Why Cara Therapeutics Is Up, Trevena Down

One thing I love about the biotech sector is that there is rarely a dull moment and the arena never lacks for big movers and big decliners. Biotech is a space that has dozens of interesting topics on a daily basis. It also is the sector about which I receive more questions from subscribers, followers and readers than all other parts of the market combined, and by a healthy margin. As a result, I am going to use my Friday columns to answer some of the most common questions I have received during the week. Here are two of this week's most frequent inquiries. What do I do with Trevena? Earlier this week Trevena , a small-cap concern that has been profiled on these pages, reported that its lead product candidate Oliceridine (also known as Olinvo) for the treatment of moderate to severe acute pain following bunionectomy and abdominoplasty procedures hit its primary endpoint in a Phase III trial. However, results were not as robust as investors desired and the stock has lost more than 40% of its value this week as shareholders fear this new product will not be able to stand out in this market compared to generic morphine. The company reiterated it still will file a new drug application (NDA) on this drug as planned. Interestingly, analysts have a different opinion than the market about Trevena, as six different firms have reiterated Buy ratings since trial results hit. Price targets proffered have ranged from $8 to $14 a share on this equity that now trades at under $4 a share. I think Oppenheimer's analyst, who lowered his price target to $10 from $13 but kept his Buy rating on the stock, had the best take on the trial outcome: While we increase our probability of success (POS) to 90% (from 75%) as we believe Olinvo will receive approval, we lower our peak sales estimate to ~$315M (from ~$400M) in order to be more conservative based on today's results. This is in line with other acute pain management drugs (i.e., Exparel, Ofirmev). I added a few shares this week in this name. Its future is not as bright as it might have been with better results, but the stock does appear oversold. Trevena now has a market capitalization of just over $200 million, and more than half of that amount is represented by cash on the balance sheet. Should I take profits on Cara Therapeutics? A much better problem to have is with Cara Therapeutics , which has more than doubled since I first profiled it last April. In addition, the company has three key trial readouts for its lead drug candidate CR845 for different indications (uremic pruritus, acute pain, osteoarthritis) between now and the end of the second quarter. Positive results obviously could send the stock significantly higher and disappointing data could have the opposite impact. In situations like this I pretty much always invoke the Jensen Rules. They go like this. If you buy 1,000 shares of a small-cap stock: Sell 100 shares if the equity goes up 50%. Sell another 200 shares if the stock doubles. Sell another 200 shares if the stock triples. You now have locked in a guaranteed profit even if the stock goes to zero. You also have 50% of the original stake riding on the house's money -- one of the best free rides there is. If you have questions on small-cap biotech stocks, please feel free to send me a note. They possibly could end up in our mailbag section next Friday.

Why Cara Therapeutics Is Up, Trevena Down

Readers want to know what to do with the two biotech names, which are headed in opposite directions.

Columnist Conversation

A New, Very Scary Movie

Advice From the Future...

A Blast From the Past Regarding Bitcoin

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.