Earlier this year, the Drug Enforcement Administration (DEA) announced a significant development for patients who need to access Epidiolex, the only federally approved drug derived from cannabis. Epidiolex is manufactured and sold by GW Pharmaceuticals (GWPH) and is no longer considered to be a controlled substance under the Controlled Substances Act.
This development paves the way for additional companies to have products re-scheduled by the DEA and we consider the announcement to be transformational for the CBD industry. During the last year, we have been working to identify a company that can follow in GW’s footsteps.
Cardiol Therapeutics (CRDL.TO) is closely comparable to GW and we see a lot of similarities between the businesses. Cardiol represents a differentiated play on the CBD market and we are bullish on how the story has evolved so far this year. There are a number of reasons for our high conviction level in Cardiol and we believe that it is an opportunity that has been flying under the radar.
Cardiol is focused on producing pharmaceutical cannabidiol (CBD) products and developing innovative therapies for heart diseases including acute myocarditis and other causes of heart failure. The company’s lead product, CardiolRx™, is formulated to be the most consistent cannabidiol formulation on the market and we are favorable on the types of products that the business is bringing to market. Cardiol plans to commercialize CardiolRx in the billion-dollar market for medicinal cannabinoids in Canada and is pursuing distribution opportunities in Europe and Latin America.
Cardiol is planning an international clinical study of CardiolRx in the treatment of acute myocarditis, a condition caused by inflammation in heart tissue, which remains the most common cause of sudden cardiac death in people under 35 years of age. The company is also developing proprietary nanotechnology to uniquely deliver pharmaceutical cannabidiol and other anti-inflammatory drugs directly to sites of inflammation in the heart associated with heart failure.
A Biotech and CBD Growth Story
The last few months have been significant for Cardiol and we are favorable on the recently reported developments. During this time, the company has been able to significantly advance its fundamental story and we are bullish on the growth prospects that are associated with the announcements.
Earlier this month, Cardiol reported a major milestone and announced that data which supports its nanotechnology approach to drug delivery was accepted for presentation at the American College of Cardiology’s (ACC) 69th Annual Scientific Session & Expo. Results from this study showed that there was a greater than 100-fold increase in uptake of Cardiol’s nanoparticles in heart failure cases compared with control subjects in a pre-clinical model of non-ischemic heart failure. These results are exciting and provide additional insight into how nanotherapeutics may be utilized to target the anti-fibrotic properties of cannabidiol to fibrous tissue in the failing heart.
Cardiol’s proprietary nanotechnology is designed to enable the distribution of water insoluble (aqueous) drugs within the blood circulation, improve pharmacokinetics, and facilitate drug accumulation in the failing heart. The company’s nanoparticles are based on a patented family of biocompatible and biodegradable amphiphilic block co-polymers made from polyethylene glycol (PEG) and polycaprolactone (PCL). Both PEG and PCL have a long history of safe use in humans.
If Cardiol can prove to be successful with its studies, we expect to see the business follow in GW’s footsteps. Through these studies, Cardiol has the opportunity to introduce a game-changing therapy for heart failure and we are bullish on the amount of value that can be created through this.
Signs an Exclusive Distribution Agreement with Shoppers
Last month, Cardiol reported a major milestone for its Canadian CBD business and signed a supplier agreement to offer its pharmaceutically produced cannabidiol to Medical Cannabis by Shoppers, a subsidiary of Shoppers Drug Mart Inc. This provides Cardiol with significant distribution in Canada and this should serve as a major revenue generator for the business.
Shoppers will be the exclusive retailer of CardiolRx in Canada and this is a relationship that we are excited about. Under the terms of the agreement, Cardiol’s exclusive manufacturing partner, Dalton Pharma Services Inc., will supply Cardiol’s pharmaceutical cannabidiol products to Shoppers for resale in all provinces and territories in Canada through Shoppers’ online store. Shoppers also has the right to resell all future products available from Cardiol’s product line and we will monitor how the products generate traction in the market.
The distribution agreement will allow Cardiol to meet the growing demand for medical cannabidiol products that are free from the psychotropic effects of tetrahydrocannabinol (THC). Cardiol represents a differentiated opportunity and we expect to see significant demand for its premium line of CBD products.
A Long-Term Opportunity to be Aware of
Cardiol represents a multi-faceted growth opportunity that is in the early innings of a major growth cycle and is an opportunity to be aware of. At current levels, we believe that Cardiol has a compelling valuation and a favorable risk-reward profile. We believe that Cardiol is an opportunity that has been flying under the radar and is one to be aware of.
Over the next year, we expect the pharmaceutical CBD company to report impressive growth and will monitor how it is able to advance clinical trials. Cardiol is focused on conditions that have a massive total addressable market (TAM) and we are favorable on this aspect of the story.
If the company is able to advance clinical trials, we expect to see a GW-like response and find this to be significant. When GW reported positive clinical data, the stock soared higher and if it is successful Cardiol should realize a similar trend.
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