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Cara Therapeutics Inc. A Story About CR845 (Difelikefalin)

|Includes: Cara Therapeutics Inc. (CARA)

Now, 28 states have approved the medical and recreational marijuana use. The company like Cara Therapeutics has a much better chance of success in the future. The overwhelming embrace of marijuana in the medical and recreational are paving the way for the companies, like Cara Therapeutics, to success. At this point, CARA is still trying to prove that its technology works, and in the way of clinical trials. In the CARA's candidate products list, the I.V. CR845 is in Phase 3, and the one closest to get the New Drug Certificate. CARA is substantially dependent on the success of the lead product candidate, I.V. CR845, and its second product candidate, Oral CR845(I.V. CR845 is the intravenous formulation of CR845). In this analysis working paper, we put more our attention on the I.V. CR845, which will bring great effect on the stock price recently.

Introduction to Cara Therapeutics Inc. and CR845 CARA Therapeutics Inc.

In the FORM S-1/A, Securities Registration Statement, released on Jan 17 th, 2014, the CARA stated that Cara Therapeutics Inc. is a clinical - stage biopharmaceutical company focused on developing and commercializing new chemical entities designed to alleviate pain by selectively targeting kappa opioid receptors. I.V. CR845 is the most advanced product, which has demonstrated significant pain relief and a favorable safety and tolerability profile in the all former Phase II clinical trials for patients with acute postoperative pain. Besides I.V. CR845, CARA is also carrying on the research and clinical trials of Oral CR845 and CR 701, which are used to Acute & Chronic Pain and Neuropathic & Inflammatory Pain respectively.

CR845 (Difelikefalin)

From the public information, the Cara Therapeutics presents that:

CR845 is designed to produce pain relief by specifically stimulating kappa, rather than mu, opioid receptors. Moreover, Cara has designed CR845 with specific chemical characteristics to restrict its entry into the CNS and further limit CR845's mechanism of action to kappa opioid receptors in the peripheral nervous system, which consists of the nerves outside the brain and spinal cord. In addition to the side effects associated with activation of mu opioid receptors in the CNS, activation of kappa receptors in the CNS is also known to result in side effects, including acute psychiatric disorders. Since CR845 is designed to modulate pain signals without activation of mu or kappa opioid receptors in the CNS, it is not expected to produce the psychiatric side effects of centrally-active prior kappa opioids or the CNS related side effects of mu opioids.

Cara Therapeutics Inc. had applied a patent on June 5 th, 2013, Peripheral Kappa Receptor Agonists 1

for Reducing Pain and Inflammation (Derek T. Chalmers, 2013). In this patent, CARA presented the chemical structure as D-Phe-D-Phe-D-Leu-D-Lys-[co(4- aminopiperidine-4-carboxylic acid)] -OH:

From the patent reference, we can find that the CARA had claimed the initial format of CR845, as D-Phe-D-Phe-D-Leu-D-Lys-[ω(4-aminopiperidine-4-carboxylic acid)]-OH, on Nov 12 th, 2007 (Claudio D. Schteingart, 2007). With 20 years patent term in the United States, the patent of CR845 will be valid until the late of 2027.

I.V. CR845 Clinical Trails Timeline and Events

From the public resource, we cannot find much information about the clinical trial information of I.V. CR845 Phase I. Currently, we can only find the Phase I Single and Multiple Ascending Dose Trial of Intravenous (I.V.) CR845 in Japanese Patients for the Treatment of Acute Pain and Uremic Pruritus, whose sponsor is the Maruishi Pharmaceutical. Maruishi Pharmaceutical is also the development partner of I.V. CR 845 of Cara Therapeutics Inc. in Japan.

Apr 2008, Phase I, Single and Multiple Ascending Dose Trial of Intravenous (I.V.) CR845 in Japanese Patients for the Treatment of Acute Pain and Uremic Pruritus. Attention, the Cara Therapeutics Inc. has completed this trial, and the result has been registered, all the information and data come from the Cara Therapeutics Inc.

The drug candidate was safe and well-tolerated after intravenous infusion and resulted in plasma levels of CR845 expected to be associated with the clinical analgesic activity. CR845 was shown to be safe at all doses investigated, with no reports of serious side effects or adverse central nervous system activity. Also, CR845 infusion triggered a quantitative endocrine biomarker of peripheral kappa opioid receptor activation at the lowest dose tested(Cara Therapeutics Inc., 2008).

March 2009, Phase II Study to Evaluate the Analgesic Efficacy and Safety of Intravenous CR845 during the Post-Operative Period in Women Following Laparoscopic-assisted Hysterectomy. Attention, the Cara Therapeutics Inc. has completed this trial, and the result has been registered, all the information and data come from the Cara Therapeutics Inc.

Significant pain relief was observed in CR845-treated patients over placebo from 4-8 hrs post-drug administration, as exemplified by a significant change in pain intensity difference (NASDAQ:PID) scores (p<0.05). Also, CR845-treated subjects required 32% less morphine than placebo-treated patients over the 16 hours post-drug administration (p<0.05). This morphine-sparing effect was accompanied by a substantial decrease in the incidence of undesirable side effects typically associated with morphine use, including an absence of vomiting and a 72% reduction in nausea (p<0.05) There was no evidence of centrally- mediated adverse effects or sedation after CR845 treatment(Cara Therapeutics Inc., 2010).

May 2011, Phase II Study to Evaluate Analgesic Effect of IV Administration of Kappa Agonist CR845 for Hysterectomy Surgery. Attention, the Cara Therapeutics Inc. has completed this trial, and the result has been registered, all the information and data come from the Cara Therapeutics Inc.

The Phase II study was a double-randomized, double-blind, placebo-controlled study of intravenous CR845 (0.04mg/kg/dose) in women undergoing a laparoscopic hysterectomy. The trial was conducted at 22 sites across the U.S., and enrolled 203 patients who were randomized into four treatment arms: (1) both a pre-and a post-operative dose of CR845; (2) a single pre-operative dose of CR845; (3) a single post-operative dose of CR845; and (4) both pre- and post-operative placebo. Patients receiving both a pre- and a post-operative dose of CR845 achieved the study's primary endpoint by exhibiting a statistically significant reduction (~33%, p<0.05) of morphine use over 24 hours compared to the placebo group. This patient group also exhibited an approximately twofold (~100%) increase in their calculated 24 hours PID0-24 (p=0.002) and SPID0-24 (p=0.003) values compared to placebo-treated subjects. Significant 24-hour analgesic effects were also seen in patients receiving a single post-operative dose of CR845 where SPID0-24 values (p=0.014) increased by more than 50% when compared to placebo. Global evaluation of study medication by all patients indicated a significant treatment effect of CR845 (p=0.006), with 80% of subjects receiving a pre- and a post-operative dose of CR845 rating the drug as good-to-excellent. Pre- and post-surgical dosing of CR845 was safe and well tolerated, and was associated with a decreased incidence of the common opioid-related side effects of nausea, vomiting, and pruritus. Importantly, CR845 did not produce any of the CNS-related effects seen with centrally-acting kappa opioid agonists (Cara Therapeutic Inc., 2011).

May 2013, Phase II, Study to Evaluate Analgesic Effect of IV CR845 for Pain Following Bunionectomy Surgery. Attention, the Cara Therapeutics Inc. has completed this trial, and the result has been registered, all the information and data come from the Cara Therapeutics Inc.

The Phase 2 trial, referred to as CLIN2003, was a randomized, double-blind, placebo-controlled trial of I.V. CR845 (0.005 mg/kg/dose) in 51 women and men undergoing a primary unilateral first metatarsal bunionectomy surgery at a single site in the United States. Patients received an initial bolus dose of I.V. CR845 or placebo at randomization, and again, at the patient's request, 30-60 minutes later, and after that, as needed, up to every 8 hours (until hour 40) over a 48-hour dosing period. Fentanyl was available as "rescue" medication for any patient not reporting adequate pain relief. In the Completer Analysis, the I.V. CR845 treatment arm met the trial's primary endpoint of a statistically significant reduction in pain intensity, as measured by the SPID score, over the initial 24-hour period (SPID0-24; p<0.05) compared to placebo. The I.V. CR845 treatment arm also met the secondary endpoint of a statistical reduction in pain intensity over the entire 48-hour dosing period (SPID0-48; p<0.025).

Also, I.V. CR845 treatment resulted in a statistically significant reduction in the incidence of opioid-related adverse events of nausea and vomiting (by 60% and 80%, respectively; p<0.05) compared to placebo during the 48-hour period of treatment. Fentanyl was available to both I.V. CR845 and placebo treatment groups upon patient request throughout the trial. There were no observed differences in the overall mean fentanyl use between the placebo and I.V. CR845 treatment groups(Cara Therapeutics Inc. , 2013).

June 2014, Phase II Safety and Pharmacokinetics of IV CR845 in Hemodialysis Patients, and Its Efficacy in Patients with Uremic Pruritus. One thing we should pay attention is that there are no approved therapeutics in the United States for uremic pruritus. Attention, the Cara Therapeutics Inc. has completed this trial, but the result has not been registered, all the information and data come from the Cara Therapeutics Inc.

Top-line results showed that therapeutic and supratherapeutic doses of I.V. CR845 (1.0 ug/kg) met the trial's primary endpoint by demonstrating highly statistically significant lower "drug liking" scores as measured by visual analog scale (VAS) Emax (p < 0.0001) when compared to I.V. pentazocine, a Schedule IV opioid receptor agonist. I.V. CR845 also demonstrated highly statistically significant lower "feeling high" and "overall liking" scores (p < 0.0001) as compared to pentazocine. Additionally, both doses of I.V. CR845 were rated equivalent to placebo on "overall drug liking" and "take drug again" measures. "Drug Liking," "feeling high," "overall liking" and "take drug again" scores are standard subjective measures recommended by the U.S. Food and Drug Administration (FDA) to assess a drug's abuse liability, both for recommended scheduling as well as labeling.

The Human Abuse Liability (NYSE:HAL) trial was a double-blind, randomized, active- and placebo-controlled four-way crossover trial that evaluated the abuse potential of I.V. CR845 in 40 non-dependent, recreational polydrug users with lifetime and recent hallucinogenic drug use. The primary objective of the trial was to measure the relative abuse potential of both a therapeutic and supratherapeutic dose of CR845, compared to an intravenous dose of pentazocine. Pentazocine is a mixed-action kappa and mu opioid receptor agonist used clinically in the treatment of moderate-to-severe pain and is classified by the Drug Enforcement Agency (NYSE:DEA) as a Schedule IV drug, indicative of reduced abuse liability compared to most other opioids.

Trial meets primary endpoint with I.V. CR845 showing highly statistically significant reductions (p < 0.0001) in scores for "drug liking," as well as "feeling high," "overall liking," and "take the drug again" when compared to I.V. pentazocine, a Schedule IV opioid analgesic. Results suggest potential for I.V. CR845 to be first Schedule V or non-scheduled peripheral opioid for acute pain.

The primary endpoint of the Phase 2 trial was the change from baseline of the average worst itching during the second week of treatment, as recorded on a visual analog scale (VAS). Patients receiving I.V. CR845 experienced a 54 percent greater reduction in worst itch scores than those receiving placebo (p-value = 0.016), with an average reduction of -48 percent from baseline as measured by the VAS. I.V. CR845-treated patients also exhibited statistically significant reductions in both daytime (-51 percent, p=0.03) and nighttime (-75 percent, p=0.007) worst itch scores compared to placebo treatment.

Secondary endpoints focused on quality of life measures associated with pruritus using a series of previously validated self-assessment scales, including the Skindex 10 score. Patients receiving I.V. CR845 experienced a 71 percent greater reduction in the average total Skindex 10 score at the end the two-week treatment period than those receiving placebo (p-value = 0.031). Another secondary measure, itch-related sleep disturbances based on the Itch MOS Sleep Problems Index II, showed a positive trend in patients receiving I.V. CR845, with a 62 percent improvement compared to placebo.

September 2015, Phase 2|Phase 3, A Study Evaluating the Overall Pain Relief and Safety of Intravenous (IV) CR845 in Patients Undergoing Abdominal Surgery. Attention, Cara Therapeutics has not completed this trial, all the information and data come from the Cara Therapeutics Inc.

The CLIN3001 trial is a multi-center, randomized, double-blind, placebo-controlled, parallel group adaptive design trial with repeated doses of I.V. CR845 or placebo administered both before and following abdominal surgery in male and female patients. The trial will enroll up to 600 patients undergoing either hysterectomy, prostatectomy, hemicolectomy or ventral hernia at 30 clinical sites within the U.S.

Three dose levels of I.V. CR845 (1.0, 2.0 and 5.0 ug/kg I.V.) will be compared to placebo. The primary efficacy measure is the Change in Pain Intensity over the 24-hour postoperative period (AUC-24) using the patient-reported Numeric Rating Scale (NRS) score collected at pre-specified time points through 24 hours. Postoperative nausea and vomiting (PONV) will be evaluated as a secondary efficacy measure. The impact of I.V. CR845 treatment on inflammatory biomarkers will also be explored. Top-line data are expected in the first half of 2016.

June 2016, Phase 2|Phase 3, Study to Evaluate IV CR845 in Hemodialysis Patients with Moderate-to-Severe Pruritus. Attention, Cara Therapeutics has not completed this trial, all the information and data come from the Cara Therapeutics Inc.

Part A will be a randomized, double-blind, placebo-controlled trial of three doses of I.V. CR845 (0.5 ug/kg, 1.0 ug/kg, and 1.5 ug/kg) administered three times per week after dialysis over an eight-week treatment period in 160 patients.

Part B will be a randomized, double-blind, placebo-controlled trial of one optimized dose of I.V. CR845 administered three times per week after dialysis over a 12-week treatment period in up to 240 patients.

Primary and secondary endpoints will include itch intensity and quality of life measures associated with pruritus burden, using a series of previously validated self-assessment scales.

License Agreements

Cara Therapeutics Inc. achieved license agreement with Maruishi Pharmaceutical in Japan and Chong Kun Dang Pharmaceutical in South Korea respectively. Maruishi Pharmaceutical Co., LTD registered a patent, Method f or Producing Synthetic Pentapeptide (Maruishi Pharmaceutical Co., LTD., 2015). We are currently unclear about the influence of this patent on Cara's future profits and supply chain structure.

Cara and Maruishi entered into a license agreement in April 2013. Under the terms of the agreement, Maruishi has exclusive rights to develop, manufacture and commercialize CR845 for acute pain and uremic pruritus in Japan. Cara received an up-front payment, including an equity investment, in the aggregate amount of $23 million and is eligible to receive further milestone payments related to predefined clinical and regulatory events in Japan and the U.S., as well as royalties on Japanese sales of any marketed products containing CR845.

A $2 million milestone payment to Cara was earned in September, upon initiation of Maruishi's Phase 2 trial in uremic pruritus and, after calculated yen to dollar conversion adjustment, resulted in a net payment to Cara of $1.7 million.

Cara and CKD (Chong Kun Dang Pharmaceutical, South Korean) entered into a license agreement in April 2012. Under the terms of the agreement, CKD has exclusive rights to develop, manufacture and commercialize CR845 in South Korea. Cara received an up-front payment, including an equity investment, and is eligible to receive further milestone payments related to predefined clinical and regulatory events in Japan and the U.S., as well as royalties on South Korean sales of any marketed products containing CR845.

A $500,000 milestone payment to Cara was earned in September, upon completion of the Company's U.S. Phase 2 trial of I.V. CR845 in uremic pruritus and, after tax withholding under applicable U.S.-South Korean tax law, resulted in a net payment to Cara of $417,500.

Events

February 25 th, 2016, Cara Therapeutics, Inc. announced that it had received oral notification from the U.S. Food and Drug Administration (FDA) that its adaptive pivotal trial of I.V. CR845 for postoperative pain had been placed on protocol clinical hold pending a pre-specified safety review. This event happened on the I.V. CR845's Phase 2|Phase 3 clinical trial, A Study Evaluating the Overall Pain Relief and Safety of Intravenous (IV) CR845 in Patients Undergoing Abdominal Surgery. Four patients in the highest (5ug/kg) dose group showed transient serum level equal to or greater than 150 mmol/L (mild-to-moderate hypernatremia). The clinical hold was triggered by the protocol - specified stopping criterion. According to the protocol-specified stopping rule based on an elevated serum sodium levels greater than 150 mmol/L, the FDA placed adaptive pivotal trial of its I.V. CR845 on a protocol clinical hold. Cara noted that the patients were asymptomatic and their sodium level returned to normal (<146 mmol/L) with 24 hours post-dosing with standard fluid management. No patients in the other two dose group - 2 ug/kg and one ug/kg - exhibited serum sodium levels greater than 150 mmol/L.

April 20 th, 2016, Cara Therapeutics Inc. announced that it had received notice from the U.S. FDA that it has been removed the clinical hold on its adaptive Phase 3 trial of I.V. CR845 for postoperative pain. The subsequent review of unblended safety data was completed by Cara, the Independent Data Monitoring Committee (IDMC), and the FDA. The safety data review result confirmed that the increases in serum sodium levels in I.V. CR845 treated patients were dose-dependent and asymptomatic with the lowest frequency of events found in the one ug/kg I.V. CR845 group.

From the previous reported clinical trial result, compared with the postoperative opioid-related analgesic, the highest dose group (5 ug/kg) got an 80% (max) side effect reduction. After the protocol - specified criterion holding event happened in February 2016, the clinical trial (NCT02542384) will continue as a three - arm trial testing two doses of I.V. CR845 (1ug/kg and 0.5 ug/kg) versus placebo. Without the previous highest dose group, we can anticipate the clinical trial study result will not be such positive as before. Also, from the historical study results in the Phase II clinical trial (NCT01789476), the IV CR845 had reported obviously unserious adverse effects on the nervous system disorders, like paranesthesia and somnolence. This adverse effect events also happened in the high dose group (5ug /kg) (U.S. National Institutes of Health, 2013). From this point, it is reasonable to exclude the further high dose group in the following Phase III clinical trial, and Phase II clinical trials for the Oral CR845.

Competitor Analysis

Tioga Pharmaceuticals - Asimadoline

Tioga Pharmaceuticals is developing an orally active, highly selective kappa-opioid agonist with approximately 500-fold greater affinity for human kappa-, as compared with either Delta- or mu-opioid receptors. Similar with I.V. CR 845, due to asimadoline's high selectivity for the kappa-opioid receptor, the asimadoline does not produce mu-opioid like side-effects.

Due to its mechanism of action, asimadoline has the potential to treat pruritus associated with a variety of conditions, including atopic dermatitis, psoriasis, end-stage renal disease, liver diseases such as cholestatic disease and primary biliary cirrhosis, malignancies, adverse drug effects, and certain orphan disease. However, only the treatment to the D-IBS patients with at least moderate pain across multiple parameters including endpoints of pain, urgency, frequency and bloating in both males and females has been proved statistically in Phase 2b clinical trial (Partners, 2012).

Tioga Pharmaceuticals is conducting a Phase 2 Proof-of-Concept clinical study of asimadoline for the treatment of pruritus associated with atopic dermatitis. It is clinical trials procedure is slower than the that of Cara Therapeutics. Also, asimadoline's target patients are not same as the I.V. CR 845's, which is directly targeting the patients with chronic kidney diseases associated pruritus (Tioga Pharmaceuticals, 2016).

TREVI Therapeutics - Nalbuphine ER

Nalbuphine ER is an oral extended release opioid with a dual mechanism of action, mu receptor antagonist 2

, and kappa receptor agonist 3 , both of which have been shown in research to be effective in abolishing itch. Trevi Therapeutics, Inc. is pursuing two conditions for clinical development: uremic pruritus and prurigo nodularis. Combining the information from the TREVI and Cara Therapeutics, there are no approved therapies in the U.S. or EU for either condition.

TREVI is conducting a clinical trial for treatment effect on Uremic Pruritus in the United States and Europe. In Phase 2/3 Trial in Uremic Pruritus, the company announced that the Oral Nalbuphine ER trial achieved statistically significant results on the primary endpoint of reducing itch intensity and also demonstrated sustained duration of effect.

However, in the Phase 2/3 Trial, only patients receiving 120 mg of Nalbuphine ER experienced a 3.5-point reduction in itch intensity from baseline, resulting in a statistically significant mean reduction in itch intensity as compared to placebo. The 60 mg dose showed a numerically favorable reduction over placebo comparison group but did not achieve statistical significance. This highly dose-related effect makes the Nalbuphine ER exposed to the serious adverse event with high possibility. There was one serious adverse event was reported in the drug trial. However, the rates quickly resolved and were approaching placebo rate after the first week of titration. The company elected to put in place a Data Safety Monitoring Board (DSMB) to oversee the safety of the study. The DSMB raised no issues that affected the continuation of the study (Trevi Therapeutics, 2015).

More importantly, from the clinical trial records of Trevi Therapeutics (ClinicalTrials.gov, 2016), the company has suspended the clinical trial of Nalbuphine HCI ER in Hemodialysis Patients with Uremic Pruritus. We can suppose the company has faced the financial issue to support its future R&D costs.

Investment Thesis

Currently, Market Perception to Cara Therapeutics is positive. The analysts at Piper Jaffray upgraded the price target to $21 per share, which brings over 25% price soaring on Nov 16 th.

Cara is substantially relying on two major drug candidates, I.V. CR845 and Oral CR845. Especially, for the I.V. CR845 treating pruritus, the company thinks that I.V. CR845 meets the criteria for the designation as a breakthrough therapy (U.S. Food & Drug Administration, 2012). For drugs designated as breakthrough therapies by the FDA may also be eligible for accelerated approval. All requests for the breakthrough therapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request(U.S. Food & Drug Administration, 2012). To qualify the breakthrough therapy designation, the FDA requires preliminary clinical evidence demonstrating that the drug may represent a substantial improvement over available therapy should involve a sufficient number of patients to be considered credible (U.S. Department of Health and Human Services, FDA, Center for Drug Evaluation and Research (CDER), Center for Biologics Evaluation and Research (CBER), 2014). Efforts have been made by the company; the Cara has planned to enroll 400 patients in the Phase III clinical trial, study to the hemodialysis patients with moderate - to - severe pruritus.

We give the positive view about the possibility of I.V. CR845 to get the New Drug License and Marketing Approval in the future.

Valuation R&D Cost

There are three critical parameters to consider when performing early stage valuation, success rates, drug development costs, and sales potential. Success rates estimate the possibility that whether the company's candidate products can get the FDA approval and start marketing. The drug development costs help us estimate the price. Combining the market potential, which is the estimated market share the company's candidate products can have if approved, we can have the estimated sale revenue. If there is a competitive subsection drug market, with limited advantages offered by the new drug regarding increased effectiveness or reduced side effects, the drug will probably not win substantial market share in its product category. We may assume that the candidate products will capture 10% or even less of that market. If no other drug addresses the same needs, we might assume the drug will enjoy a high market share if approved. In the Phase II clinical trial, the I.V. CR845 has approved its ability to reduce the pruritus symptom of hemodialysis patients and improve their living conditions. Finally, by deducting the drug's operating costs, taxes, net investment and working capital requirements from its sales revenues, we can get the free cash flow generated by the drug if it becomes commercial.

The success rate of candidate products will increase with the clinical trial phases. According to the data, the Phase 3 success rate will increase to 93% compared with the 62% success rate of Phase II. A rule of thumb is that clinical trials performed by pharma cost five times more than those performed by biotech. From the 10-K, the Cara's research and development expenses were $21,221,000 million, $15,068,000 million, $8,685,000 million in 2015, 2014 and 2013 respectively. Clinical compound revenue for years ended December 31, 2015, 2014 and 2013 includes $0, $0.6 million and $0.1 million, respectively, from the clinical compound sale to the Maruishi. Compared with the huge amount of research and development cost, for the preapproved revenue, there is not much value to our forecast. Further, according to the 10-K, for the year ended December 31, 2015, compared the year ended December 31, 2014, the net increase in direct preclinical studies and clinical trial costs and related consultant costs primarily resulted from increases totaling $5.4 million. This increased amount from 2014 to 2013 fiscal year is $5.2 million. There are $2 million and $4 million research and development cost being covered by the previous clinical trials in 2014 and 2015 respectively. We can anticipate that more cost will be covered by the previous clinical trials cost in Phase III, 2016. From the 10Q of third quarter, 2016, for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, the net increase in direct clinical trial costs and related consultant costs primarily resulted from increases totaling $7.5 million for the Phase 3. For the total research and development expense, the 2016 nine months ended expense ($28,976,000) increased 112% compared with that of 2015. Supposed 90% completing rate, we predicate the total research and development in 2016 is $32 million approximately.

Estimated Patient Number and Unit Price

The higher level of clinical trials, the higher successful rate will be. From the Accenture's research, the Phase III clinical trial success rate can reach 93%. Here, we use the formula, patient_number * price_per_unit * number_of_units_per_year * margin, to estimate the future peak sales of I.V. CR 845.

There are two potential target markets, Chronic Kidney Disease (CKD) and End-Stage Renal Disease (ESRD).

From the U.S. Renal Data System, the overall prevalence of CKD in the general population is approximately 14%. Conservatively, 26 million adults in the United States have CKD. In 2013, per patient per year (PPPY) Medicare Prat D (Medicare Prescription Drug Benefit) for CKD patients was $3,675, compared with the $2,509 of general Medicare patients. Average total spending for Part D-covered medications in 2013 for CKD patients was $6,088, higher than those without ($2,873). However, CKD patients include both dialysis treatment and non-dialysis treatment patients. The I.V. CR 845 mainly uses to treat the Uremic Pruritus related to dialysis treatment. So, the patients with End-Stage Renal Disease will have a higher demand for I.V. CR 845.

From the U.S. Renal Data System and National Institutes of Health, the prevalence of Uremic Pruritus is to be 40% of patients with End-Stage Renal Disease (ESRD), with approximately 24% percent of patients reporting severe pruritus. Similarly, the majority of dialysis patients (about 60%) report pruritus, with 30% to 40% reporting moderate or severe pruritus. Conservatively, we can suppose that 35% dialysis patients are willing to use medicine, like I.V. CR 845, to reduce the itch symptoms and improve the life quality.

From the National Institute of Diabetes and Digestive and Kidney Diseases, End Stage Renal Disease (ESRD) affects almost 650,000 people in the United States. The number of patients in the United States diagnosed with ESRD is increasing by 5% each year. Internationally the numbers are staggering; estimates are that 2 million people worldwide suffer from ESRD, and the number of patients diagnosed with the disease continues to increase at a rate of 5%-7% per year. After one year of treatment, those on dialysis have a 20%-25% mortality rate, with a 5-year survival rate of 35%. Persons who receive transplants have a 3% mortality rate after five years.

Currently, the estimated total R&D cost of I.V. CR 845 and Oral I.V. CR 845 are $77 million. Considering the future clinical trial cost and FDA certification application procedures fee, the R&D cost of I.V. CR 845 can reach $50 million easily. From the spending data of ESRD patients in 2013, the total spending of ESRD patients increased to $30.9 billion. The cost per person per year (PPPY) of ESRD patients is about $52,675 in 2013. In 2013, the average cost of peritoneal dialysis patients was $69,919, compared with $84,550 of the hemodialysis patients. From the U.S. Renal Data System, in 2013, regardless the LIS (Low-Income Subsidy) status, Medicare Part D (Medicare Prescription Drug Benefit) costs for hemodialysis, peritoneal dialysis, and transplant patients were $7,142 and $6,566, and $4,875 per person per year (PPPY), respectively, compared to $2,592 for general Medicare patients. Here, we use the weighted Medicare Part D cost is $6,627.

Combining the clinical use of another selective kappa-opioid receptor agonist, Nalfurafine (Approved in 2009 in Japan for uremic pruritus), in Japan, we can predicate the cost and sale of the I.V. CR 845. The daily cost of Nalfurafine is $21/day, accumulated to $7,665/year (Industries, 2009). The first year sales in Japan (March 2010) is $42.8 million. 2011 full year sales (March 2011) in Japan is $94.4 million (Pharmaceuticals, 2010).

According to the real and estimated data, after the FDA grants approve and commercial certification, the I.V. CR 845 can bring at least $150-450 million revenue in 5 years, corresponding the 10% to 30% market share, respectively. Except for the management, production, and marketing fee, this revenue can partly support the further clinical trials cost of Oral CR 845 and CR 701. Without seriously adverse event effects, considering the I.V. CR 845 uremic pruritus clinical trial procedures and market condition, the company may reach the break-even point in 2019 or 2020.

Investment Risks

The uncertainty about the success of the lead product candidate, I.V. CR845

Cara currently has no products approved for commercial distribution. The company has invested a significant portion of efforts and financial resources in the development of the most advanced product candidate, I.V. CR845. Its business depends entirely on the successful development and commercialization of the product candidates, and in particular, I.V. CR845, which may never occur. Also, the company's ability to generate revenues in the near term is substantially dependent on the ability to develop, obtain regulatory approval for, and then successfully commercialize I.V. CR845. If the company does not receive FDA approval for, and successfully commercialize, I.V. CR845, Cara will not be able to generate revenue from I.V. CR845 in the United States in the foreseeable future, or at all. From the Thomas J. Hwang's paper(Hwang, 2103), the negative stock return due to adverse events is greater in magnitude and persists longer than abnormal return due to positive events, suggesting asymmetric market reactions.

The possible of profitability in the future

Cara is a clinical-stage biopharmaceutical company with a limited operating history. For the last several years, the company has focused the efforts primarily on developing I.V. and Oral CR845 with the goal of achieving regulatory approval. Since inception, the company has incurred significant operating and net losses available to common stockholders. The net losses available to common stockholders were $24.7 million, $17.7 million and $3.1 million for years ended December 31, 2015, December 31, 2014, and December 31, 2013, respectively. As of December 31, 2015, Cara had an accumulated deficit of $104.9 million. Also, Cara expects to incur significant sales, marketing, and manufacturing expenses related to the commercialization of I.V. and Oral CR845 or other product candidates, if the FDA approves them. As a result, Cara expects to continue to incur significant losses for the foreseeable future.

The uncertainty about the additional funding ability

Conducting clinical trials, pursuing regulatory approvals, establishing outsourced manufacturing relationships and successfully manufacturing and commercializing the product candidates, including I.V. and Oral CR845, is expensive. Cara will need to raise additional capital to fund the future clinical trials, and fund the operations and continue the efforts to hire additional personnel and build a commercial infrastructure to prepare for the commercialization of I.V. CR845 and the other future product candidates, if approved by the FDA, and so on.

The company believes that with the available cash and cash equivalent and marketable securities balances as of December 31, 2015. Cara will have sufficient funds to meet the projected operating requirements until the end of the first quarter of 2018, without giving effect to any potential milestone payments.

Conclusion

Firstly, we can give a positive view about the possibility of FDA certification for the I.V. CR 845, which can bring great revenue for the Cara Therapeutics Inc. As we mentioned in the License Agreement section, the Maruishi Pharmaceutical Co. has already acquired the patent of the manufacturing method of I.V. CR 845. We are unclear about this potential effect for the Cara. Under our estimation formula, if Cara can get 10%~30% market share in dialysis patients with uremic pruritus, the I.V. CR 845 can produce $150 - $450 million potential revenues. This data can be indirectly approved by the TREVI Therapeutics 4

' business plan for funding. Under the current condition, the market will be more concerned about Cara's marketing ability after the result release of phase III clinical trial of I.V. CR 845 for dialysis patients with uremic pruritus. Considering other two candidate products, Oral CR 845 and CR 701, we predicate the Cara can reach the profits breakpoint in 2019 - 2020 if there are no serious adverse events happen.

Disclosure: I am/we are long CARA.

Additional disclosure: Started focusing on CARA since 2015. Long CARA.
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