Clinical-stage biotechs can be veritable goldmines for patient investors. The caveat, however, is that it can immensely difficult to predict which companies are actually worth the wait.
For instance, the developmental biotech Cara Therapeutics (CARA +0.00%) has been making steady progress in the clinic with its novel kappa receptor agonist, Korsuva (CR845), over the past few years. If approved, this drug should generate tremendous upside for investors, but there's also substantial risks involved for early shareholders at this stage of the game.
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As such, I think it's definitely worth contemplating where this promising clinical-stage biotech might be in five years from now -- that is, prior to buying shares. Let's dig in to find out.
Cara's present
Korsuva is in early- to late-stage trials for various pruritus (itching) indications, as well as acute postoperative pain. The big draw here for investors is that this experimental drug is designed to be far less addictive than traditional opioids, potentially making it a powerful new tool in the battle against the raging opioid epidemic.
That being said, this experimental kappa receptor agonist has had some noteworthy setbacks along the way. Last year, for instance, Korsuva produced mixed results in a mid-stage study as a possible treatment for pain in patients with osteoarthritis of the knee or hip. As a result, Cara has been shifting investors' attention toward the drug's pruritus clinical program in recent months, despite the fact that Korsuva is close to wrapping up yet another late-stage trial in the postoperative pain setting. Fortunately, this pivot away from the high-value pain market and toward the arguably safer pruritus arena has proven to be a smart move thus far.
As proof, the biotech signed a lucrative licensing deal with Vifor Fresenius Medical Care Renal Pharma Ltd. (VFMCRP) for Korsuva's chronic kidney disease (CKD) associated pruritus indication last month. Apart from gaining a major partner with a huge footprint in the CKD space, Cara also got some much-needed cash in this deal. Specifically, VFMCRP agreed to dole out $50 million to Cara up front, and purchase another $20 million worth of the biotech's common stock, per the terms of this newly minted licensing deal.
The key takeaway here is that Cara should now have enough cash to reach Korsuva's late-stage readout in CKD-associated pruritus early next year, and perhaps even get the drug approved for this initial indication before having to tap the markets for additional capital. This deal also provides an all-important buffer in case Korsuva flames out altogether in the postoperative pain setting.
Cara's future
As things stand now, Cara's immediate future hinges directly on the strength of Korsuva's late-stage results in both postoperative pain and CKD-associated pruritus. Having said that, I think investors should largely consider the drug's postoperative pain indication as icing on the cake at this point. Heron Therapeutics' (NASDAQ: HRTX) experimental pain medicine HTX-011, after all, appears to have a sizable advantage in terms of efficacy over Korsuva based on the trial data so far. And Heron is almost certainly going to beat Cara to market by several years as well, giving it a formidable first-mover advantage.
The good news is that the VFMCRP licensing deal does strongly suggest that both companies have a lot of confidence in Korsuva's prospects in the CKD-associated pruritus arena. So while Korsuva still needs to hit the mark in its ongoing pivotal trial for this indication, my guess is that this trial will ultimately produce a favorable result. In that case, I fully expect Cara and VFMCRP to engage in buyout talks.
I believe Cara will likely be acquired by its new partner within the next five years, assuming Korsuva gets a green light from regulators. Large biopharmas usually only take out an equity stake in their smaller developmental biotechs when they have a keen interest in making a tender offer, after all. Of course, this scenario is directly dependent on the drug's forthcoming trial results, and all bets are off if it doesn't perform as expected.
