Cardiol Therapeutics is hitting an inflection point, says Raymond James

Raymond James analyst Rahul Sarugaser is increasingly confident in Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:CRDL), maintaining an “Outperform 2” rating while raising his target price to $5.00/share from $4.50/share in an update to clients on August 24.

Founded in 2017 and headquartered in Oakville, Cardiol Therapeutics is a clinical-stage biotechnology company focused on producing pharmaceutical cannabidiol (CBD) products and developing anti-inflammatory therapies for the treatment of cardiovascular disease.

Sarugaser’s latest update comes after Cardiol announced that the U.S. FDA has given the company clearance to proceed with its Phase II multi-centre, randomized controlled trial of CardiolRx among 100 patients with acute myocarditis (AM).

“We see the FDA’s acceptance of CRDL’s IND application for its Phase II study in AM as a very positive step in CRDL’s prevailing mission to address inflammatory heart disease with its proprietary formulations of pharmaceutical cannabidiol (CBD),” Sarugaser said.

The trial will include patients in the U.S. and Europe, and will evaluate patients after 12 weeks of therapy on the domains of safety, tolerability and the treatment’s impact on myocardial recovery. Cardiol says the trial was designed by an independent steering committee of opinion leaders in the fields of heart failure and myocarditis that represent prominent international research centres, including: the Cleveland Clinic, the Mayo Clinic, the Houston Methodist DeBakey Heart and Vascular Center, the University of Ottawa Heart Institute, McGill University Health Centre, University of Pittsburgh Medical Center, Charité Hospital Berlin, and the University of South Florida Health Morsani College of Medicine/Tampa General Hospital Heart and Vascular Institute.

Based on the large body of evidence of the anti-inflammatory and cardioprotective properties of CBD in models of cardiovascular disease, Cardiol management believes there is an opportunity to develop a new therapy for acute myocarditis (which does not have a generally accepted treatment to date) that would be eligible for designation as an orphan drug, which offers companies accelerated regulatory review and approval to develop treatments for diseases that affect fewer than 200,000 people in the U.S.

“IND clearance to proceed with our Phase II clinical trial of CardiolRx in patients with acute myocarditis represents another major milestone for Cardiol as we continue to pursue the development of new treatment options for patients with inflammatory heart disease,” said David Elsley, President and CEO in an August 24 press release. “We look forward to further studying the cardioprotective potential of CardiolRx in this rare but potentially devastating condition that remains an underdiagnosed cause of acute heart failure, sudden death, and chronic dilated cardiomyopathy.”

In addition, Cardiol has coordinated its AM studies with its ongoing Phase II/III ‘LANCER’ trial of CardiolRx among 422 patients COVID-19 patients with underlying/previous histories of cardiovascular disease, which Sarugaser believes could help de-risk the AM trials and lead to significant steps forward for the company.

“With CRDL’s COVID-19+CVD LANCER trial drawing to an end (data ~4Q21/1Q22), and the AM trial now underway, we see 2022 representing an inflection point for CRDL,” Sarugaser said. “Submission of LANCER to FDA for NDA review, plus possible interim readouts from the AM trial—if both are successful—portend individual clinical program valuations of $459 million and $281 million, respectively.”

Sarugaser sees the company starting to turn its processes into revenue imminently, as he projects $1 million in revenue for 2021, with a projected increase to $4 million in 2022. He also has the company’s EBITDA numbers starting to turn around, with a projected $14 million loss for 2021 after an $18 million loss in 2020, followed by a projected $13 million loss in 2022.

With his update, Sarugaser also adjusted some of his valuation data; while he maintained a 269.6x multiple for 2020, he has raised his projection to 124.2x for 2021 from 86.9x, while his 2022 multiple projection is now 31.6x compared to the initial projection of 22.1x.

On top of the clinical trials, the company has been busy from financial and corporate perspectives. In May, Cardiol announced a $15 million bought deal public offering which got upsized to $22 million after high demand for shares, then got approval to begin trading on NASDAQ on August 10.

From a corporate perspective, the company appointed Dr. Guillermo Torre-Amione, former chief of the Heart Failure Division and former medical director of Cardiac Transplantation at the Houston Methodist DeBakey Heart & Vascular Center, as its new chairman after having served as an independent director since August 2018.

Overall, Cardiol’s stock price has risen by 63.9 per cent for the year to date, reaching a high point of $5.18/share on February 16. At the time of publication, Sarugaser’s $5.00 target represented a projected one-year return of 31.2 per cent.