Is Cara Therapeutics a Purchase?
IInvesting in a company that is on the verge of being able to sell a drug for the first time is as close to a blow in the world of biotechnology. With the clinical trials process in the rearview mirror, much of the risk associated with development is a thing of the past, leaving “only” the risks of profitable competition.
This is the situation of Cara Therapeutics (NASDAQ: CARA), who is developing a medicine called Korsuva to treat pruritus. You’ve probably experienced pruritus before (at least to a small extent) because it’s the itchy sensation. But, with conditions like chronic kidney disease (CKD) and chronic liver disease (CLD), itching is not something trivial to relieve with a quick scratch for many patients. This is often a serious and pervasive problem that dramatically reduces a patient’s quality of life, and this is where Korsuva could help.
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Marketing and juicy income are closer than ever
At a minimum, investors should pay attention to Cara Therapeutics as it is likely on the cusp of recurring revenue for the first time. Korsuva recently completed its Phase 3 clinical trials to treat pruritus in CRF patients who are on hemodialysis, and is currently seeking final approval from regulators in the US and EU for see if he can go ahead with the marketing. If all goes according to plan, the drug could be launched in the second half of this year, although the profits will have to be split evenly with Vifor Pharma AG. Clinical trials for four other indications for Korsuva are also underway, two of which are in phase 2 trials and two are about to enter phase 3.
Upon commercialization of Korsuva, Cara will earn $ 50 million under the terms of its agreement with Vifor Pharma. It will also make up to $ 240 million in milestone payments as the drug rolls out in the United States. Also, sales income will continue to run for the entire time, which could drive her inventory up once the income is reflected in the earnings reports.
Currently, Cara has a limited debt of $ 4.89 million and over $ 228 million in cash. Management expects the sum to be more than enough to bring the company in 2023 to its burn rate of approximately $ 23 million in operating expenses in the first quarter. This means investors probably don’t have to worry about diluting their equity to raise cash anytime soon.
Small patient populations and missed endpoints are not a good look
In my opinion, there are two problems with Cara Therapeutics.
The first is that in the United States, the company estimates that more than 20 million prescriptions for treating pruritus are dispensed each year. Many of these prescriptions are for corticosteroids, which are inexpensive, ubiquitous, and effective enough to stop itching with minimal side effects. Some can also be given topically to the itchy area, unlike Korsuva, which must be given as an injection or as an oral tablet, depending on the indication. In other words, the company is going to have to fight for market share against a strong first-line drug class from the start, and it doesn’t have a clear answer. competitive advantage. Plus, that doesn’t even take into account other types of itching treatments like immunosuppressants.
Then there is the question of Korsuva’s effectiveness, which hasn’t always been great. At the end of April, Cara reported that its Phase 2 clinical trial of the atopic dermatitis drug had failed to meet one of its primary endpoints as well as one of its endpoints. secondary, who tanked his stock. Similar problems with low efficacy and missed parameters have occurred in previous clinical trials for other indications such as CRF. But it’s important to remember that some drugs still hit the market after missing an end point throughout the clinical trial process. In this case, unfortunately, the drug does not appear to be a panacea for the extreme itching, which limits the size of the company’s total addressable market and makes clinicians less likely to prescribe it.
Considering the stiff competition Cara Therapeutics will face in the pruritus market and the fact that its profits will need to be shared with Vifor, it is difficult to be excited about buying the stock. Still, the coming catalysts of commercialization and milestone payments could lead investors to a modest victory.
If you are looking to speculate on part of your portfolio, this stock might do the trick, but in my opinion there are some more promising companies to invest in.
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