Raymond James analyst Rahul Sarugaser delivered an update to clients on Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News TSX:CRDL) on Monday, saying a slower than expected rollout of CardiolRx is cause for a target price drop.
In the update, Sarugaser reiterated his “Outperform 2” rating for CRDL while lowering his target from $6.00 to $4.50 per share, which at press time represented a projected one-year return of 64.8 per cent.
Cannabis pharma company Cardiol has as its lead product CardiolRx, formulated to be most consistent cannabidiol formulation on the market and set to be commercialized in Canada’s medicinal cannabinoid, notably through a deal with Shoppers Drug Mart, while the company is also planning clinical trials with CardiolRx for acute myocarditis.
Last week, Cardiol announced the closing of a previously-announced bought deal short form prospectus offering for total proceeds of $17.25 million, including the full exercise of the over-allotment option. The involves the minting of 6.9 million new shares at $2.50 per unit plus one half warrant exercisable at $3.25 per share.
Management said in a press release that the funds will go towards the commercialization of its pharmaceutical cannabidiol products, ongoing research and clinical development programs, additional product development and general corporate purposes.
On the financing, president and CEO David Elsley said the funds will help Cardiol in working with leading international researchers on inflammation in heart failure, other cardiovascular abnormalities and also with 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. We also look forward to the commercial introduction of our lead product through our national supplier agreement with Medical Cannabis by Shoppers, a subsidiary of Shoppers Drug Mart,” Elsley wrote.
In his update, Sarugaser said while he had previously estimated Cardiol would need up to $30 million in new money to fully fund the commercialization of CardiolRx as well as support clinical trials, his new estimates tell him the $17.25 million should do the job.
On the commercialization front, Sarugaser said in hindsight he was too optimistic in expecting sales to start in Q2 of this year. Now, adjusting for what he said are likely COVID-19-related delays, the analyst is saying sales will start in Q3.
“We regard CRDL’s recent equity financing as a win, particularly given the current volatile market, and we very much appreciate that its two primary programs —commercialization of CardiolRx among medical cannabis patients and the clinical development of CardiolRx in AM (through to the end of Phase 2) — are now fully funded,” Sarugaser wrote, noting that he expects new financing will be need to advance the company’s mass-market clinical program in heart failure.
“This win notwithstanding, the company has been slower than we had expected in meeting its commercialization milestones, so we continue to take a conservative view of CRDL’s future sales ramp and its ability to penetrate the Shoppers and DS/LGS channels,” he wrote.
Sarugaser is now calling for fiscal 2020 revenue and EBITDA of $1 million (no change) and negative $9 million (previously negative $15 million), respectively, and for fiscal 2021 revenue and EBITDA of $7 million (previously 9 million) and negative $10 million (previously negative $11 million), respectively.