Why Shares of Cara Therapeutics Are Up Over 75% Since the Start of 2017
For most, the first day of the New Year is a day of rest, tidying up, and working on those New Year's resolutions. For shareholders of Cara Therapeutics (NASDAQ: CARA), however, the party hasn't shown any signs of stopping. Since the start of the year, shares have rocketedup a whopping 75%.
With some near-term trial results reading out in the coming months, this stock is definitely worth revisiting. But first, a little bit of history.
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The company
Cara Therapeutics is a small cap biopharma company focused on the development of pain management therapies. The company's most advanced product is CR845, an injectable kappa opioid receptor agonist intended for the treatment of acute pain. What makes CR845 special is that unlike traditional pain relief medications (opioids),CR845 targets the "kappa" receptor rather than the "mu" receptor. This means that the drug provides pain relief without many of the side effects associated with traditional opioid therapies such as nausea, vomiting, and respiratory depression.
Moreover, because CR845 only acts in the periphery (it cannot enter the brain and spinal cord), the drug is unable to create any of the "euphoric" side effects of traditional opioid pain medications. In layman's terms, this means that CR845 has the potential to provide a non-addictive form of pain relief with fewer of the side effects associated with traditional therapy.
The market
Cara is currently targeting the postoperative pain market. According to the company, around 100 million people in the United States experience chronic pain, and millions more suffer from acute pain. Acute pain is often the result of surgical procedures and is commonly treated with injectable opioid therapies. Cara estimates that opioid analgesics accounted for $9.1 billion in sales in 2015. However, there are many drawbacks associated with the usage of these commonly prescribed therapies. In addition to the side effects outlined above, post-surgery opioid use is also associated with postoperative opioid-induced respiratory depression (
However, there are many drawbacks associated with the usage of these commonly prescribed therapies. In addition to the side effects outlined above, post-surgery opioid use is also associated with postoperative opioid-induced respiratory depression (POIRD) and opioid-induced bowel dysfunction (OBD). Cara estimates that the incidence of POIRD could be as high as 29% and results in longer and costlier hospital stays. While non-opioid acute pain therapies do exist (examples include acetaminophen and ibuprofen), use of these products is limited in higher dosage forms due to associations with liver toxicity, kidney damage, heart attack, and stroke.
The drug
In September of 2015, Cara initiated a phase 3 pivotal trial for CR845 in patients with postoperative pain. However, in February of 2016, the FDA placed this trial in a clinical hold due to a stopping rule related to elevated sodium levels. Following this announcement, the stock cratered. However, upon further review, this drop seems unwarranted. The trial-halting concentration of sodium was activated at 150mmol/L. For reference, the normal expected range in this population would be 135-145mmol/L. All four of the patients who reached high sodium concentrations were asymptomatic, and their sodium levels dropped back to normal levels within 24 hours post-dose. This also occurred only in the highest dosing group (5 ug/kg). Cara continued its trials in the lower dosing (1 ug/kg and 2 ug/kg) and is expected to release data sometime in the second quarter of this year. I believe the recent climb in stock price is in direct anticipation of this data being released.
Is the trend your friend?
It is clear that should CR845 be approved, it would offer several distinct advantages over traditional opioid therapies. If Cara is able to penetrate even a small part of the total postoperative pain market, the stock (which currently sits at a market cap around $400 million) could shoot even higher. As the company has noted, in 2013, the FDA Commissioner stated that "The FDA is invoking its authority to require safety labeling changes and post-market studies to combat the crisis of misuse, abuse, addiction, overdose, and death from these potent drugs," and announced a classwide safety labeling change to mu receptor-targeting opioids. Therefore, there is definitely a strong desire for non-opioid pain therapies. Although shares have had a considerable run-up, I would still call Cara a buy for the long-term investor.
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David Liang 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.