In late April, we highlighted Cardiol Therapeutics (Cardiol) (CRDL: TSX) (CRTPF: OTC) as a company that has been ahead of the curve with the legal cannabis industry and has been focused on the production of 100% pure pharmaceutical-grade cannabidiol (CBD).
Cardiol has been able to differentiate itself from other CBD companies by focusing of the production of CBD through a chemical synthesis process. This is completely different and a more advanced method of extraction. The result of this process is a substance that is identical to plant-derived CBD, with the benefit of purity and consistency unique to pharmaceutical production.
Through a synthetic production process, Cardiol has been able to de-risk its operation as this method avoids the risk of having contaminants make their way into the final product. During the extraction process, there are a number of things that can go wrong, and we are favorable on Cardiol’s method of production.
Another reason why we are favorable on the synthetic production process is due to purity of the product. Cardiol can produce pharmaceutical-grade CBD that is 100% pure and does not contain any tetrahydrocannabinol (THC). This will allow the company to have the first product on the market that does not require Health Canada’s Standardized Cannabis Symbol THC warning. This is an important differentiator for the business.
Positioned to Capitalize on the Global CBD Market
During the last year, demand for CBD oil has significantly increased and this is a trend that is expected to continue. In Canada, it is tough for a consumer to find CBD oil and Cardiol is working on a solution to capitalize on this opportunity. Cardiol has had its finger on the pulse of the cannabis industry and is led by a management team that had the foresight to recognize a major market need for pharmaceutical-grade CBD oil that is 100% pure.
To capitalize on this opportunity, Cardiol plans to launch a commercial pharmaceutical CBD product and has created strategic supply partnerships that will provide them with the capacity needed to commercialize large volumes of pharmaceutical-grade CBD for a market where demand significantly exceeds the supply.
The CBD oil market represents a massive opportunity and we are favorable on Cardiol’s leverage to this. As the CBD industry continues to mature, we expect to see more companies utilize a pharmaceutical production process. Cardiol has been ahead of the curve with this process and we expect to see strong consumer demand for its premium CBD oil products.
A Company with a Visible Growth Trajectory
One of the reasons we are confident in Cardiol’s ability to capitalize on the global CBD market is due to the partnerships that it has with Noramco Inc. and with Dalton Pharma Services, two major global pharmaceutical manufacturers. Through these relationships, the company has established a proprietary supply-chain to produce pure pharmaceutical CBD on a multi-metric tonne scale (one million grams) and this is an exciting opportunity. Noramco is one of the largest manufacturers of pharmaceutical ingredients in the world, and Dalton is a cGMP, FDA registered, Health Canada approved manufacturer of over 200 pharmaceuticals including cannabinoids.
In the back half of 2019, Cardiol expects to launch its pharmaceutically-pure CBD product, CardiolRx, and this represents a significant opportunity for the company. We expect this product to generate significant demand and serve as a major revenue driver for the company. Cardiol recently brought on Thomas Moffatt to serve as Chief Commercial Officer and to lead the rollout. We believe that this represents a strategic addition to the team due to his background working with leading Canadian drug store retailers like Shoppers Drug Mart and Rx Drug Mart. We believe that Moffatt’s experience will play a key role as Cardiol prepares to capitalize on the medical cannabis market in Canada and abroad (Europe and Latin America).
A Company with Significant Catalysts for Growth
Cardiol is a company that has significant near-term catalysts for growth, and we believe that this opportunity is flying under the radar. In the coming months, we expect to learn about the company’s commercial CBD launch as it also works to advance its most promising CBD product candidates through the clinical trial and drug development process.
When it comes to the long-term opportunity for Cardiol, we are closely following its focus on developing proprietary CBD formulations for heart failure and how it advances these formulations through the clinical trial process. The heart failure market represents a massive unmet medical need and is a condition that affects more than 37 million people globally.
Cardiol’s proprietary formulations aim to address this need and the successful commercialization of a product would be a massive catalyst. If you look at the performance of GW Pharmaceuticals (GW Pharma) (NYSE: GWPH), which has been focused on a much smaller market, you will understand why we are excited about this emerging opportunity.
When compared to its peers, we believe that Cardiol has an attractive valuation and is well positioned to capitalize on the global CBD market. The core of the company’s value proposition is related to its manufacturing process which facilitates the production of pure pharmaceutical CBD in an efficient manner that is less capital-intensive than other industry participants. We think the risk-reward scenario with Cardiol is attractive and are monitoring this opportunity.
Cardiol provides the potential upside of investing in this next generation CBD biotech company and this is something to be aware of. If you want to learn more about this emerging biotech company, please reach out to firstname.lastname@example.org.
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