How High Can Cara Therapeutics Stock Go?

By Keith Speights Markets Fool.com

In just six weeks, Cara Therapeutics' (NASDAQ: CARA) shares have skyrocketed by roughly 80%. The stock has more than doubled since the beginning of November. Did Cara report great results from a clinical trial? Nope. Investors simply seem to have gained an intense interest in the clinical-stage biotech.

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There are several potential catalysts coming up this year that could give investors solid reasons to like Cara Therapeutics even more. The real question, though is this: How high can this biotech's stock really go?

Image source: Getty Images.

What's intriguing investors

There have been plenty of news stories about the opioid epidemic sweeping the United States. Opioid drugs are great at helping reduce pain, but they're also very addictive. At least most of them are. But not all. That's where Cara Therapeutics comes into play.

Cara's lead product, CR845, is a kappa opioid agonist. Most of the opioid drugs you're probably familiar with, like morphine, oxycodone, and hydrocodine, bind to mu opioid receptors in the body's central nervous system. CR845, however, targets kappa opioid receptors in peripheral nerve cells outside of the central nervous system. Because the drug doesn't enter the brain, it has the potential to relieve pain without causing the negative side effects associated with many existing opioid drugs.

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The biotech is targeting three indications with CR845: post-operative pain, chronic pain, and pruritus (itching). Phase 2 clinical results for the experimental drug in treating post-operative pain after hysterectomies were very encouraging. Patients taking CR845 experienced significantly lower post-op pain levels and reduced post-op use of narcotics.

Cara also reported great results from a phase 2 study of CR845 in treating chronic pain. Patients taking a 5 mg dose of the drug experienced significantly less pain and required less rescue medications (drugs needed for immediate pain relief) than those on placebo.

It was a similar story for Cara's phase 2 study targeting uremic pruritis, an internal itching that is caused by chronic kidney failure. Patients taking CR845 reported significantly reduced itch intensity than did patients on placebo. The patient receiving CR845 also reported significantly better quality of life scores.

Coming catalysts

More good news could be on the way for Cara Therapeutics. The biotech has three key data readouts scheduled for 2017.

Cara expects to announce top-line results from its late-stage study evaluating CR845 administered intravenously in treating acute post-op pain in the first half of this year. These results will be enormously important for the company. If things go well, Cara could file for regulatory approval based on the study.

Top-line results from the company's phase 2/3 clinical study of intravenous CR845 in treating uremic pruritus are expected by the end of the first quarter. This phase involved 160 patients treated for eight weeks. The next phase of the study will include 240 patients with a treatment period of 12 weeks.

Another key announcement is also expected in the first half of 2017. Cara should report top-line results from its phase 2 study evaluating an oral form of CR845 in treating patients with chronic osteoarthritis pain.

Lots of opportunity

There's certainly a large potential market for CR845 if it wins approval. Take the post-op pain indication, for example. Around46 million inpatient and 53 million outpatient surgeries are performed each year in the U.S. Over 200 million prescriptions are filled annually for drugs to manage pain outside of the hospital setting.

The chronic pain market is also a big opportunity. More than 100 million prescriptions are dispensed each year in the U.S. for drugs to treat patients with chronic pain.What about the potential uremic pruritus market? Over 20 million Americans take prescription drugs for treating the condition.

Of course, Cara won't capture all of the potential market even assuming CR845 wins regulatory approval. Dislodging existing drugs won't be an easy task even with some of the advantages offered by the kappa opioid agonist.

Cara could also face stiff competition from another new entrant to the market --Trevena (NASDAQ: TRVN). Although Trevena's lead candidate, oliceridine, targets the mu opioid receptors like most opioids available today, there's a twist. Oliceridine selectively activates pain-relieving pathways while avoiding the pathway associated with the adverse effects typically experienced with opioid drugs.

Trevena could get a slight head start on Cara as well. The biotech expects to announce results from its late-stage study ofoliceridine as a treatment formoderate-to-severe acute post-op pain in the first quarter of 2017. If those results are positive, Trevena plans to submit for U.S. regulatory approval in the second half of this year.

How high?

Cara Therapeutics' market cap soared to over $450 million thanks to the huge stock run-up in recent months. Although there are always risks, I think the potential for CR845 to ultimately win approval for all three indications the biotech is targeting looks pretty good.

I wouldn't be surprised if Cara becomes an acquisition target by a larger company with an established sales force in the pain market. Even without the buyout possibility, though, my view is that the coming catalysts this year should spur Cara's shares to go even higher. Another jump of 30% or perhaps more by the end of 2017 doesn't seem unrealistic.

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Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.