Shares of Cara Therapeutics (NASDAQ: CARA) rose over 17% last month, according to data provided by S&P Global Market Intelligence. The company announced that it had completed enrollment for its phase 3 clinical trial evaluating its lead drug candidate, Korsuva, as a potential treatment for chronic kidney disease-associated pruritus (CKD-aP) in patients on dialysis. That means top-line results from the study will be available sometime in the second quarter of 2019.
Shareholders are oh so close to the long-awaited clinical results for Korsuva in CKD-aP. If successful across all indications and formulations (both oral and injectable), then Wall Street thinks it could generate peak sales of up to $500 million per year once fully ramped up. While that would take years to occur, the company has a market cap of just $650 million today. It could also hit the ground running if the drug candidate receives marketing approval from the U.S. Food and Drug Administration.
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That's because Cara Therapeutics has de-risked both development and commercialization by partnering with Vifor Fresenius Medical Care Renal Pharma (VFMCRP), a joint venture between Vifor Pharma Group and Fresenius Medical Care. The latter is the largest dialysis provider in the U.S., which would provide instant demand for the drug. The small-cap pharma company could receive up to $470 million in milestone payments and royalties on sales as part of the collaboration.
While a successful outcome for Korsuva could deliver significant upside for Cara Therapeutics, the drug candidate is also the only asset being developed by the company. That helps to explain why it sports a low market cap relative to the drug candidate's potential. After all, if the first pivotal trial fails to meet its primary outcome, then the company could see shares collapse. Investors that understand the risk and still want to have a little fun could stake a small position in the company ahead of its mid-2019 data readout. Just know this could go either way.
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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.