Image source: Getty Images.

What happened

Shares of clinical-stage biopharma Cara Therapeutics (NASDAQ:CARA) soared over 25% higher today after analysts at Piper Jaffray upgraded their price target to $21 per share. That represents a substantial premium to the company's closing price on Tuesday, which was near $10 per share.  

So what

Analyst Charles Duncan raised the price target for Cara Therapeutics after meeting with management and confirming his confidence in due diligence conducted with respect to the company's clinical programs. The pipeline contains two major drug candidates, CR845 and CR701, which are being investigated for pain indications and pruritus, a severe skin itch condition. Two programs are in phase 3 trials, one is in a phase 2 trial, and one is awaiting the start of a phase 1 trial. 

Duncan is particularly interested in the timing of data releases. After spending most of 2016 conducting studies with relatively few material updates for investors, Cara Therapeutics is expected to announce updates and results on its three leading clinical programs within the next six months. That makes the first half of 2017 a make-or-break period for the company.

Now what

Given the dependency on two compounds for its entire pipeline and just $71 million in cash at the end of September, failing to announce at least one positive trial will have drastic consequences for the company. On the other hand, sweeping all three programs with positive results could be a huge boon for investors. Anything in between will likely be met with mixed results. That makes Cara Therapeutics a high-risk, potentially high-reward stock, but investors should consider the consequences of failure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.