Cara Therapeutics (NASDAQ:CARA) stock just set an all-time record high. And it did so in a spectacular fashion, jumping nearly 40% in five days after Cara announced encouraging feedback from its independent data monitoring committee's interim assessment of a late-stage study evaluating intravenous CR845 in treating post-operative pain.

Some investors might prefer to lock in gains after Cara Therapeutics' tremendous stock performance. However, it seems quite possible that the stock could go even higher. 

Man pointing to chart going up

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A crisis in need of a solution

You don't have to search long to find hundreds of news stories about the opioid epidemic sweeping the U.S. Over 50,000 Americans died from opioid overdoses in 2016. States and local governments face tremendous financial challenges in dealing with the added healthcare and law enforcement costs related to opioid abuse. 

The problem is that opioid drugs are highly addictive, but they're also highly effective at helping patients cope with pain. Physicians continue to prescribe the drugs in large part because there simply aren't better treatment alternatives. It's a major crisis in need of a solution. Cara Therapeutics just might have one.

The types of opioids that are contributing to all the negative headlines bind to mu opioid receptors in the body's central nervous system. They reduce pain, but they also enter the brain and are very addictive. Cara's CR845 is also an opioid painkiller. However, it's a much different kind of opioid.

CR845 activates peripheral kappa opioid receptors on sensory nerves. The drug helps alleviate pain like other opioids. However, CR845 doesn't enter the brain. As a result, it doesn't have nearly as significant of a risk for addiction that mu opioid drugs such as hydrocodone and oxycodone have.

Opioid drugs on Rx pad

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More catalysts ahead

Cara Therapeutics has benefited this year from several catalysts. In March, the company announced positive results from a phase 2/3 study of intravenous CR845 in treating itching associated with chronic kidney disease. In April, Cara announced positive data from a phase 1 study measuring respiratory safety for the drug.

Following the recent good news from the interim assessment of the late-stage study of IV CR845 in treating post-operative pain, Cara announced that the drug had received breakthrough therapy designation from the FDA in treating chronic kidney disease-associated pruritis (itching). There are even more potential catalysts ahead.

Cara should soon announce results from its phase 2b trial of an oral version of CR845 in treating chronic pain associated with osteoarthritis. Data is also expected any day now from a pharmacokinetic safety trial of multiple doses of oral CR845 in hemodialysis patients. The phase 3 study of IV CR845 in treating pruritis is scheduled to wrap up in early 2018. 

Going higher?

How much higher can Cara stock go? If you only looked at what Wall Street analysts predict, you might think Cara's recent run might soon be out of steam. The consensus price target among analysts is less than 7% above the current price of the stock. My view, however, is that Cara Therapeutics stock could easily beat the analysts' target. 

Peak annual sales for CR845 could realistically top $1 billion. After all, 100 million prescriptions are filled annually for managing chronic pain with 200 million prescriptions filled for managing pain outside of hospitals. The market potential for Cara is enormous.

Even with the stock's big run-up so far in 2017, Cara Therapeutics' market cap stands close to $800 million. If CR845 keeps on impressing in clinical studies, investors will likely become more convinced of the drug's blockbuster potential.

In early May, I wrote that investors would be smart to buy Cara stock. That turned out to be good advice. I still think buying Cara Therapeutics is a smart move. It wouldn't surprise me if this hot stock rises another 30% or more by the end of the year. 

Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.