Tvardi Therapeutics (TVRD) Risk Analysis

In June 2024, Cara announced that it was undertaking a comprehensive exploration of strategic alternatives focused on maximizing stockholder value, and in December 2024 announced entrance into the Merger Agreement with Tvardi. If the Merger is not consummated, the terms of any other strategic transaction that Cara might enter could result in the issuance of securities in the company, such as Cara's common stock, which could result significant dilution to Cara's stockholders. Additionally, in connection with such strategic alternatives, Cara may seek to finance its cash needs through a combination of equity offerings, debt financings, royalty arrangements, grants, license and development agreements in connection with any collaborations, and other financial instruments. Cara does not yet have any committed external source of funds. To the extent that Cara raises additional capital by issuing equity securities, Cara's existing stockholders' ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting Cara's ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Cara raises additional funds through strategic transactions, collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, Cara may have to relinquish valuable rights to its technologies, future revenue streams, research programs, product candidate or grant licenses on terms that may not be favorable to Cara. Any debt financing that Cara enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of Cara's assets as well as prohibitions on Cara's ability to create liens, pay dividends, redeem its stock or make investments.

The trading market for Cara's common stock is likely to be influenced by the research and reports that equity research analysts publish about Cara and its business. Cara does not have any control over the analysts or the content and opinions included in their reports. The price of Cara's stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. Certain equity research analysts who covered Cara has ceased coverage, and if further analysts who cover Cara were to cease coverage of the company or fail to publish reports on Cara regularly, demand for Cara's stock could decrease, which in turn could cause Cara's stock price or trading volume to decline.

Since Cara's initial public offering in January 2014, Cara's stock price has been volatile and it is likely that the trading price of its common stock will continue to be volatile. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for Cara's common stock may be influenced by many factors, including: - the outcome of Cara's exploration of strategic alternatives;- actual or anticipated variations in quarterly or annual operating results;- failure to meet or exceed financial projections Cara provides to the public;- failure to meet or exceed the estimates and projections of the investment community, including securities analysts;- announcements by Cara or Cara's competitors of significant acquisitions, strategic partnerships, or divestitures;- introduction of competitive products or technologies;- the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;- general trends in Cara's industry or economic and market conditions and overall fluctuations in U.S. equity markets;- developments concerning Cara's 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 Cara's operations or lawsuits filed against it;- capital commitments;- investors' general perception of the company and its business;- announcements and expectations of additional financing efforts, including the issuance of debt, equity or convertible securities or other security instruments;- sales of Cara's common stock, including sales by its directors and officers or significant stockholders;- changes in the market valuations of companies similar to Cara;- should Cara resume development activities in the future, (i) changes or developments in laws or regulations applicable to such product candidate;(ii) delays in the commencement, enrollment and ultimate completion of any clinical trials; (iii) results of any clinical trials or those of Cara's competitors; or (iv)any delay or refusal on the part of the FDA or other regulatory authorities in approving marketing authorization for any potential product candidate;- changes in the structure of healthcare payment systems; 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 experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors, such as those related to fluctuations in inflation and interest rates and concerns of a recession in the United States or other major markets, the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide, and geopolitical instability, including resulting from the ongoing conflicts between Russia and Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan, may negatively affect the market price of Cara's common stock, regardless of Cara's actual operating performance. Further, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies' stock. Such litigation, if instituted against Cara, could cause Cara to incur substantial costs and divert management's attention and resources from its business.

Cara's common stock is currently listed on Nasdaq under the symbol "CARA." To maintain the listing of its common stock on the Nasdaq Capital Market, Cara is required to meet certain listing requirements, including, among others, maintaining a minimum closing bid price of $1.00 per share. On February 1, 2024, Cara received a letter from the Listing Qualifications Department, or the Staff, of Nasdaq, notifying Cara that, for the previous 30 consecutive business day period prior to the date of the letter, the closing bid price for Cara's common stock was below $1.00. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) Cara was provided an initial period of 180 calendar days, or until July 30, 2024, to regain compliance with Nasdaq's bid price requirement. On July 31, 2024, Cara received a notice, or the Extension Notice, from the Staff granting Cara an additional 180 calendar days, or until January 27, 2025, to regain compliance with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under the under Nasdaq Listing Rule 5550(a)(2), or the Minimum Bid Price Requirement. Effective as of August 1, 2024, the listing of Cara's common stock was transferred from the Nasdaq Global Market to the Nasdaq Capital Market. As part of Cara's plans to regain compliance with the Minimum Bid Price Requirement following the initial notification letter, a series of alternate amendments to effect (i) a reverse stock split and (ii) a reduction in the total number of authorized shares of the Cara's common stock was approved by Cara's stockholders at the Company's 2024 Annual Meeting of Stockholders held on June 4, 2024. On December 19, 2024, Cara's Board approved a one-for-twelve (12) reverse stock split and corresponding reduction in the total number of authorized shares. On December 30, 2024, Cara filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the reverse stock split, and Cara's common stock began trading on the Nasdaq Capital Market on a post-split basis as of December 31, 2024. On January 16, 2025, Cara received a letter from the Staff notifying the company that Cara had regained compliance with the minimum bid price requirement. The closing bid price of the Company's common stock was at or above $1.00 per share for ten consecutive business days, and Nasdaq considers the matter closed. Separately, Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain shareholders' equity of at least $2.5 million, or the Stockholders' Equity Requirement, or the alternative requirements of having a market value of listed securities of $35.0 million or net income from continuing operations of $0.5 million in the most recently completed fiscal year or two of the last three most recently completed fiscal years, or the Alternative Standards. On November 19, 2024, Cara received a letter from the Staff notifying the company that Cara was not in compliance with the Stockholders' Equity Requirement because Cara's stockholders' equity of $707,000, as reported in Cara's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, was below the required minimum of $2.5 million and Cara did not meet the Alternative Standards. As of December 31, 2024, Cara had negative stockholders' equity of $4.6 million and therefore is not in compliance with the Stockholders' Equity Requirement and, as of December 31, 2024, Cara did not meet the Alternative Standards. As requested by the Staff, Cara subsequently submitted a plan to require compliance to Nasdaq, or the Compliance Plan. Based on the Compliance Plan, which contemplates the closing of the Merger, on January 14, 2025, Nasdaq granted Cara an extension until May 19, 2025 to regain compliance with the Stockholders' Equity Requirement. The Merger will constitute a "change of control" for purposes of Nasdaq's listing rules and will require that the combined company comply with all applicable criteria for initial listing on the Nasdaq Capital Market, including a higher minimum bid price requirement and higher minimum stockholders' equity requirement. The parties intend to satisfy each of the applicable listing criteria upon completion of the proposed Merger such that the combined company will remain listed on the Nasdaq Capital Market. While Cara is making every effort to regain compliance prior to the extended deadline, there can be no assurance that Cara will be able to regain compliance within the extension period, by consummation of the Merger or otherwise, or will otherwise be in compliance with other Nasdaq listing criteria, including remaining in compliance with the minimum bid price requirement. If the Nasdaq Capital Market delists Cara's securities from trading on its exchange for failure to meet the listing standards, Cara and its stockholders could face significant negative consequences including: reducing the liquidity and market price of its common stock; reducing the number of investors willing to hold or acquire its common stock, which could negatively impact Cara's ability to raise equity financing; decreasing the amount of news and analyst coverage of Cara; and limiting Cara's ability to issue additional securities or obtain additional financing in the future. In addition, delisting from Nasdaq may negatively impact Cara's reputation and, consequently, its business.

Cara is currently subject to certain contractual and regulatory obligations and commitments. In connection with its comprehensive exploration of strategic alternatives, Cara may seek to negotiate with third parties in order to reduce or eliminate such obligations and commitments. For example, on December 17, 2024, Cara and its subsidiary, Cara Royalty Sub, LLC (Cara Royalty Sub, and together with Cara, each, a Seller and together, the Sellers), entered into the APA with CSL Vifor, pursuant to which, at the consummation of the transaction, Sellers will sell to CSL Vifor and CSL Vifor will acquire from Sellers certain assets and rights for the development, manufacture and commercialization of difelikefalin as well as certain associated liabilities, or the Asset Disposition. Pursuant to the APA, in connection with the consummation of the Asset Disposition, CSL Vifor and HCR have entered into a letter agreement with Cara providing that CSL Vifor and HCR will, subject to the satisfaction of conditions to closing under the APA, enter into an amended and restated purchase agreement to amend and replace the Original HCR Agreement, by and among Cara Royalty Sub, HCRX Investments HoldCo, L.P. and HCR. Upon entering into the amended and restated purchase agreement, effective as of the closing of the Asset Disposition: (i) CSL Vifor will be obligated to make certain payments to HCR from and after the date thereof relating to certain revenue and/or royalties from difelikefalin, (ii) each of the Contribution Agreement, the License Agreement and the Pledge Agreement (each as defined in the Original HCR Agreement) shall be terminated, and (iii) Sellers shall have no further payment or other obligations to HCR under the Original HCR Agreement. Additionally, pursuant to the APA, at the consummation of the Asset Disposition, Cara has agreed to pay CSL Vifor $3.0 million to compensate CSL Vifor for the estimated incremental future expenses to be incurred by CSL Vifor as a result of the transfer of the assets to be acquired and the liabilities to be assumed by it in connection with the Asset Disposition. The Asset Disposition is subject to certain conditions to closing, including either (i) the consummation of the Merger concurrently with the Asset Disposition or (ii) the receipt of the requisite stockholder approval needed to approve the Asset Disposition in the event that the Merger is terminated. The APA provides for certain termination rights of Sellers and CSL Vifor, including the right of either CSL Vifor or Cara to terminate the APA if (a) there is a permanent and nonappealable prohibition on the consummation of the Asset Disposition, (b) the Asset Disposition has not occurred by June 30, 2025 (which date shall be automatically extended in one-month increments until October 30, 2025 in certain instances if the Merger is not closed by June 30, 2025) or (c) if a meeting of Cara's stockholders has been held for the stockholders to consider and vote upon the APA and the Asset Disposition and the stockholders have not voted in favor of adopting the APA and approving the Asset Disposition at such stockholder meeting. Either party may also terminate the APA if the other party breaches its obligations under the APA in certain instances and subject to customary cure protections. The APA contains representations, warranties, and covenants of the parties, including, among others, a covenant that requires (i) Sellers to operate their business in the ordinary course during the period between the execution of the APA and consummation of the Asset Disposition and to not engage in certain kinds of activities or transactions during such period (subject to either prior consent of CSL Vifor or customary limited exceptions), (ii) the parties to use their reasonable best efforts to complete certain transition steps in connection with the consummation of the Asset Disposition, and (iii) Sellers to use their commercially reasonable efforts to obtain any needed consents and provide any needed notices in connection with the Asset Disposition. Cara currently has license agreements with Maruishi Pharmaceutical Co., Ltd. (Maruishi), and Chong Kun Dang Pharmaceutical Corporation (CKDP), for the intravenous and oral formulations of difelikefalin, and manufacturing agreements with Polypeptide Laboratories S.A. (PPL) and Patheon UK Limited (Patheon) for the difelikefalin injection. Cara expects to assign these agreements with each of Maruishi, CKDP, PPL and Patheon to CSL Vifor in connection with the Merger and Asset Disposition. Cara's ability to successfully negotiate such obligations or commitments on favorable terms, or at all, or Cara's ability to satisfy any such obligations may impact Cara's ability to pursue or implement a strategic transaction on terms favorable to Cara, the resulting value to stockholders in a strategic transaction or the cash available for distribution to Cara's stockholders in the event of its dissolution. Cara may also incur substantial costs in connection with or as a result of such negotiations or termination of any of its commitments. There can be no assurance that Cara will be successful in negotiating to reduce or eliminate any of its existing contractual or regulatory obligations and commitments, or that Cara will be able to satisfy any such obligations on a timetable that will allow Cara to maximize potential value to its stockholders.

Currently, Cara's common stock is publicly traded on The Nasdaq Capital Market. In connection with the proposed Merger, Tvardi will file an initial listing application with Nasdaq pursuant to Nasdaq's "reverse merger" rules. The combined company will be required to meet the initial listing requirements for its securities to be listed on Nasdaq. If Cara and Tvardi fail to meet the Nasdaq listing requirements and their respective boards choose to close the merger without Nasdaq's approval, then Nasdaq may notify the combined company of its determination to delist the company's securities based upon the failure to satisfy the criteria in the Nasdaq application. For more information, refer to the section titled "Risk Factors Related to the Merger-Cara or Tvardi may waive one or more of the conditions to the Merger without recirculation of the proxy statement/prospectus or resoliciting stockholder approval". We cannot assure you that the combined company will be able to meet those initial listing requirements. Even if the combined company's securities are so listed, the combined company may be unable to maintain the listing of its securities in the future. In order to continue listing its securities on Nasdaq following the proposed Merger, the combined company will be required to maintain certain financial, distribution and stock price levels. If Nasdaq delists the combined company's securities from trading on its exchange at closing of the Merger (or thereafter) and the combined company is not able to list its securities on another national securities exchange or regain compliance with Nasdaq, the combined company's securities could be quoted on an over-the-counter market. If this were to occur, the combined company could face significant material adverse consequences, including: - a limited availability of market quotations for its securities;- reduced liquidity for its securities;- a determination that the combined company's common stock is a "penny stock" which will require brokers trading in the combined company's common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;- a limited amount of news and analyst coverage; and - a decreased ability to issue additional securities or obtain additional financing in the future. The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts states from regulating the sale of certain securities, which are referred to as "covered securities." Since Cara's common stock is listed on Nasdaq, they are covered securities. Although states are preempted from regulating the sale of covered securities, the federal statute does allow states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then states can regulate or bar the sale of covered securities in a particular case. If Cara was no longer listed on Nasdaq, its securities would not be covered securities and it would be subject to regulation in each state in which it offers its securities, including in connection with the Merger.

According to SEC guidance, the requirements applicable to reporting shell company business combinations apply to any company that sells or otherwise disposes of its historical assets or operations in connection with or as part of a plan to combine with a non-shell private company in order to convert the private company into a public one. Cara has suspended its development activities and, as such, Cara's plan to merge with Tvardi, resulting in the conversion of Tvardi into a public company, will be subject to the SEC requirements applicable to reporting shell company business combinations, which are as follows: - the combined company will need to file a Current Report on Form 8-K to report the Form 10 type information (Super 8-K) after the closing of the Merger reflecting its status as an entity that is not a shell company;- the combined company will not be eligible to use a Form S-3 until 12 full calendar months after the closing of the Merger;- the combined company will need to wait at least 60 calendar days after the filing of the Super 8-K to file a Form S-8 for any equity plans or awards, such as the 2025 Equity Plan and the 2025 Employee Stock Purchase Plan;- the combined company will be an "ineligible issuer" for three years following the closing of the Merger, which will prevent the combined company from (i) incorporating by reference in its Form S-1 filings, (ii) using a free writing prospectus or (iii) taking advantage of the well-known seasoned issuer (WKSI) status despite its public float;- investors who (i) were affiliates of Tvardi at the time the Merger was submitted for the vote or consent of Tvardi's stockholders, (ii) receive securities of the combined company in the Merger and (iii) publicly offer or sell such securities will be deemed to be engaged in a distribution of such securities, and therefore would be underwriters with respect to resales of those securities, and accordingly such securities may not be included in any resale shelf registration statement unless such securities are sold only in a fixed price offering in which such investors are named as underwriters in the prospectus; and - Rule 144(i)(2) will limit the ability of holders of restricted securities and any affiliates of the public company to publicly resell Rule 145(c) securities per Rule 145(d), as well as any other "restricted" or "control" securities of the combined company per Rule 144, until one year after the Form 10 information is filed with the SEC. Non-affiliate Cara Stockholders prior the Mergers will not be subject to such restrictions on public resales of their shares. The foregoing SEC requirements will increase the combined company's time and cost of raising capital, offering stock under equity plans, and complying with securities laws. Furthermore, such requirements will add burdensome restrictions on the resale of the combined company common stock by affiliates of Tvardi and any holders of "restricted" or "control" securities of the combined company.

A significant portion of the combined company's securities will be restricted from immediate resale. Holders should be aware that transfers of Cara's securities pursuant to Rule 144 under the Securities Act (Rule 144) may be limited as Rule 144 is not available, subject to certain exceptions, for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have previously been a shell company. Cara's winddown of its historical operations, the suspension of development activities and the proposed Merger will make Cara subject to the SEC requirements applicable to reporting shell company business combinations. Cara anticipates that following the consummation of the proposed transaction, the combined company will no longer be a shell company. As a result, Cara anticipates that holders will not be able to sell their restricted combined company securities pursuant to Rule 144 without registration until one year after the combined company files the Current Report on Form 8-K following the closing that includes the required Form 10 type information that reflects that the combined company is no longer a shell company.

Conditions to Cara's or Tvardi's obligations to complete the Merger may be waived, in whole or in part, to the extent permitted by law, in certain circumstances unilaterally or by agreement of Cara and Tvardi. In the event of a waiver of a condition, the Cara Board will evaluate the materiality of any such waiver to determine whether amendment of the proxy statement/prospectus and resolicitation of stockholder approval is necessary. In the event that the Cara Board, in its own reasonable discretion, determines any such waiver is not significant enough to require recirculation of this proxy statement/prospectus and re-solicitation of its stockholders, it will have the discretion to complete the Merger without seeking further stockholder approval, which decision may have a material adverse effect on the Cara stockholders. For example, if Cara and Tvardi agree to waive the requirement that the shares of Cara common stock to be issued in the Merger have been approved for listing (subject to official notice of issuance) on Nasdaq as of the closing of the Merger, and their respective boards of directors elect to proceed with the closing of the Merger, Nasdaq may notify the combined company of its determination to delist the company's securities based upon the failure to satisfy the initial inclusion criteria in the Nasdaq application. The combined company may appeal the determination to a hearings panel but such appeal will not stay the suspension and delisting action and Nasdaq may notify the combined company that its common stock will be immediately suspended from trading and delisted. In addition, in order to meet the initial listing requirements of Nasdaq, Cara may release Tvardi stockholders from their Lock-Up Agreements and waive the requirement that such Lock-Up Agreements be in full force and effect immediately following the Effective Time. Such release would increase the number of shares that may be sold in the public market immediately after the Merger and any such sales could cause the combined company's stock price to decline.

The outstanding common stock of Tvardi is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Tvardi's common stock. Because the percentage of Cara equity to be issued to Tvardi stockholders was determined based on negotiations between the parties, it is possible that the value of the Cara common stock to be received by Tvardi stockholders will be less than the fair market value of Tvardi's common stock, or Cara may pay more than the aggregate fair market value for Tvardi's common stock.

Immediately following the Merger, the pre-Merger equity holders of Cara are expected to hold approximately 15.25% of the outstanding shares of Cara common stock, the pre-Merger equity holders of Tvardi are expected to hold approximately 72.21% of the outstanding shares of Cara common stock, and the holders of the Convertible Notes are expected to hold approximately 12.54% of the shares of Cara common stock, in each case, on a fully diluted basis (subject to further adjustment as further described below), subject to certain adjustments, including based upon Cara's net cash at the closing of the Merger. The calculation of Cara's net cash at the closing of the Merger includes, among other things, a credit or reduction for cash proceeds that Cara receives or pays from the Asset Disposition. The Net Cash Condition means that Cara's net cash must be no less than $18.0 million in order for Tvardi to be required to complete the Merger. Following the Closing, Sujal Shah will serve as Chairman and Imran Alibhai will serve as the Chief Executive Officer of Cara as the combined company. Additionally, following the closing, the combined company board of directors will consist of seven directors, and will be comprised of five members designated by Tvardi (Sujal Shah, Michael Wyzga, Wallace Hall, Shaheen Wirk and Imran Alibhai), one member to be designated by Cara prior to Closing and one vacancy, to be designated by Tvardi if prior to the closing of the Merger or by the combined company if following the consummation of the Merger.

The market price of Cara common stock may decline as a result of the Merger for a number of reasons, including if: - investors react negatively to the prospects of the combined company's business and prospects following the closing of the Merger;- the effect of the Merger on the combined company's business and prospects following the closing of the Merger is not consistent with the expectations of financial or industry analysts; or - the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by stockholders or financial or industry analysts, or at all.

Some officers and directors of Cara are parties to arrangements that provide them with interests in the Merger that are different from the stockholders of Cara, including some or all of service as an officer or director of the combined company following the closing of the Merger, severance and retention benefits, the acceleration of equity award vesting and continued indemnification.

Each outstanding share of Tvardi common stock (after giving effect to the conversion of preferred stock and excluding shares held by stockholders who have exercised and perfected appraisal rights and excluding shares held as treasury stock by Cara or held or owned by Cara, Merger Sub or any subsidiary of Cara or Tvardi), will be converted into the right to receive a number of shares of Cara common stock based on an exchange ratio. The exchange ratio will not change based on changes in the trading price of Cara common stock. Therefore, if before the completion of the Merger, the market price of Cara common stock increases from the market price on the date of the Merger Agreement, Tvardi stockholders could then receive merger consideration with substantially higher value for their shares of Tvardi common stock than the parties had negotiated when they established the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Immediately following the Merger, the pre-Merger equity holders of Cara are expected to hold approximately 15.25% of the shares of Cara common stock, the pre-Merger equity holders of Tvardi are expected to hold approximately 72.21% of the shares of Cara common stock, and the holders of the Convertible Notes are expected to hold approximately 12.54% of the shares of Cara common stock, in each case, on a fully diluted basis (subject to further adjustment as further described below), subject to certain adjustments, including based upon Cara net cash at the closing of the Merger. The calculation of Cara's net cash at closing of the Merger includes, among other things, a credit or reduction for cash proceeds that Cara receives or pays from the Asset Disposition. The Net Cash Condition means that Cara's net cash must be no less than $18.0 million in order for Tvardi to be required to complete the Merger.

For purposes of the Merger Agreement, net cash is subject to certain reductions, including, without limitation, for payments made in connection with the sale, transfer, license, assignment or other divestiture of its intellectual property and other assets and technology in existence on the date of the Merger Agreement on or about the anticipated closing of the Merger, accounts payable, accrued expenses (except those related to the Merger), current liabilities payable in cash, unpaid expenses related to the Merger and certain other unpaid obligations. In the event the amount of Cara's cash is smaller or such reductions are greater than anticipated, Cara stockholders could hold a significantly smaller portion of the combined company.

The Cara Board has not obtained an updated opinion either as of the date of the Annual Report on Form 10-K or as of any other date subsequent to the date of the Piper Sandler Opinion from Piper Sandler, Cara's financial advisor. Changes in circumstances, including without limitation the operations and prospects of Cara or Tvardi, stock prices, general market and economic conditions and other factors, some or all of which may be beyond the control of Cara and Tvardi, are not reflected in the Piper Sandler Opinion. The Piper Sandler Opinion does not speak as of any date other than the date thereof.

Cara is a biopharmaceutical company. Until recently, Cara had focused its efforts primarily on developing KORSUVA injection, Kapruvia and oral difelikefalin for a number of indications with the goal of achieving regulatory approval and, more recently, commercializing KORSUVA injection and Kapruvia. However, the commercial launches of KORSUVA injection and Kapruvia did not achieve meaningful success and, in January 2024, Cara made the strategic decision to focus its efforts on developing oral difelikefalin for the treatment of pruritus associated with NP. In June 2024, Cara discontinued the clinical program in NP following the outcome from the dose-finding Part A of the KOURAGE-1 study evaluating the efficacy and safety of oral difelikefalin for moderate-to-severe pruritus in adult patients with NP in which oral difelikefalin did not demonstrate a meaningful clinical benefit at any dose compared to placebo. At that time, Cara announced it would conduct a comprehensive exploration of strategic alternatives focused on maximizing stockholder value and in December 2024 Cara announced its proposed merger with Tvardi. Since inception, Cara has incurred significant operating and net losses. Cara incurred net losses of $70.9 million, $118.5 million and $85.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, Cara had an accumulated deficit of $755.6 million. In connection with the termination of all ongoing clinical programs noted above, Cara's research and development expenses have decreased. Cara expects to continue to incur costs and expenditures in connection with the merger process. There can be no assurance that the proposed merger with Tvardi, or any other course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value. Further, if Cara does not obtain additional funding and/or if a strategic transaction is not completed and Cara is unable to continue as a going concern, Cara may have to liquidate its assets and the values Cara receives for the assets in liquidation or dissolution could be significantly lower than the values reflected in Cara's consolidated financial statements. Should Cara resume development activities in the future, Cara expects that research and development costs would increase significantly and Cara would continue to incur significant expenses and operating and net losses, as Cara develops and seeks regulatory approval for such product candidates. Cara's financial results may fluctuate significantly from year to year, depending on whether Cara resumes development of its product candidate or any future product candidates, the timing of any clinical trials, the receipt of payments under any future agreements Cara may enter into, and its expenditures on other R&D activities as well as any payments owed under the License Agreement with Enteris and any future similar agreements. Should Cara resume development activities in the future, Cara expects it would continue to incur significant losses for the foreseeable future as it: - continues the development of any product candidate;- seeks regulatory approvals for any product candidate that successfully completes clinical trials;- establishes a sales, marketing and distribution infrastructure in the United States and scales up external manufacturing capabilities to commercialize any products for which Cara may obtain regulatory approval;- maintains, expands and protects its global intellectual property portfolio;- hires additional clinical, quality control and scientific personnel; and - adds operational, financial and management information systems and personnel, including personnel to support Cara's drug development and potential future commercialization efforts. Revenues from KORSUVA injection will not be sufficient to enable Cara to reach profitability. To become and remain profitable from product sales, Cara must succeed in developing and eventually commercializing one or more products that generate significant revenue. In order to commercialize any product candidate, Cara will need to be successful in a range of challenging activities, including, should Cara resume the development of its product candidate or any future product candidate, successful registration of oral difelikefalin, discovering, developing, licensing or acquiring additional product candidates and completing preclinical testing and clinical trials for those product candidates, potentially entering into collaboration and license agreements, obtaining regulatory approval for product candidates and manufacturing, marketing and selling approved products and product candidates for which Cara may obtain regulatory approval. Cara may never succeed in these activities and, even if Cara does, may never achieve profitability. Because of the numerous risks and uncertainties associated with pharmaceutical product development, Cara is unable to accurately predict the timing or amount of increased expenses or when, or if, should Cara resume development activities in the future, Cara will be able to achieve profitability. If Cara is required by the FDA or foreign regulatory authorities, to perform studies in addition to those expected, or if there are any delays in completing Cara's clinical trials or the development of Cara's product candidate, Cara's expenses could increase. Even if Cara does achieve profitability from product sales, Cara may not be able to sustain or increase profitability on a quarterly or annual basis. Cara's failure to become and remain profitable would depress the value of the company and could impair Cara's ability to raise capital, expand its business, should Cara resume the development of its product candidate or any future product candidate, maintain its R&D efforts and diversify its product offerings, or even continue its operations. A decline in the value of the company could also cause you to lose all or part of your investment.

A portion of Cara's net operating loss, or NOL, carryforwards and R&D tax credits may expire and not be used. As of December 31, 2024, Cara had federal and state NOL carryforwards of approximately $475.4 million and $403.1 million, respectively, and Cara also had federal and state R&D tax credit carryforwards of approximately $28.6 million and $4.4 million, respectively. Cara's NOL carryforwards will begin expiring in 2026 for federal purposes (to the extent such federal NOLs are generated in taxable years beginning on or before December 31, 2017) and 2027 for state purposes if Cara has not used them prior to that time, and Cara's federal R&D tax credits will begin expiring in 2025 unless previously used. The federal NOLs arising in 2018 and forward have an unlimited carryforward period and losses from 2018-2020 may be carried back five years due to the Coronavirus Aid, Relief, and Economic Security Act of 2020, or the CARES Act. It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act of 2017, or TCJA, as modified by the CARES Act. To the extent that Cara has not exchanged its Connecticut R&D tax credits for a tax refund, those tax credits carry forward indefinitely. Additionally, Cara's ability to use any NOL and R&D tax credit carryforwards to offset taxable income or tax, respectively, in the future will be limited under Internal Revenue Code Sections 382 and 383, respectively, if Cara has a cumulative change in ownership of Cara's stock of more than 50% within a three-year period. The completion of Cara's initial public offering in 2014 and Cara's follow-on public offerings in 2015, 2017, 2018 and 2019, together with private placements and other transactions that have occurred, may have triggered such ownership changes. Cara conducted a 382 analysis in the first quarter of 2021. This analysis showed a limited change of ownership had occurred, and 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. In addition, since Cara will need to raise substantial additional funding to finance its operations, Cara may undergo ownership changes in the future. The Merger, if consummated, may also constitute an ownership change (within the meaning of Section 382 of the Code). Any such annual limitation may significantly reduce the utilization of the NOL carryforwards and R&D tax credits before they expire. In addition, certain states have in the past suspended use of NOL carryforwards for certain taxable years (including Connecticut which currently limits the use of NOL carryforwards by 50% and California, which recently enacted legislation that temporarily suspends the use of California NOLs for three years beginning on or after January 1, 2024), and other states are considering similar measures. As a result, Cara may incur higher state income tax expense in the future. Depending on Cara's future tax position, limitations on its ability to use NOL carryforwards in states in which Cara is subject to income tax could have an adverse impact on Cara's results of operations and financial condition.

Cara is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 and the rules and regulations of Nasdaq. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, Cara is required to perform system and process evaluation and testing of its internal control over financial reporting to allow its management to report on the effectiveness of its internal control over financial reporting and, in the past, Cara has also previously been required to have its independent registered public accounting firm issue an opinion on the effectiveness of its internal control over financial reporting on an annual basis as a large accelerated filer. However, based on Cara's public float as of June 30, 2024, the company remained qualified as a non-accelerated filer at the end of 2024, which would allow it to forgo the auditor attestation requirement. While Cara has previously voluntarily complied with the auditor attestation requirement when it qualified as a non-accelerated filer in 2023, it has forgone the auditor attestation for the fiscal year ended December 31, 2024. During the evaluation and testing process, if Cara identifies one or more material weaknesses in its internal control over financial reporting, Cara will be unable to assert that its internal control over financial reporting is effective. Further, Cara may in the future discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. Moreover, Cara's internal controls over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. Moreover, Cara is aware that the increased prevalence of remote working arrangements potentially presents additional areas of risk, including cyber and privacy risks, and Cara is carefully monitoring any impact to its internal controls and procedures. If Cara is unable to assert that its internal control over financial reporting is effective, investors could lose confidence in the reliability of Cara's consolidated financial statements, the market price of Cara's stock could decline and Cara could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Cara expects its operating results to be subject to quarterly fluctuations. Cara's operating results will be affected by numerous factors, including: - Cara's exploration of strategic alternatives to maximize stockholder value, including whether Cara is able to implement any strategic alternatives, in a timely manner or at all, whether Cara realizes all or any of the anticipated benefits of any such transaction and whether any such transactions would generate value for Cara's stockholders;- should Cara resume development of its product candidate or any future product candidate, the successful progress of any clinical trials for such product candidates;- should Cara resume development of activities in the future, variations in the level of expenses related to Cara's future development programs;- should Cara resume development of its product candidate or any future product candidate, whether the FDA or other regulatory authorities require Cara to complete additional, unanticipated studies, tests or other activities prior to approving any product candidates, which would likely further delay any such approval;- should Cara resume development of its product candidate or any future product candidate, Cara's ability to identify, enter into and maintain third party manufacturing arrangements capable of manufacturing any potential product candidate in commercial quantities;- Cara's execution of other collaborative, licensing or similar arrangements and the timing of payments Cara may make or receive under these arrangements;- any product liability or intellectual property infringement lawsuit in which Cara may become involved;- regulatory developments affecting any potential product candidates, or the product candidates of Cara's competitors; and - if any potential product candidate receives regulatory approval, the level of underlying demand for such product and wholesaler buying patterns. If Cara's quarterly or annual operating results fall below the expectations of investors or securities analysts, the price of Cara's common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in Cara's operating results may, in turn, cause the price of Cara's stock to fluctuate substantially. Cara believes that quarterly comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of its future performance.

Cara has never declared or paid any cash dividends on its capital stock. Cara currently intends to retain all available funds and any future earnings to support its operations and finance the growth and development of Cara's business and does not anticipate declaring or paying any cash dividends on its common stock for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, if any. Investors seeking cash dividends should not purchase its common stock.

During the fourth quarter of 2023, Cara, through Cara Royalty Sub, entered into the Original HCR Agreement with HCR, pursuant to which Cara Royalty Sub sold, or agreed to sell, to HCR the Royalties under the Covered License Agreements, in exchange for up to $40.0 million. Cara has retained all of its rights, title and interest in, to and under the Covered License Agreements that relate to any non-intravenous formulation of difelikefalin. Under the terms of the Original HCR Agreement, Cara received an initial payment of $17.5 million less certain transaction costs in November 2023. In December 2023, Cara received an additional $20.0 million less certain advisory fees, upon satisfying the milestone event for pricing for Kapruvia (difelikefalin) in Germany being approved above a certain threshold amount per dose. The terms of the Original HCR Agreement also provide for an additional $2.5 million milestone payment to Cara Royalty Sub upon achievement of a 2024 sales milestone of KORSUVA in Japan, which was achieved in the fourth quarter of 2024 and is expected to be paid in the first quarter of 2025. On December 17, 2024, the Sellers entered into the APA with CSL Vifor, pursuant to which, at the consummation of the transaction, Sellers will sell to CSL Vifor and CSL Vifor will acquire from Sellers certain assets and rights for the development, manufacture and commercialization of difelikefalin as well as certain associated liabilities, or the Asset Disposition, for a purchase price of $900,000 (subject to certain adjustments with respect to inventory). Pursuant to the APA, in connection with the consummation of the Asset Disposition, CSL Vifor and HCR have entered into a letter agreement with Cara providing that CSL Vifor and HCR will, subject to the satisfaction of conditions to closing under the APA, enter into an amended and restated purchase agreement to amend and replace the Original HCR Agreement. Upon entering into the amended and restated purchase agreement, effective as of the closing of the Asset Disposition: (i) CSL Vifor will be obligated to make certain payments to HCR from and after the date thereof relating to certain revenue and/or royalties from difelikefalin, (ii) each of the Contribution Agreement, the License Agreement and the Pledge Agreement (each as defined in the Original HCR Agreement) shall be terminated, and (iii) Sellers shall have no further payment or other obligations to HCR under the Original HCR Agreement. Additionally, pursuant to the APA, at the consummation of the Asset Disposition, Cara has agreed to pay CSL Vifor $3.0 million to compensate CSL Vifor for the estimated incremental future expenses to be incurred by CSL Vifor as a result of the transfer of the assets to be acquired and the liabilities to be assumed by it in connection with the Asset Disposition. The Asset Disposition is subject to certain conditions to closing, including either (i) the consummation of the Merger concurrently with the Asset Disposition or (ii) the receipt of the requisite stockholder approval needed to approve the Asset Disposition in the event that the Merger is terminated. The APA provides for certain termination rights of Sellers and CSL Vifor, including the right of either CSL Vifor or Cara to terminate the APA if (a) there is a permanent and nonappealable prohibition on the consummation of the Asset Disposition, (b) the Asset Disposition has not occurred by June 30, 2025 (which date shall be automatically extended in one-month increments until October 30, 2025 in certain instances if the Merger is not closed by June 30, 2025) or (c) if a meeting of Cara's stockholders has been held for the stockholders to consider and vote upon the APA and the Asset Disposition and the stockholders have not voted in favor of adopting the APA and approving the Asset Disposition at such stockholder meeting. Either party may also terminate the APA if the other party breaches its obligations under the APA in certain instances and subject to customary cure protections. The APA contains representations, warranties, and covenants of the parties, including, among others, a covenant that requires (i) Sellers to operate their business in the ordinary course during the period between the execution of the APA and consummation of the Asset Disposition and to not engage in certain kinds of activities or transactions during such period (subject to either prior consent of CSL Vifor or customary limited exceptions), (ii) the parties to use their reasonable best efforts to complete certain transition steps in connection with the consummation of the Asset Disposition, and (iii) Sellers to use their commercially reasonable efforts to obtain any needed consents and provide any needed notices in connection with the Asset Disposition. If the above transactions are not approved/consummated, the Original HCR Agreement will automatically expire, and the payment of Royalties to HCR will cease, when HCR has received payments of Royalties equal to two times the aggregate amount of payments made by HCR under the Original HCR Agreement if achieved on or prior to December 31, 2029, or 2.8 times the aggregate amount of payments made by HCR under the Original HCR Agreement, if the 2029 Threshold is not achieved on or prior to December 31, 2029. In the event of a change of control, Cara Royalty Sub will pay to HCR an amount equal to 2.8 times the aggregate amount of payments made by HCR less the total net amounts paid by Cara Royalty Sub to HCR as of the effective date of control. In certain situations, Cara Royalty Sub would not be obligated to pay the change of control payment to HCR. After the Original HCR Agreement expires, all rights to receive the Royalties return to Cara Royalty Sub. In connection with the HCR Agreement, Cara entered into a Contribution and Servicing Agreement which contains various representations and warranties, covenants, indemnification obligations and other provisions related to the contribution of the Covered License Agreement to Cara Royalty Sub and its maintenance and servicing obligations with respect to the Royalties and the Covered License Agreements. In the event Cara violates these covenants or provisions, Cara may lose the right to act as the servicer of Cara Royalty Sub and a third-party servicer may be appointed at Cara Royalty Sub's expense. Cara's replacement as servicer, if it were to occur, could have a material adverse effect on Cara's financial condition as HCR, by virtue of owning Cara Royalty Sub, would own the Royalties. In connection with the Original HCR Agreement, Cara also entered into a Pledge and Security Agreement containing various representations, warranties and covenants, and a limited recourse guaranty of Cara Royalty Sub's obligations under the Purchase and Sale Agreement which is secured by the pledge in favor of HCR all of the capital stock of Cara Royalty Sub. HCR is entitled to foreclose on the capital stock of Cara Royalty Sub following the occurrence of certain remedies events, including, without limitation, a bankruptcy of Cara or the failure of Cara to perform its obligations under the Contribution and Servicing Agreement. Such foreclosure, if it were to occur, could have a material adverse effect on Cara's financial condition as HCR, by virtue of owning Cara Royalty Sub, would own the Royalties.

The Cara Board remains dedicated to diligent deliberations and the making of informed decisions that the directors believe are in the best interests of the company and its stockholders. There can be no assurance, however, that the company's current strategic direction, or the Cara's Board's evaluation of strategic alternatives, will result in any initiatives, agreements, transactions or plans that will further enhance stockholder value. In addition, given the substantial restructuring of Cara's operations over the past several years, it may be difficult to evaluate its current business and future prospects on the basis of historical operating performance.

In January 2024 and June 2024, Cara implemented reductions in force that significantly reduced its workforce in order to conserve its capital resources. Cara may not realize, in full or in part, the anticipated benefits, savings and improvements in its cost structure from its restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If Cara is unable to realize the expected operational efficiencies and cost savings from the restructuring, its operating results and financial condition will be adversely affected. Furthermore, its restructuring plan may be disruptive to its operations. For example, Cara's headcount reductions could yield unanticipated consequences, such as increased difficulties in implementing its business strategy, including retention of its remaining employees. Employee litigation related to the headcount reduction could be costly and prevent management from fully concentrating on the business. Any future growth of Cara's business would impose significant added responsibilities on members of management,including the need to identify, recruit, maintain and integrate additional employees. Due to its limited resources, Cara may not be able to effectively manage its operations or recruit and retain qualified personnel, which may result in weaknesses in its infrastructure and operations, risks that Cara may not be able to comply with legal and regulatory requirements, loss of employees and reduced productivity among remaining employees.

Although there can be no assurance that the Merger will be completed, the negotiation and consummation of the Merger has required and will continue to require significant time on the part of its management, and the diversion of management's attention may disrupt its business. The negotiation and consummation of the Merger may also require more time or greater cash resources than Cara anticipates and exposes Cara to other operational and financial risks, including: - increased near-term and long-term expenditures;- exposure to unknown liabilities;- higher than expected acquisition or integration costs;- incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;- write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;- increased amortization expenses;- difficulty and cost in combining the operations and personnel of any acquired business with its operations and personnel;- impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;- inability to retain key employees of Cara or any acquired business; and - possibility of future litigation. Any of the foregoing risks could have a material adverse effect on Cara's business, financial condition and prospects.

There can be no assurance that Cara will be able to successfully consummate the Merger or that the Merger will be completed on attractive terms, within the anticipated timing, or at all. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and Cara has incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal and accounting fees and expenses and other related charges. Cara may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in its business. In addition, any strategic business combination or other transactions that Cara may consummate in the future could have a variety of negative consequences and Cara may implement a course of action or consummate a transaction that yields unexpected results that adversely affects its business and decreases the remaining cash available for use in its business or the execution of its strategic plan. There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value or achieve the anticipated results. Any potential transaction would be dependent on a number of factors that may be beyond its control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with Cara, obtaining stockholder approval and the availability of financing to third parties in a potential transaction with Cara on reasonable terms. Any failure of such a potential transaction to achieve the anticipated results could significantly impair Cara's ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to its stockholders. If Cara is not successful in setting forth a new strategic path for Cara, or if its plans are not executed in a timely fashion, this may cause reputational harm with Cara's stockholders and the value of its securities may be adversely impacted. In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of Cara could cause its stock price to fluctuate significantly.

There can be no assurance that the Merger will be completed. If the Merger is not completed, the Cara Board may decide to pursue a dissolution and liquidation of Cara. In such an event, the amount of cash available for distribution to Cara stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Cara continues to fund its operations while pursuing the Merger. In addition, if Cara's Board were to approve and recommend, and Cara stockholders were to approve, a dissolution and liquidation, Cara would be required under Delaware corporate law to pay Cara's outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Cara's commitments and contingent liabilities may include obligations under Cara's employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the company, litigation against Cara, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities, As a result of this requirement, a portion of Cara's assets would need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain. In addition, Cara may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, Cara's Board, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Cara's common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of the company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Cara stockholders.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by Cara stockholders and Tvardi stockholders. Cara cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If Cara is unable to satisfy certain closing conditions or if other mutual closing conditions are not satisfied, Tvardi will not be obligated to complete the Merger. Under certain circumstances, Cara would be required to pay Tvardi a termination fee of $2.25 million. Additionally, if the Merger Agreement is terminated by Cara or Tvardi due to Cara stockholders voting on and failing to approve certain proposals, Cara will be required to reimburse Tvardi for Merger-related expenses up to $750,000. The expense reimbursement, to the extent paid, will be credited against any termination fee payable by Cara in the transaction. Even if a termination fee is not payable in connection with a termination of the Merger Agreement, Cara will have incurred significant fees and expenses, which must be paid whether or not the Merger is completed. If the Merger is not completed, the Cara Board, in discharging its fiduciary obligations to Cara stockholders, would evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to Cara stockholders as the Merger, including a liquidation and dissolution. Any future sale or Merger, financing or other transaction, including a liquidation or dissolution, may be subject to further stockholder approval. Cara may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect on Cara's business. Until the Merger is completed, the Merger Agreement restricts Tvardi and Cara from taking specified actions without the consent of the other party, and requires Cara to operate in the ordinary course of business consistent with past practice. These restrictions may prevent Tvardi and Cara from making appropriate changes to Cara respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger. Further, if Cara's net cash at closing is lower than anticipated, either because expenses exceed current estimates or due to delays prior to closing, then the pre-Merger Cara stockholders will own less of the combined company pursuant to the exchange ratio adjustment set forth in the Merger Agreement. Any delay in completing the Merger may materially and adversely affect the timing and benefits that are expected to be achieved from the Merger.

In June 2024, Cara announced that it was undertaking a comprehensive exploration of strategic alternatives focused on maximizing stockholder value. After a comprehensive review of strategic alternatives, including identifying and reviewing potential candidates for the merger, on December 17, 2024, Cara entered into the Merger Agreement. The closing is subject to approval by the Cara stockholders and Tvardi stockholders as well as other customary closing conditions, including the effectiveness of a registration statement filed with the SEC in connection with the transaction. If the Merger is completed, the business of Tvardi will continue as the business of the combined company. Any failure to satisfy a required condition to closing may prevent, delay or otherwise materially and adversely affect the completion of the transaction, which could materially and adversely affect Cara's results of operations, business, financial results and/or stock price. Cara cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that the Merger will be successfully consummated or that Cara will be able to successfully consummate the proposed merger as currently contemplated under the Merger Agreement or at all. Cara's efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, Cara's business, which may materially adversely affect Cara's results of operations and Cara's business. Uncertainty as to whether the Merger will be completed may affect Cara's ability to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles during and following the transaction. A substantial amount of Cara management's and employees' attention is being directed toward the completion of the transaction and thus is being diverted from Cara's day-to-day operations. Uncertainty as to Cara's future could adversely affect Cara's business and Cara's relationship with collaborators, suppliers, vendors, regulators and other business partners. For example, vendors, collaborators and other counterparties may defer decisions about working with Cara or seek to change existing business relationships with Cara. Changes to, or termination of, existing business relationships could adversely affect Cara's results of operations and financial condition, as well as the market price of Cara's common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

In connection with the Cara Board's evaluation of the Merger, Cara's management prepared certain short-term unaudited prospective internal financial projections with respect to Cara that were provided to the Cara Board in connection with its evaluation of the Merger and to Piper Sandler in connection with its financial analysis and Opinion. The financial projections reflect numerous variables, estimates, forecasts and assumptions and these variables, estimates, forecasts and assumptions may prove to be wrong.

The terms of the Merger Agreement prohibit each of Cara and Tvardi from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances for Cara when the Cara Board determines in good faith, after consultation with its outside financial advisor and outside legal counsel, that an unsolicited competing proposal constitutes, or is reasonably likely to result in, a superior competing proposal and, after consultation with its outside legal counsel, that failure to take such action is reasonably likely to be inconsistent with the fiduciary duties of the Cara Board. Even in such circumstances, while the Cara Board may change its recommendation to Cara stockholders, Cara will remain obligated to hold a stockholder vote on the Required Cara Closing Stockholder Matters and may not terminate the Merger Agreement in order to enter into an agreement with respect to a Superior Offer. In addition, if Cara or Tvardi terminate the Merger Agreement under specified circumstances, including terminating because of a decision of the Cara Board to recommend a superior competing proposal, Cara may be required to pay Tvardi a termination fee of $2.25 million and/or up to $750,000 in expense reimbursements or Tvardi may be required to pay Cara a termination fee of $2.25 million, and/or up to $750,000 in expense reimbursements. This termination fee may discourage third parties from submitting competing proposals to Cara or its stockholders and may cause the Cara Board or the Tvardi Board, as the case may be, to be less inclined to recommend a competing proposal.

Covenants in the Merger Agreement impede the ability of Cara and Tvardi to make acquisitions, subject to specified exceptions relating to fiduciary duties, or complete other mergers, sales of assets or other business combinations pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into specified extraordinary transactions, such as a merger, sale of assets or other business combination, with any third party, subject to specified exceptions, even if any such transaction could be favorable to such party's stockholders.

Cara's business model in the past has been to develop and commercialize product candidates in the United States and generally to seek collaboration arrangements with pharmaceutical or biotechnology companies for the development or commercialization of product candidates in the rest of the world. Cara currently has license agreements with Maruishi and CKDP for the intravenous and oral formulations of difelikefalin, as well as license agreements with respect to its commercially approved products, KORSUVA Injection and Kapruvia with CSL Vifor. Should Cara resume development activities, in addition to its existing agreements, Cara may enter into additional collaboration arrangements in the future on a selective basis. Cara's existing collaborations and future collaboration arrangements may not be successful. The success of Cara's existing and future collaboration arrangements will depend heavily on the efforts and activities of its collaborators. 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 the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements 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. Maruishi may terminate its agreement with Cara at will, and CKDP may terminate its agreement with Cara in certain circumstances relating to patent invalidity or unenforceability or generic entry by a third party, as further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Collaboration and License Agreements." Any such termination or expiration could adversely affect Cara financially and could harm Cara's business reputation. Cara's current collaborations and any future collaborations Cara might enter into, including related to development of Cara's product candidate or any future product candidate should Cara resume development activities in the future, may pose a number of risks, including the following: - collaborators may not perform their obligations as expected;- collaborators may not pursue development and commercialization of Cara's product or any product candidate that achieves regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators' strategic focus or available funding 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 product candidate, 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 or product candidate;- collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements;- collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with Cara's products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than Cara's;- product candidates discovered in collaboration with Cara may be viewed by Cara's collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of any potential product candidates;- a collaborator with marketing and distribution rights to one or more of Cara's products or product candidates that achieve regulatory approval may not commit 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 of development, might cause delays or termination of the research, development or commercialization of products and product candidates, might lead to additional responsibilities for Cara with respect to products and 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 Cara's intellectual property rights or may use Cara's proprietary information in such a way as to invite litigation that could jeopardize or invalidate Cara's intellectual property or proprietary information or expose Cara to potential litigation;- collaborators may infringe the intellectual property rights of third parties, which may expose Cara to litigation and potential liability; and - collaborations, including Cara's collaboration with Maruishi, may be terminated for the convenience of the collaborator and, if terminated, Cara could be required to raise additional capital to pursue further development or commercialization of the applicable product candidate. If Cara's current collaborations or any other collaborations Cara might enter into in the future, including related to development of its product candidate or any future product candidate should Cara resume development activities in the future, do not result in the successful development and commercialization of products or if one of Cara's collaborators terminates its agreement with Cara, Cara may not receive any future research funding or milestone or royalty payments under the collaboration. If Cara does not receive the funding it expects under these agreements, Cara's development of potential product candidates could be delayed and Cara may need additional resources to develop a product candidate and product platform. All of the risks relating to Cara's product development, regulatory approval and commercialization described in this Annual Report on Form 10-K also apply to the activities of Cara's collaborators in their respective jurisdictions. Additionally, if any current or future collaborator of Cara, including related to development of Cara's product candidate or any future product candidate should Cara resume development activities in the future, is involved in a business combination, the collaborator might deemphasize or terminate development or commercialization of any product candidate licensed to it by Cara. If one of Cara's collaborators terminates its agreement with Cara, Cara may find it more difficult to attract new collaborators and Cara's reputation in the business and financial communities could be adversely affected. If Cara determines to collaborate in the future with additional pharmaceutical or biotechnology companies for the development and potential commercialization of oral difelikefalin or any potential future product candidate, should Cara resume development activities in the future, Cara would face significant competition in seeking appropriate collaborators. Cara's ability to reach a definitive agreement for collaboration will depend, among other things, upon Cara's assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. If Cara is unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, Cara may have to curtail the development of a product candidate, reduce or delay its development program or one or more of Cara's other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase Cara's expenditures and undertake development or commercialization activities at Cara's own expense. If Cara elects to fund and undertake development or commercialization activities on its own, Cara may need to obtain additional expertise and additional capital, which may not be available to Cara on acceptable terms or at all. If Cara fails to enter into collaborations and does not have sufficient funds or expertise to undertake the necessary development and commercialization activities, Cara may not be able to further develop product candidates or bring them to market or to develop a product platform or successfully commercialize Cara's products and business may be materially and adversely affected.

The consummation of the Merger is subject to numerous conditions, including (1) the effectiveness of the registration statement on Form S-4 filed in connection with the Merger, or the Registration Statement, (2) the approval by Cara's stockholders of the required stockholder proposals set forth in the proxy statement/prospectus included in the Registration Statement, (3) the requisite approval by Tvardi's stockholders, and (4) other customary closing conditions and there can be no assurance that the Merger will be consummated. If the Merger is not completed for any reason, the price of Cara's common stock may decline to the extent that the market price of Cara's common stock reflects or previously reflected positive market assumptions that the Merger would be completed and the related benefits would be realized. In addition, Cara and Tvardi have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory, printing and financial services fees related to the Merger. These expenses must be paid regardless of whether the Merger is consummated.

In general, either Cara or Tvardi can refuse to complete the Merger if there is a Tvardi Material Adverse Effect (as defined in the Merger Agreement) or a Cara Material Adverse Effect (as defined in the Merger Agreement), as applicable, between December 17, 2024, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Cara or Tvardi, including: - general business, political or economic conditions generally affecting the industry in which Tvardi or Cara operate;- acts of war, the outbreak or escalation of armed hostilities, acts of terrorism, earthquakes, wildfires, hurricanes or other natural disasters, health emergencies, including pandemics (including COVID-19 and any evolutions or mutations thereof) and related or associated epidemics, disease outbreaks or quarantine restrictions;- changes in financial, banking or securities markets;- any change in the stock price or trading volume of Cara common stock (it being understood, however, that any effect causing or contributing to any change in stock price or trading volume of Cara common stock may be taken into account in determining whether a material adverse effect with respect to Cara has occurred, unless such effects are otherwise excepted from the definition of Cara material adverse effect);- any failure by Cara to meet internal or analysts' expectations or projections or the results of operations of Cara (it being understood, however, that any effect causing or contributing to the failure of Cara to meet internal or analysts' expectations or projections or the results of operations of Cara may be taken into account in determining whether a material adverse effect with respect to Cara has occurred, unless such effects are otherwise excepted from the definition of Cara material adverse effect);- any change in, or any compliance with or action taken for the purpose of complying with, any applicable law or GAAP (or interpretations of any applicable law or GAAP);- the announcement of the Merger Agreement or the pendency of the Merger and other transactions and actions contemplated by the Merger Agreement (collectively, the Contemplated Transactions); or - the taking of any action required to be taken by the Merger Agreement. If a material adverse change occurs with respect to either party or both parties and Cara and Tvardi still complete the Merger, the stock price of the combined company following the closing of the Merger may suffer and may reduce the value of the Merger to the stockholders of Cara, Tvardi or both.

Even if the required stockholder proposals set forth in the proxy statement/prospectus included in the Registration Statement are approved by the stockholders of Cara, specified conditions must be satisfied or waived to complete the Merger. Cara and Tvardi cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and Cara and Tvardi each may lose some or all the intended benefits of the Merger.