It was only a few weeks ago that Cara Therapeutics (NASDAQ:CARA) stock was hitting all-time highs. The company had announced good news from its independent data monitoring committee's interim assessment for a late-stage study of intravenous (IV) CR845 in treating post-operative pain. More potential catalysts were on the way. Things seemed to be looking up for the clinical-stage biotech.

Note the use of past tense in all those statements. Results from a phase 2 study of an oral version of CR845 in treating chronic pain for patients with osteoarthritis of the hip or knee were underwhelming. Cara stock has plunged more than 50% since the announcement. Can it bounce back?

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How bad was the bad news?

For Cara's market cap to lose half of its value, you'd think the results from the phase 2 study were totally devastating. Actually, though, there were some positives. The highest dosage given to patients in the study (5 mg) did produce a statistically significant reduction in pain scores for hip patients compared to placebo. Two-thirds of hip patients taking oral CR845 didn't require a rescue medication after eight weeks of treatment compared to 43% for the placebo group.

Also, oral CR845 appeared to have a good overall safety profile. There were no drug-related serious adverse events. The most common side effects that did occur -- constipation, dizziness, and dry mouth -- were prevalent in fewer patients than a commonly prescribed opioid pain medication, Oxycontin-IR.

That's the good news. The bad news is that oral CR845 proved no more effective than placebo at lower dosages. And Cara didn't say much about how the drug performed with knee patients.

However, we do know two things. First, the reduction in pain scores was quite lower than for hip patients, since there was a 35% reduction in mean joint pain score for all patients. Second, more knee patients completed treatment with placebo than they did with oral CR845, whereas the completion rates were similar for hip patients on placebo and CR845.

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Where Cara goes from here

By no means is Cara throwing in the towel for its oral version of CR845. The company intends to initiate a phase 2 adaptive trial with some key changes. Cara is going to increase the tablet strength to 10 mg. It will also increase hip patient exposure in the study. Both seem like smart things to do.

Cara also plans to request a "type C" meeting with the U.S. Food and Drug Administration (FDA) to discuss next steps. The FDA has three categories of meetings with drugmakers. Type A meetings are focused on helping a stalled program proceed. Type B meetings are held at key junctures such as before an investigational new drug application (NDA) is submitted, at the end of phase 1, or at the end of phase 2 and the beginning of phase 3 testing. The type C meeting that Cara requested is for any other type of meeting.

The company also awaits completion of two late-stage studies for its IV version of CR845. Cara expects the study targeting post-operative pain to complete by the end of 2017. The other study, which is focused on treatment of uremic pruritis (itching) in patients on hemodialysis, is scheduled to wrap up early next year.

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Is a rebound likely?

There's no way to know for sure how the late-stage studies of IV CR845 will turn out. However, earlier results hint at a reasonable chance of success.

Clearly, though, the potential market for an oral form of CR845 would be tremendously important for Cara Therapeutics. At this point, it's really up in the air as to what happens next for oral CR845. There's a lot riding on Cara's discussion with the FDA. 

Can Cara rebound? I think the short answer is "yes." Good news from the IV CR845 studies or from the FDA should give a nice boost to the stock.

But will Cara stock regain all the ground that it's lost in the last couple of weeks? My guess is that's not likely to happen in the near future. Over time, however, if higher doses of oral CR845 are found to be effective and safe, the promise seen in Cara earlier this year could still be realized. For now, that's a big "if."

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.