For all the hype and media attention around the G20 summit in Argentina, it’s clear that U.S.-Chinese trade relations won’t be fixed overnight. Despite the rally of stocks today, Presidents Trump and Xi have a pretty wide gulf to cross before they can normalize relations. One of the topics they have to discuss, interestingly enough, appears to be America’s opioid crisis. As a result, America’s opioid crisis will become more prominent in news coverage, potentially providing a positive catalyst for Cara Therapeutics (NASDAQ:CARA) and CARA stock.
The increasing attention being paid to China’s role in the opioid epidemic appears likely to force Trump to pressure Beijing on this issue, while Cara has a promising potential alternative to traditional opioid drugs. Consequently, CARA stock is well-positioned for the swell of media attention that is likely coming.
America’s Opioid Crisis
The bull thesis on Cara Therapeutics stock is based on a sad reality: America is facing a prescription opioid crisis. It’s easy to look at the numbers and see the problem. Total prescription painkiller overdose deaths have risen from 15,000 in 2005 to 30,000 last year. And contrary to public perception, men aren’t the only victims of the epidemic. Around 10,000 women kill themselves with these drugs each year as well. Shockingly, between 2003 and 2008, in just the state of Ohio, the number of people who died of drug overdoses was higher than the total number of U.S. soldiers who were killed in the Iraq War.
It gets even worse. According to a book called Dreamland about the opioid crisis, “a government survey found that the number of people who reported using heroin in the previous year rose from 373,000 in 2007 to 620,000 in 2011. Eighty percent of them had used a prescription painkiller first.” These legal painkillers truly are a gateway to a terrible place.
And it truly is an epidemic. Dreamland included this scene from Portsmouth, Ohio: “It seemed like an evil lottery, a massive brainwashing. One by one people succumbed. After a while, Roberts, [a local nurse] could recognize the look, say, in an old friend she hadn’t seen for a while. ‘They’re coming over to your house [with] these big elaborate stories to get money off you,’ she said. ‘It’s like watching people being picked off one by one by one.'”
The Momentum For a Solution Is Growing
Importantly for CARA stock, it appears that this epidemic has finally penetrated the national consciousness. Trump’s team has made a point of highlighting this crisis since the 2016 campaign. Earlier this year, the official White House and Pence Twitter accounts kept hammering home the administration’s Share Your Story campaign, which is its effort to raise awareness and publicize victims’ experiences.
This campaign is bringing about more results. Concerned social media users have made the hashtag #FentanylChina huge on Twitter. It now appears that the Trump administration may require China to crack down on its illicit opioid producers as part of any trade deal. In any case, the media has been increasing its coverage of the topic in recent weeks.
Enter CARA Stock
Opioids work through several different receptors, including the mu, delta, and kappa receptors. The opioids that are currently on the market target the mu receptors. It is thought that the strong addictive qualities of these drugs come from the side effects of targeting the mu receptors. According to Cara, most painkillers are mu drugs or NSAIDs such as aspirin and ibuprofen.
The company’s ambitious goal is to launch a fundamentally new class of opioids that target the kappa receptor rather than the mu receptor. By doing so, it hopes to avoid many of the side effects of traditional opioids that use the mu receptor pathway.
At this point in time, Cara is focusing on its lead drug candidate, CR845, which is in Phase 2 trials. The company reported: “To date, CR845 has shown in Phase 2 clinical trials promising improvements in itch relief in a very difficult to treat itch condition called uremic pruritus, an itch that develops in Chronic Kidney Disease (CKD) and in particular dialysis patients.”
It’s traditional for smaller drug companies to target just one or two specific medical conditions with their lead candidates. However, if a company’s drug successfully treats one specific condition, then it can start targeting a wider range of medical issues. If a new, game-changing type of opioid succeeds, it probably won’t be limited to just management of kidney-related problems. And if Cara’s drug is able to successfully treat other types of pain and discomfort, CARA stock will rally.
Is CARA Stock Worth the Risk?
The company reported a great deal of clinical results in its most recent corporate presentation. If you are thinking about investing a substantial sum of money in CARA stock, it’d be wise to examine these results carefully. As a lay person, it’s very difficult to forecasts whether this sort of drug will work, as so many drug candidates fail once they reach more rigorous Phase 3 trials.
What we do know is that the company had $206 million in cash as of Sept 30. As far as its cash burn, it spent $19.4 million last quarter, suggesting losses of about $80 million annually. At that rate, CARA can keep funding its trials and seeing if its novel opioids are viable commercial alternatives to the current mu-based options for more than two years.
From a trading perspective, pay close attention to headlines from the Trump administration and the ongoing China negotiations. Opioids are currently in the news, and that chatter should pick up even more if President Trump starts hammering China on its illegal drug development. That could lead to serious interest in CARA stock. I almost never invest in clinical-stage biotech stocks, as they’re outside of my comfort zone. But if you have high risk tolerance, CARA stock could be a good name to add to your portfolio
At the time of this writing, Ian Bezek held no position in CARA stock. You can reach him on Twitter at @irbezek.