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Why Cara Therapeutics Shot Higher Today

What happened

Cara Therapeutics (NASDAQ: CARA) was a hot stock on Tuesday. One of the formerly clinical-stage biotech's drug candidates won FDA approval, and investors reacted in the usual manner. The shares rose by as much as 28% on the day before settling down to a sub-3% gain near market close.

So what

Many biotechs concentrate on afflictions that are considered serious and threatening. Cara's specialty is more prosaic, although still very much in need of solutions: pruritus, i.e., abnormally itchy skin.

Image source: Getty Images.

The biotech company's most promising drug, Korsuva --- developed with Switzerland-based Vifor Pharma -- addresses this medical challenge sufficiently to win that all-important FDA approval. The regulator's nod was announced by Cara late Monday afternoon, hence Tuesday's share price gains.

In its announcement, Cara CEO Derek Chalmers called regulator's green light "a transformational milestone for Cara and a significant advancement for the substantial number of adult hemodialysis patients suffering from moderate-to-severe pruritus."

Korsuva was submitted to the FDA via a New Drug Application. The regulator granted the drug its Priority Review status, which moved it through the approval pipeline relatively quickly.

Now what

Cara said it and Vifor Pharma intend to roll out Korsuva "in the coming months." The two companies share the commercial rights to the drug in the U.S. Under the terms of their deal, Cara will receive 60% of profits and Vifor Pharma 40% outside of Fresenius Medical Care clinics. For sales in those facilities, profits will be divided 50/50.

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Eric Volkman 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.


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