Take a pass on Cardiol Therapeutics, says Raymond James

With the news of a discontinued clinical trial from Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:CRDL), Raymond James analyst Rahul Sarugaser has reduced his projections on the company. Sarugaser delivered a Company Comment on Cardiol on Monday where he reiterated a “Market Perform” rating while dropping his target price from $3.00 to $1.00 per share.

Oakville, Ontario-based biopharm company Cardiol focuses on pharmaceutical cannabidiol (CBD) products and therapies for heart disease and has lead asset CardiolRx, a chemically-synthesized pure CBD formulation. The company had been investigating the cardio-protective properties of CardiolRx in patients with COVID-19 who have a prior history of or risk factors for cardiovascular disease (CVD).

Cardiol announced on October 25 that it was discontinuing a LANCER trial with CardiolRx due to lack of eligible patients and a lower than expected event rate. The company said it will instead focus on its Phase 2 ARCHER trial in acute myocarditis (AM) along with a Phase 2 pilot study in recurrent pericarditis.

“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,” said Cardiol President and CEO David Elsley in a press release. 

“Notwithstanding this, we are in a strong financial position to support our international collaborations with world class researchers and clinicians who are at the forefront of developing important medicines for the treatment of debilitating heart diseases that affect all age groups and remain underserved by available therapies,” he said.

Commenting on the announcement, Sarugaser said while there may be promise in CardiolRX, at this point the company has only pre-clinical data to draw upon, with no data yet on the drug’s efficacy in a human population.

“LANCER, in our view, was supposed to provide the first view into said data, however, now that the trial has been discontinued, first human evidence will not be available until ARCHER or possibly the pericarditis trial reads out,” Sarugaser wrote. “Given the persistent delays we saw in LANCER, the timelines ascribed to the ARCHER and pericarditis trials remain uncertain, in our view.”

Sarugaser said he has removed the risk-adjusted Net Present Value of Cardiol’s COVID-related asset, which had been set at $56.1 million, and he has discounted the value of the ARCHER trial by 50 per cent due to the uncertain timelines, with no value yet ascribed to the pericarditis investigation.

By the numbers, Sarugaser is now forecasting zero revenue in 2022 and 2023 and negative EBITDA of $24 million and $23 million, respectively, for 2022 and 2023. At the time of publication, Sarugaser’s $1.00 target represented a projected one-year return of 30 per cent.