Cardiol Therapeutics has price target trimmed at AltaCorp Capital

A delay in commercialization is cause for a lowering of the price target for Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News TSX:CRDL) but AltaCorp Capital analyst David Kideckel is still upbeat on the stock, saying in a note to clients on Thursday that the now-well-capitalized company has a promising future in cannabinoid-derived pharmaceuticals.

Oakville, Ontario’s Cardiol is planning on commercializing in Canada its lead product CardiolRx through a supply agreement with Medical Cannabis by Shoppers Drug Mart and has a planned international clinical study on the product in acute myocarditis, a condition caused by inflammation in heart tissue.

Cardiol reported on Thursday the closing of a previously-announced bought deal for proceeds of $17.25 million. The terms include an offering of 6.9 million units at a price of $2.50 per unit, with each unit consisting of one common share and one-half warrant at an exercise price of $3.25. The company says it will use the money to fund its clinical programs focused on heart failure.

“Cardiol is fortunate to have the opportunity to collaborate with leading international researchers to develop new therapies to address inflammation in heart failure and in other cardiovascular abnormalities, and through this work explore the possibility of improving outcomes in high-risk COVID-19 patients. There is increasing recognition that COVID-19 involves the heart and blood vessels, with excessive levels of inflammation,” wrote Cardiol CEO and president David Elsley in a press release.

Kideckel says CRDL’s now robust capital position will be enough for both the company’s clinical work and the commercialization of CardiolRx, which the analyst says will now start likely in the third quarter of this year.

“We believe that Cardiol can generate near-term sales from CardiolRx while developing its clinical trials, and that the Company is well-positioned through agreements with Purisys LLC, a spin-out out of Noramco, a leading specialty API provider, and Dalton Pharma Services. Cardiol continues to progress through its clinical pipeline and expects to commence the clinical trial program in acute myocarditis in H2/20e,” Kideckel wrote.

“We believe the agreement with Shoppers is a testament to the Company’s ability to navigate the complexities and high levels of rigour required by Shoppers for sale of medical cannabis products. We know through our discussions with industry executives that Shoppers is among the most stringent of any outlets in Canada in order for a company to have their medical cannabis products sold,” Kideckel said.

Last month, Cardiol reported first quarter 2020 results which Kideckel said were in line with his expectations, where operating expenses came in at $3.1 million versus Kideckel’s $3.0-million estimate and Cardiol’s adjusted diluted net loss was $0.12 per share compared to the same estimate from Kideckel

As for its clinical trials, the analyst noted that Cardiol received in March a No Objection letter from Health Canada for a Phase 1 study to measure blood levels of drug of Cardiols pharmaceutical CBD, with the trial expected to start in the second half of this year.

Kideckel thinks CRDL will generate fiscal 2020 revenue and adjusted EBITDA of $2.0 million and negative $10.6 million, respectively, and fiscal 2021 revenue and adjusted EBITDA of $23.1 million and negative $4.1 million, respectively.

The analyst is maintaining his “Speculative Buy” rating but dropping his target on revised estimates
from $8.15 per share to $6.75, which at press time represented a projected 12-month return of 142 per cent.