Canaccord Confident on Cara Therapeutics (CARA) Thanks to Strong New Collaborator

Canaccord's Arlinda Lee cheers a new deal between Cara and VFMCRP that relieves financial pressure on the stock.


Cara Therapeutics Inc (NASDAQ:CARA) stock is on a vault ever since a big licensing win fueled bullish fire on the drug maker, with shares continuing to leap another 12% today. In total, shares have flown 50% since yesterday’s buzz broadcasted a new partnership with Vifor Fresenius Medical Care Renal (VFMCRP) for CR845 injection in an exclusive chronic kidney disease-associated pruritus (CKD-aP).

Under the agreement, VFMCRP is primed to develop and commercialize Cara’s injection across the globe, except for in the U.S., japan, and South Korea. This translates to $70 million upfront for Cara, with a $50 million cash payment coupled with a $20 million equity investment at roughly $17 per share. Additionally, the biotech company has eligibility to gain $30 million in regulatory coupled with $440 million in commercial milestone payments, along with double-digit royalties on product sales.

Moreover, Cara has walked into a 50-50 profit share with VPMCRP for IV Korsuva, the company’s injectable drug designed to treat kidney dialysis-induced severe itching in patients. which will bring the Korsuva injection to Fresenius Kidney Care dialysis centers in the U.S. For context, Fresenius leads the globe as the biggest provider of dialysis services and products, holding a 38% domestic share of dialysis services, with 8% in Europe, the Middle East, and Africa, and 11% in Latin America.

Canaccord analyst Arlinda Lee cheers that this “deal removes financial overhang,” reiterating a Buy rating on CARA stock with a $21 price target, which implies a 20% upside from current levels. (To watch Lee’s track record, click here)

“With Cara’s first pivotal Ph3 trial for lead candidate Korsuva underway, and a second international Ph3 trial on track to start in mid-2018, we remain optimistic for IV CR845 prospects in chronic kidney disease-associated pruritus CKD-aP, particularly with the strength of VFMCRP as a new collaborator,” highlights Lee.

The analyst continues, “We adjust our model to reflect increased cash ($140M pro forma) and optimism for better penetration with this collaboration: we increase Korsuva penetration of IV CKD-aP market in US (35% peak from 30%) and EU (30% peak from 25%) and success probability to 60% at US Fresenius centers, EU, and Japan and to 55% for US non-Fresenius centers. We remove a $150M raise in 2Q19.”

Regarding IV Korsuva in CKD-aP, the analyst anticipates the initiation of a second and international Phase 3 trial later on in the second quarter of this year, with eyes on Phase 1 top-line data and the kickstart of a Phase 2 trial for oral Korsuva in CKD-aP (non-dialysis patients) likewise in the second quarter. When glancing at Oral CR845 in chronic liver disease-associated pruritus, the analyst angles for Phase 1 data and the initiation of a Phase 2 trial this year. For I.V. Korsuva in post-operative pain, the analyst predicts Phase 3 results will be posted in the second quarter of 2018.

TipRanks points to a unanimous bullish camp on the Street betting on CARA stock, with all 5 analysts polled in the last 3 months rating a Buy on the biotech player. With a solid return potential of nearly 33%, the stock’s consensus target price stands at $22.80.

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