Cardiol Therapeutics is a double, says Raymond James

With a Shoppers Drug deal in hand and clinical trials in the works, things are just getting started for Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News TSX:CRDL), according to Rahul Sarugaser of Raymond James.

In an earnings update to clients on Friday kept his “Outperform 2” rating and $6.00 target price for Cardiol.

Biopharm company Cardiol Therapeutics is focused on producing CBD products and developing therapies for its lead product CardiolRx, including planned trials for acute myocarditis.

The company filed its year end 2019 financials on Thursday, with management celebrating a number of developments for the year. President and CEO David Elsley called 2019 a pivotal year for Cardiol.

“We attracted industry-leading talent to our management team, world class stewardship and experience to our Board of Directors, and global thought leaders in cardiology to the Steering Committee for our Phase 2 international trial in acute myocarditis. We also established the commercial infrastructure and pharmaceutical supply chain necessary to support the commercial launch of the purest cannabidiol in the world – a product specifically formulated for consistency, stability, and purity to meet the needs of millions of people who should not be exposed to THC,” Elsley said.

Most importantly and subsequent to the close of 2019, Cardiol signed an exclusive supplier agreement with Shoppers Drug Mart with its pharma-grade, THC-free cannabidiol oils. Also coming in the first quarter of 2020 was the receipt of a No Objection Letter from Health Canada to Cardiol’s Phase 1 study for CariolRx, with the company now aiming to follow up with the start of a Phase 2 study sometime later this year.

Cardiol ended 2019 with a cash position of $7.0 million, a Q4 net loss of $3.1 million and a 2019 net loss of $13.7 million, numbers which Sarugaser said were in line with his estimates.

Overall, the analyst called the year end earnings as benign, with the good times to come over the next few quarters.

“During 2019, CRDL was a pre-revenue company focused on scaling up manufacturing of its ultra-pure pharmaceutical CBD formulations (done) and focused on structuring its gold-standard clinical trials that investigate these formulations in the clinical context of heart disease (in full swing). A lot has changed since 2019, however,” said Sarugaser.

The analyst estimated the Shoppers deal will start bearing fruit in Q2 of this year and is calling for Q2, Q3 and Q4 revenues of $320,000, $480,000 and $690,000 respectively.

Sarugaser also said that an equity raise is likely in the cards for CRDL.

“We expect SG&A and marketing costs to increase during 2020 as CRDL begins sales through Shoppers and launches its engagement with Canadian paediatric neurologists and gerontologists (for sales of its pharmaceutical CBD formulations) in earnest. We also anticipate escalating clinical trial costs beginning 1Q20, continuing into 2021. CRDL has two quarters of cash remaining, so we anticipate that the company will need to raise money in the near-term. (Our models price in a $20 million capital raise executed at
$4.00 per share plus a half warrant),” Sarugaser wrote.

Sarugaser’s $6.00 target at press time represented a projected 12-month return of 100 per cent.