Cara Therapeutics Top-Line Data Disappoints: 'This Is Why You Do Phase 2'

Shares of Cara Therapeutics Inc CARA fell nearly 30 percent early Friday morning after the company released concerning top-line results from a phase 2B trial of its oral CR845 therapy for the treatment of pain associated with osteoarthritis of the hip or knee.

But not all analysts are ready to throw in the towel, even though the company missed the primary endpoint in its trial, including H.C. Wainwright & Co's Corey Davis, Ph.D., who maintains a Buy rating and $30 price target.

Despite Disappointing Phase 2, Justification For Buy Rating

One of the reasons why the trial failed to achieve its primary endpoint was a higher placebo response among knee patients who accounted for around 75 percent of the total enrollment population, the analyst noted. But, among the 66 patients at 5mg who had OA of the hip saw a 39 percent statistically significant improvement from baseline in their mean joint pain score, which was 69 percent better than a placebo.

"We think the results and this clear efficacy signal are all the more impressive given that the oral formulation of ‘845 has only 10-13% bioavailability which decreases when taken with food, so the "real-world" design of the trial where patients could easily not have been strictly complying with the protocol is indicative of how the drug would perform outside the confines of a carefully controlled clinical trial," Davis wrote.

In fact, the trial not only shows a positive signal in the subset of patients with hip OA (but not knee OA) but shows an "incredibly benign side effect profile." In addition, the study marks the first ever successful proof of concept study for an oral kappa opioid that the analyst is aware of with no side effects.

Bottom line, Cara's stock decline is not a surprise but the outcome "could have been far worse." Up next for the company will be another phase 2 study with several changes that could optimize the chances of the therapy showing clear efficacy and perhaps even count as a pivotal trial, the analyst concluded.

At time of publication, shares of Cara were down 26.26 percent at $18.81 in Friday's pre-market session.

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