Why This Connecticut Biotech Could be a $1M Opportunity for Investors

Cara Therapeutics focuses on developing therapeutics for pain, inflammation and pruritis. In 2017, company shares were volatile, ranging from a high of $28 to a low of $11, and began 2018 around $14. The company has been cited as one of the top stocks to keep an eye on this year as a potential acquisition target, although much of its value depends on successfully completing a couple Phase III clinical trials for non-opioid pain medications.

The company’s lead product candidate is CR845 for post-operative pain, as well as in another study for chronic kidney disease-associated pruritus (CKD-aP), which is chronic itching in kidney dialysis patients. If successful, the company’s $11 stock price will be something seen in the rear-view mirror.

Keith Speights, writing for The Motley Fool, points to CR845 for post-operative pain, saying, "The potential in this indication is significant. Currently, post-operative pain is frequently addressed using mu-opioid receptor agonists such as morphine. The problem with these drugs is that they come with serious side effects, including a high potential for addiction, nausea and vomiting, and respiratory depression."

Because CR845 doesn’t easily pass the blood-brain barrier, there are fewer side effects than typically associated with mu-opioids. It also has shown anti-inflammatory properties in addition to its ability to reduce itching. He also notes that the company has an oral version, which presents an even greater opportunity than the IV formulation. It could be indicated for atopic dermatitis, chronic liver disease and psoriasis.

MarketWatch noted today, "Of course, as with all small biotech stocks, a successful investment in Cara is wholly dependent on the results of its 2018 trials. After all, doctors are not going to stop prescribing currently proven medications for their patients if the alternative is not at least marginally better—or, a nightmare scenario for Cara, if the treatments don’t even perform as well."

Seeking Alpha is overall positive about the company’s chances, saying, "We have confidence in the pruritus studies, and even with our reduced confidence in IV pain management following dosing modifications, we expect that any strong readout will result in considerably share price appreciation. At that point, if the company does foresee the need for additional funds, it will likely proactively make that move for an equity offering at significantly higher share prices."

Speights essentially agrees, although like everyone watching the company, much is going to depend on the outcomes of the late-stage trials. Phase II trials have been promising, but things can go wrong in Phase III. Speights notes, "There’s an old joke that the easiest way to end up with $1 million is to start with $2 million. I don’t think that path will be necessary with Cara Therapeutics. On the other hand, for Cara to be a millionaire-maker stock requires a lot to go right."

The political environment is probably good, with so much focus on the opioid epidemic and the federal government’s apparent ineffectiveness on coming up with a response. The company isn’t buried in cash, but it seems to have enough to operate for over a year, and positive results on either Phase III trial will give the company stock a real shot in the arm.