Cara Therapeutics Inc (NASDAQ:CARA) Is Down But Far From Out

Cara Therapeutics Inc (NASDAQ:CARA) isn’t having a great close to the week. The company just put out data from a phase IIb study of its lead development asset, a drug called CR845, and has taken a dive on the back of the news.The company closed out the session on Thursday at $25.51 a share. Premarket trading on Friday morning has brought this down to $17.90 – a close to 30% dip and a sharp correction from Tuesday's close just ahead of $28.Our regular readers will know that this is one we follow quite closely.We first highlighted it back in November when it traded for just $8. Our thesis at the time was simple – that the company just couldn’t stay that cheap for too much longer. During the subsequent six to eight months, Cara appreciated to the tune of 250%, very much validating our bull thesis.So where does the latest dip fit into the picture?For those new to the company, Cara is trying to bring the above-mentioned CR845 to market in two primary indications – pain management (broken down into chronic and post-operative) and Pruritis, which is a skin condition that causes itching, redness, dry skin, all the usual culprits of chronic dermatology issues.Right now, there are two administration types under investigation – an intravenous (IV) admin type and an oral admin type. Cara's pipeline combines these administration types with the various indications across four separate trials, each at varying stages of completion along their respective pathways.The lead pain management program combines IV administration CR845 with post-op pain management in a phase III. The trial read out interim earlier this month and the data supported a continuation of the study (as recommended by an independent monitoring board) having proven safe and on its way towards meeting its primary in the study.The lead Pruritis is also a phase II and again with an IV administration. It's a phase II/III, for which the first part completed earlier this year. In short, the drug hit it out of the park against its endpoints and the second stage of the study is well on its way to doing the same.So what's the problem?Well, the latest data comes from a phase IIb study looking at oral administration drug in osteoarthritis patients. The data showed some degree of response versus placebo in a higher dose portion of the population and no real response in two lower doses.Right off the bat, that looks like an issue. In reality, however, while its disappointing, it's not that bad. The highest dose was just 5mg. Patients in this population are taking opioids at doses of 20mg plus in the US right now. If the company can up the dose (and there's plenty of room to do so) there's a good chance clinical benefit will increase in parallel.Even if it doesn’t, this is a secondary pathway. It will be disappointing to write off the osteoarthritis population (as there are potentially hundreds of millions of dollars in revenues to be captured in the US alone if the company can prove its asset a viable alternative to addictive opioids) but there are various other equally large chronic pain populations to be had, and the failure of an oral asset to induce pain relief in one of these populations is far from indicative of similar failure in another.Bottom line here is that this is one miss for a company that has multiple shots on goal. Well, it's not even really a miss – the drug hit the post. The degree to which Cara has declined is representative of the potential that markets place on the asset in question long term, in that the response is amplified based on the disappointment of the drug not hitting it out of the park, as it has done in the past (and as we expect it to continue to do so going forward).Get the whole picture: catch up on our previous coverage of this one here.We will be updating our subscribers as soon as we know more. For the latest updates on CARA, sign up below!Image courtesy of The Comedian via FlickrDisclosure: We have no position in CARA and have not been compensated for this article.