What happened

Shares of Cara Therapeutics (CARA 1.82%), a clinical-stage biotech company with a focus on treating pain and pruritus (itching), rocketed higher by as much as 11% during Wednesday's trading session after providing an update to its phase 3 trial involving kappa opioid receptor agonist (KORA) CR845 as a treatment for postoperative pain. KORAs are believed to have a poor ability to transcend the blood-brain barrier, and thus have a lessened impact on the central nervous system compared to traditional pain-treatment options like opioids.

So what

According to the early morning press release, the independent data-monitoring committee (IDMC) suggested that Cara's phase 3 study involving I.V. CR845 for post-operative pain following abdominal surgery continue as planned. This planned interim-analysis continuation for both doses is a good thing as it signals that the IDMC believes CR845 has a chance of reaching its primary treatment endpoint, and that it's safe and being well tolerated.

A doctor speaking with a patient in a hospital bed.

Image source: Getty Images.

Chief Medical Officer of Cara, Joseph Stauffer, had this to say: "We look forward to continuing to test both doses of I.V. CR845 in our ongoing adaptive Phase 3 trial following the IDMC's interim assessment analysis, and are encouraged by the overall clinical safety profile of CR845 for use in the postoperative setting."

Normally, drugmakers wouldn't rally as much as Cara did on today's news of trial continuation, but given that Cara has no Food and Drug Administration-approved therapies, and that post-operative pain could generate the company significant revenue, investors are clearly excited.

Now what

Before you click the "buy" button, keep two things in mind. First, since Cara has no approved therapies on pharmacy shelves, a failure in any one of its phase 3 trials could wind up pummeling its stock. Post-operative pain is a much broader and lucrative indication than pruritus associated with chronic kidney disease, meaning an unsuccessful phase 3 study in post-operative pain will hurt (no pun intended). This doesn't mean that CR845 is on a path toward failure, as the data has suggested otherwise, but it's rarely a good idea for investors to count their chickens before the phase 3 data has hatched.

A doctor holding cannabis buds in one hand and cannabis-infused pills in the other.

Image source: Getty Images.

Another factor to keep in mind is that Cara Therapeutics has been lumped in with marijuana stocks, given its preclinical research into CR701, a cannabinoid receptor agonist. Similar to CR845, it looks to replace opioids as a primary treatment option for pain, albeit CR701 aims to do so through the use of the cannabinoid receptor system in our bodies. CR701 demonstrated promise in rodent models, but we've yet to see how Cara plans to mold this preclinical data into a human-based clinical trial. Long story short, some of Cara's valuation is likely due to its ties to the volatile emotions surrounding marijuana stocks.

For the time being, this Fool would suggest investors stick patiently to the sidelines and wait for Cara to deliver its top-line phase 3 results in post-operative pain. While you may miss the initial pop if the data is good, there will be plenty of opportunity to benefit from sales of the drug, if approved. Plus, if the data isn't good, you'll be happy you're on the sidelines.