The landscape of the cannabis industry is changing, and this is something that investors need to be aware of. During the last year, the industry has recorded major advancements which has led to the creation of new opportunities for companies that are levered to this burgeoning market.
We have been covering the cannabis industry since early 2014 and have seen several changes during this time. The initial phase of the industry was defined by the construction of massive cultivation facilities that are focused on the production of premium cannabis. We believe that we have entered the next phase of the cannabis industry and that this period will be defined by marketing, science and quality standards.
When we look at the cannabis industry, we look for companies that are ahead of the curve and have been able to focus on capitalizing on the next phase of growth in the cannabis industry. Cardiol Therapeutics (Cardiol) (CRDL: TSX) (CRTPF: OTC) is a company that meets these criteria.
The company represents a differentiated opportunity that has significant potential catalysts for growth, and we are excited about this. Cardiol Therapeutics is a biotechnology company positioned to lead the global sales and distribution of pharmaceutically pure CBD that sets a new industry standard in terms of product purity, safety, consistency, and manufacturing standards.
The company has established a proprietary supply-chain to produce pure pharmaceutical CBD at a multi-metric tonne scale (one million grams) through its exclusive partnerships with two global leaders in pharmaceutical cannabinoids: Noramco (cGMP, FDA certified, manufacturer of pharmaceutical CBD and the largest narcotics manufacturer in the world) and Dalton Pharma (cGMP-, FDA-certified finished product producer with over 10 years experience manufacturing pharmaceutical cannabinoids for the medicinal market).
Cardiol is now positioned to generate significant revenues in the second half of 2019 through the commercial launch of their CardiolRx pharmaceutical CBD brand in the billion-dollar Canadian market for medicinal cannabinoids. Cardiol also has a number of additional growth drivers including international distribution agreements in Europe and Latin America, and the development of targeted therapeutics for heart failure – which represents one of the largest medical markets in the world.
The heart failure market represents a massive unmet medical need and the Cardiol team is at the forefront of innovative research in this area. Heart Failure is a condition that affects more than 37 million people globally and Cardiol’s proprietary formulations aim to address this need. The successful commercialization of one of the company’s drug candidates would be a massive catalyst, and you can look at the performance of GW Pharmaceuticals (GW Pharma) (NYSE: GWPH) to see why we are excited about this opportunity.
When it comes to investing in cannabis companies, you are really investing in the management team. Cardiol has proven management that rivals anyone in the business. In early 2017, the company was founded by David Elsley (President and CEO), Dr. Anthony Bolton (Director of Research), and Dr. Eldon Smith, OC (Chairman and CMO), all of whom have decades of experience in developing companies in the medical space. These founders have attracted a management team, Board of Directors, and Scientific Advisory Board comprising business and thought leaders with extensive industry experience and expertise in commercializing new important medicines in around the world.
We believe that Cardiol has an attractive valuation and is well positioned to capitalize on the global CBD market, which could be a $100+ billion opportunity. The core of the Company’s value proposition rests with their manufacturing process that allows for the production of pure pharmaceutical CBD in an efficient manner that is less capital-intensive than other industry participants.
A Differentiated Opportunity with Significant Growth Prospects
When we are evaluating cannabis companies, we look for companies that meet the following criteria: 1) have attractive and visible growth prospects; 2) are led by a management team with a proven track record; 3) are focused on an opportunity with a significant total addressable market (TAM), 4) are well capitalized and have an attractive share structure; and 5) have an attractive valuation.
Cardiol meets these criteria and is an opportunity to watch. One of the reasons we are excited about Cardiol is because they have several significant potential catalysts for growth over the next year, including: 1) the commercial launch of CardiolRx in the second half of 2019 in the billion dollar medicinal cannabinoid market in Canada; 2) the commencement of clinical trials in heart failure; 3) entering into distribution agreements for international markets in Europe and Latin America, and 4) the commencement of clinical development in brain cancer.
In 2019, the company plans to commercialize CardiolRx, a Health Canada-certified pharmaceutical CBD product that has greater than 99.5% purity, and this represents a major opportunity for the business. The company is also highly focused on advancing its clinical trial programs for heart disease and we are favorable on the growth prospects associated with these projects.
One of the ways that Cardiol has been able to differentiate itself is through the development of a proprietary platform that encapsulates lipophilic drugs, like CBD, in a nanoparticle comprising a lipophilic core to dissolve CBD and an outer hydrophilic shell to enable compatibility with the aqueous environment of the bloodstream. The platform allows for the retention of higher levels of lipophilic active ingredients in the bloodstream and allowing for the delivery of drugs to sites of disease in the body. We find this to be a significant differentiator and a major value driver in the near-term. The company can monetize this technology through a number of avenues, and we are favorable on this aspect of the story.
A Next Generation CBD Biotech Company to Monitor
Cardiol represents a multi-faceted growth opportunity with a diversified business and a de-risked clinical pipeline. The company’s ability to commercialize its pharmaceutical CBD products provides immediate near-term revenue opportunities which significantly reduces downside scenarios for the business.
One of the reasons we are bullish on Cardiol is the prospects associated with its clinical trials program in heart disease. This represents a significant opportunity to build medical credibility for its retail Pharmaceutical CBD product in near term and a massive growth driver for the long-term story, and we have a strong conviction level when it comes to the management team’s ability to execute. Cardiol provides the potential upside of investing in this next generation CBD biotech company and this is something to be aware of.
When looking at companies to compare Cardiol to, we believe the best option on the commercial CBD front would be CV Sciences or Charlotte’s Web, and on the Biotech side, GW Pharma, which is known for its CBD product for treatment of epilepsy called Epidiolex, which was approved for treatment of epilepsy in June 2018.
When looking at Cardiol, we see a biotech company that is following in the footsteps of GW Pharma but is also focused on a much more significant opportunity in heart disease. Having said that, Cardiol has a market cap of approximately $148 million while CV Sciences is valued at over $700 million, Charlotte’s Web is valued at over $2.2 billion, and GW Pharma is valued at more than $7.1 billion. We think the risk-reward scenario with Cardiol is attractive and we are monitoring how the team continues to execute.
Cardiol is in the early innings of a major growth cycle and we are favorable on its catalysts for growth. If you want to learn more about this emerging biotech company, please reach out to firstname.lastname@example.org
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