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Cardiol has target lowered at Leede Jones Gable

Leede Jones Gable reported on Canadian drug developer Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:CRDL) on Wednesday, with analyst Douglas W. Loe saying a reevaluation of the company’s progress is cause for a revision of his target price. Loe kept a “Speculative Buy” rating on the stock while dropping his target from $6.00 to $4.50, which at press time represented a projected one-year return of 442 per cent.

Cardiovascular disease-focused Cardiol announced a recalibration of its clinical programs on Tuesday, saying it would be discontinuing the LANCER trial due to lack of eligible patients and putting focus on its Phase 2 clinical programs for CardiolRx, one for acute myocarditis and now a new one for recurrent pericarditis. 

Cardiol, which is currently testing its orally-active, ultra-pure cannabidiol formulation Cortalex/CardiolRx for a number of medical markets, said the LANCER trial, which was to investigate the cardioprotective properties of CardiolRx in hospitalized COVID patients, said there were multiple factors that caused the decline in patient numbers for the trial, including vaccine-induced or natural immunity in the general population, the use of COVID therapeutics and the varying effects of COVID variants. 

Cardiol President and CEO David Elsley said the company is in a strong financial position to keep its research going.

“The decision to terminate the LANCER trial was difficult but necessary, as the evolution of the disease and its management have inhibited our ability to recruit eligible patients to such an extent that continuing the trial is no longer practical,” Elsley wrote in a press release.

With the news, Loe rejigged his model on CRDL, taking out COVID-19-based royalty revenue projections which led to a compression of his forecasts and valuation.

“[O]ur key takeaway is that we are slightly revising our PT for CRDL to $4.50 while maintaining our Speculative Buy rating on the stock. As before, our valuation is still based on NPV (30 per cent discount rate), but we are shifting forward the reference year in our EBITDA/EPS-based valuation methodologies to F2028 from F2027, based on our reassessment of plausible timelines to FDA approval for CardiolRx in one or more inflammation-associated cardiovascular disease indications (we assume that the cannabidiol formulation can be approved for both acute myocarditis and recurrent pericarditis in that year),” Loe wrote.

Loe is now forecasting Cardiol to be generating 2026, 2027 and 2028 revenue of $118,000, $33.0 million and $105.8 million, respectively, and 2026, 2027 and 2028 EBITDA of negative $18.8 million, positive $14.6 million and positive $84.2 million, respectively. 

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