Cara Therapeutics, Inc.

CARA Details

Cara Therapeutics, Inc. (NASDAQ: CARA) operates as a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities targeting peripheral kappa opioid receptors (KORs) for relieving pruritus. It is currently working on KORSUVA (CR845/difelikefalin), a KOR agonist targeting the peripheral nervous system and certain immune cells.

Latest News:

• Oral KORSUVA's Phase 2 Trial Results: On October 04, 2021, CARA announced that the KARE Phase 2 clinical study of oral KORSUVA for treating moderate-to-severe pruritus in mild-to-severe atopic dermatitis (AD) patients did not achieve its primary objective in any of the three dosages (0.25, 0.5, or 1.0 mg). However, the adverse events were mild to moderate in intensity, which indicates that the drug was well tolerated. The most common side effects were abdominal discomfort, nausea, dry mouth, headache, dizziness, and hypertension.

Q2FY21 Results:

• Decline in Revenues: The company generated no revenue in Q2FY21 (ended June 30, 2021), compared to USD 5.63 million in Q2FY20. Its H1FY21 revenues were USD 1.94 million, 85.90% lesser than USD 13.73 million generated in H1FY20 due to a significant decline in license and milestone fees.
• Expanding Losses: Its net loss for Q2FY21 increased slightly to USD 30.75 million from USD 25.07 million reported in Q2FY20.
• Strong Balance Sheet: As of June 30, 2021, CARA had cash and cash equivalents (including marketable securities) of USD 155.18 million and no outstanding debt.

Key Risks:

• Third-Party Dependence: CARA and Vifor Pharma have signed a license agreement to commercialize KORSUVA injections in the US, with a 60:40 profit-sharing arrangement. The company's financials will be significantly impacted if they fail to market the injections successfully or if a new cheaper medication enters the market.
• Regulatory Risk: The process for receiving FDA approval (and from similar foreign authorities) is fairly lengthy and subject to stringent regulatory scrutiny. If the regulatory authorities do not grant the required approvals, CARA's results of operations could be compromised.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CARA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CARA's share price has surged 48.16% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 11.22 to USD 29.65. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 76.81. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 15.28.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are sufficiently reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 18.13, up 10.40% as of October 28, 2021, 10:45 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.