Most investors would be excited if one of the stocks they owned achieved a 45% gain in less than a year. But for Cara Therapeutics (NASDAQ:CARA) shareholders, that level of performance is somewhat disappointing. Earlier in 2017, the biotech stock was up 190%. However, Cara Therapeutics lost a huge chunk of its market cap after reporting disappointing results in June from a late-stage study of an oral formulation of experimental pain drug CR845.
Is the future now bleak for Cara? I don't think so. Instead, I suspect that 2018 could be the best year yet for the biotech. Here's why.
What it would take
Let's first look at exactly what it would take for Cara to enjoy its greatest year ever in 2018. The company had its initial public offering in 2014. Cara stock fell nearly 23% that year. While its share price roared back with a gain of 69% in 2015, the next year saw another drop of close to 45%. As of now, 2015 remains Cara's best year for stock performance, with 2017 shaping up to be its second best ever.
From a financial standpoint, it shouldn't be too hard for Cara to have its best year ever. The biotech's highest revenue came before Cara went public in 2013, with the company reporting just under $12 million in revenue. Most of that amount stemmed from up-front payments associated with licensing deals with Japanese drugmaker Maruishi Pharmaceutical and South Korean biotech CKD.
Cara Therapeutics has never been profitable since its founding in 2004. Its best bottom-line performance for which it has reported financial results was also in 2013, with a net loss of nearly $4 million. Since then, Cara's losses have been significantly greater.
Multiple potential catalysts
The good news for Cara is that there are several potential catalysts that could give the company its best stock performance ever in 2018. First up is the biotech's late-stage study evaluating the intravenous version of CR845 in treating patients undergoing abdominal surgery. Cara expects this study to likely complete enrollment by the end of 2017 and wrap up in early 2018.
The biotech also plans to conduct two late-stage clinical trials of IV CR845 in treating moderate to severe pruritis (itching) in patients on dialysis. The first of these should begin in the U.S. by end of the year, while the second international late-stage study will commence in the first half of 2018. These studies will evaluate the efficacy and safety of IV CR845 over a 12-week treatment period, so results from both trials will be known next year.
Cara also currently has a phase 1 study of oral CR845 under way for treatment of pruritis associated with chronic kidney disease. The company thinks data from this study will help it design a phase 2 study, which is expected to begin in the first quarter of 2018.
Best year ever?
Whether 2018 turns out to be Cara Therapeutics' best year ever obviously depends on how well those clinical studies go. But because three of them are late-stage studies, positive results should turbocharge Cara stock even more than results from earlier clinical studies have.
Some investors might have lower expectations because of the disappointment from Cara's phase 2 study of oral CR845 in treating osteoarthritis pain. I'm more optimistic, though. First, the studies that could be the biggest catalysts for the biotech next year are for the IV version of the drug. I haven't seen anything in earlier studies for IV CR845 that raise a yellow flag.
Second, even the dark clouds surrounding the aforementioned phase 2 study of oral CR845 had a silver lining. Data from that study showed some reason to think the drug could be effective at treating hip pain in osteoarthritis patients.
Several large investors have bought Cara Therapeutics stock in recent quarters. It's not hard to understand why. If Cara is successful, the market potential for CR845 should be tremendous. Both physicians and patients are skittish about opioid painkillers because of the highly addictive attributes and other negative side effects of the drugs. CR845, which is an opioid but targets kappa opioid receptors in peripheral nerve cells outside of the central nervous system, doesn't have those downsides.
Again, though, everything rides on those late-stage studies. If they go well, look for 2018 to be a banner year for Cara Therapeutics.