Oncology is the largest and fastest growing therapy area in the drug industry, with a market estimated to reach $190 billion by 2022. But cancer is a devilishly complex disease, and investors trying to profit from the effort to develop successful therapies are faced with a bewildering array of companies working on competing approaches to attack it.

For investors looking for a small biotech stock for the riskier potion of their portfolios, one company taking on simpler problems with a single drug is easy to understand and stands to win big if successful. Cara Therapeutics (NASDAQ:CARA) is working on a drug for pain and itching that doesn't have the serious drawbacks of existing therapies...for some simple reasons. 

Wrist with arthritis pain

Image source: Getty Images. 

A new approach to pain

Opioid drugs such as morphine and its derivatives are the strongest therapies available for acute pain, but come with significant drawbacks. Side effects include nausea and vomiting, sedation, and respiratory depression, which all come about due to the action of the drug on one of the three types of opioid receptors in the nervous system, known as the mu opioid receptors. The activation of these receptors in the central nervous system relieve pain, but also induce the undesirable side effects.

The fact that current opioid pain drugs enter the brain and activate mu receptors there leads to the most deleterious side effect of all: euphoria. The pleasant sensations produced by these medications lead to abuse and addiction and are creating a societal problem of growing significance.

Cara's CR845 doesn't cross the blood-brain barrier, so it can't activate the pleasure centers in the brain that lead to abuse, and neither does it activate the mu opioid receptors that trigger the other side effects. Instead, it works on the kappa opioid receptors in the periphery of the body, where pain originates. The result is not only a non-addictive pain killer with few side effects, but a drug that is both anti-inflammatory and anti-itching.

A big market opportunity

CR845 is being tested for three indications to begin with: post-operative pain, chronic pain of arthritis, and pruritis, a severe itching condition common in patients with chronic kidney disease, something that is unresponsive to conventional itch medications. These markets add up to a big opportunity for Cara. There are about 60 million post-operative patients in the U.S. every year, 140 million prescriptions written annually for chronic pain, and over 3 million potential patients for the pruritis indication. 

Trial results so far have been very positive. The IV formulation for post-operative pain significantly lowered pain scores in phase 2 trials compared with placebo and resulted in a 44% reduction in the use of morphine. The oral formulation for arthritis pain has been shown to be more effective in reducing pain than controlled release oxycodone. Results for part A of a phase 2/3 trial of CR845 for pruritis released this March were highly encouraging. The drug produced a 68% reduction in itching scores versus placebo after an eight-week treatment period. A Human Abuse Liability trial proved that recreational drug users do not find the drug pleasurable.

New data coming soon

Pain trials progress much more quickly than trials of cancer drugs that can months or years to determine effectiveness. Results from two important trials for pain indications are due by the end of this month. Top line data for a phase 2b trial of the oral formulation for osteoarthritis is due out any day now.

The company announced on Wednesday interim results from the phase 3 trial of IV CR845 for post-operative pain, and the news was good. A review by an independent panel found that the drug was well-tolerated with no safety issues, so the trial will continue with the two dosing levels that had been planned. The stock was up nearly 10% on the news.

The prospects for stocks of clinical-stage companies making cancer drugs can be very difficult for the individual investor to evaluate, and the technology is mind-bendingly hard to understand. Cara Therapeutics, while still carrying the binary risk of human trials that are never sure things, offers a simple proposition: a single drug with understandable benefits and a mode of action that doesn't take a doctorate in biochemistry to understand. Of course, if that drug fails, Cara is likely finished. Investors looking to add a little to the riskier part of their portfolios should take a look at the stock.