2 Biotech Stocks on Analysts’ Radar: Cara Therapeutics Inc (CARA) and AVEO Pharmaceuticals, Inc. (AVEO)

New insights emerge in the biotech sector as Cara Therapeutics Inc (NASDAQ:CARA) released mixed results from a phase 2b trial of the company’s pain medication, and AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) has gained CHMP recommendation for its kidney cancer drug. Let’s take a closer look as analysts weigh in on both drug makers:

Cara Therapeutics Inc

Shareholders of Cara Therapeutics are having a rough day after the company missed the primary endpoint in its Phase 2b trial of oral CR845 in Osteoarthritis (OA). As of this writing, Cara shares are falling nearly 38% to $15.75.

However, Canaccord analyst Arlinda Lee remains positive as the trial provided some encouraging hints of efficacy.

Lee wrote, “By the Patient Global Assessment score, a significantly greater proportion of patients receiving 5mg CR845 had “very much improved” or “much improved” for both hip and hip+knee vs placebo (p<0.006 and p<0.005, respectively). There were no drug-related serious adverse events (SAEs), nor clinically significant serum sodium changes at any dose level. At 5mg, the most common AEs were dry mouth (6%) and constipation (12%). While there is no obvious difference in hip vs knee OA or patient baseline characteristics, we expect longer treatment duration and higher doses (potentially 7.5 and 10mg) could help flesh out CR845 benefit in OA.”

“While we expect the stock will sell off on the mixed dataset, we continue to carry $5/share in our SOTP valuation for oral CR845 in OA, representing 15% probability of success on ~$900M peak sales, pending further clarity.” the analyst concluded. (To watch Lee’s track record click here.)

Needham analyst Alan Carr, echoing remarks by Lee, said, “Our initial interpretation, based on available data, is that CR845 still has potential to be a differentiated option for chronic pain and that additional development is warranted. We note, however, assessment of trial outcome is complicated by incomplete disclosure of data. We reiterate BUY based on 1) CR845 efficacy established in pruritus earlier this yr, which provides floor for valuation and 2) our belief that CR845 risk:reward opportunity for investors in pain (development risk:commercial potential) remains sufficiently attractive.”

Out of the 7 analysts polled by TipRanks (in the past 3 months), 6 rate Cara stock a Buy, while one 1 rates the stock a Hold. With a return potential of nearly 55%, the stock’s consensus target price stands at $25.71.

AVEO Pharmaceuticals, Inc. 

Last Friday, AVEO nnounced that the Committee for Medicinal Products for Human Use (CHMP), the scientific committee of the European Medicines Agency (EMA), has recommended FOTIVDA (tivozanib) for approval as a treatment for patients with advanced renal cell carcinoma (RCC). Although it is not obligated to do so, the European Commission typically adheres to the recommendation of its panel of experts at the CHMP.

FBR Capital analyst Vernon Bernardino commented, “We think the potential for tivozanib to gain EU approval in late 2017 is underappreciated, as it has been overshadowed by the ongoing TIVO-3 Phase III trial in third-line RCC (advanced kidney cancer) […]  Based on positive feedback from the CHMP rapporteur and co-rapporteur for the MAA (marketing approval application) that was submitted by AVEO and partner EUSA Pharma, we are confident that the progression-free survival (PFS) prolongation observed in the TIVO-1 Phase III trial supports approval of tivozanib (now branded as Fotivda). We think the CHMP recommendation should increase investor awareness of AVEO as an attractive turnaround story and recommend buying the stock ahead of the preplanned midyear futility analysis of TIVO-3 that we expect to be positive.”

As such, Bernardino reiterates an Outperform rating on shares of AVEO Pharma, with a price target of $3.00, which implies an upside of 42% from current levels. (To watch Bernardino’s track record click here.)

Overall, according to TipRanks, 2 analysts rate AVEO Pharmaceuticals stock a Buy. With a return potential of 19%, the stock’s consensus target price stands at $2.50.

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