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Hawk’s Nest

Cara Therapeutics (CARA) Moves 60% Higher Following Bullish Options Signal

by | Apr 13, 2021

Cara Therapeutics (CARA) shares were trading just under $18 when we featured it on January 14th, and after digging into the story further it became clear there was a lot of value. CARA shares have climbed 60% in the three months that followed and the May call spreads remain in open interest sitting on a 145% gain.

Here was our original write-up from 1/14/2021:

Cara Therapeutics (CARA) on 1/13 with a buyer of 5000 May $20/$30 call spreads to open at $2.25, a large trade for a smaller Biotech without a lot of open interest though 1200 May $20 calls bought in December sit in open interest. CARA shares broke out past November highs this week and showing some momentum with weekly RSI clearing 60, a name that put in a double top at $26 in 2019 and this high value range breakout measures back to around that level. The $875M Biotech expects $65M in revenues in 2020, up 227% Y/Y, and forecasts see $325M+ revenues in 2024. CARA activity on 1/13 notably came with it presenting at the JP Morgan Healthcare Conference. CARA’s focus is developing and commercializing new chemical entities designed to alleviate pruritus by selectively targeting peripheral kappa opioid receptors, or KORs. KORSUVA (CR845/difelikefalin), a first-in-class KOR agonist that targets KORs located in the peripheral nervous system and on immune cells is its lead product. Pruritus, or itch, is defined as an unpleasant sensation that provokes the desire to scratch. Certain systemic diseases have been known to cause pruritus that ranges in intensity from a mild annoyance to an intractable, disabling condition. Pruritus is a large opportunity across multiple disease areas accounting for more than 20M scripts annually. CARA expects FDA approval of KORSUVA Injection in 2021 and commercial launch with its partner Vifor Pharma in 2H21. CARA also will have Phase 2 readouts for KORSUVA in atopic dermatitis in 1H21 and Oral KORSUVA plans to move into Phase 3 registration trials in 2H21. The Vifor agreement includes an upfront payment of $150 million last quarter, $100 million of that in cash and an equity investment of $50 million to acquire Cara’s stock at 20% premium to a vend price. Upon U.S. regulatory approval for KORSUVA Injection, Cara will be eligible to receive an additional $50 million equity investment, again, at a calculated premium for then stock price. Vifor has the exclusive rights to commercialize KORSUVA Injection in non-Fresenius Medical Care North America dialysis clinics under a Cara 60%, Vifor 40% profit sharing arrangement. Analysts have an average target of $33 and short interest is 9.9% of the float. HCW recently with a $33 target seeing a high probability of approval in CKD and sees compelling economics on its Vifor arrangement.”