First Berlin Equity Research has published a research update on Cardiol Therapeutics Inc. (ISIN: CA14161Y2006). Analyst Christian Orquera reiterated his BUY rating and maintained his USD 3.60 price target.

Cardiol Therapeutics has published its Q1/23 financial report and business update, which was roughly in line with our expectations. The company reported no revenue (FBe and Q1/22: CAD 0) and EBIT of CAD -7.8m (FBe: CAD -7.4m; Q1/22: CAD -9.8m). OPEX was largely driven by administrative and R&D expenses for CardiolRx(TM)’s two ongoing phase II clinical trials in recurrent pericarditis (RP) and acute myocarditis (AM). Robust net interest income of CAD 546k (FBe: CAD 125k; Q1/22: CAD 72k) and a foreign exchange gain and change in derivative liability totalling CAD 151k (FBe: 0; Q1/22: CAD 762k), meant that the net result came in at CAD -7.1m (FBe: CAD -7.3m; Q1/22: CAD -9.0m). Due mainly to the operating performance and high cash outflow for working capital (particularly accounts receivable/accrued liabilities amounting to CAD 2.6m relating to R&D and clinical trials expenses), operating cash flow was CAD -9.9m (Q1/22: CAD -10.4m). The net change in cash was CAD -10.0m (Q1/22: CAD -10.4m), leading to a cash position of CAD 49.5m (FY/22: CAD 59.5m). These funds should be sufficient to fund the company into 2026. CardiolRx’s lead indication is RP (inflammation of the sac protecting the heart), for which the company is conducting a phase II open-label pilot US study in 25 patients. We anticipate headline efficacy results in early 2024. CardiolRx’s second lead indication, AM (heart muscle inflammation), is undergoing a multi-national phase II study in 100 patients. We believe recruitment in both studies is progressing according to plan. CardiolRx is a blockbuster drug candidate with a combined sales potential of >USD 1.4bn in the two lead indications of RP and AM, according to our estimates. Still, the stock is trading roughly at the level of its net cash position, thereby placing no value on CardiolRx. In our view, this is unwarranted. We thus see Cardiol as an attractive investment opportunity for investors. We have updated the cash position in our sum of the parts valuation model, which still yields a USD 3.60 (€3.30) price target. We reiterate our Buy recommendation.