Cara Therapeutics Inc (NASDAQ:CARA) Is A Cheap Buyout Target


A couple of weeks ago we highlighted the potential in Cara Therapeutics Inc (NASDAQ:CARA)’s pipeline. The company is down considerably year to date (circa 65%) and sentiment remains weak. We don’t think this is going to be the case for long, however. A look at the charts reveals that Cara has found multiple support at around the $5 mark, and from a technical perspective, it looks as though the company has found its floor. All that’s required now is a fundamental catalyst and Cara will be on a path to recovery.

This catalyst could come in the form of a big pharma partnership, and if one was going to happen, now is the time to be watching out for it. By Q4, the company will have three late stage studies ongoing, and prior to the wrapping up of these studies, there’s a small window of opportunity to get in and strike a deal with the company while terms are favorable. There’s even the potential for a buyout.

So what might a deal look like?

Cara’s most attractive candidate for a big pharma partnership is CR845. It’s a kappa opioid receptor agonist, and it’s targeting pain management in a host of patient subpopulations. We discussed in detail the drug’s MOA, but we’ll summarize here by way of a quick recap. Kappa opioid receptors are what gets activated by current opioid pain management drugs, but the type on which these drugs act are part of the central nervous system. This means their activation causes a bunch of unwanted side effects – nausea, sedation, vomiting and euphoria (this last one leads to abuse and dependence).

CR845 acts on what’s called the periphery system, which means that it doesn’t need to enter the brain. No brain entry, none of the standard opioid receptor side effects. This means it’s non-addictive.

The drug has performed great in trials to date, and has a potentially massive market if it can pick up an unrestricted labeling when it goes in front of the FDA. We’re not exaggerating when we say it could replace oxycodone in the US. OxyContin has generated in excess of $30 billion revenues for privately held Purdue since its introduction.

We’d like to see a big name swoop in and pick up the commercialization rights to the drug for a large upfront fee, some sales related milestones and a royalty for Cara. Our front runner for a deal like this is AbbVie Inc (NYSE:ABBV). AbbVie is active in the pain management space, and markets the pain management blockbuster Vicodin. Sector wide sales have been declining for the past few years, however, as more deaths and addictive tendencies have forced physicians to change administration procedures. If AbbVie was to pick up the rights Cara’s CR845, it could transition to a peripheral system based compound, and supplement the declining sales of its lead. Drugs like this are going to be the future of pain management, and companies like AbbVie stay on top by getting in early. Now is early, and the company has the means (cash on hand at $6.3 billion as of June 30) and the incentive to make the move.

Of course, it might just decide to buy Cara outright. The company’s pipeline is robust even outside of CR845, and it’s got a cannabis product that would fit nicely with AbbVie’s Marinol. Cara is very attractive right now, with a market cap of $150 million, no debt and cash on hand (at June 30) of a little over $84 million. At a 20% premium on Cara’s current share price, AbbVie could pick up full rights to CR845, and Cara’s wider pipeline, for just $180 million. That seems incredibly cheap for a company that could dominate pain management in the US within half a decade.

We’re watching this one closely for any hints that a deal or a buyout might come to fruition. Subscribe below to stay updated!

Disclosure: We have no position in CARA and have not been compensated for this article.