For smaller pharmaceutical companies, valuation can be greatly impacted by progression in a clinical trial program. Milestones can act as catalysts for the stock, each one instilling more investor confidence that a company is headed in the right direction with its drug candidates.
A study conducted in 2022 looked at the market reaction to almost 14,000 clinical trials conducted from 2000 to 2020. It found that the smallest companies experienced the largest gains following a positive trial result.
“Early-stage biotechnology companies tend to be smaller in size, and are involved in earlier stage discovery and development efforts for specific potential therapeutics. In general, they do not have FDA-approved products. The trial results for a sponsored therapeutic candidate thus have a large impact on the growth of the company. Hence, we observe higher values of abnormal returns for these companies… Moreover, we observe that the sponsor company classification has the biggest impact on abnormal returns compared to other properties of clinical trials.”
In light of this information, Cardiol Therapeutics Inc. (Nasdaq: CRDL) (TSX: CRDL) is worth considering. Cardiol is focused on developing therapies for heart-related conditions and has some imminent milestones on the horizon that could act as catalysts for the stock.
Phase 3 Trial Beginning
Following a successful Phase 2 trial, Cardiol is initiating a Phase 3 trial to evaluate its lead product candidate CardiolRx™ for the treatment of recurrent pericarditis. The data reported from the Phase 2 MAvERIC-Pilot study “…show that patients enrolled [in the study], despite the severity of their disease, experienced clinically relevant and rapid reductions in both their pericarditis pain and C-reactive protein levels that were maintained throughout the study. In addition, results demonstrated a substantial reduction in pericarditis episodes per year as compared to the patients’ historical event rate prior to the study. Importantly, treatment was shown to be safe and well tolerated in a population who presented with significant disease burden,” said Dr. S. Allen Luis, Co-Director of the Pericardial Diseases Clinic and Associate Professor of Medicine in the Department of Cardiovascular Medicine at the Mayo Clinic.
The only FDA-approved treatment for this troublesome inflammatory heart condition is rilonacept (trade name ARCALYST), marketed by Kiniksa Pharmaceuticals (Nasdaq: KNSA). ARCALYST is mainly responsible for their ~$1.6 billion valuation. It’s an interleukin-1 blocker and immunosuppressant primarily used as a third line therapy, which Kiniksa licensed from Regeneron in 2017.
There is an interesting connection between Cardiol’s and Kiniksa’s clinical programs. Allan L. Klein, MD, Director of the Center of Pericardial Diseases and Professor of Medicine, Heart and Vascular Institute, at the Cleveland Clinic is the Chair of Cardiol’s MAVERIC Phase 3 recurrent pericarditis trial and also led the rilonacept Phase 2 and 3 studies.
Phase 2 Trial Concluded; Excellent Results Reported
The conclusion and reporting of excellent Phase 2 data from the MAvERIC-Pilot study, and the progression to the MAVERIC Phase 3 trial, are de-risking milestones on the journey to drug approval. Combined with the potential of CardiolRx™ to impact a disease with significant treatment challenges, and with an initial U.S. market opportunity currently valued at over $500M and projected to grow to $1B in 3 years, Cardiol represents a compelling and attractive investment opportunity based on its current valuation.
Cardiol Therapeutics’ other active trial, the Phase 2 ARCHER trial evaluating CardiolRx™ for the treatment of acute myocarditis, is awaiting study completion, data analysis, and the reporting of top-line results. The study reached full enrollment at the end of September with a trial duration of three months for each patient. Results take time to gather and decipher prior to any announcement, and Cardiol has provided a Q2 2025 timeline for the reporting of top-line results. Positive data could further reinforce Cardiol’s position in the competitive biotech landscape, offering a clear signal to investors that its clinical pipeline is advancing as planned.
Take Aways
Cardiol Therapeutics is a microcap biotechnology company (valuation currently around $100 million) with an advanced clinical trial program that gives the company tremendous potential. Every step forward presents a major building block toward meeting that potential, and the near future features two of those foundational pieces. With money in the bank sufficient to complete the confirmatory MAVERIC Phase 3 trial for recurrent pericarditis, the last step prior to a potential filing for approval from the FDA, Cardiol is well positioned. Keep an eye out for news of clinical results.
