As the summer season comes to a close, the cannabis sector is trending higher and this is something that we are watching. During the last quarter, the sector had been under pressure with several leading companies impacted by the decline.
Although the weakness over the summer was concerning, we believe it was transitory and are excited about how the cannabis industry has advanced over the last year. Going forward, we are focused on identifying companies that are poised to capitalize on the changing landscape of the industry.
Cardiol Therapeutics (CRDL.TO) (CRTPF) is focused on creating the purest and safest cannabidiol (CBD) therapies while innovating unique formulations to target heart disease. When analyzing the growth prospects associated with Cardiol Therapeutics, there is a lot to be excited about. The company has several significant potential catalysts for growth including:
- the launch of its pharmaceutical CBD product line later this year
- the scaling of its supply of premium CBD
- the formation of strategic international research partnerships
- the advancement of its heart failure therapies
- the development of additional CBD products that are based on science.
A Leading CBD Company with Multiple Revenue Streams
Cardiol Therapeutics represents a multi-faceted growth opportunity that has several emerging pharmaceutical product streams. The company has a number of attractive potential near and long-term catalysts. When looking at the company’s near-term growth prospects, we are most excited about the launch of CardiolRx™ which is expected to be available in Canada in the near future. Through the launch of CardiolRx™, a THC-free premium CBD product, Cardiol will be able to capitalize on the $1.2 billion CBD market (according to New Frontier Data) and we expect this product should be a major revenue driver for their business.
Another potential pharmaceutical product stream is related to Cardiol’s planned clinical trial in acute myocarditis, a condition characterized by the inflammation of the heart muscle. The clinical trial will utilize the company’s CardiolRx™ CBD formulation and this will provide the company with a unique opportunity to build brand awareness in support of the commercial launch of Cardiol’s pure pharmaceutically produced CBD product.
The total addressable market (TAM) associated with acute myocarditis is significant. Based on the experimental evidence that supports the powerful anti-inflammatory benefits associated with CBD in cardiovascular disease models, Cardiol believes that there is a major opportunity to develop a breakthrough therapy for acute myocarditis that would be eligible for designation as an orphan drug.
The orphan drug designation is granted to pharmaceutical products that are being developed to treat medical conditions that affect fewer than 200,000 people. Orphan drugs are eligible for accelerated marketing approvals and the companies that are developing orphan drugs tend to receive other incentives. This designation would be a major milestone for Cardiol and is a considerable potential catalyst to be aware of.
The most significant potential pharmaceutical product stream for Cardiol is related to the focus on developing treatments for heart failure. The company is developing potential solutions through strategic international partnerships and we are bullish on this focus. During the last 20 years, there have been no new introductions of therapeutics in diastolic heart failure (according to Cook et al., International Journal of Cardiology 171, 368-376 (2014)) and Cardiol is working on developing a game-changing treatment for this indication.
Working with the Best to Become the Best
Earlier in this article, we highlighted the strategic relationships that Cardiol has entered into as a major value driver for the entire business and want to provide more context on this aspect of the story. These relationships are significant to Cardiol as they provide unparalleled access to metric ton quantities of pharmaceutically manufactured pure CBD.
Through an exclusive agreement with Noramco for the manufacture and supply of pure pharmaceutical CBD in Canada and Mexico, Cardiol Therapeutics is in league of its own. Noramco is a global leader in the manufacture and supply of controlled substances and active pharmaceutical ingredients (APIs) for the pharmaceutical industry. Noramco can produce pure CBD compounds that can form the starting point for clinical and commercial activities in every market sector (i.e., pharmaceutical, nutraceuticals, food and beverage, and personal care) and we are favorable on the potential value that can be created for Cardiol through this relationship.
Cardiol has been nothing short of an execution story when it comes to securing strategic partnerships to support growth. Another attractive aspect of the Cardiol story is related to its exclusive global manufacturing agreement with Dalton Pharma Services for the supply of pharmaceutical CBD for commercial introduction. Dalton is a Health Canada approved, FDA registered, cGMP manufacturer of pharmaceutical cannabinoids. We are bullish on the growth prospects associated with this agreement and this is something to be watching.
Creating CBD Products to Disrupt the Market
One of the most important trends taking place in the Canadian cannabis industry is related to the focus on quality. More than 75% of Canadian cannabis consumers have stated that their number one need is related to quality and safety (according to a National Cannabis Survey in the fourth quarter of 2018 by Statistics Canada). Since inception, Cardiol has been laser focused on creating safe and quality products and this is an area where the company excels with its CardiolRx™ products.
These premium pure CBD products are created under the most stringent standards and contain zero THC. Through a chemical synthesis process, Cardiol is able to create a substance that is identical to botanically derived CBD, with the benefit of purity and consistency that only comes from pharmaceutical production processes.
Through this process, Cardiol has been able to de-risk the operation due to how the process avoids the risk of contaminants, pollutants, and pesticides making their way into the finished formulation. Since CardiolRx does not contain any THC, it will be the first product on the market that does not require Health Canada’s Standardized Cannabis Symbol THC warning. This is an important differentiator for consumers who do not want to consume any THC and we are favorable on this aspect of the product.
Focused on Burgeoning International Markets
The international market represents an attractive opportunity for CBD businesses, and we have been closely watching this aspect of the industry. Since Dalton Pharma Services is providing Cardiol with pharmaceutical CBD from a cGMP compliant facility, the company will be able to capitalize on the international opportunity, a significant potential catalyst for growth.
According to Prohibition Partners, Europe’s medical cannabis markets is expected to be a $58 billion (euros) industry by 2028. CBD is currently being sold as an over-the-counter product in a number of countries in Europe such as the U.K. and Germany. Over the next year, we expect to see Cardiol secure distribution across the European market and this would prove to be a major growth driver.
Latin America is home to several attractive emerging cannabis markets and is an opportunity that has gained considerable traction. CBD is being sold as an over-the-counter product at pharmacy stores in several countries in Latin America and this represents a significant long-term opportunity for Cardiol. According to Prohibition Partners, Latin America’s medical cannabis market is expected to be valued at $8.5 billion by 2028 and is a market that continues to evolve.
A Multi-Faceted Growth Story in the Making
Cardiol represents a multi-faceted growth opportunity that has a number of potential revenue streams. We are favorable on the management team’s ability to execute and want to highlight some of the near-term avenues for growth.
When looking at the first potential major revenue driver for Cardiol, we are focusing on the Canadian opportunity especially as it relates to pharmacy prescription sales. Two additional potential revenue drivers are related to the pharmacy distribution opportunity in Latin America as well as distribution in Europe. These are two emerging markets that have been showing strong levels of demand for CBD products. Cardiol should gain traction in these markets once such products are approved for sale.
Another exciting revenue generation opportunity for Cardiol is related to the innovative formats that its pharmaceutical CBD can be delivered. As the company continues to execute, we expect to see new proprietary pharmaceutical CBD products hit the market and find this to be significant for the long-term story.
Assessing the Acute Myocarditis Opportunity
When we look the work that Cardiol is doing as it relates to the acute myocarditis opportunity, there is a lot to be excited about. Acute Myocarditis is eligible for US and European Orphan Drug status and the granting of this designation would provide Cardiol with several key advantages.
In the US, the designation is granted for pharmaceuticals being developed to treat conditions affecting less than 200,000 people. In the US and in the European Union, orphan drugs are eligible for accelerated marketing approvals and companies that develop orphan drugs typically receive other incentives, including a prolonged period of market exclusivity that can extend over seven years during which time the developer has sole rights to market the drug.
Cardiol’s acute myocarditis program provides a unique opportunity to build brand awareness in support of the commercial launch of CardiolRx™ and is being designed by an independent steering committee comprised of significant leaders in cardiology from North America and Europe. We are bullish on this aspect of the business and find this initiative to play a key role in its trajectory.
A Growth Story to be Aware of
So far this year, Cardiol Therapeutics has done a fantastic job at advancing its fundamental story and has recorded several significant achievements. We believe that this is just the start of something big and Cardiol is an opportunity that has several potential catalysts for growth. Over the next year, the company should report major developments as it relates to CardiolRx™ and we expect this to prove to be a major revenue generator.
When looking at the most significant potential catalysts for Cardiol, we are looking for the company to announce distribution agreements for the sale of CardiolRx™ in Canada. The launch of CardiolRx™ will also serve as a major catalyst later this year as the product should set the standard for purity and consistency. The entry into additional international markets in Europe or in Latin America would also represent a major advancement in the story. And finally, how the advancement of clinical programs designed to demonstrate the impact of CardiolRx™ and CTX formulations on inflammatory heart disease will be a significant catalyst for the company.
Cardiol is not your typical CBD company and we expect to see the company’s products and formulations change the landscape of the cannabis industry. This is an opportunity that we are excited about. To be added to our Cardiol Therapeutics distribution list, please contact firstname.lastname@example.org.
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