Cara Therapeutics Inc. (NASDAQ:CARA) impressive run shows no signs of slowing down the stock having more than doubled in price this year. The stock has soared by more than 160% on positive news of the company’s candidate chronic pain drug CR845.
CR845 Prospects
The big question now is whether the stock will continue to edge higher with the expected unveiling of results for the drug. Investors appear to have taken note of the drug’s prospects as it continues to enjoy positive reviews as a powerful tool for fighting the raging opioid epidemic. Over 50,000 American died from opioid overdoses last year.
The market potential for CR845 is big given that 100 million prescriptions are filled annually for managing chronic pain. In addition, 200 million prescriptions are usually filed outside hospitals.
The Food and Drug Administration has already designated CR845 a breakthrough therapy for the treatment of chronic itching related kidney failure. Cara Therapeutics could generate sales of up to $300 million on the drug gaining the much needed regulatory approval seen as a key driver of investor sentiments.
Market Expectations
The fact that biotech stocks normally trade at multiples several times sales means the company’s market cap could soar to highs of $1 billion from $800 million on CR845 gaining regulatory approval. Janney analyst Ken Trbovich expects the stock to be extremely volatile when the clinical stage company reports mid-stage trial results for the oral osteoarthritis drug.
“The long-term potential of oral CR845 for chronic pain is a tantalizing opportunity for a company with a market cap that remains below $1 billion even after its amazing run over the past week,” said Mr. Trbovich.
The analyst expects the stock to go up by $16 a share on positive CR845 trial results given that Nektar Therapeutics rallied by 42.7% on releasing positive phase 3 results for its chronic back pain drug. However, the stock also faces the risk of crashing down on the results failing to meet expectations. The analyst has warned that the stock could crash to $10-$12 trading range on negative trial results.
Cara Therapeutics was up by 2.01% in Wednesday’s trading session to end the day at $26.95 a share.
