Laidlaw Sheds Light on Cara Therapeutics (CARA) as It Scores Key Licensing Alliance

Laidlaw's Francois Brisebois sings the praises of Cara's significant licensing win as a doorway to commercial expertise and more credibility.


Cara Therapeutics (NASDAQ:CARA) shares were on a mad dash up almost 43% yesterday on back of the reveal of a key licensing deal sure to be in this drug maker’s advantage.

Laidlaw analyst Francois Brisebois calls the agreement “important,” one where CARA has licensed global rights (not including U.S., Japan, and South Korea) to Vifor Fresenius Medical Care Renal Pharma (VFMCRP) for the commercialization of its Korsuva injection, designed to treat CKD-aP in dialysis patients.

In reaction, the analyst reiterates a Buy rating on CARA stock with a $26 price target, which implies a 54% upside from current levels.

The financial implications of the licensing are encouraging to the analyst, as the deal translates to $50 million in a cash upfront payment as well as a $20 million equity investment to acquire the drug maker’s common stock at a roughly $17 per share premium. Under the terms of the agreement, CARA may gain further payments worth as much as $470 million, with $30 million in regulatory coupled with as much as $440 million in commercial milestones, along with tiered royalties contingent upon net sales in the specific licensed territories. Meanwhile, Cara maintains development and commercial rights in the U.S., save for dialysis clinics of Fresenius Medical Care North America (FMCNA), which stand for a roughly 38% slice of U.S. dialysis patients. Here, the company will operate according to a profit-sharing deal.

“In addition to adding much needed capital, we view the alliance as a real positive as CARA can benefit from VFMCRP’s significant commercial experience as a leader in CKD treatment, which could ultimately help ramp up sales in such an unmet medical need. While we look forward to more color on the impact of the deal in terms of operating expenses, we continue to anticipate topline data of their adaptive Phase 3 trial in acute post-operative pain in 2Q18. We also expect oral Korsuva for pruritus in pre-dialysis CKD and CLD patients to readout Phase 1 PK/safety data in 2Q18 and later in 2018, respectively. In addition to bringing in a significant amount of upfront and potential long-term capital, we see the VFMCRP as adding credibility and important commercial expertise to CARA’s IV CKD-aP program,” writes Brisebois.

The VFMCRP alliance is poised to yield key “commercial expertise and significant capital,” notes the analyst, considering the company is a worldwide leader in CKD-aP treatment. This means Cara can “benefit” from VFMCRP’s strategic commercial knowhow in ex-U.S. licensing coupled with U.S. experience in FMCNA clinics. Likewise, between the $70 million upfront, a prospective $470 million between regulatory and commercial milestones along with royalties, Brisebois takes this all as “a significant sign of confidence.”

Moving forward, the analyst eyes top drivers fresh on the horizon, anticipating Phase 3 postoperative pain trial and Phase 1 PK/safety CKD data readouts to hit in the second quarter of this year coupled with CLD Phase 1 PK/safety data come the back half of the year.

TipRanks indicates word on the Street is unanimously bullish when it comes to this biotech player’s opportunity. All 4 analysts polled in the last 3 months rate a Buy on CARA stock. With a return potential of nearly 33%, the stock’s consensus target price stands at $22.00.

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