Is Cardiol Therapeutics a buy?

Leede Financial analyst Douglas Loe maintained a “Speculative Buy” rating and $11.00 target on Cardiol Therapeutics (Cardiol Therapeutics Stock Quote, Chart, News, Analysts, Financials TSX:CRDL) in an August 6 update following the company’s release of headline results from its 109-patient Phase II ARCHER trial. The study evaluated CardiolRx, the company’s orally-active ultra-pure cannabidiol formulation, in acute myocarditis.

Loe noted that final data arrived only slightly later than expected, with enrollment for the 12-week trial concluding in late fiscal Q3/24 and readout originally anticipated in Q2/25.

Cardiol and its collaborators viewed the ARCHER data as favourable based on at least one primary endpoint. However, additional biomarker and cardiac function data are still to come.

“Cardiol’s ARCHER update was heavy on description and light on actual data, and to be candid, we suspect that capital market response to the ARCHER data is that it is largely devoid of ARCHER data, an observation made even more stark by the fact that the primary endpoints were based on three-month follow-up analysis of a study that completed enrollment back in late Sept/24 as indicated above,” Loe said. “The trial has two primary endpoints, one of which was essentially met though not quite to a statistically significant degree (cardiac MR-assessed change in extracellular volume) & another that was not met (global longitudinal strain, also assessed by cardiac MR) but which had no chance of being met based on patient enrollment characteristics.”

Cardiol’s share price fell from $1.91 on August 1 to $1.85 on August 5 and dropped further to $1.48 on August 6. The decline suggests limited market tolerance for studies that miss statistical significance thresholds, despite supportive commentary from collaborating cardiologists.

“So on the press released ARCHER update itself, Cardiol indicated that CardiolRx-treated patients exhibited measurable improvement on extracellular volume on cardiac MR images after three months of CardiolRx in comparison to placebo patients, with a p-value that was close to achieving statistical significance (p-value was 0.054, close to 0.05 & still reflecting to us that CardiolRx exhibited clear efficacy trends),” Loe said.

Loe said the market reaction was “in a way unsurprising” given the slight miss on statistical significance for extracellular volume reduction, a key measure of inflammation and fibrosis in the myocardium. He emphasized the miss was minor.

“We have rarely, if ever, seen capital markets show tolerance for missing statistical significance, even when accounting for factors such as the magnitude of the miss (which was extremely small in ARCHER), the size of the trial (109 patients is not insignificant, though still below what would be needed for a Phase III registration study), the target indication (acute myocarditis, where efficacy relies on interpretation of radiographic images rather than hard endpoints like survival in oncology or microbial clearance in infectious disease), or the lack of a true standard of care (there are no approved therapies for myocarditis, aside from off-label use of glucocorticoids or anti-hypertensive agents),” he said.

Loe doesn’t expect Cardiol to generate revenue until fiscal 2029, when he estimates the company will produce $65.8-million in revenue and $42.7-million in Adjusted EBITDA. He projects those figures will improve significantly in fiscal 2030 to $165.4-million in revenue and $139.3-million in Adjusted EBITDA, reflecting expected commercial ramp-up following clinical milestones.

In the interim, he expects ongoing development-stage losses, forecasting Adjusted EBITDA of negative $23.5-million, $20.8-million, and $20.6-million in 2026, 2027, and 2028, respectively.

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