Cara Therapeutics - Itching For Big Returns In 2019


Summary

  • CARA's switch from pain to pruritis (chronic severe itching) is a sound strategy as the pruritis data and market provide a much better opportunity for CARA’s lead drug candidate, Korsuva™.

  • IV and oral Korsuva™ late-stage readouts coming in 2019 should be major catalyst events for CARA.

  • We like the probability of success for the 2019 Korsuva™ IV CKD pruritis Phase 3 trial readouts based on the Phase 2 data.

  • Oral Korsuva™ trial readouts in 2019 provide a large upside opportunity.

  • Currently CARA appears undervalued, trading below a $600 million market cap, especially if Korsuva™ is further derisked by positive readouts in 2019.

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Overview and Thesis

The purpose of this article, is to bring your attention to CARA Therapeutics (“CARA”), which in our view provides an exceptional risk/reward for 2019 for biopharma investors, given their strong and differentiated data in pruritis for their lead compound, Korsuva™, their upcoming catalyst events in 2019, and their attractive current market cap of under $500 million, which is almost 50% of its 52-week high. CARA is a clinical stage biotech company focused primarily on treating pruritus (chronic severe itching) through targeting kappa opioid receptors. Pruritis is a severely underserved market, with treatment relying on steroids and antihistamines with no fundamentally new therapies in decades (Cara web site). This puts CARA's lead drug candidate CR845 (Korsuva™) in an exciting position to fundamentally change the way pruritis is managed and treated. CARA’s stock price has come down significantly this quarter, along with other small and mid cap biopharma companies in this indiscriminate 4th quarter 2018 correction, such that CARA is now priced at almost 50% of its 52 week high without any negative data to justify the selloff. With numerous mid and late-stage pruritis readouts coming in 2019 that in our view have a good chance of success, we see CARA as a significantly undervalued opportunity for pre-commercial biopharma investors.

Conclusion

We see CARA’s current stock price providing an attractive valuation going into 2019 with major readouts coming in CKD. The pruritis indication has natural expansion into pruritis associated with other diseases outside of the kidney, which provides further upside for CARA. Overall given the previous clinical data, and our valuation modeling, we see CARA as an attractive current risk/reward opportunity for investors having an appetite for high-risk, pre-commercial biopharma stocks.

Disclosure: I am/we are long CARA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is not legal or investment advise. Please do your own diligence and consider consulting a professional adviser.

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