue Recognition, as milestone and license fee revenue andcollaboration revenue based upon the relative standalone selling prices of the two performance obligations at inception of the Maruishi Agreement, and asmilestone and license fee revenue under the CKDP Agreement. Under the Maruishi Agreement, the transaction price includes only the non-refundable and non-creditable upfront license fee of $15,337, includingthe premium of $337 from the sale of Company stock to Maruishi, that was paid to the Company at inception of the contract. The remaining potentialconsideration was considered to be variable consideration and was constrained at inception of the contract, including an aggregate of up to $10,500, whichthe Company is eligible to receive upon achievement of clinical development and regulatory milestones, a one-time sales milestone of one billion Yen whena certain sales level is attained; a mid-double-digit percentage of all non-royalty payments received by Maruishi from its sub-licensees, if any; and tieredroyalties based on net sales of products containing CR845/difelikefalin in Japan, if any, with minimum royalty rates in the low double digits and maximumroyalty rates in the low twenties. Under the CKDP Agreement, the transaction price includes only the non-refundable and non-creditable upfront license fee of $646, including thepremium of $83 from the sale of Company stock to CKDP, that was paid to the Company at inception of the contract. The remaining consideration wasconsidered to be variable consideration and was constrained at inception of the contract, including an aggregate of up to $3,750, which the Company iseligible to earn upon achievement of clinical development and regulatory milestones. The Company is also eligible to receive a mid-double-digitpercentage of all non-royalty payments received by CKDP from its sub-licensees, if any, and tiered royalties ranging from the high single digits to the highteens based on net sales of products containing CR845/difelikefalin in South Korea, if any. 3.Determination of the estimate of the standalone selling price of performance obligationsIn order to recognize revenue under ASC 606, as amended, for contracts for which more than one distinct performance obligation has been identified,the Company must allocate the transaction price to the performance obligations based upon their standalone selling prices. The best evidence of standaloneselling price is an observable price of a good or service when sold separately by an entity in similar circumstances to similar customers. If such evidence isnot available, standalone selling price should be estimated so that the amount that is allocated to each performance obligation equals the amount that theentity expects to receive for transferring goods or services. The Company has identified more than one performance obligation only in the MaruishiAgreement. Since evidence based on observable prices is not available for the performance obligations under the Maruishi Agreement, the Companyconsidered market conditions and entity-specific factors, including those contemplated in negotiating the agreements, as well as certain internally developedestimates. F-28 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) At inception of the Maruishi Agreement, the Company determined the estimate of standalone selling price for the license performance obligation byusing the adjusted market assessment approach. Under this method, the Company forecasted and analyzed CR845/difelikefalin in the Japanese market, thephase of clinical development as well as considered recent similar license arrangements within the same phase of clinical development, therapeutic area, typeof agreement, etc. To estimate the standalone selling price of the R&D services, the Company forecasted its expected costs of satisfying that performanceobligation and added a margin for that service. 4.Determination of the method of allocation of the transaction price to the distinct performance obligationsAt inception of the Maruishi Agreement, the Company allocated the transaction price of $15,337 between the two performance obligations based ontheir relative standalone selling prices, determined as described above. The Company determined that the license and the R&D services had estimatedstandalone selling prices of $10,200 and $6,200, respectively. The resulting percentage allocations were applied to the $15,337 of total transaction price,which resulted in $9,637 being allocated to the license performance obligation, which was recognized immediately as license revenue, while $5,700 wasallocated to the R&D services performance obligation. The amount allocated to the R&D services performance obligation was initially recorded as deferredrevenue and was recognized as collaborative revenue as the R&D services were provided through July 2015. Since both the VFMCRP Agreement and the CKDP Agreement each contain only one distinct performance obligation, at the inception of each ofthose agreements, the entire transaction price was allocated to the respective performance obligation. 5.Determination of the timing of revenue recognition for contractsRevenue should be recognized when, or as, an entity satisfies a performance obligation by transferring a promised good or service to a customer; i.e.,when the customer obtains control of the good or service. The licenses granted to both Maruishi and CKDP are being accounted for as distinct performanceobligations. As discussed below, both licenses relate to functional IP for which revenue is recognized at a point in time – in the case of these two licenseagreements, the point in time is at inception of the contract because the customer obtained control of the license at that point. The licenses grant Maruishi and CKDP the right to use the Company’s IP relating to CR845/difelikefalin as it existed at the point in time that thelicenses were granted. That IP has significant standalone functionality as it provides the customer with the ability to perform a function or task, such as tomanufacture CR845/difelikefalin and conduct clinical trials, and is considered to be functional IP.During the license periods, the Company is continuing to develop and advance CR845/difelikefalin by conducting clinical trials. Thosedevelopment efforts are for its own benefit and do not substantively change the significant standalone functionality of the licensed IP granted to Maruishi orCKDP. Therefore, the Company’s ongoing development efforts do not significantly affect the IP’s utility to which Maruishi or CKDP have rights.Furthermore, if the Company abandons its development efforts, Maruishi or CKDP may still continue to develop CR845/difelikefalin in their respectivecountries. The R&D services performance obligation under the Maruishi Agreement represents a separate performance obligation. The R&D services wereprovided to Maruishi by the Company from inception of the agreement in 2013 through the third quarter of 2015, at which time the Company had fulfilledits promise related to the R&D services. Revenue related to the R&D services performance obligation was recognized as services were performed based on thecosts incurred as a percentage of the estimated total costs to be incurred to complete the performance obligation.Similarly, under the VFMCRP Agreement, revenue related to the single distinct performance obligation, which includes both granting of the licenseand performance of the R&D services, will be recognized as the R&D services are performed, based on the costs incurred as a percentage of the estimated totalcosts to be incurred to complete the performance obligation. The Company expects that the remaining amount of the transaction price that was allocated tothe combined performance obligation of $42,009 at December 31, 2018 will be recognized by 2020, as the R&D services are performed, subject to certaindevelopment and regulatory uncertainties.F-29 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) 6.Determination of consideration as variable consideration, including factors related to inclusion in the transaction price at inception of thecontract and timing of recognition as revenue.The VFMCRP Agreement, the Maruishi Agreement and the CKDP Agreement contain potential payments related to achievement of definedmilestone events and royalties upon net sales of future products, which are considered to be variable consideration because of the uncertainty of occurrenceof any of those events specified in those agreements at inception of the agreements. Therefore, those potential payments were not included in the transactionprice at the inception of the agreements.Revenue related to achievement of milestone events is recognized when the Company has determined that it is probable that a milestone event willbe achieved and there will not be a significant reversal of revenue in future periods. Upon probability of achievement of a milestone event, the most likelyamount of variable consideration is included in the transaction price. Subsequent changes to the transaction price, after contract initiation, are allocated tothe performance obligations in the contract on the same basis as at contract inception. Revenue for variable consideration is recognized in the same manner(point in time or over time) as for the performance obligations to which the payment amounts were allocated.The Maruishi Agreement and the CKDP Agreement specify that certain development milestones will be achieved at pre-specified defined phases of aclinical trial (such as initiation or completion or other pre-specified time during a clinical trial as specified in the agreements).During the years ended December 31, 2018, 2017 and 2016, no milestone events were probable of occurrence or achieved. Sublicense paymentsVFMCRP’s, Maruishi’s and CKDP’s right to grant sub-licenses is explicitly stated in their respective license agreements. The amount of any potentialsub-license fees to be received by the Company, which is based on a formula, is considered to be variable consideration and is constrained from inclusion inthe transaction price at inception of the contract since at that time it was probable that there would be a reversal of such revenue in the future because theCompany did not know if a sublicense would be granted in the future.In March 2017, Maruishi entered into a sub-license agreement to the Maruishi Agreement with Kissei in Japan for development and sales/marketingof CR845/difelikefalin for the treatment of uremic pruritus in dialysis patients in Japan. The Company first learned that the terms of the sub-licenseagreement had been finalized less than a month before the sub-licensee publicly announced the agreement. At that time, the Company determined that thesub-license fee would not be constrained from inclusion in the transaction price. Consequently, the Company included the amount of the sub-license fee inthe transaction price and recognized revenue of $843 in the same manner as described above for milestone payments.Sales-based Royalty PaymentsThe VFMCRP Agreement, CKDP Agreement and Maruishi Agreement each allow the Company to earn sales-based royalty payments in exchange fora license of intellectual property. In that case, the Company will recognize revenue for a sales-based royalty only when (or as) the later of the followingevents occurs: a.The subsequent sale or usage occurs. b.The performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied). Since the sale (item a, above) occurs after the license was delivered (item b, above), the sales-based royalty exception, to exclude such royaltypayments from the transaction price, applies to the overall revenue stream. Therefore, sales-based royalty payments are recognized as revenue when thecustomer’s sales occur. To date, no royalties have been earned or were otherwise due to the Company.F-30 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) 13. Stock-Based Compensation2014 Equity Incentive PlanThe Company’s 2014 Equity Incentive Plan, or the 2014 Plan, is administered by the Company’s Board of Directors or a duly authorized committeethereof, referred to as the Plan administrator. The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stockawards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, collectively referred to asStock Awards. Additionally, the 2014 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. Allother awards may be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options may be granted under the2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vest at the rate specified by the Planadministrator. Initial grants of Stock Awards made to employees and non-employee consultants generally vest as to 25% on the first anniversary of the date ofgrant and the balance ratably over the next 36 months and subsequent grants vest monthly over a period of four years from the grant date. Beginning in 2018,stock options initially granted to members of the Company’s Board of Directors vest over a period of three years in equal installments from the date of thegrant, subject to the option holder’s continued service as a Director through such date. Subsequent grants to Directors that are made automatically at AnnualMeetings of Stockholders vest fully on the first anniversary of the date of grant. The Plan administrator determines the term of Stock Awards granted underthe 2014 Plan up to a maximum of ten years. The aggregate number of shares of the Company’s common stock reserved for issuance under the 2014 Plan has automatically increased on January 1of each year, beginning on January 1, 2015 and will continue to increase on January 1 of each year through and including January 1, 2024, by 3% of the totalnumber of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by theCompany’s Board of Directors. On January 1, 2019, the aggregate number of shares of common stock that may be issued pursuant to Stock Awards under the2014 Plan automatically increased from 4,900,481 to 6,086,907. The maximum number of shares that may be issued pursuant to the exercise of incentivestock options under the 2014 Plan is 30,000,000 shares. Restricted Stock UnitsIn September 2018, the Company granted a total of 83,791 restricted stock units to executive officers under the 2014 Plan with a grant date fair valueof $20.21 per share. Vesting of the restricted stock units was contingent on the achievement of certain performance targets through the first quarter of 2019,subject to the recipient’s continuous service through the vesting events. At the date of grant, the Company concluded that the probability of achievement ofthe performance targets could not be determined until they were achieved, and accordingly, the Company would recognize compensation expense associatedwith these awards when, and to the extent, the restricted stock units vested in accordance with achievement of the performance targets. As of December 31,2018, all of the performance targets had been achieved and, consequently, all of the restricted stock units had vested. As a result, $1,693 of stockcompensation expense relating to the vesting of restricted stock units was recognized in the Statement of Comprehensive Loss for the year ended December31, 2018, consisting of $1,217 relating to G&A stock compensation expense and $476 relating to R&D stock compensation expense. In addition, all of the83,791 restricted stock units were converted to outstanding shares of the Company’s common stock as of December 31, 2018.2004 Stock Incentive PlanThe Company’s 2004 Stock Incentive Plan, or the 2004 Plan, as amended, was adopted by the Company’s Board of Directors and stockholders.Under the 2004 Plan, the Company has granted stock options to selected officers, employees and consultants of the Company. The Company’s Board ofDirectors administers the 2004 Plan. Options granted under the 2004 Plan have a maximum term of ten years. Options issued generally vest 25% on the firstanniversary date of grant and the balance ratably over the next 36 months. Following the effectiveness of the 2014 Plan in January 2014, no additionaloptions or restricted share awards were granted under the 2004 Plan. As of September 30, 2014, the 2004 Plan expired and no further grants of stock optionsor restricted stock are allowed.F-31 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Company accounts for stock options granted to employees and non-employee members of the Board of Directors in accordance with ASC 718,Compensation – Stock Compensation. The Company also occasionally grants stock options to non-employee consultants. Such grants are accounted forpursuant to ASC 505-50, Equity-Based Payments to Non-Employees (refer to Note 2, Summary of Significant Accounting Policies - Stock-BasedCompensation).A summary of the Company’s stock option activity related to employees, non-employee members of the Board of Directors and non-employeeconsultants as of and for the year ended December 31, 2018 is as follows: Weighted- Aggregate Number of Average Intrinsic Options Exercise Price Value Outstanding at December 31, 2017 3,492,141 $11.75 Granted 1,197,500 16.15 Exercised (451,685) 9.29 Expired (60,111) 10.79 Forfeited (173,423) 12.12 Outstanding at December 31, 2018 4,004,422 $13.34 $6,627 Weighted average remaining contractual life as of December 31, 2018 (in years) 7.92 Options exercisable at December 31, 2018 1,974,979 $11.70 $4,985 Weighted average remaining contractual life as of December 31, 2018 (in years) 7.00 Options vested and expected to vest as of December 31, 2018 4,004,422 $13.34 $6,627 Weighted average remaining contractual life as of December 31, 2018 (in years) 7.92 The total fair value of options vested during the years ended December 31, 2018, 2017 and 2016 was $9,023, $5,303 and $3,589, respectively. Theintrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was $3,893, $2,285 and $126, respectively. During the years ended December 31, 2018, 2017 and 2016, the Company granted 1,197,500, 1,328,500 and 1,078,000 stock options, respectively,to employees, non-employee members of the Board of Directors or non-employee consultants. The fair values of the stock options granted to those groupswere estimated using the Black-Scholes option valuation model with the following ranges of assumptions (see Note 2, Summary of Significant AccountingPolicies - Stock-Based Compensation): Year Ended December 31, 2018 2017 2016 Risk-free interest rate 2.51% - 3.09% 1.85% - 2.57% 1.19% - 1.93% Expected volatility 82.6% - 92.8% 75.3% - 84.5% 67.8% - 77.8% Expected dividend yield 0% 0% 0% Expected life of employee and Board of Directors' options (in years) 6.25 6.25 6.25 Expected life of non-employee options (in years) — 10 10 The weighted average grant date fair value of options granted to employees, non-employee members of the Board of Directors for their Board serviceand non-employee consultants during the years ended December 31, 2018, 2017 and 2016 was $11.99, $11.46 and $4.28, respectively.F-32 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) At the end of each fiscal quarter during the years ended December 31, 2018, 2017 and 2016, the Company used the Black-Scholes option valuationmodel with the following ranges of assumptions to re-measure the fair value of all outstanding options that had been granted to non-employee consultantsduring the vesting period of each tranche in accordance with ASC 505-50: Year Ended December 31, 2018 2017 2016 Risk-free interest rate 1.82% - 3.02% 1.28% - 2.39% 1.35% - 2.38% Expected volatility 58.2% - 101.0% 74.6% - 87.3% 70.8% - 75.5% Expected dividend yield 0% 0% 0% Expected life of non-employee options (in years) 0.25 - 8.94 0.62 - 9.94 7.08 - 9.60 Under ASC 505-50, upon re-measurement of each award, income or expense is recognized during its vesting term (see Note 2, AccountingPronouncements Not Yet Adopted for the adoption of ASU 2018-07 on January 1, 2019).The weighted average fair value of outstanding options that had been granted to nonemployee consultants, as re-measured during the vesting periodof each tranche in accordance with ASC 505-50 during the years ended December 31, 2018, 2017 and 2016 was $8.74, $10.16 and $4.81, respectively. On January 1, 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (see Note 2, Basis ofPresentation - Recently Adopted Accounting Pronouncements). On the date of adoption of ASU 2016-09, the Company began to account for forfeitures ofunvested stock options as they occur rather than estimate forfeiture rates that were applied to unvested stock option awards, as under the previous accountingguidance. Accordingly, on the date of adoption, the Company recorded a cumulative-effect adjustment to stockholders’ equity of $45 for all stock optionawards that were unvested as of that date. During the years ended December 31, 2018, 2017 and 2016, the Company recognized compensation expense relating to stock options (excludingcompensation expense related to the vesting of restricted stock units of $476 in R&D and $1,217 in G&A in 2018), as follows: Year Ended December 31, 2018 2017 2016 Research and development $3,919 $2,433 $1,301 General and administrative 4,482 3,897 1,499 Total stock option expense $8,401 $6,330 $2,800 Included in the table above are the following amounts of compensation expense recognized with regard to stock options that were granted to non-employee consultants, including the effect of re-measurement of the fair values of those options, as described above: Year Ended December 31, 2018 2017 2016 Research and development $195 $170 $(79)General and administrative 192 200 (20)Total stock option expense $387 $370 $(99) F-33 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) In October 2018, the Company modified the terms of its former Chief Medical Officer’s outstanding Stock Awards to accelerate 50% of the unvestedshares underlying his outstanding stock options immediately as of the modification date, and specify that the remainder of the unvested shares will vestmonthly through the date of termination of his continuous service to the Company as a Consultant. As of the modification date, the Company entered into aconsulting agreement with the former Chief Medical Officer under which he will provide continuous service to the Company as a Consultant by providingtransition services and other services upon request by the Company. Pursuant to the terms of the separation and consulting agreement, such Stock Awardswill continue to vest under their original vesting conditions as long as he provides continuous service to the Company (including as a consultant). The termof his consulting agreement is through July 22, 2019, if not terminated earlier per the terms of the consulting agreement or extended by the Company.In August 2017, the Company modified the terms of its former Chief Financial Officer’s outstanding Stock Awards to (1) accelerate 50% of theunvested shares underlying his outstanding Stock Awards immediately as of the modification date and specify that the remainder will vest monthly throughthe date of termination of his continuous service to the Company; and (2) extend the period during which his outstanding Stock Awards may be exercisedthrough the six-month anniversary of the date of termination of his continuous service to the Company. As of the modification date, the Company enteredinto a consulting agreement with the former Chief Financial Officer under which he provided continuous service to the Company by assisting with thetransition of his role to the Company’s Chief Financial Officer. Pursuant to the terms of the 2014 Plan and his outstanding Stock Awards, such Stock Awardscontinued to vest under their original vesting conditions as long as he provided continuous service to the Company (including as a consultant). The term ofhis consulting agreement ended on February 15, 2018. The Company determined that the acceleration of vesting for Stock Awards in 2018 and 2017 that would have vested based on their original vestingterms through the term of the consulting services were Type 1 modifications pursuant to ASC 718, Compensation – Stock Compensation, because thoseStock Awards would have vested whether or not the vesting of those Stock Awards had been accelerated. However, acceleration of vesting for the remainingStock Awards was a Type 3 modification pursuant to ASC 718 because absent the modification terms, those Stock Awards would have been forfeited as of thelast day that the former Chief Medical Officer and Chief Financial Officer provided continuous service as a consultant.During the year ended December 31, 2018, with respect to these modifications for the former Chief Medical Officer, the Company recognized $520 ofcompensation expense, including expense based on marking to market the fair value of the modified Stock Awards in accordance with ASC 505-50, which isincluded in Research and development expense in the total compensation expense table above.During the years ended December 31, 2018 and 2017, with respect to these modifications for the former Chief Financial Officer, the Companyrecognized $96 and $537 of compensation expense, respectively, including expense based on marking to market the fair value of the modified Stock Awardsin accordance with ASC 505-50, which is included in General and administrative expense in the total compensation expense table above.As of December 31, 2018, the total compensation expense relating to unvested options granted to employees, non-employee members of the Board ofDirectors and non-employee consultants that had not yet been recognized was $20,474, which is expected to be realized over a weighted average period of2.84 years. The Company will issue shares upon exercise of options from common stock reserved.The Company does not expect to realize any tax benefits from its stock option activity or the recognition of stock-based compensation expensebecause the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related toexcess tax benefits have been reported in cash flows from operations or cash flows from financing activities for the years ended December 31, 2018, 2017 and2016. F-34 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) 14. Income Taxes The Company’s benefit from income taxes is as follows: December 31, 2018 2017 2016 Current: Federal $— $— $— State (389) (204) (468) (389) (204) (468)Deferred: Federal — — — State — — — — — — Benefit from income taxes $(389) $(204) $(468) The Company’s tax benefits relate to state R&D tax credits exchanged for cash. The State of Connecticut provides companies with the opportunity toexchange certain R&D credit carryforwards for cash in exchange for foregoing the carryforward of the R&D credit. The program provides for such exchangeof the R&D credits at a rate of 65% of the annual R&D credit, as defined.A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows: December 31, 2018 2017 2016 Income taxes using U.S. federal statutory rate 21.00% 34.00% 34.00%State income taxes, net of federal benefit 6.82% 5.33% 5.44%Tax Cuts and Jobs Act 0.00% -44.43% 0.00%Impact of R&D tax credit on effective tax rate 3.48% 3.25% 3.24%Stock option shortfalls and cancellations -0.43% 0.21% -0.07%Permanent items and other -0.15% -0.56% -0.64%Change in valuation allowance -31.76% 2.55% -41.17%Provision to return 0.03% 0.00% 0.00%Non-taxable revenue 1.54% 0.00% 0.00% 0.53% 0.35% 0.80% F-35 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $73,578 $54,831 Federal and state tax credits 11,108 8,401 Deferred revenue 1,111 — Stock-based compensation expense 3,605 2,382 Other 420 582 89,822 66,196 Deferred tax liabilities: Accelerated depreciation (7) (23)Valuation allowance (89,815) (66,173)Net deferred tax asset $— $— A 100% valuation allowance has been recorded on the deferred tax asset as of December 31, 2018 and 2017 because management believes it is morelikely than not that the asset will not be realized. The change in the valuation allowance during 2018 and 2017 was $23,642 and $618, respectively.In 2017, the Company recorded a cumulative-effect adjustment for the tax benefit of approximately $840 related to the exercise of non-qualifiedstock options and the disqualified disposition of incentive stock options. As a result of the adoption of ASU 2016-09 on January 1, 2017, the tax benefitrelated to the exercise of stock options was recognized as a deferred tax asset with a corresponding cumulative adjustment to retained earnings, that is offsetby a valuation allowance against retained earnings.The Company applies the provisions of ASC 740, Income Taxes, which prescribes a comprehensive model for how a company should recognize,measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. As ofDecember 31, 2018 and 2017, the Company had no unrecognized tax benefits or related interest and penalties accrued. In the event the Company determinesthat accrual of interest or penalties are necessary in the future, the amount will be presented as a component of income tax expense.The Company files income tax returns in the United States and the State of Connecticut. All tax years since the date of the Company’s incorporationremain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carry-forward attributes generated inyears past may still be adjusted upon examination by the Internal Revenue Service, or IRS, or other authorities if they have or will be used in a future period.The Company is not currently under examination by the IRS, or any other jurisdictions, for any tax year.At December 31, 2018, the Company had federal and state net operating loss carryforwards of approximately $274,764 and $267,973, respectively.The federal and state tax loss carryforwards will begin to expire in 2026 and 2027, respectively, unless previously utilized. The federal net operating lossesarising in 2018 and forward have an unlimited carryforward period, however will only offset 80% of taxable income in a carryforward year. The federal lossesmay also be subject to limitation pursuant to Internal Revenue Code section 382. The Company also had federal and state R&D tax credit carryforwards ofapproximately $9,925 and $1,236, respectively. The federal credits will begin expiring in 2025 unless previously utilized. The Connecticut creditcarryforwards have no expiration period. Because of the net operating loss and research credit carryforwards, tax years 2006 through 2018 remain open toU.S. federal and state tax examinations.F-36 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “U.S. taxreform”, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to21% starting in 2018. During the year ended December 31, 2017, the Company reduced deferred tax assets by $25,913, offset by a corresponding reductionto its valuation allowance, as a result of the re-measurement of deferred tax assets and liabilities from its 34% effective rate under existing law to the newlower statutory rate of 21%. As of December 31, 2018 and 2017, the Company did not have any foreign subsidiaries and the international aspects of the Actwere not applicable.On December, 22, 2017, SAB 118 was issued due to the complexities involved in accounting for the recently enacted Tax Act. SAB 118 requires theCompany to include in its financial statements a reasonable estimate of the impact of the Tax Act on earnings to the extent such estimate has beendetermined. Accordingly, the U.S. provision for income tax for 2017 was based on the reasonable estimate guidance provided by SAB 118. The Company hasfinalized its accounting for the Act as of December 31, 2018, which resulted in insignificant adjustments. 15. Net Loss per ShareThe Company computes net loss per share in accordance with ASC 260-10, Earnings per Share (see Note 2, Significant Accounting Policies –Income (Loss) per Share). The denominators used in the net loss per share computations are as follows: Year Ended December 31, 2018 2017 2016 Basic: Weighted average shares outstanding 35,892,786 31,202,842 27,279,008 Diluted: Weighted average shares outstanding - Basic 35,892,786 31,202,842 27,279,008 Common stock options * — — — Denominator for diluted net loss per share 35,892,786 31,202,842 27,279,008 *No amounts were considered as their effects would be anti-dilutive.Basic and diluted net loss per share are computed as follows: Year Ended December 31, 2018 2017 2016 Net loss $(74,013) $(58,125) $(57,280)Weighted-average common shares outstanding: Basic and Diluted 35,892,786 31,202,842 27,279,008 Net loss per share: Basic and Diluted $(2.06) $(1.86) $(2.10) As of December 31, 2018, 2017 and 2016, 4,004,422, 3,492,141 and 2,548,408 stock options, respectively, were outstanding, which couldpotentially dilute basic earnings per share in the future, but were not included in the computation of diluted net loss per share because to do so would havebeen anti-dilutive.F-37 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) 16. Employee Benefit PlanIn February 2006, the Company adopted a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code. Allemployees over the age of 21 are eligible to participate in the plan at the beginning of the calendar quarter after three consecutive months of service.Employees are able to defer a portion of their pay into the plan on the first day of the quarter on or after the day all age and service requirements have beenmet. All eligible employees receive an employer contribution equal to 3% of their salary up to the annual IRS limit. During the years ended December 31,2018, 2017 and 2016, employer contributions to the plan were $198, $174 and $118, respectively.17. Commitments and ContingenciesContractual obligations and commitments as of December 31, 2018, comprising future minimum lease payments under the Company’s Stamfordlease, were as follows: Payment Due for the Year Ending December 31, 2019 2020 2021 2022 2023 Total Stamford operating lease $1,215 $1,240 $1,264 $1,288 $1,164 $6,171 Stamford Operating LeaseIn December 2015, the Company entered into a lease agreement, or the Stamford Lease, for office space in Stamford, Connecticut, or the Premises, forthe purpose of relocating its headquarters. The initial term of the Stamford Lease commenced in May 2016, or the Commencement Date, and ends inNovember 2023. The Stamford Lease requires monthly lease payments, including rent escalations and rent holidays, during the initial lease term. TheCompany began to make rental payments from the Commencement Date. The Company records monthly rent expense on a straight-line basis from March2016, upon taking possession of the Premises, through November 2023. As of December 31, 2018 and 2017, the balance of deferred lease obligation,representing the difference between cash rent paid and straight-line rent expense, was $864 and $876, respectively. The Stamford Lease is renewable for onefive-year term. As of the Commencement Date, the Stamford Lease landlord had made tenant improvements of $1,094 to the leased premises. Such amount wasincluded in Property and equipment, net and in Deferred lease obligation. The portion of Deferred lease obligation that is related to tenant improvements isbeing amortized as a reduction to rent expense over the same term as rent expense. As of December 31, 2018 and 2017, the balance of Deferred leaseobligation related to tenant improvements was $698 and $842, respectively.Total rent expense under the Stamford Lease was $974, $935 and $797 for the years ended December 31, 2018, 2017 and 2016, respectively.In connection with the signing of the Stamford Lease, the Company entered into a standby letter of credit agreement for $769, which serves as asecurity deposit for the Premises. The standby letter of credit is automatically renewed annually through November 2023. This standby letter of credit issecured with restricted cash in a money market account (refer to Note 7, Restricted Cash). Shelton Operating LeaseIn May 2016, the Company relocated its headquarters to Stamford, Connecticut and vacated its former operating facility in Shelton, Connecticut,which the Company continued to lease under an operating lease, or the Shelton Lease. The Shelton Lease terminated in November 2017.F-38 CARA THERAPEUTICS, INC.NOTES TO FINANCIAL STATEMENTS(amounts in thousands, except share and per share data) The Shelton Lease, as amended, required monthly lease payments through its term. The Company recorded monthly rent expense associated with theShelton Lease on a straight-line basis from inception of the lease in October 2007 through May 2016, when the facility was vacated. In accordance with theaccounting guidance in ASC 420-10-25-13 regarding exit or disposal cost obligations, as of May 2016, the Company recorded rent expense, within R&Dexpense and General and administrative expense, and accrued a liability of $1,312, which represented the fair value of costs that continued to be incurredduring the remaining term of the Shelton Lease without economic benefit to the Company.Total rent expense under the Shelton Lease was $1,127 for the year ended December 31, 2016.In conjunction with the signing of the Shelton Lease, the Company entered into a standby letter of credit agreement, which expired on December 13,2017, as a security deposit for the premises. The balance of the letter of credit was $700, which was secured with restricted cash.The Company accelerated the amortization of the Shelton leasehold improvements from the date of signing of the Stamford lease in December 2015through the date that the Company vacated the Shelton facility in May 2016. Additional amortization expense as a result of such acceleration amounted to$899 (additional net loss per share of $0.03) for the year ended December 31, 2016. 18. Legal Matters From time to time, the Company may become subject to arbitration, litigation or claims arising in the ordinary course of its business. The Company isnot currently a party to any arbitration or legal proceeding that, if determined adversely to the Company, would have a material adverse effect on its business,operating results or financial condition. The results of any future claims or proceedings cannot be predicted with certainty, and regardless of the outcome,litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.19. Quarterly Results of Operations (Unaudited)The following tables contain selected financial data for each quarter of the years ended December 31, 2018 and 2017. The Company believes that thefollowing information reflects all normal recurring adjustments necessary for a fair presentation of the information for each quarter of the years endedDecember 31, 2018 and 2017. The operating results for any period are not necessarily indicative of results for any future periods. Year Ended December 31, 2018 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Revenues $— $2,874 $5,062 $5,533 Net loss - Basic and Diluted (16,767) (17,194) (19,400) (20,652) Loss per share - Basic and Diluted $(0.51) $(0.52) $(0.51) $(0.52) Year Ended December 31, 2017 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Revenues $911 $— $— $— Net loss - Basic and Diluted (22,204) (9,300) (12,444) (14,177) Loss per share - Basic and Diluted $(0.81) $(0.29) $(0.38) $(0.43)(a) (a)The difference between the sum of net loss per share, basic and diluted, as calculated on a quarterly basis for 2017 ($1.91), and net loss per share,basic and diluted, for the year ended December 31, 2017 ($1.86) is due to the denominator used for the year ended December 31, 2017, whichweights shares outstanding on a cumulative basis and reflects the issuance of 5.1 million shares of the Company’s common stock during the yearended December 31, 2017 (see Note 9, Stockholders’ Equity). F-39 Exhibit 10.11EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (the “Agreement”) is entered into effective 22 Oct 2018, by and between JoanaGoncalves, M.D. (“Executive”) and Cara Therapeutics, Inc. (the “Company”).WHEREAS, the Company desires to employ Executive and, in connection therewith, to compensate Executive forExecutive’s personal services to the Company; andWHEREAS, Executive wishes to be employed by the Company and provide personal services to the Company in return forcertain compensation.Accordingly, in consideration of the mutual promises and covenants contained herein, the parties agree to the following:1.Employment by the Company.1.1Position. Subject to the terms set forth herein, the Company agrees to employExecutive initially in the position of Chief Medical Officer, and Executive hereby accepts such employment. The Company reservesthe right to change or modify Executive’s title and/or duties as business needs may require. During the term of Executive’semployment with the Company, Executive will devote her best efforts and substantially all of her business time and attention to thebusiness of the Company.1.2Duties. Executive will report to the Chief Executive Officer of the Company (the“CEO”) performing such duties as are normally associated with Executive’s position, and as more fully described on Exhibit Ahereto, and such duties as are assigned to Executive from time to time by the CEO, subject to the oversight and direction of theCEO. Executive shall perform Executive’s duties under this Agreement principally out of the Company’s corporate headquarterswhich are currently located in Stamford, Connecticut. In addition, Executive shall make such business trips to such places as may benecessary or advisable for the efficient operations of the Company. 1.3At-Will Employment. Executive’s employment relationship with the Company is, andshall at all times remain, at-will. This means that either Executive or the Company may terminate the employment relationship at anytime, for any reason or for no reason, with or without cause or advance notice. 1.4Company Policies and Benefits. The employment relationship between the partiesshall also be subject to the Company’s personnel policies and procedures as they may be interpreted, adopted, revised or deleted fromtime to time in the Company’s sole discretion. Executive will be eligible to participate on the same basis as similarly situatedemployees in the Company’s benefit plans in effect from time to time during her employment. All matters of eligibility for coverage orbenefits under any benefit plan shall be determined in accordance with the provisions of such plan. The Company reserves the right tochange, alter, or terminate any benefit plan in its sole discretion. Notwithstanding the foregoing, in the event that the terms ofA-1 this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shallcontrol.1.5Start Date. Executive’s employment with the Company shall commence on October22nd, 2018 (the “Start Date”). 2.Compensation.2.1Salary. Executive shall receive for Executive’s services to be rendered hereunder aninitial annualized base salary of $425,000, subject to review and adjustment from time to time by the Board of Directors of theCompany (the “Board”) in its sole discretion and payable subject to standard federal and state payroll withholding requirements inaccordance with Company’s standard payroll practices (“Base Salary”). 2.2Hiring Bonus. On the first regularly scheduled payroll date following the Start Date,Executive shall receive a one-time bonus in the amount of Sixty Thousand Dollars ($60,000.00), less required withholding anddeductions (the “Hiring Bonus”). In the event Executive terminates her employment or is terminated for Cause within the 12-monthperiod following the Start Date, she will repay to the Company the net amount of the Hiring Bonus that she received. The Executiveshall not have to repay the Hiring Bonus if she is terminated by the Company without Cause.2.3Target Bonus. (a)During Employment. Executive shall be eligible to earn an annual cashbonus pursuant to the Company’s annual performance bonus plan, with the initial target amount of such bonus equal to forty percent(40%) of Executive’s Base Salary during the then current bonus year (“Target Bonus”), subject to review and adjustment from time totime by the Company in its sole discretion, payable subject to standard federal and state payroll withholding requirements. Any TargetBonus for 2018 shall be prorated for any partial year of employment on the basis of a 365-day year. Whether or not Executive iseligible for any Target Bonus will be dependent upon (a) the actual achievement by Executive and the Company of the applicableindividual and corporate performance goals, as determined by the Company, and (b) Executive’s continuous performance of servicesto the Company through the date any bonus is paid. (b)Upon Termination. Except as otherwise set forth in Section 6 herein, in theevent Executive leaves the employ of the Company for any reason prior to payment of any bonus, Executive is not eligible for suchbonus, prorated or otherwise.2.4Expense Reimbursement. The Company will reimburse Executive for reasonablebusiness expenses in accordance with the Company’s standard expense reimbursement policy. To the extent that any reimbursementspayable to Executive under this Agreement are subject to the provisions of Section 409A of the Code, then (i) any suchreimbursements will be paid no later than December 31 of the year following the year in which the expense was incurred or, withrespect to any tax reimbursement, the year in which the taxes were paid, (ii) the amount of expenses reimbursed in one year will notaffect the amount eligible2 for reimbursement in any subsequent year, and (iii) the right to reimbursement under this Agreement will not be subject to liquidationor exchange for another benefit.2.5Stock Option. Subject to approval by the Board and subject to the terms of theCompany’s 2014 Equity Incentive Plan (the “Plan”), Executive will be granted an option (the “Option”) to purchase 250,000 sharesof the Company’s Common Stock (the “Option Shares”). The Option will vest and become exercisable with respect to twenty-fivepercent of the Option Shares on the first anniversary of the Start Date and will vest with respect to the remaining 75% of the OptionShares in thirty-six (36) equal monthly installments at the end of each calendar month following the first anniversary of the Start Date,subject to Executive’s Continuous Service (as defined in the Plan) through each applicable vesting date. The exercise price of theOption will be equal to the fair market value of the Company’s Common Stock on the date of grant of the Option, as determined by theCompany. The Option will be governed by the Plan and other documents issued in connection with the grant.3.Confidential Information, Inventions, Non-Competition and Non-Solicitation Obligations. As a condition ofemployment Executive agrees to execute and abide by the Company’s Confidential Information and Inventions Assignment, Non-Competition Non-Solicitation and Arbitration Agreement (“CIIA”), attached as Exhibit B which may be amended by the parties fromtime to time without regard to this Agreement. 4.Outside Activities. Except with the prior written consent of the Company’s Board, Executive will not, while employedby the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere withExecutive’s responsibilities and the performance of Executive’s duties hereunder except for (i) reasonable time devoted to volunteerservices for or on behalf of such religious, educational, non-profit and/or other charitable organization as Executive may wish to serve,(ii) reasonable time devoted to activities in the non-profit and business communities consistent with Executive’s duties; and (iii) suchother activities as may be specifically approved by the Board. This restriction shall not, however, preclude Executive from owning lessthan one percent (1%) of the total outstanding shares of a publicly traded company.5.No Conflict with Existing Obligations. Executive represents that Executive’s performance of all theterms of this Agreement and as an Executive of the Company do not and will not breach any agreement or obligation of any kind madeprior to Executive’s employment by the Company, including agreements or obligations Executive may have with prior employers orentities for which Executive has provided services. Executive has not entered into, and Executive agrees that Executive will not enterinto, any agreement or obligation, either written or oral, in conflict herewith. 6.Termination Of Employment. The parties acknowledge that either Executive or the Company mayterminate the employment relationship at any time for any reason by giving notice as described in Sections 6.6 and 7.1. The provisionsin this Section 6 govern the amount of compensation, if any, to be provided to Executive upon termination of employment and do notrestrict the right of either party to terminate the employment relationship.3 6.1Termination by the Company Without Cause.(a)The Company shall have the right to terminate Executive’s employment withthe Company pursuant to this Section 6.1 at any time without “Cause” (as defined in Section 6.2(b) below) by giving notice asdescribed in Section 6.6 of this Agreement. A termination pursuant to Section 6.5 below is not a termination without “Cause” forpurposes of receiving the benefits described in this Section 6.1.(b)In the event Executive’s employment is terminated without Cause on or afterthe first anniversary of the Start Date, then provided that Executive executes a general release in favor of the Company, in the formpresented by the Company (the “Release”), and subject to Section 6.1(c) (the date that the Release becomes effective and may nolonger be revoked by Executive is referred to as the “Release Date”), then the Company shall provide the following severance benefitsto Executive (the “Severance Benefits”):(i)The Company will pay an amount equal to Executive’s thencurrent Base Salary for a period of nine (9) months following the Release Date (such applicable period is referred to as the “SeverancePeriod”), less applicable withholdings and deductions, on the Company’s regular payroll dates, starting with the second regular payrolldate following the Release Date;(ii)The Company will pay an amount equal to 50% of theTarget Bonus that Executive was eligible to receive at the time of the termination without Cause (if any), less applicable withholdingsand deductions, and payable in a lump sum on the later of (x) the date that annual performance bonuses are normally paid to otherexecutives at the Company or (y) the Release Date, but in no event later than March 15 of the year following the year for which theTarget Bonus is paid; and(iii)Provided Executive timely elects and remains eligible forcontinued coverage under COBRA, the Company will pay Executive COBRA premiums for the coverage that Executive andExecutive’s eligible dependents had at the time of the separation from the Company until the earliest of: (x) nine (9) months followingthe separation from the Company; (y) the date when Executive becomes eligible for substantially equivalent health insurance coveragein connection with new employment or self-employment; or (z) the date Executive cease to be eligible for COBRA continuationcoverage for any reason. For the avoidance of doubt, Executive will not be eligible to receive the Severance Benefits if her termination without Cause occursprior to the first anniversary of the Start Date. To receive the Severance Benefits under (i), (ii), and (ii) above, Executive’s terminationmust constitute a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)) and Executive must executeand allow the Release to become effective within sixty (60) days following Executive’s termination. (c)Executive shall not receive any of the Severance Benefits or Change inControl Severance Benefits pursuant to Section 6.1(b) or Section 6.4 unless she4 executes the Release within the consideration period specified therein, which shall in no event be more than 60 days, and until theRelease becomes effective and can no longer be revoked by Executive under its terms. If the consideration period for signing theRelease spans two calendar years, then, notwithstanding when Executive signs the Release and the Release becomes effective, nopayments under Sections 6.1(b) or 6.4 will occur until the subsequent calendar year if necessary to avoid the imposition of taxes underSection 409A (with such payments beginning or being made, as applicable, on the later of the Company’s first regularly scheduledpayroll date in the subsequent calendar year or the first payroll date after the Release Date). Executive’s ability to receive SeveranceBenefits or Change in Control Severance Benefits pursuant to Section 6.1(b) or Section 6.4 is further conditioned upon her: returningall Company property; complying with her post-termination obligations under this Agreement and the CIIA; and complying with theRelease, including without limitation any non-disparagement and confidentiality provisions contained therein. (d)In the event Executive’s employment is terminated at any time without Cause,in addition to the Severance Benefits or Change in Control Severance Benefits in Section 6.1(b) or in Section 6.4, the Company shallpay to Executive the accrued but unpaid salary of Executive through the date of termination, in accordance with the Company’sstandard payroll policies, together with all compensation and benefits payable to Executive based on her participation in anycompensation or benefit plan, program or arrangement through the date of termination. The Company will also reimburse Executivefor reasonable business expenses in accordance with the Company’s standard expense reimbursement policy. (e)The damages caused by the termination of Executive’s employment withoutCause would be difficult to ascertain; therefore, the Severance Benefits or Change in Control Severance Benefits for which Executiveis eligible pursuant to Section 6.1(b) or Section 6.4 in exchange for the Release is agreed to by the parties as liquidated damages, toserve as full compensation, and not a penalty.6.2Termination by the Company for Cause.(a)Subject to Section 6.2(c) below, the Company shall have the right to terminateExecutive’s employment with the Company at any time for Cause by giving notice as described in Sections 6.6 and 7.1 of thisAgreement. (b)“Cause” for termination shall mean that the Company has determined in itssole discretion that Executive has engaged in any one or more of the following: (i) a material breach of any covenant or conditionunder this Agreement or any other agreement between the parties; (ii) any act constituting dishonesty, fraud, immoral or disreputableconduct; (iii) any conduct which constitutes a felony under applicable law; (iv) material violation of any Company policy or any act ofmisconduct; (v) refusal to follow or implement a clear and reasonable directive of Company; (vi) negligence or incompetence in theperformance of Executive’s duties or failure to perform such duties in a manner satisfactory to the Company after the expiration of ten(10) days without cure after written notice of such failure; or (vii) breach of fiduciary duty.5 (c)In the event Executive’s employment is terminated at any time for Cause,Executive will not receive the Severance Benefits or Change in Control Severance Benefits in Sections 6.1(b) or 6.4, or any otherseverance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall pay toExecutive the accrued but unpaid salary of Executive through the date of termination, together with all compensation and benefitspayable to Executive based on her participation in any compensation or benefit plan, program or arrangement through the date oftermination. The Company will also reimburse Executive for reasonable business expenses in accordance with the Company’sstandard expense reimbursement policy. 6.3Resignation by Executive.(a)Executive may resign from Executive’s employment with the Company atany time by giving notice as described in Sections 6.6 and 7.1.(b)In the event Executive resigns from Executive’s employment with theCompany for any reason, Executive will not receive the Severance Benefits or Change in Control Severance Benefits under Section6.1(b) or Section 6.4, or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies,the Company shall pay to Executive the accrued but unpaid salary of Executive through the date of resignation, together with allcompensation and benefits payable to Executive through the date of resignation under any compensation or benefit plan, program orarrangement during such period and Executive shall be eligible for any benefit continuation or conversion rights provided by theprovisions of a benefit plan or by law. The Company will also reimburse Executive for reasonable business expenses in accordancewith the Company’s standard expense reimbursement policy. 6.4Termination in Connection With a Change in Control. (a)In the event that the Company terminates Executive without Cause less thansix (6) months after a Change in Control (together with the termination described in Section 6.4(b), a “Change in ControlTermination”), then provided that Executive executes the Release and allows it to become effective and subject to Section 6.1(c), theCompany shall provide the following “Change in Control Severance Benefits”:(i)The Severance Benefits described in Section 6.1(b); and(ii)Notwithstanding anything contained in Executive’s stockoption or other equity award agreements to the contrary, upon a Change in Control Termination, and provided that Executive’s equityawards have been continued, assumed or substituted for by the Company or the acquirer or the surviving entity in such Change inControl, then 50% of the unvested portion of the equity awards will vest in full.(b)In the event that the Company terminates Executive without Cause betweensix (6) and twelve (12) months after a Change in Control, then provided that Executive executes the Release and allows it to becomeeffective and subject to Section 6.1(c), the Company shall provide the Change in Control Severance Benefits, provided that Section6 6.4(a)(ii) will be revised such that 100% of the unvested portion of Executive’s equity awards will vest in full in the event thatExecutive’s equity awards have been continued, assumed or substituted for by the Company or the acquirer or the surviving entity insuch Change in Control.For the purposes of this Agreement, “Change in Control” will have the same meaning and effect as “Change in Control” is defined inthe Company’s 2014 Equity Incentive Plan, as may be amended from time to time.6.5Termination by Virtue of Death or Disability of Executive.(a)In the event of Executive’s death while employed pursuant to this Agreement,all obligations of the parties hereunder shall terminate immediately, and the Company shall, pursuant to the Company’s standardpayroll policies, pay to Executive’s legal representatives Executive’s accrued but unpaid salary through the date of death together withall legally required compensation and benefits payable to Executive based on Executive’s participation in any compensation or benefitplan, program or arrangement through the date of termination. (b)Subject to applicable state and federal law, the Company shall at all timeshave the right, upon written notice to Executive, to terminate this Agreement based on Executive’s Disability (as definedbelow). Termination by the Company of Executive’s employment based on “Disability” shall mean termination because Executive isunable due to a physical or mental condition to perform the essential functions of Executive’s position with or without reasonableaccommodation for ninety (90) calendar days in the aggregate during any twelve (12) month period or based on the writtencertification by two licensed physicians of the likely continuation of such condition for such period. This definition shall be interpretedand applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law. In theevent Executive’s employment is terminated based on Executive’s Disability, Executive will not receive the Severance Benefits, theChange in Control Severance Benefits, or any other severance compensation or benefit, except that, pursuant to the Company’sstandard payroll policies, the Company shall pay to Executive the accrued but unpaid salary of Executive through the date oftermination, together with all compensation and benefits payable to Executive based on Executive’s participation in any compensationor benefit plan, program or arrangement through the date of termination. 6.6Notice; Effective Date of Termination.(a)Termination of Executive’s employment pursuant to this Agreement shall beeffective on the earliest of:(i)immediately after the Company gives notice to Executive ofExecutive’s termination, with or without Cause (except for a termination for “Cause” under Section 6.2(b)(iv)), unless the Companyspecifies a later date, in which case, termination shall be effective as of such later date;(ii)immediately upon Executive’s death;7 (iii)ten (10) days after the Company gives notice to Executiveof Executive’s termination on account of Executive’s Disability, unless the Company specifies a later date, in which case, terminationshall be effective as of such later date, provided that Executive has not returned to the full time performance of Executive’s duties priorto such date; or(iv)thirty (30) days after Executive gives written notice to theCompany of Executive’s resignation, provided that may set a termination date at any time between the date of notice and the date ofresignation, in which case Executive’s resignation shall be effective as of such other date. Executive will receive compensationthrough any required notice period.(b)In the event notice of a termination under subsections (a)(i) and (iii), is givenorally, at the other party’s request, the party giving notice must provide written confirmation of such notice within five (5) businessdays of the request in compliance with the requirement of Section 7.1 below. 6.7Cooperation With Company. During Executive’s employment and followingtermination of Executive’s employment for any reason, Executive shall fully cooperate with the Company in all matters relating to thewinding up of Executive’s pending work including, but not limited to, any litigation in which the Company is involved, and theorderly transfer of any such pending work to such other employees as may be designated by the Company.6.8Application of Section 409A. It is intended that all of the benefits and payments underthis Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Internal RevenueCode of 1986, as amended (the “Code”) provided under Treasury Regulations 1.409A‑1(b)(4), 1.409A‑1(b)(5) and 1.409A‑1(b)(9),and this Agreement will be construed to the greatest extent possible as consistent with those provisions. If not so exempt, thisAgreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A of the Code, andincorporates by reference all required definitions and payment terms. For purposes of Section 409A of the Code (including, withoutlimitation, for purposes of Treasury Regulation Section 1.409A‑2(b)(2)(iii)), Executive’s right to receive any installment paymentsunder this Agreement (whether severance payments, reimbursements or otherwise) will be treated as a right to receive a series ofseparate payments and, accordingly, each installment payment hereunder will at all times be considered a separate and distinctpayment. Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed by the Company at the time of herSeparation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, and if any of the paymentsupon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferredcompensation”, then if delayed commencement of any portion of such payments is required to avoid a prohibited distribution underSection 409A(a)(2)(B)(i) of the Code and the related adverse taxation under Section 409A of the Code, the timing of the paymentsupon a Separation from Service will be delayed as follows: on the earlier to occur of (i) the date that is six months and one day after theeffective date of Executive’s Separation from Service, and (ii) the date of Executive’s death (such earlier date, the8 “Delayed Initial Payment Date”), the Company will (A) pay to Executive a lump sum amount equal to the sum of the payments uponSeparation from Service that Executive would otherwise have received through the Delayed Initial Payment Date if thecommencement of the payments had not been delayed pursuant to this paragraph, and (B) commence paying the balance of thepayments in accordance with the applicable payment schedules set forth above. No interest will be due on any amounts so deferred.6.9Parachute Taxes.(a)If any payment or benefit Executive would receive from the Company orotherwise in connection with a Change in Control or other similar transaction (“Payment”) would (i) constitute a “parachute payment”within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 ofthe Code (the “Excise Tax”), then such Payment will be equal to the Reduced Amount. The “Reduced Amount” will be either (x) thelargest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion,up to and including the total, of the Payment, whichever amount ((x) or (y)), after taking into account all applicable federal, state andlocal employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’sreceipt of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If aReduced Amount will give rise to the greater after tax benefit, the reduction in the Payments will occur in the following order: (a)reduction of cash payments; (b) cancellation of accelerated vesting of equity awards other than stock options; (c) cancellation ofaccelerated vesting of stock options; and (d) reduction of other benefits paid to Executive. Within any such category of payments andbenefits (that is, (a), (b), (c) or (d)), a reduction will occur first with respect to amounts that are not “deferred compensation” within themeaning of Section 409A of the Code and then with respect to amounts that are “deferred compensation” within the meaning ofSection 409A of the Code. In the event that acceleration of compensation from Executive’s equity awards is to be reduced, suchacceleration of vesting will be canceled, subject to the immediately preceding sentence, in the reverse order of the date of grant.(b)The registered public accounting firm engaged by the Company for generalaudit purposes as of the day prior to the effective date of the event described in Section 280G(b)(2)(A)(i) of the Code will perform theforegoing calculations. If the registered public accounting firm so engaged by the Company is serving as accountant or auditor for theacquirer or is otherwise unable or unwilling to perform the calculations, the Company will appoint a nationally recognized firm that hasexpertise in these calculations to make the determinations required hereunder. The Company will bear all expenses with respect to thedeterminations by such independent registered public accounting firm required to be made hereunder. The Company will usereasonable efforts to cause firm engaged to make the determinations hereunder will provide its calculations, together with detailedsupporting documentation, to the Company and Executive within 30 calendar days after the date on which Executive’s right to aPayment is triggered (if requested at that time by the Company or Executive) or such other time as reasonably requested by theCompany or Executive. Any good faith determinations of the independent registered public accounting firm made hereunder will befinal, binding and conclusive upon the Company and Executive.9 7.General Provisions.7.1Notices. Any notices required hereunder to be in writing shall be deemed effectivelygiven: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed facsimile if sent duringnormal business hours of the recipient, and if not, then on the next business day, (c) five (5) days after having been sent by registeredor certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnightcourier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company,“Attention Chairman of the Board,” at its primary office location and to Executive at Executive’s address as listed on the Companypayroll, at Executive’s Company-issued email address, or at such other address as the Company or Executive may designate by ten(10) days advance written notice to the other.7.2Severability. Whenever possible, each provision of this Agreement will be interpretedin such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal orunenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will notaffect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction asif such invalid, illegal or unenforceable provisions had never been contained herein.7.3Waiver. If either party should waive any breach of any provisions of this Agreement,Executive or the Company shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any otherprovision of this Agreement.7.4Complete Agreement. This Agreement constitutes the entire agreement betweenExecutive and the Company with regard to the subject matter hereof. This Agreement is the complete, final, and exclusiveembodiment of their agreement with regard to this subject matter and supersedes any prior oral discussions or written communicationsand agreements. This Agreement is entered into without reliance on any promise or representation other than those expresslycontained herein, and it cannot be modified or amended except in writing signed by Executive and an authorized officer of theCompany. The parties have entered into a separate CIIA, and have or may enter into separate agreements related to stockawards. These separate agreements govern other aspects of the relationship between the parties, have or may have provisions thatsurvive termination of Executive’s employment under this Agreement, may be amended or superseded by the parties without regard tothis Agreement and are enforceable according to their terms without regard to the enforcement provision of this Agreement.7.5Counterparts. This Agreement may be executed in separate counterparts, any one ofwhich need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.7.6Headings. The headings of the sections hereof are inserted for convenience only andshall not be deemed to constitute a part hereof nor to affect the meaning thereof.10 7.7Successors and Assigns. This Agreement is intended to bind and inure to the benefitof and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators,except that Executive may not assign any of her duties hereunder and he may not assign any of her rights hereunder without the writtenconsent of the Company, which shall not be withheld unreasonably.7.8Choice of Law. All questions concerning the construction, validity and interpretationof this Agreement will be governed by the law of the State of Connecticut, without giving effect to choice of law principles.7.9Resolution of Disputes. The parties recognize that litigation in federal or state courts orbefore federal or state administrative agencies of disputes arising out of Executive’s employment with the Company or out of thisAgreement, or Executive’s termination of employment or termination of this Agreement, may not be in the best interests of eitherExecutive or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty. The parties agree that anydispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement orExecutive’s employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the CivilRights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americanswith Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the EmployeeRetirement Income Security Act, and any similar federal, state or local law, statute, regulation, or any common law doctrine, whetherthat dispute arises during or after employment, shall be settled by binding arbitration in accordance with the National Rules for theResolution of Employment Disputes of the American Arbitration Association; provided however, that this dispute resolution provisionshall not apply to any separate agreements between the parties that do not themselves specify arbitration as an exclusive remedy. Thelocation for the arbitration shall be in Fairfield County, Connecticut. Any award made by such panel shall be final, binding andconclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrators may be entered in any court havingjurisdiction thereof. The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of thearbitration shall be borne by the Company; provided however, that at Executive’s option, Executive may voluntarily pay up to one-halfthe costs and fees. The parties acknowledge and agree that their obligations to arbitrate under this Section survive the termination ofthis Agreement and continue after the termination of the employment relationship between Executive and the Company. The partieseach further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each partyexpressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in thisAgreement. By election arbitration as the means for final settlement of all claims, the parties hereby waive their respective rightsto, and agree not to, sue each other in any action in a Federal, State or local court with respect to such claims, but may seek toenforce in court an arbitration award rendered pursuant to this Agreement. The parties specifically agree to waive theirrespective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial by jury. 11 [signatures to follow on next page] 12 In Witness Whereof, the parties have executed this Executive Employment Agreement on the day and year first written above. Cara Therapeutics, Inc./s/ Derek Chalmers________________________________(Signature) By: Derek ChalmersTitle: CEO Executive:/s/ Joana Goncalves__________________________________(Signature) By: Joana Goncalves 13 Exhibit ACMO POSITION DESCRIPTION In this position, you will be reporting directly to the President and Chief Executive Officer and will work closely with the CEO, SVPR&D and clinical development team to advance the clinical development programs of the Company directed towards the treatment ofpruritus. You will also be responsible for staffing, developing and managing the Company’s Medical Affairs group as well have directline reports from Cara’s Safety/Pharmacovigilance and Regulatory Affairs groups.As CMO, you will have the primary responsibility for clinical development programs focused on the development of the company’slead compound, KORSUVA (CR845/difelikefalin), for the treatment of pruritus within dermatological patient populations, such asatopic dermatitis patients. Your responsibilities will include general oversight as well as design and conduct of clinical trials, related siteselection and management of physicians, CROs and clinical data in collaboration with Cara’s clinical development group. You willalso: •Act as liaison to regulatory agencies regarding clinical development of KORSUVA; working with the Company’s Directorof Regulatory Affairs and related personnel to ensure timely filing of clinical applications; •Co-ordinate with the clinical development team to up-date Investigator Brochures, Investigational Medicinal ProductDossiers and other clinical documentation as required; •Participate in presentations of Cara clinical data at appropriate medical and scientific meetings as required; and •Attend meetings of the Company’s Board of Directors as may be necessary; participate in communications, as necessary,with investment, analyst and other communities. A-1  Exhibit B CARA THERAPEUTICS, INC.AT WILL EMPLOYMENT, CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT,AND ARBITRATION AGREEMENT As a condition of my employment with Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns (togetherthe “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafterpaid to me by Company, I agree to the following: 1.At-Will Employment. I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT WITH THE COMPANY IS FOR ANUNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. I ALSO UNDERSTAND THAT ANYREPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND NOT VALID UNLESS OBTAINED INWRITING AND SIGNED BY THE PRESIDENT OF THE COMPANY. I ACKNOWLEDGE THAT THISEMPLOYMENT RELATIONSHIP MAY BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE ORFOR ANY OR NO CAUSE, AT THE OPTION EITHER OF THE COMPANY OR MYSELF, WITH OR WITHOUTNOTICE. 2.Confidential Information. A.Company Information. I agree at all times during the term of my employment andthereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm orcorporation without written authorization of the Board of Directors of the Company, any Confidential Information of the Company,except under a nondisclosure agreement duly authorized and executed by the Company. I understand that “ConfidentialInformation” means any non-public information that relates to the actual or anticipated business or research and development of theCompany, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other informationregarding Company’s products or services and markets therefor, customer lists and customers (including, but not limited to,customers of the Company on whom I called or with whom I became acquainted during the term of my employment), software,developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information,marketing, finances or other business information. I further understand that Confidential Information does not include any of theforegoing items which have become publicly known and made generally available through no wrongful act of mine or of otherswho were under confidentiality obligations as to the item or items involved or improvements or new versions thereof. B.Former Employer Information. I agree that I will not, during my employment withthe Company, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer orother person or entity and that I will not bring onto the premises of the Company any unpublished document or proprietaryinformation belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.B-1  C.Third Party Information. I recognize that the Company has received and in thefuture will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part tomaintain the confidentiality of such information and to use it only for certain limited purposes. I agree to hold all such confidentialor proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except asnecessary in carrying out my work for the Company consistent with the Company’s agreement with such third party. 3.Inventions. A.Inventions Retained and Licensed. I have attached hereto, as Exhibit A, a listdescribing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by meprior to my employment with the Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to theCompany’s proposed business, products or research and development, and which are not assigned to the Company hereunder; or,if no such list is attached, I represent that there are no such Prior Inventions. If in the course of my employment with the Company,I incorporate into a Company product, process or service a Prior Invention owned by me or in which I have an interest, I herebygrant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license to make, have made,modify, use and sell such Prior Invention as part of or in connection with such product, process or service, and to practice anymethod related thereto. B.Assignment of Inventions. I agree that I will promptly make full written disclosure tothe Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, allmy right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements,designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws,which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced topractice, during the period of time I am in the employ of the Company (collectively referred to as “Inventions”). I furtheracknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of andduring the period of my employment with the Company and which are protectible by copyright are “works made for hire,” as thatterm is defined in the United States Copyright Act. I understand and agree that the decision whether or not to commercialize ormarket any invention developed by me solely or jointly with others is within the Company’s sole discretion and for the Company’ssole benefit and that no royalty will be due to me as a result of the Company’s efforts to commercialize or market any suchinvention. C.Inventions Assigned to the United States. I agree to assign to the United Statesgovernment all my right, title, and interest in and to any and all Inventions whenever such full title is required to be in the UnitedStates by a contract between the Company and the United States or any of its agencies. D.Maintenance of Records. I agree to keep and maintain adequate and current writtenrecords of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company. Therecords will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The recordswill be available to and remain the sole property of the Company at all times. B-2  E.Patent and Copyright Registrations. I agree to assist the Company, or its designee, atthe Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, maskwork rights or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company ofall pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and allother instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign andconvey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to suchInventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that myobligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after thetermination of this Agreement. If the Company is unable because of my mental or physical incapacity or for any other reason tosecure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrationscovering Inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate andappoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf andstead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance ofletters patent or copyright registrations thereon with the same legal force and effect as if executed by me. 4.Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage in any other employment,occupation or consulting directly related to the business in which the Company is now involved or becomes involved during theterm of my employment, nor will I engage in any other activities that conflict with my obligations to the Company. 5.Returning Company Documents. I agree that, at the time of leaving the employ of the Company, I willdeliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data,notes, reports, proposals, lists, correspondence, specifications, drawings blueprints, sketches, materials, equipment, other documentsor property, or reproductions of any aforementioned items developed by me pursuant to my employment with the Company orotherwise belonging to the Company, its successors or assigns, including, without limitation, those records maintained pursuant toparagraph 3.D. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification”attached hereto as Exhibit B. 6.Notification of New Employer. In the event that I leave the employ of the Company, I hereby grantconsent to notification by the Company to my new employer about my rights and obligations under this Agreement. 7.Solicitation of Employees. I agree that for a period of twelve (12) months immediatelyfollowing the termination of my relationship with the Company for any reason, whether with or without cause, I shall noteither directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave theiremployment, or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of theCompany, either for myself or for any other person or entity. 8.Conflict of Interest Guidelines. I agree to diligently adhere to the Conflict ofB-3  Interest Guidelines attached as Exhibit C hereto. 9.Representations. I agree to execute any proper oath or verify any proper document required to carry outthe terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement tokeep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. Ihereby represent and warrant that I have not entered into, and I will not enter into, any oral or written agreement in conflict herewith. 10.Arbitration and Equitable Relief. A.Arbitration. IN CONSIDERATION OF MY EMPLOYMENT WITH THECOMPANY, ITS PROMISE TO ARBITRATE ALL EMPLOYMENT-RELATED DISPUTES AND MY RECEIPT OF THECOMPENSATION, PAY RAISES AND OTHER BENEFITS PAID TO ME BY THE COMPANY, AT PRESENT AND INTHE FUTURE, I AGREE THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE(INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER OR BENEFIT PLANOF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, ORRESULTING FROM MY EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF MY EMPLOYMENTWITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT OR ANY CLAIMS ARISING OUT OFANY FEDERAL, STATE OR LOCAL ANTI- DISCRIMINATION STATUTE, SHALL BE SUBJECT TO BINDINGARBITRATION. THE DEMAND FOR ARBITRATION SHALL BE MADE WITHIN A REASONABLE TIME AFTERTHE CLAIM, DISPUTE OR OTHER MATTER IN QUESTION HAS ARISEN, AND IN ANY EVENT SHALL NOT BEMADE AFTER THE DATE WHEN INSTITUTION OF LEGAL OR EQUITABLE PROCEEDINGS, BASED ON SUCHCLAIM, DISPUTE OR OTHER MATTER IN QUESTION, WOULD BE BARRED BY THE APPLICABLE STATUTE OFLIMITATIONS. THE PLACE OF ARBITRATION SHALL BE NEW YORK, NEW YORK. B.Procedure. I AGREE THAT ANY ARBITRATION WILL BEADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) AND THAT THE NEUTRALARBITRATOR WILL BE SELECTED IN A MANNER CONSISTENT WITH ITS NATIONAL RULES FOR THERESOLUTION OF EMPLOYMENT DISPUTES. I AGREE THAT THE ARBITRATOR SHALL HAVE THE POWERTO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONSFOR SUMMARY JUDGMENT AND/OR ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS,PRIOR TO ANY ARBITRATION HEARING. I ALSO AGREE THAT THE ARBITRATOR SHALL HAVE THEPOWER TO AWARD ANY REMEDIES, INCLUDING ATTORNEYS’ FEES AND COSTS, AVAILABLE UNDERAPPLICABLE LAW. I UNDERSTAND THE COMPANY WILL PAY FOR ANY ADMINISTRATIVE OR HEARINGFEES CHARGED BY THE ARBITRATOR OR AAA EXCEPT THAT I SHALL PAY THE FIRST $125.00 OF ANYFILING FEES ASSOCIATED WITH ANY ARBITRATION I INITIATE. C.Remedy. EXCEPT AS PROVIDED BY THIS AGREEMENT, ARBITRATIONSHALL BE THE SOLE, EXCLUSIVE AND FINAL REMEDY FOR ANY DISPUTE BETWEEN ME AND THECOMPANY. ACCORDINGLY, EXCEPT ASB-4  PROVIDED FOR BY THIS AGREEMENT, NEITHER I NOR THE COMPANY WILL BE PERMITTED TO PURSUECOURT ACTION REGARDING CLAIMS THAT ARE SUBJECT TO ARBITRATION. NOTWITHSTANDING, THEARBITRATOR WILL NOT HAVE THE AUTHORITY TO DISREGARD OR REFUSE TO ENFORCE ANY LAWFULCOMPANY POLICY, AND THE ARBITRATOR SHALL NOT ORDER OR REQUIRE THE COMPANY TO ADOPT APOLICY NOT OTHERWISE REQUIRED BY LAW WHICH THE COMPANY HAS NOT ADOPTED. D.Availability of Injunctive Relief. I AGREE THAT ANY PARTY MAY ALSOPETITION THE COURT FOR INJUNCTIVE RELIEF WHERE EITHER PARTY ALLEGES OR CLAIMS A VIOLATIONOF THE EMPLOYMENT, CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT AGREEMENT BETWEENME AND THE COMPANY OR ANY OTHER AGREEMENT REGARDING TRADE SECRETS, CONFIDENTIALINFORMATION OR NONSOLICITATION. I UNDERSTAND THAT ANY BREACH OR THREATENED BREACH OFSUCH AN AGREEMENT WILL CAUSE IRREPARABLE INJURY AND THAT MONEY DAMAGES WILL NOTPROVIDE AN ADEQUATE REMEDY THEREFOR AND BOTH PARTIES HEREBY CONSENT TO THE ISSUANCEOF AN INJUNCTION. IN THE EVENT EITHER PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTYSHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS FEES. E.Administrative Relief. I UNDERSTAND THAT THIS AGREEMENT DOES NOTPROHIBIT ME FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE OR FEDERALADMINISTRATIVE BODY SUCH AS THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUALEMPLOYMENT OPPORTUNITY COMMISSION OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENTDOES, HOWEVER, PRECLUDE ME FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM. F.Voluntary Nature of Agreement. I ACKNOWLEDGE AND AGREE THAT I AMEXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BYTHE COMPANY OR ANYONE ELSE. I FURTHER ACKNOWLEDGE AND AGREE THAT I HAVE CAREFULLYREAD THIS AGREEMENT AND THAT I HAVE ASKED ANY QUESTIONS NEEDED FOR ME TO UNDERSTANDTHE TERMS, CONSEQUENCES AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTAND IT,INCLUDING THAT I AM WAIVING MY RIGHT TO A JURY TRIAL. FINALLY, I AGREE THAT I HAVE BEENPROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF MY CHOICE BEFORE SIGNINGTHIS AGREEMENT. 11.General Provisions. A.Governing Law; Consent to Personal Jurisdiction. This Agreement will begoverned by the laws of the State of Connecticut. I hereby expressly consent to the personal jurisdiction of the state and federalcourts located in Connecticut for any lawsuit filed there against me by the Company arising from or relating to this Agreement. B.Entire Agreement. This Agreement sets forth the entire agreement and understandingbetween the Company and me relating to the subject matter herein and supersedesB-5  all prior discussions or representations between us including, but not limited to, any representations made during my interview(s) orrelocation negotiations, whether written or oral. No modification of or amendment to this Agreement, nor any waiver of any rightsunder this Agreement, will be effective unless in writing signed by the President of the Company and me. Any subsequent changeor changes in my duties, salary or compensation will not affect the validity or scope of this Agreement. C.Severability. If one or more of the provisions in this Agreement are deemedvoid by law, then the remaining provisions will continue in full force and effect. D.Successors and Assigns. This Agreement will be binding upon my heirs, executors,administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. Date:Signature Name of Employee (typed or printed) Witness: Signature Name (typed or printed) B-6  Exhibit A LIST OF PRIOR INVENTIONSAND ORIGINAL WORKS OF AUTHORSHIP Title DateIdentifying Number or BriefDescription No inventions or improvements Additional Sheets Attached Signature of Employee:Print Name of Employee: Date:  Exhibit B CARA THERAPEUTICS, INC.TERMINATION CERTIFICATIONThis is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports,proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property,or reproductions of any aforementioned items belonging to Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns(together, the “Company”). I further certify that I have complied with all the terms of the Company’s Employment, Confidential Information,Invention Assignment and Arbitration Agreement signed by me, including the reporting of any inventions and original works ofauthorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement. I further agree that, in compliance with the Employment, Confidential Information, Invention Assignment, and ArbitrationAgreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating toproducts, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, otheroriginal works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any businessof the Company or any of its employees, clients, consultants or licensees. I further agree that for twelve (12) months from this date, I will not solicit, induce, recruit or encourage any of theCompany’s employees to leave their employment. Date: (Employee’s Signature) (Type/Print Employee’s Name) Exhibit 10.11Exhibit C CARA THERAPEUTICS, INC.CONFLICT OF INTEREST GUIDELINESIt is the policy of Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”) toconduct its affairs in strict compliance with the letter and spirit of the law and to adhere to the highest principles of business ethics.Accordingly, all officers, employees and independent contractors must avoid activities which are in conflict, or give the appearanceof being in conflict, with these principles and with the interests of the Company. The following are potentially compromisingsituations which must be avoided. Any exceptions must be reported to the President and written approval for continuation must beobtained. 1.Revealing confidential information to outsiders or misusing confidential information. Unauthorizeddivulging of information is a violation of this policy whether or not for personal gain and whether or not harm to the Company isintended. (The Employment, Confidential Information, Invention Assignment and Arbitration Agreement elaborates on thisprinciple and is a binding agreement.) 2.Accepting or offering substantial gifts, excessive entertainment, favors or payments which may be deemedto constitute undue influence or otherwise be improper or embarrassing to the Company. 3.Participating in civic or professional organizations that might involve divulging confidentialinformation of the Company. 4.Initiating or approving personnel actions affecting reward or punishment of employees or applicants wherethere is a family relationship or is or appears to be a personal or social involvement. 5.Initiating or approving any form of personal or social harassment of employees. 6.Investing or holding outside directorship in suppliers, customers, or competing companies,including financial speculations, where such investment or directorship might influence in any manner a decision orcourse of action of the Company. 7.Borrowing from or lending to employees, customers or suppliers. 8.Acquiring real estate of interest to the Company. 9.Improperly using or disclosing to the Company any proprietary information or trade secrets of any formeror concurrent employer or other person or entity with whom obligations of confidentiality exist.  10.Unlawfully discussing prices, costs, customers, sales or markets with competing companies ortheir employees. 11.Making any unlawful agreement with distributors with respect to prices. 12.Improperly using or authorizing the use of any inventions which are the subject of patent claims of anyother person or entity. 13.Engaging in any conduct which is not in the best interest of the Company. Each officer, employee and independent contractor must take every necessary action to ensure compliance with theseguidelines and to bring problem areas to the attention of higher management for review. Violations of this conflict of interest policymay result in discharge without warning. [***] Text Omitted and Filed Separatelywith the Securities and Exchange Commission.Confidential Treatment RequestedUnder 17 C.F.R. Sections 200.80(b)(4) and 240.24b-2 Exhibit 10.14 October 18, 2018Joseph Stauffer123 Opossum RoadSkillman, NJ 08558 Re:Separation and Consulting AgreementDear Joseph:This letter sets forth the substance of your separation agreement (the “Agreement”) which Cara Therapeutics, Inc. (the “Company”) isoffering to you to aid in your employment transition.1.Separation. Your last day of work with the Company and your employment termination date will be October 22,2018 (the “Separation Date”).2.Accrued Salary and Vacation. On the next regular payroll date following the Separation Date, the Companywill pay you all accrued salary and all accrued and unused vacation earned through the Separation Date, subject to standard payrolldeductions and withholdings. You will receive these payments regardless of whether or not you sign this Agreement. 3.Severance Benefits. If you execute and do not revoke this Agreement, the Company will provide you with thefollowing Severance Benefits, which you and the Company agree will be in full accord and satisfaction of anything you couldotherwise be eligible for under Section 5 of the Employment Agreement between you and the Company dated December 1, 2014 (the“Employment Agreement”):a.The Company will provide enhanced vesting of your Options (as defined in Section 5), provided thatyou comply with the requirements of Section 5.b.if you timely elect continued coverage under COBRA for yourself and your covered dependents underthe Company’s group health plans following the Separation Date, and comply fully with your obligations hereunder, then theCompany will reimburse, as[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 2 of 10and when due and as actually paid by you to the insurance carrier or COBRA administrator (as applicable), the premiums of yourgroup health insurance COBRA continuation coverage, including coverage for your eligible dependents, until the earliest of (A)receipt by you of six (6) months of group health insurance COBRA continuation coverage, (B) the expiration of your eligibility for thecontinuation coverage under COBRA, or (C) the date when you become eligible for substantially equivalent health insurance coveragein connection with new employment or self-employment (such period from the termination date through the earliest of (A) through (C),the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that thereimbursement of the COBRA premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code orany statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amendedby the 2010 Health Care and Education Reconciliation Act), then all payments and obligations under this clause will cease. If youbecome eligible for coverage under another employer's group health plan or otherwise cease to be eligible for COBRA during theperiod provided in this clause, you must immediately notify the Company of such event, and all payments and obligations under thisclause will cease.c.The Company will offer you the Consulting Agreement attached as Exhibit A (the “ConsultingAgreement”). If you execute the Consulting Agreement on the Separation Date you will begin your consulting relationship effectiveimmediately and you will be deemed to remain in continuous service for purposes of your Options and RSUs (each as defined inSection 5) while the Consulting Agreement remains in effect. If you then do not execute this Agreement, or execute but then revokeyour acceptance of this Agreement, then the Consulting Agreement will automatically terminate, as described therein.d.The Company will pay out a pro-rated potion of your 2018 bonus, subject to standard payroll deductionsand withholdings within ten (10) days of the Effective Date of this Agreement.4.Benefit Plans.If you are currently participating in the Company’s group health insurance plans, your participation as an employee will end on theSeparation Date. Thereafter, to the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by theCompany’s current group health insurance policies, you will be eligible to continue your group health insurance benefits at your ownexpense. Later, you may be able to convert to an individual policy through the provider of the Company’s health insurance, if youwish. If applicable, your participation in Employer-Sponsored Group Life Insurance and Short and Long Term Disability Insurance willcease as of the Separation Date. [***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 3 of 10Deductions for the 401(k) Plan will end with your last regular paycheck if applicable. You will receive information by mailconcerning 401(k) plan rollover procedures should you be a participant in this program. You have the right to continue your current Health Care Spending Account if you are participating in this program. Enclosed is theinformation concerning how to continue this benefit. Dependent Care Spending Accounts cannot be continued. 5.Stock Options and Restricted Stock Units. During your employment you were granted options to purchase atotal of 378,750 shares of the Company’s common stock (collectively, the “Options”) and one grant of restricted stock units withrespect to a total of 11,779 shares of the Company’s common stock as set forth on attached Exhibit B (collectively, the “RSUs”),pursuant to the Company’s 2004 Stock Incentive Plan and the 2014 Equity Incentive Plan (collectively the “Plans”) and stock optionagreements, restricted stock unit agreements and any other documents between you and the Company setting forth the terms of theOptions and the RSUs (the “Equity Award Documents”). If you timely return and do not revoke this fully signed Agreement to theCompany, then:a.an additional 50% of the unvested shares subject to the Options that would otherwise not be vested as ofthe Separation Date will be treated as vested and exercisable as of the Separation Date as shown on Exhibit B, such that an aggregateof 315,304 shares subject to the Options will be treated as vested and exercisable as of the Separation Date; andb.the remaining unvested shares subject to the Options and the unvested RSUs as set forth on Exhibit Bwill continue to be eligible to vest following the Separation Date during the term of the Consulting Agreement in accordance with theirterms, provided you timely execute the Consulting Agreement no later than the Separation Date, in accordance with the vestingschedules applicable to such Options as long as you remain in continuous service (as defined in the 2014 Plan) with the Company as aconsultant pursuant to the terms of the Consulting Agreement. For the avoidance of doubt, the vesting of the unvested shares subjectto the RSUs will not be accelerated and none of such shares will be treated as vested as of the Separation Date.Except as provided in this Agreement, all terms, conditions and limitations applicable to the Options and RSUswill remain in full force and effect pursuant to the applicable Plan and Equity Award Documents; provided however, you acknowledgethat this Section 5 sets forth the full agreement between the parties as to the treatment of your Options and RSUs as of the SeparationDate and that you are not entitled to any other options to purchase shares of the Company’s common stock or restricted stock unitswith respect to shares of the Company’s common stock. The Company makes no representations or guarantees regarding the status ofyour Options as incentive stock options (ISOs). You understand and agree that to the extent any Options granted as ISOs (i) aresubject to accelerated vesting and become vested as of the[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 4 of 10Separation Date or (ii) are exercised with respect to any vested shares later than the date that is three (3) months following theSeparation Date, your Options may be treated as NSOs for federal tax purposes, and you will be obligated to satisfy your taxobligations that arise when you exercise the Options. No shares of the Company’s common stock will be issued to you in respect of (i)your exercise of any Options granted as ISOs that are no longer eligible to qualify as ISOs, (ii) your exercise of any Options granted asISOs after the date that is three (3) months following the Separation Date, (iii) your exercise of any Options granted as NSOs, or (iv)the settlement of vested RSUs, in each case unless and until you satisfy the applicable tax obligations. You acknowledge that theCompany is not providing tax advice to you and that you have been advised by the Company to seek independent tax advice withrespect to the exercise of the Options and settlement of the RSUs.6.Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, youwill not receive any additional compensation, severance or benefits after the Separation Date, including any severance under theEmployment Agreement except as provided for in this Agreement.7.Expense Reimbursements. You agree that, within ten (10) days of the Separation Date, you will submit yourfinal documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any,for which you seek reimbursement. The Company will reimburse you for reasonable business expenses pursuant to its regularbusiness practice.8.Return of Company Property. By the Separation Date, you agree to return to the Company all Companydocuments (and all copies thereof) and other Company property that you have had in your possession at any time, including, but notlimited to, Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, identification badges andkeys, and any materials of any kind that contain or embody any proprietary or confidential information of the Company (and allreproductions thereof). Please coordinate return of Company property with Derek Chalmers. This obligation does not extend tothose documents and materials that would reasonably be expected to assist you in the provision of services under the ConsultingAgreement. Receipt of the Severance Benefits described in Section 3 of this Agreement is expressly conditioned upon return ofall Company Property.9.Proprietary Information and Post-Termination Obligations. Both during and after your employment youacknowledge your continuing obligations under the Cara Therapeutics, Inc. At Will Employment, Confidential Information,Invention Assignment, And Arbitration Agreement (“Confidentiality Agreement”) not to use or disclose any confidential orproprietary information of the Company. A copy of the Confidentiality Agreement is attached as Exhibit C. If you have any doubtsas to the scope of the restrictions in[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 5 of 10your agreement, you should contact Derek Chalmers immediately to assess your compliance. As you know, the Company willenforce its contract rights. Please familiarize yourself with the enclosed agreement which you signed. Confidential information that isalso a “trade secret,” as defined by law, may be disclosed (A) if it is made (i) in confidence to a federal, state, or local governmentofficial, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation oflaw; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Inaddition, in the event that you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclosethe trade secret to your attorney and use the trade secret information in the court proceeding, if you: (A) file any document containingthe trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order. 10.Confidentiality. The provisions of this Agreement will be held in strictest confidence by you and will not bepublicized or disclosed in any manner whatsoever; provided, however, that: (a) you may disclose this Agreement to your immediatefamily; (b) you may disclose this Agreement in confidence to your attorney, accountant, auditor, tax preparer, and financial advisor;and (c) you may disclose this Agreement insofar as such disclosure may be required by law. Notwithstanding the foregoing, nothing inthis Agreement shall limit your right to voluntarily communicate with the Equal Employment Opportunity Commission, United StatesDepartment of Labor, the National Labor Relations Board, the Securities and Exchange Commission, other federal government agencyor similar state or local agency or to discuss the terms and conditions of your employment with others to the extent expressly permittedby Section 7 of the National Labor Relations Act.11.Non-Disparagement. You agree not to disparage the Company, and the Company’s attorneys, directors,managers, partners, employees, agents and affiliates, in any manner likely to be harmful to them or their business, business reputationor personal reputation; provided that you may respond accurately and fully to any question, inquiry or request for information whenrequired by legal process. The Company agrees not to disparage you in any manner likely to be harmful to you or your business,business reputation or personal reputation; provided that it may respond accurately and fully to any question, inquiry or request forinformation when required by legal process. The Company’s obligation in this Section extends to those persons with knowledge ofthis provision. Notwithstanding the foregoing, nothing in this Agreement shall limit your right to voluntarily communicate with theEqual Employment Opportunity Commission, United States Department of Labor, the National Labor Relations Board, the Securitiesand Exchange Commission, other federal government agency or similar state or local agency or to discuss the terms and conditions ofyour employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act.12.Release. In exchange for the payments and other consideration under this Agreement, to which you would nototherwise be entitled, and except as otherwise set forth in this Agreement, you, on behalf of yourself and, to the extent permitted bylaw, on behalf of your[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 6 of 10spouse, heirs, executors, administrators, assigns, insurers, attorneys and other persons or entities, acting or purporting to act on yourbehalf (collectively, the “Employee Parties”), hereby generally and completely release, acquit and forever discharge the Company, itsparents and subsidiaries, and its and their officers, directors, managers, partners, agents, representatives, employees, attorneys,shareholders, predecessors, successors, assigns, insurers and affiliates (the “Company Parties”) of and from any and all claims,liabilities, demands, contentions, actions, causes of action, suits, costs, expenses, attorneys’ fees, damages, indemnities, debts,judgments, levies, executions and obligations of every kind and nature, in law, equity, or otherwise, both known and unknown,suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements, events, acts or conduct atany time prior to and including the execution date of this Agreement, including but not limited to: all such claims and demands directlyor indirectly arising out of or in any way connected with your employment with the Company or the termination of that employment;claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company,vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to anyfederal, state or local law, statute, or cause of action; tort law; or contract law (individually a “Claim” and collectively “Claims”). TheClaims you are releasing and waiving in this Agreement include, but are not limited to, any and all Claims that any of the CompanyParties: •has violated its personnel policies, handbooks, contracts of employment, or covenants of good faith and fairdealing, including but not limited to Section 5 of the November 2017 Employment Agreement between you andthe Company (“Employment Agreement”); •has discriminated against you on the basis of age, race, color, sex (including sexual harassment), national origin,ancestry, disability, religion, sexual orientation, marital status, parental status, source of income, entitlement tobenefits, any union activities or other protected category in violation of any local, state or federal law, constitution,ordinance, or regulation, including but not limited to: the Age Discrimination in Employment Act, as amended(“ADEA”); Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; 42 U.S.C.§ 1981, as amended; the Equal Pay Act; the Americans With Disabilities Act; the Genetic InformationNondiscrimination Act; the Family and Medical Leave Act; the Connecticut Fair Employment Practices Act; theConnecticut Family and Medical Leave Act; the Connecticut Whistleblower Law; the Connecticut Free SpeechLaw; the Employee Retirement Income Security Act; the Employee Polygraph Protection Act; the WorkerAdjustment and Retraining Notification Act; the Older Workers Benefit Protection Act; the anti-retaliationprovisions of the Sarbanes-Oxley Act, or any other federal or state law regarding whistleblower retaliation; theLilly Ledbetter Fair Pay Act; the Uniformed Services Employment and Reemployment Rights Act; the Fair Credit[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 7 of 10 Reporting Act; and the National Labor Relations Act; •has violated any statute, public policy or common law (including but not limited to Claims for retaliatorydischarge; negligent hiring, retention or supervision; defamation; intentional or negligent infliction of emotionaldistress and/or mental anguish; intentional interference with contract; negligence; detrimental reliance; loss ofconsortium to you or any member of your family and/or promissory estoppel).Notwithstanding the foregoing, other than events expressly contemplated by this Agreement you do not waive or release rights orClaims that may arise from events that occur after the date this waiver is executed and you are not releasing any right ofindemnification you may have for any liabilities arising from your actions within the course and scope of your employment with theCompany or within the course and scope of your role as an officer of the Company. Also excluded from this Agreement are anyClaims which cannot be waived by law, including, without limitation, any rights you may have under applicable workers’compensation laws and your right, if applicable, to file or participate in an investigative proceeding of any federal, state or localgovernmental agency. Nothing in this Agreement shall prevent you from filing, cooperating with, or participating in any proceeding orinvestigation before the Equal Employment Opportunity Commission, United States Department of Labor, the National LaborRelations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federalgovernment agency, or similar state or local agency (“Government Agencies”), or exercising any rights pursuant to Section 7 of theNational Labor Relations Act. You further understand this Agreement does not limit your ability to voluntarily communicate with anyGovernment Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency,including providing documents or other information, without notice to the Company. While this Agreement does not limit your right toreceive an award for information provided to the Securities and Exchange Commission, you understand and agree that, you areotherwise waiving, to the fullest extent permitted by law, any and all rights you may have to individual relief based on any Claims thatyou have released and any rights you have waived by signing this Agreement. If any Claim is not subject to release, to the extentpermitted by law, you waive any right or ability to be a class or collective action representative or to otherwise participate in anyputative or certified class, collective or multi-party action or proceeding based on such a Claim in which any of the Company Parties isa party. This Agreement does not abrogate your existing rights under any Company benefit plan or any plan or agreement related toequity ownership in the Company; however, it does waive, release and forever discharge Claims existing as of the date you executethis Agreement pursuant to any such plan or agreement.13.Your Acknowledgments and Affirmations/ Effective Date of Agreement. You acknowledge that you areknowingly and voluntarily waiving and releasing any and all rights you may have under the ADEA, as amended. You alsoacknowledge and agree that (i) the[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 8 of 10consideration given to you in exchange for the waiver and release in this Agreement is in addition to anything of value to which youwere already entitled, and (ii) that you have been paid for all time worked, have received all the leave, leaves of absence and leavebenefits and protections for which you are eligible, and have not suffered any on-the-job injury for which you have not already filed aClaim. You acknowledge upon signing this Agreement that you are not eligible for severance benefits under Section 5 of theEmployment Agreement. You affirm that all of the decisions of the Company Parties regarding your pay and benefits through the dateof your execution of this Agreement were not discriminatory based on age, disability, race, color, sex, religion, national origin or anyother classification protected by law. You affirm that you have not filed or caused to be filed, and are not presently a party to, a Claimagainst any of the Company Parties. You further affirm that you have no known workplace injuries or occupational diseases. Youacknowledge and affirm that you have not been retaliated against for reporting any allegation of corporate fraud or other wrongdoingby any of the Company Parties, or for exercising any rights protected by law, including any rights protected by the Fair LaborStandards Act, the Family Medical Leave Act or any related statute or local leave or disability accommodation laws, or any applicablestate workers’ compensation law. You further acknowledge and affirm that you have been advised by this writing that: (a) yourwaiver and release do not apply to any rights or Claims that may arise after the execution date of this Agreement; (b) you have beenadvised hereby that you have the right to consult with an attorney prior to executing this Agreement; (c) you have been given twenty-one (21) days to consider this Agreement (although you may choose to voluntarily execute this Agreement earlier and if you do youwill sign the Consideration Period waiver below); (d) you have seven (7) days following your execution of this Agreement to revokethis Agreement; and (e) this Agreement shall not be effective until the date upon which the revocation period has expired unexercised(the “Effective Date”), which shall be the eighth day after this Agreement is executed by you.14.No Admission. This Agreement does not constitute an admission by the Company of any wrongful action orviolation of any federal, state, or local statute, or common law rights, including those relating to the provisions of any law or statuteconcerning employment actions, or of any other possible or claimed violation of law or rights.15.Breach. You agree that upon any breach of this Agreement you will forfeit all amounts paid or owing to youunder this Agreement. Further, you acknowledge that it may be impossible to assess the damages caused by your violation of theterms of Sections 8, 9, 10 and 11of this Agreement and further agree that any threatened or actual violation or breach of those Sectionsof this Agreement will constitute immediate and irreparable injury to the Company. You therefore agree that any such breach of thisAgreement is a material breach of this Agreement, and, in addition to any and all other damages and remedies available to theCompany upon your breach of this Agreement, the Company shall be entitled to an injunction to prevent you from violating orbreaching this Agreement. You agree that if the Company is successful in whole or part in any legal or equitable action against youunder this Agreement, you agree to pay[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 9 of 10all of the costs, including reasonable attorneys’ fees, incurred by the Company in enforcing the terms of this Agreement.16.Miscellaneous. This Agreement, including Exhibits, constitutes the complete, final and exclusive embodiment ofthe entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on anypromise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises,warranties or representations, including the provisions of the Employment Agreement or any other agreement with the Companyconferring severance by the Company. This Agreement may not be modified or amended except in a writing signed by both you and aduly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of bothyou and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision ofthis Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provisionof this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement willbe deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of Connecticut asapplied to contracts made and to be performed entirely within Connecticut.If this Agreement is acceptable to you, please sign below and return the original to me on or before the date that is twenty-one (21)days after you receive this Agreement. I wish you good luck in your future endeavors.Sincerely,Cara Therapeutics, Inc.By: /s/ Derek Chalmers, Ph.D., D.Sc.Derek Chalmers, Ph.D., D.Sc.President and Chief Executive OfficerAgreed to and Accepted:/s/ Joseph StaufferJoseph Stauffer Exhibit A – Consulting Agreement Exhibit B – Options Schedule [***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 10 of 10Exhibit C – Cara Therapeutics, Inc. At Will Employment, Confidential Information, Invention Assignment, And ArbitrationAgreement[***] Confidential Treatment RequestedJoseph StaufferOctober 18, 2018Page 11 of 10CONSIDERATION PERIODI, Joseph Stauffer, understand that I have the right to take at least 21 days to consider whether to sign this Agreement, which I receivedon October 18, 2018. If I elect to sign this Agreement before 21 days have passed, I understand I am to sign and date below thisparagraph to confirm that I knowingly and voluntarily agree to waive the 21-day consideration period. Agreed:/s/ Joseph StaufferSignature 10/20/18Date [***] Confidential Treatment Requested[***] Text Omitted and Filed Separatelywith the Securities and Exchange Commission.Confidential Treatment RequestedUnder 17 C.F.R. Sections 200.80(b)(4) and 240.24b-2 Exhibit 10.14 Exhibit A CONSULTING AGREEMENT This Consulting Agreement (the “Agreement”) by and between Cara Therapeutics, Inc. (“Client”) and Joseph Stauffer, an individual(“Consultant”) is effective as of October 22, 2018, (the “Effective Date”). RECITALSWHEREAS the parties desire for the Client to engage Consultant to perform the services described herein and forConsultant to provide such services on the terms and conditions described herein; andWHEREAS, the parties desire to use Consultant’s independent skill and expertise pursuant to this Agreement as anindependent contractor;NOW THEREFORE, in consideration of the promises and mutual agreements contained herein, the parties hereto, intendingto be legally bound, agree as follows: 1.Engagement of Services. Consultant agrees to provide consulting services to include, among other things,transition services and other services upon request of the Chief Executive Officer (“Executive”) of the Client. Those services shallinitially include, but not be limited to: (1) [***]. Consultant agrees to exercise the highest degree of professionalism and utilize hisexpertise and creative talents in performing these services. Consultant agrees to make himself available to perform such consultingservices throughout the Consulting Period, for approximately twenty (20) to forty (40) hours per week throughout the ConsultingPeriod, and to be reasonably available to meet with the Client at its offices or otherwise.2.Compensation.a.In consideration for the services rendered pursuant to this Agreement and for the assignment of certain ofConsultant’s right, title and interest pursuant hereto, Client will pay Consultant a consulting fee of $36,600 per month. Following thecompletion of a month, Consultant will submit an invoice for the consulting fee. The Client will pay the amount due the Consultantwithin thirty (30) days after receipt of Consultant’s monthly invoice. A-1[***] Confidential Treatment Requested  b.All matters of vesting and exercisability of Consultant’s options shall be as governed by Section 5 of theSeparation Agreement and the terms of the applicable Equity Plan and the terms of any equity plan or award agreement.3.Ownership of Work Product. Consultant hereby irrevocably assigns, grants and conveys to Client allright, title and interest now existing or that may exist in the future in and to any document, development, work product, know-how,design, processes, invention, technique, trade secret, or idea, and all intellectual property rights related thereto, that is created byConsultant, to which Consultant contributes, or which relates to Consultant’s services provided pursuant to this Agreement (the “WorkProduct”), including all copyrights, trademarks and other intellectual property rights (including but not limited to patent rights) relatingthereto. Consultant agrees that any and all Work Product shall be and remain the property of Client. Consultant will immediatelydisclose to the Client all Work Product. Consultant agrees to execute, at Client’s request and expense, all documents and otherinstruments necessary or desirable to confirm such assignment. In the event that Consultant does not, for any reason, execute suchdocuments within a reasonable time of Client’s request, Consultant hereby irrevocably appoints Client as Consultant’s attorney-in-factfor the purpose of executing such documents on Consultant’s behalf, which appointment is coupled with an interest. Consultant shallnot attempt to register any works created by Consultant pursuant to this Agreement at the U.S. Copyright Office, the U.S. Patent &Trademark Office, or any foreign copyright, patent, or trademark registry. Consultant retains no rights in the Work Product and agreesnot to challenge Client’s ownership of the rights embodied in the Work Product. Consultant further agrees to assist Client in everyproper way to enforce Client’s rights relating to the Work Product in any and all countries, including, but not limited to, executing,verifying and delivering such documents and performing such other acts (including appearing as a witness) as Client may reasonablyrequest for use in obtaining, perfecting, evidencing, sustaining and enforcing Client’s rights relating to the Work Product.4.Artist’s, Moral, and Other Rights. If Consultant has any rights, including without limitation “artist’srights” or “moral rights,” in the Work Product which cannot be assigned (the “Non-Assignable Rights”), Consultant agrees to waiveenforcement worldwide of such rights against Client. In the event that Consultant has any such rights that cannot be assigned orwaived Consultant hereby grants to Client a royalty-free, paid-up, exclusive, worldwide, irrevocable, perpetual license under the Non-Assignable Rights to (i) use, make, sell, offer to sell, have made, and further sublicense the Work Product, and (ii) reproduce,distribute, create derivative works of, publicly perform and publicly display the Work Product in any medium or format, whether nowknown or later developed.5.Representations and Warranties. Consultant represents and warrants that: (a) Consultant has the fullright and authority to enter into this Agreement and perform his obligations hereunder; (b) Consultant has the right and unrestrictedability to assign the Work Product to Client as set forth in Sections 3 and 4 (including without limitation the right to assign any WorkProduct created by Consultant’s employees or contractors); (c) the Work Product has not heretofore been published in its entirety; and(d) the Work Product will not infringe upon any copyright, patent, trademark, right of publicity or privacy, or any other proprietaryright of anyA-2[***] Confidential Treatment Requested  person, whether contractual, statutory or common law. Consultant agrees to indemnify Client from any and all damages, costs, claims,expenses or other liability (including reasonable attorneys’ fees) arising from or relating to the breach or alleged breach by Consultantof the representations and warranties set forth in this Section 5.6.Independent Contractor Relationship. Consultant is an independent contractor and not an employee ofthe Client. Nothing in this Agreement is intended to, or should be construed to, create a partnership, agency, joint venture oremployment relationship. The manner and means by which Consultant chooses to complete the consulting services are in Consultant’ssole discretion and control. In completing the consulting services, Consultant agrees to provide his own equipment, tools and othermaterials at his own expense. Consultant is not authorized to represent that he is an agent, employee, or legal representative of theClient. Consultant is not authorized to make any representation, contract, or commitment on behalf of Client or incur any liabilities orobligations of any kind in the name of or on behalf of the Client. Consultant shall be free at all times to arrange the time and manner ofperformance of the consulting services. Consultant is not required to maintain any schedule of duties or assignments. Consultant isalso not required to provide reports to the Client. In addition to all other obligations contained herein, Consultant agrees: (a) toproceed with diligence and promptness and hereby warrants that such services shall be performed in accordance with the highestprofessional standards in the field to the satisfaction of the Client; and (b) to comply, at Consultant’s own expense, with the provisionsof all state, local, and federal laws, regulations, ordinances, requirements and codes which are applicable to the performance of theservices hereunder.7.Consultant’s Responsibilities. As an independent contractor, the mode, manner, method and means usedby Consultant in the performance of services shall be of Consultant’s selection and under the sole control and direction ofConsultant. Consultant shall be responsible for all risks incurred in the operation of Consultant’s business and shall enjoy all thebenefits thereof. Any persons employed by or subcontracting with Consultant to perform any part of Consultant’s obligationshereunder shall be under the sole control and direction of Consultant and Consultant shall be solely responsible for all liabilities andexpenses thereof. The Client shall have no right or authority with respect to the selection, control, direction, or compensation of suchpersons.8.Tax Treatment. Consultant and the Client agree that the Client will treat Consultant as an independentcontractor for purposes of all tax laws (local, state and federal) and file forms consistent with that status. Consultant agrees, as anindependent contractor, that neither he nor his employees are entitled to unemployment benefits in the event this Agreement terminates,or workers’ compensation benefits in the event that Consultant, or any employee of Consultant, is injured in any manner whileperforming obligations under this Agreement. Consultant will be solely responsible to pay any and all local, state, and/or federalincome, social security and unemployment taxes for Consultant and his employees. The Client will not withhold any taxes or prepareW-2 Forms for Consultant, but will provide Consultant with a Form 1099, if required by law. Consultant is solely responsible for, andwill timely file all tax returns and payments required to be filed with, or made to, any federal, state or local taxA-3[***] Confidential Treatment Requested  authority with respect to the performance of services and receipt of fees under this Agreement. Consultant is solely responsible for, andmust maintain adequate records of, expenses incurred in the course of performing services under this Agreement, except as providedherein. No part of Consultant’s compensation will be subject to withholding by Client for the payment of any social security, federal,state or any other employee payroll taxes. Client will regularly report amounts paid to Consultant with the appropriate taxingauthorities, as required by law.9.No Employee Benefits. Subject to Consultant’s ability to receive reimbursements from Client for COBRAper Section 3(b) of the Separation Agreement, Consultant acknowledges and agrees that neither he nor anyone acting on his behalfshall receive any employee benefits of any kind from the Client. Consultant (and Consultant’s agents, employees, and subcontractors)is excluded from participating in any fringe benefit plans or programs as a result of the performance of services under this Agreement,without regard to Consultant’s independent contractor status. In addition, Consultant (on behalf of himself and on behalf ofConsultant’s agents, employees, and contractors) waives any and all rights, if any, to participation in any of the Client’s fringe benefitplans or programs including, but not limited to, health, sickness, accident or dental coverage, life insurance, disability benefits,severance, accidental death and dismemberment coverage, unemployment insurance coverage, workers’ compensation coverage, andpension or 401(k) benefit(s) provided by the Client to its employees.10.Expenses and Liabilities. Consultant agrees that as an independent contractor, he is solely responsiblefor all expenses (and profits/losses) he incurs in connection with the performance of services, except for reasonable expenses relating tohotel and travel costs related to services hereunder which the Company shall reimburse in accordance with its expense reimbursementpractices upon receipt of documentation of such incurred expenses. Consultant understands that he will not be reimbursed for anysupplies, equipment, or operating costs, nor will these costs of doing business be defrayed in any way by the Client. In addition, theClient does not guarantee to Consultant that fees derived from Consultant’s business will exceed Consultant’s costs.11.Non-Exclusivity. The Client reserves the right to engage other consultants to perform services, withoutgiving Consultant a right of first refusal or any other exclusive rights. Consultant reserves the right to perform services for otherpersons, provided that the performance of such services do not conflict or interfere with services provided pursuant to or obligationsunder this Agreement. 12.No Conflict of Interest. During the term of this Agreement, unless written permission is given by theExecutive, Consultant will not accept work, enter into a contract, or provide services to any third party that provides products orservices which compete with the products or services provided by the Client nor may Consultant enter into any agreement or performany services which would conflict or interfere with the services provided pursuant to or the obligations under thisAgreement. Consultant warrants that there is no other contract or duty on his part that prevents or impedes Consultant’s performanceunder this Agreement. Consultant agrees to indemnify Client from any and all loss or liability incurred by reason of the alleged breachby Consultant of any services agreement with any third party.A-4[***] Confidential Treatment Requested  13.Confidential Information. Consultant agrees to hold Client’s Confidential Information (as definedbelow) in strict confidence and not to disclose such Confidential Information to any third parties. Consultant also agrees not to use anyof Client’s Confidential Information for any purpose other than performance of Consultant’s services hereunder. “ConfidentialInformation” as used in this Agreement shall mean all information disclosed by Client to Consultant, or otherwise, regarding Client orits business obtained by Consultant pursuant to services provided under this Agreement that is not generally known in the Client’strade or industry and shall include, without limitation, (a) concepts and ideas relating to the development and distribution of content inany medium or to the current, future and proposed products or services of Client or its subsidiaries or affiliates; (b) trade secrets,drawings, inventions, know-how, software programs, and software source documents; (c) information regarding plans for research,development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublishedfinancial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; and (d) any informationregarding the skills and compensation of employees, contractors or other agents of the Client or its subsidiaries oraffiliates. Confidential Information also includes proprietary or confidential information of any third party who may disclose suchinformation to Client or Consultant in the course of Client’s business. Consultant’s obligations set forth in this Section shall not applywith respect to any portion of the Confidential Information that Consultant can document by competent proof that such portion: (i) is inthe public domain through no fault of Consultant; (ii) has been rightfully independently communicated to Consultant free of anyobligation of confidence; or (iii) was developed by Consultant independently of and without reference to any informationcommunicated to Consultant by Client. In addition, Consultant may disclose Client’s Confidential Information in response to a validorder by a court or other governmental body, as otherwise required by law. All Confidential Information furnished to Consultant byClient is the sole and exclusive property of Client or its suppliers or customers. Upon request by Client, Consultant agrees to promptlydeliver to Client the original and any copies of such Confidential Information. Consultant’s duty of confidentiality under thisAgreement does not amend or abrogate in any manner Consultant’s continuing duties under any prior agreement between Consultantand Client.14.Term and Termination.14.1Term. The term of this Agreement and the “Initial Term” is for nine (9) months fromthe Effective Date set forth above, unless earlier terminated as provided in this Agreement. After the Initial Term, the Company mayelect to renew the Agreement for successive one-month periods (each a “Renewal Term”) by agreeing to the renewal in a writingsigned by both the Client and the Consultant, or his designee, at least three (3) days prior to the expiration of the Initial Term orRenewal Term, as applicable. The parties expressly agree that designation of the Initial Term and Renewal Terms in this Agreementdoes not in any way limit the right of the parties to terminate this Agreement as provided in Section 14.2 below. Reference herein tothe Consulting Period shall refer both to the Initial Term and any Renewal Term as the context requires.14.2Termination. A-5[***] Confidential Treatment Requested  (a)Automatic Termination. If Consultant fails to execute theSeparation Agreement within twenty-one (21) days of receipt, then this Agreement will automatically terminate effective at the end ofthe twenty-first day following Consultant’s receipt of the Separation Agreement. If Consultant revokes his acceptance of theSeparation Agreement within seven (7) days after executing the Retirement and Separation Agreement, then this Agreement willautomatically terminate on the day of such revocation. (b)Termination upon Notice. After ninety (90) days from the EffectiveDate, either party may terminate this Agreement for any reason, or no reason, upon thirty (30) days’ advance written notice. (c)Termination upon Breach. The Client may terminate thisAgreement before its expiration immediately if the Consultant materially breaches the Agreement. The parties agree that a “MaterialBreach” by Consultant shall occur if he: (i) fails to abide by any recognized professional standard, including any ethical standard; (ii)fails to provide services as reasonably requested by the Executive; (iii) secures other full-time employment that prohibits his ability toprovide services to the Client; (iv) breaches any other material obligations of this Agreement; or (v) violates local, state, or federal laws.14.3Effect of Termination. Upon any termination or expiration of this Agreement, Consultant (i) shallimmediately discontinue all use of Client’s Confidential Information delivered under this Agreement; (ii) shall delete any such ClientConfidential Information from Consultant’s computer storage or any other media, including, but not limited to, online and off-linelibraries; and (iii) shall return to Client, or, at Client’s option, destroy, all copies of such Confidential Information then in Consultant’spossession. In the event the Client terminates this Agreement, or if Consultant terminates this Agreement, Consultant will not receiveany additional consulting fees or other compensation for services performed after the date of termination. 14.4Survival. The rights and obligations contained in Sections 3-6, 8-9, 12, 13.3, 13.4, and 15-21 willsurvive any termination or expiration of this Agreement.15.Successors and Assigns. Consultant may not subcontract or otherwise delegate his obligations under thisAgreement without Client’s prior written consent. Client may assign this Agreement. Subject to the foregoing, this Agreement will befor the benefit of Client’s successors and assigns, and will be binding on Consultant’s subcontractors or delegatees.16.Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered asfollows with notice deemed given as indicated: (i) by overnight courier upon written verification of receipt; or (ii) by telecopy, email, orfacsimile transmission upon acknowledgment of receipt of electronic transmission. Notice shall be sent to the addresses set forth belowor such other address as either party may specify in writing.17.Governing Law. This Agreement shall be governed in all respects by the laws of the State ofConnecticut, as such laws are applied to agreements entered into and to be performed entirely within Connecticut between Connecticutresidents. Any suit involving this AgreementA-6[***] Confidential Treatment Requested  shall be brought in a court sitting in Connecticut. The parties agree that venue shall be proper in such courts, and that such courts willhave personal jurisdiction over them.18.Severability. Should any provisions of this Agreement be held by a court of law to be illegal, invalid orunenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impairedthereby.19.Waiver. The waiver by Client of a breach of any provision of this Agreement by Consultant shall notoperate or be construed as a waiver of any other or subsequent breach by Consultant.20.Injunctive Relief for Breach. Consultant’s obligations under this Agreement are of a unique characterthat gives them particular value; breach of any of such obligations will result in irreparable and continuing damage to Client for whichthere will be no adequate remedy at law; and, in the event of such breach, Client will be entitled to injunctive relief and/or a decree forspecific performance, and such other and further relief as may be proper (including monetary damages if appropriate and attorneys’fees).21.Entire Agreement. This Agreement and the Separation Agreement constitutes the entire understandingof the parties relating to the subject matter and supersedes any previous oral or written communications, representations, understanding,or agreement between the parties concerning such subject matter; provided however, if the parties have entered into any separateagreements governing the previous employment relationship between the parties, then such agreements may have provisions thatsurvive the termination of Consultant’s relationship with Client under this Agreement, may be amended or superseded without regardto this Agreement, and are enforceable according to their terms without regard to the enforcement provision of this Agreement. ThisAgreement shall not be changed, modified, supplemented or amended except by express written agreement signed by Consultant andthe Client.In Witness Whereof, the parties have executed this Agreement effective as of the date first written above. Cara Therapeutics, Inc.By: /s/ Derek Chalmers, Ph.D., D.Sc.Derek Chalmers, Ph.D., D.Sc.President and Chief Executive OfficerAgreed to and Accepted:/s/ Joseph StaufferJoseph Stauffer A-7[***] Confidential Treatment Requested [***] Text Omitted and Filed Separatelywith the Securities and Exchange Commission.Confidential Treatment RequestedUnder 17 C.F.R. Sections 200.80(b)(4) and 240.24b-2 Exhibit 10.14 Exhibit B Outstanding Options as of Separation Date Grant Date Number of shares granted Exercise price Granted as ISO or NSO Shares Vested as ofSeparation Date (inclusive of50% accelerated vesting) Option GrantEligible to VestDuring ConsultingTerm112/1/201445,764$8.74ISO45,764No—fully vested12/1/2014134,236$8.74NSO134,236No—fully vested3/30/201620,625$6.00ISO20,625No—fully vested3/30/201645,375$6.00NSO45,375No—fully vested3/8/20179,067$17.41ISO9,067No—fully vested3/8/201765,933$17.41NSO51,816Yes—14,117shares unvested3/9/20184,906$14.39ISO0Yes—4,906 sharesunvested3/9/201852,844$14.39NSO8,421Yes—44,423shares unvestedTotal 315,304 Outstanding RSUs as of Separation Date Grant Date Number of RSU sharesgranted RSU Shares Vested as ofSeparation Date RSU Shares Eligible to Vest DuringConsulting Term19/5/201811,779011,779Total 0 1 Shares will be eligible to continue to vest in accordance with the Plans and applicable stock option agreements and restricted stockagreements while you remain in continuous service with the Company, as determined pursuant to the applicable Plans. Vesting willcease immediately upon you no longer being in continuous service with the Company. For the avoidance of doubt, the vesting of noRSU shares will be accelerated upon your Separation Date.B-1[***] Confidential Treatment Requested 188021968 v7 Exhibit C CARA THERAPEUTICS, INC.AT WILL EMPLOYMENT, CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT,AND ARBITRATION AGREEMENT As a condition of my employment with Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns (together the“Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafterpaid to me by Company, I agree to the following: 1.At-Will Employment. I UNDERSTAND AND ACKNOWLEDGE THAT MY EMPLOYMENT WITH THE COMPANY IS FOR ANUNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. I ALSO UNDERSTAND THAT ANYREPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND NOT VALID UNLESS OBTAINED INWRITING AND SIGNED BY THE PRESIDENT OF THE COMPANY. I ACKNOWLEDGE THAT THISEMPLOYMENT RELATIONSHIP MAY BE TERMINATED AT ANY TIME, WITH OR WITHOUT GOOD CAUSE ORFOR ANY OR NO CAUSE, AT THE OPTION EITHER OF THE COMPANY OR MYSELF, WITH OR WITHOUTNOTICE. 2.Confidential Information. A.Company Information. I agree at all times during the term of my employment andthereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm orcorporation without written authorization of the Board of Directors of the Company, any Confidential Information of the Company,except under a nondisclosure agreement duly authorized and executed by the Company. I understand that “ConfidentialInformation” means any non-public information that relates to the actual or anticipated business or research and development of theCompany, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other informationregarding Company’s products or services and markets therefor, customer lists and customers (including, but not limited to,customers of the Company on whom I called or with whom I became acquainted during the term of my employment), software,developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information,marketing, finances or other business information. I further understand that Confidential Information does not include any of theforegoing items which have become publicly known and made generally available through no wrongful act of mine or of otherswho were under confidentiality obligations as to the item or items involved or improvements or new versions thereof. B.Former Employer Information. I agree that I will not, during my employment withthe Company, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer orother person or entity and that I will not bring onto the premises of the Company any unpublished document or proprietaryinformation belonging to any such employer, person or entity unless consented to in writing by such[***] Confidential Treatment RequestedC-1  employer, person or entity. C.Third Party Information. I recognize that the Company has received and in thefuture will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part tomaintain the confidentiality of such information and to use it only for certain limited purposes. I agree to hold all such confidentialor proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except asnecessary in carrying out my work for the Company consistent with the Company’s agreement with such third party. 3.Inventions. A.Inventions Retained and Licensed. I have attached hereto, as Exhibit A, a listdescribing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by meprior to my employment with the Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to theCompany’s proposed business, products or research and development, and which are not assigned to the Company hereunder; or,if no such list is attached, I represent that there are no such Prior Inventions. If in the course of my employment with the Company,I incorporate into a Company product, process or service a Prior Invention owned by me or in which I have an interest, I herebygrant to the Company a nonexclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license to make, have made,modify, use and sell such Prior Invention as part of or in connection with such product, process or service, and to practice anymethod related thereto. B.Assignment of Inventions. I agree that I will promptly make full written disclosure tothe Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, allmy right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements,designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws,which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced topractice, during the period of time I am in the employ of the Company (collectively referred to as “Inventions”). I furtheracknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of andduring the period of my employment with the Company and which are protectible by copyright are “works made for hire,” as thatterm is defined in the United States Copyright Act. I understand and agree that the decision whether or not to commercialize ormarket any invention developed by me solely or jointly with others is within the Company’s sole discretion and for the Company’ssole benefit and that no royalty will be due to me as a result of the Company’s efforts to commercialize or market any suchinvention. C.Inventions Assigned to the United States. I agree to assign to the United Statesgovernment all my right, title, and interest in and to any and all Inventions whenever such full title is required to be in the UnitedStates by a contract between the Company and the United States or any of its agencies. D.Maintenance of Records. I agree to keep and maintain adequate and current writtenrecords of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company. Therecords will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records[***] Confidential Treatment RequestedC-2  will be available to and remain the sole property of the Company at all times. E.Patent and Copyright Registrations. I agree to assist the Company, or its designee, atthe Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, maskwork rights or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company ofall pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and allother instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign andconvey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to suchInventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. I further agree that myobligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after thetermination of this Agreement. If the Company is unable because of my mental or physical incapacity or for any other reason tosecure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrationscovering Inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate andappoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf andstead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance ofletters patent or copyright registrations thereon with the same legal force and effect as if executed by me. 4.Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation orconsulting directly related to the business in which the Company is now involved or becomes involved during the term of myemployment, nor will I engage in any other activities that conflict with my obligations to the Company. 5.Returning Company Documents. I agree that, at the time of leaving the employ of the Company, I willdeliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data,notes, reports, proposals, lists, correspondence, specifications, drawings blueprints, sketches, materials, equipment, other documentsor property, or reproductions of any aforementioned items developed by me pursuant to my employment with the Company orotherwise belonging to the Company, its successors or assigns, including, without limitation, those records maintained pursuant toparagraph 3.D. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification”attached hereto as Exhibit B. 6.Notification of New Employer. In the event that I leave the employ of the Company, I hereby grantconsent to notification by the Company to my new employer about my rights and obligations under this Agreement. 7.Solicitation of Employees. I agree that for a period of twelve (12) months immediatelyfollowing the termination of my relationship with the Company for any reason, whether with or without cause, I shall noteither directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave theiremployment, or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of theCompany, either for myself or for any other person or entity.[***] Confidential Treatment RequestedC-3  8.Conflict of Interest Guidelines. I agree to diligently adhere to the Conflict of Interest Guidelinesattached as Exhibit C hereto. 9.Representations. I agree to execute any proper oath or verify any proper document required to carry outthe terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement tokeep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. Ihereby represent and warrant that I have not entered into, and I will not enter into, any oral or written agreement in conflict herewith. 10.Arbitration and Equitable Relief. A.Arbitration. IN CONSIDERATION OF MY EMPLOYMENT WITH THECOMPANY, ITS PROMISE TO ARBITRATE ALL EMPLOYMENT-RELATED DISPUTES AND MY RECEIPT OF THECOMPENSATION, PAY RAISES AND OTHER BENEFITS PAID TO ME BY THE COMPANY, AT PRESENT AND INTHE FUTURE, I AGREE THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE(INCLUDING THE COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER OR BENEFIT PLANOF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE) ARISING OUT OF, RELATING TO, ORRESULTING FROM MY EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF MY EMPLOYMENTWITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT OR ANY CLAIMS ARISING OUT OFANY FEDERAL, STATE OR LOCAL ANTI- DISCRIMINATION STATUTE, SHALL BE SUBJECT TO BINDINGARBITRATION. THE DEMAND FOR ARBITRATION SHALL BE MADE WITHIN A REASONABLE TIME AFTERTHE CLAIM, DISPUTE OR OTHER MATTER IN QUESTION HAS ARISEN, AND IN ANY EVENT SHALL NOT BEMADE AFTER THE DATE WHEN INSTITUTION OF LEGAL OR EQUITABLE PROCEEDINGS, BASED ON SUCHCLAIM, DISPUTE OR OTHER MATTER IN QUESTION, WOULD BE BARRED BY THE APPLICABLE STATUTE OFLIMITATIONS. THE PLACE OF ARBITRATION SHALL BE NEW YORK, NEW YORK. B.Procedure. I AGREE THAT ANY ARBITRATION WILL BEADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) AND THAT THE NEUTRALARBITRATOR WILL BE SELECTED IN A MANNER CONSISTENT WITH ITS NATIONAL RULES FOR THERESOLUTION OF EMPLOYMENT DISPUTES. I AGREE THAT THE ARBITRATOR SHALL HAVE THE POWERTO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONSFOR SUMMARY JUDGMENT AND/OR ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS,PRIOR TO ANY ARBITRATION HEARING. I ALSO AGREE THAT THE ARBITRATOR SHALL HAVE THEPOWER TO AWARD ANY REMEDIES, INCLUDING ATTORNEYS’ FEES AND COSTS, AVAILABLE UNDERAPPLICABLE LAW. I UNDERSTAND THE COMPANY WILL PAY FOR ANY ADMINISTRATIVE OR HEARINGFEES CHARGED BY THE ARBITRATOR OR AAA EXCEPT THAT I SHALL PAY THE FIRST $125.00 OF ANYFILING FEES ASSOCIATED WITH ANY ARBITRATION I INITIATE. C.Remedy. EXCEPT AS PROVIDED BY THIS AGREEMENT,[***] Confidential Treatment RequestedC-4  ARBITRATION SHALL BE THE SOLE, EXCLUSIVE AND FINAL REMEDY FOR ANY DISPUTE BETWEEN MEAND THE COMPANY. ACCORDINGLY, EXCEPT AS PROVIDED FOR BY THIS AGREEMENT, NEITHER I NORTHE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING CLAIMS THAT ARE SUBJECTTO ARBITRATION. NOTWITHSTANDING, THE ARBITRATOR WILL NOT HAVE THE AUTHORITY TODISREGARD OR REFUSE TO ENFORCE ANY LAWFUL COMPANY POLICY, AND THE ARBITRATOR SHALLNOT ORDER OR REQUIRE THE COMPANY TO ADOPT A POLICY NOT OTHERWISE REQUIRED BY LAW WHICHTHE COMPANY HAS NOT ADOPTED. D.Availability of Injunctive Relief. I AGREE THAT ANY PARTY MAY ALSOPETITION THE COURT FOR INJUNCTIVE RELIEF WHERE EITHER PARTY ALLEGES OR CLAIMS A VIOLATIONOF THE EMPLOYMENT, CONFIDENTIAL INFORMATION, INVENTION ASSIGNMENT AGREEMENT BETWEENME AND THE COMPANY OR ANY OTHER AGREEMENT REGARDING TRADE SECRETS, CONFIDENTIALINFORMATION OR NONSOLICITATION. I UNDERSTAND THAT ANY BREACH OR THREATENED BREACH OFSUCH AN AGREEMENT WILL CAUSE IRREPARABLE INJURY AND THAT MONEY DAMAGES WILL NOTPROVIDE AN ADEQUATE REMEDY THEREFOR AND BOTH PARTIES HEREBY CONSENT TO THE ISSUANCEOF AN INJUNCTION. IN THE EVENT EITHER PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTYSHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS FEES. E.Administrative Relief. I UNDERSTAND THAT THIS AGREEMENT DOES NOTPROHIBIT ME FROM PURSUING AN ADMINISTRATIVE CLAIM WITH A LOCAL, STATE OR FEDERALADMINISTRATIVE BODY SUCH AS THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUALEMPLOYMENT OPPORTUNITY COMMISSION OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENTDOES, HOWEVER, PRECLUDE ME FROM PURSUING COURT ACTION REGARDING ANY SUCH CLAIM. F.Voluntary Nature of Agreement. I ACKNOWLEDGE AND AGREE THAT I AMEXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BYTHE COMPANY OR ANYONE ELSE. I FURTHER ACKNOWLEDGE AND AGREE THAT I HAVE CAREFULLYREAD THIS AGREEMENT AND THAT I HAVE ASKED ANY QUESTIONS NEEDED FOR ME TO UNDERSTANDTHE TERMS, CONSEQUENCES AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTAND IT,INCLUDING THAT I AM WAIVING MY RIGHT TO A JURY TRIAL. FINALLY, I AGREE THAT I HAVE BEENPROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF MY CHOICE BEFORE SIGNINGTHIS AGREEMENT. 11.General Provisions. A.Governing Law; Consent to Personal Jurisdiction. This Agreement will begoverned by the laws of the State of Connecticut. I hereby expressly consent to the personal jurisdiction of the state and federalcourts located in Connecticut for any lawsuit filed there against me by the Company arising from or relating to this Agreement.[***] Confidential Treatment RequestedC-5  B.Entire Agreement. This Agreement sets forth the entire agreement and understandingbetween the Company and me relating to the subject matter herein and supersedes all prior discussions or representations between usincluding, but not limited to, any representations made during my interview(s) or relocation negotiations, whether written or oral. Nomodification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless inwriting signed by the President of the Company and me. Any subsequent change or changes in my duties, salary or compensationwill not affect the validity or scope of this Agreement. C.Severability. If one or more of the provisions in this Agreement are deemedvoid by law, then the remaining provisions will continue in full force and effect. D.Successors and Assigns. This Agreement will be binding upon my heirs, executors,administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. Date: SignatureName of Employee (typed or printed) Witness: Signature Name (typed or printed) [***] Confidential Treatment RequestedC-6  EXHIBIT A LIST OF PRIOR INVENTIONSAND ORIGINAL WORKS OF AUTHORSHIP Title DateIdentifying Number or BriefDescription No inventions or improvements Additional Sheets Attached Signature of Employee:Print Name of Employee: Date: [***] Confidential Treatment Requested  EXHIBIT B CARA THERAPEUTICS, INC.TERMINATION CERTIFICATIONThis is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals,lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, orreproductions of any aforementioned items belonging to Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns(together, the “Company”). I further certify that I have complied with all the terms of the Company’s Employment, Confidential Information, InventionAssignment and Arbitration Agreement signed by me, including the reporting of any inventions and original works of authorship(as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement. I further agree that, in compliance with the Employment, Confidential Information, Invention Assignment, and ArbitrationAgreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating toproducts, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, otheroriginal works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any businessof the Company or any of its employees, clients, consultants or licensees. I further agree that for twelve (12) months from this date, I will not solicit, induce, recruit or encourage any of the Company’semployees to leave their employment. Date: (Employee’s Signature) (Type/Print Employee’s Name) [***] Confidential Treatment Requested  EXHIBIT C CARA THERAPEUTICS, INC.CONFLICT OF INTEREST GUIDELINESIt is the policy of Cara Therapeutics, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”) to conduct itsaffairs in strict compliance with the letter and spirit of the law and to adhere to the highest principles of business ethics. Accordingly,all officers, employees and independent contractors must avoid activities which are in conflict, or give the appearance of being inconflict, with these principles and with the interests of the Company. The following are potentially compromising situations whichmust be avoided. Any exceptions must be reported to the President and written approval for continuation must be obtained. 1.Revealing confidential information to outsiders or misusing confidential information. Unauthorizeddivulging of information is a violation of this policy whether or not for personal gain and whether or not harm to the Company isintended. (The Employment, Confidential Information, Invention Assignment and Arbitration Agreement elaborates on thisprinciple and is a binding agreement.) 2.Accepting or offering substantial gifts, excessive entertainment, favors or payments which may be deemedto constitute undue influence or otherwise be improper or embarrassing to the Company. 3.Participating in civic or professional organizations that might involve divulging confidentialinformation of the Company. 4.Initiating or approving personnel actions affecting reward or punishment of employees or applicants wherethere is a family relationship or is or appears to be a personal or social involvement. 5.Initiating or approving any form of personal or social harassment of employees. 6.Investing or holding outside directorship in suppliers, customers, or competing companies,including financial speculations, where such investment or directorship might influence in any manner a decision orcourse of action of the Company. 7.Borrowing from or lending to employees, customers or suppliers. 8.Acquiring real estate of interest to the Company. 9.Improperly using or disclosing to the Company any proprietary information or trade secrets of any formeror concurrent employer or other person or entity with whom obligations of confidentiality exist. 10.Unlawfully discussing prices, costs, customers, sales or markets with competing companies ortheir employees. [***] Confidential Treatment Requested 188021968 v7 11.Making any unlawful agreement with distributors with respect to prices. 12.Improperly using or authorizing the use of any inventions which are the subject of patent claims of anyother person or entity. 13.Engaging in any conduct which is not in the best interest of the Company. Each officer, employee and independent contractor must take every necessary action to ensure compliance with these guidelines andto bring problem areas to the attention of higher management for review. Violations of this conflict of interest policy may result indischarge without warning. [***] Confidential Treatment Requested  EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-3 No. 333-216657) of Cara Therapeutics Inc.(2)Registration Statement (Form S-3 No. 333-203072) of Cara Therapeutics Inc.(3)Registration Statement (Form S-8 No. 333-216606) of Cara Therapeutics Inc., pertaining to the 2014 Equity Incentive Plan of Cara Therapeutics Inc.(4)Registration Statement (Form S-8 No. 333-210096) of Cara Therapeutics Inc., pertaining to the 2014 Equity Incentive Plan of Cara Therapeutics Inc.(5)Registration Statement (Form S-8 No. 333-203057) of Cara Therapeutics Inc., pertaining to the 2014 Equity Incentive Plan of Cara Therapeutics Inc.,and(6)Registration Statement (Form S-8 No. 333-193905) pertaining to the 2004 Stock Incentive Plan, as amended, and 2014 Equity Incentive Plan;of our report dated March 12, 2019, with respect to the financial statements of Cara Therapeutics Inc., included in this Annual Report (Form 10-K) of CaraTherapeutics Inc., for the year ended December 31, 2018./s/ Ernst & Young LLPStamford, ConnecticutMarch 12, 2019 EXHIBIT 31.1 Certification of Chief Executive Officer Pursuant toRule 13a-14(a) under the Securities Exchange Actof 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Derek Chalmers, certify that: 1. I have reviewed this Annual Report on Form 10-K of Cara Therapeutics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: March 12, 2019By:/s/ Derek Chalmers DEREK CHALMERS, Ph.D., D.Sc. CHIEF EXECUTIVE OFFICER EXHIBIT 31.2 Certification of Chief Financial Officer Pursuant toRule 13a-14(a) under the Securities Exchange Actof 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Mani Mohindru, certify that: 1. I have reviewed this Annual Report on Form 10-K of Cara Therapeutics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting. Date: March 12, 2019By:/s/ Mani Mohindru MANI MOHINDRU, Ph.D. CHIEF FINANCIAL OFFICER EXHIBIT 32.1 CERTIFICATIONS OFCHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICEROF CARA THERAPEUTICS, INC.PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Cara Therapeutics, Inc. (the "Company") for the year ended December 31, 2018, as filed withthe Securities and Exchange Commission on the date hereof (the "Report"), Derek Chalmers, Ph.D., D.Sc., as Chief Executive Officer of the Company, andMani Mohindru, Ph.D., as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002, that, to the best of his or her knowledge, based upon a review of the Report: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ DEREK CHALMERSName: Derek Chalmers, Ph.D., D.Sc.Title: Chief Executive OfficerDate: March 12, 2019 /s/ MANI MOHINDRUName: Mani Mohindru, Ph.D.Title: Chief Financial OfficerDate: March 12, 2019 

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