Cardiol Therapeutics (NASDAQ: CRDL) (TSX: CRDL) is a life sciences company developing pharmaceutically manufactured cannabidiol formulations (CardiolRx™ and CRD-38) as innovative therapies for heart diseases, including recurrent pericarditis (RP), acute myocarditis, and heart failure. We previously covered the company and its pipeline extensively (LINK) prior to and in preparation for the MAvERIC-Pilot trial (NCT05494788) readout in Q2 2024 assessing CardiolRx™ in RP patients. We are now updating the story following positive interim data for CardiolRx™ from MAvERIC-Pilot and believe a deep dive is in order to fully understand the meaning of the trial results and assess Cardiol’s progress. As we were hoping to see and as we predicted, this data demonstrated CardiolRx™, Cardiol’s lead oral drug candidate, showed marked response rates on important RP endpoints. Impressively, this was also shown in a subset of patients with very severe disease. Judging by the stock’s reaction, it is our belief that the market does not recognize the significance of these data, which we will explain below. This leaves a gap for informed investors to benefit from.

MAvERIC-PILOT – The Bigger Picture and the Arcalyst Precedent

Any analysis of the Phase 2 MAvERIC-Pilot trial interim results for CardiolRx™ must begin and end with a comparison to the Arcalyst® (rilonacept) Phase II pilot study published in 2020.¹ As we explained previously, the team at Cardiol is following the same accelerated clinical development pathway used previously by Kiniksa Pharmaceuticals to speed CardiolRx™ as a new therapeutic option to market for RP. The Arcalyst regulatory path began with an open label Phase II pilot study in 25 patients as the first step. The pilot study established proof of concept by means of several endpoints, enabling them to follow it immediately with a randomized Phase 3 trial and FDA approval, all within a lightning-fast, 3-year span. The design of the Arcalyst pilot study was analogous to MAvERIC-Pilot with a 6-week treatment period followed by an optional 18-week extension period (as compared to MAvERIC-Pilot with an 8-week treatment period, including 10 days of dose titration, followed by 18-week extension period). In the treatment period, Arcalyst showed benefits in three key endpoints, particularly in the subgroup of patients starting at baseline CRP levels >1.0: reduction in pericarditis pain numerical rating scale (NRS) score, reduction in C-reactive protein (CRP), and % normalization of CRP. It also demonstrated a reduction in pericardial signs. The extension period was then assessed for maintenance of these benefits in those who chose to participate, along with the pericarditis recurrence rate, and tapering of background medications. Before data was even obtained from the extension period, Kiniksa began recruiting the Phase 3 trial based solely on the promising treatment period results which nailed those endpoints. Cardiol has now reported topline data for CardiolRx™ from the MAvERIC-Pilot 8-week treatment period, which is remarkably comparable to the early Arcalyst data that spurred its accelerated Phase 3 development program. The results from the CardiolRx™ treatment period were impressive with marked reductions reported in the NRS pain score, CRP reductions from baseline, and % CRP normalization, which now positions the drug as a potential new RP therapy. We will look in detail at each of the endpoints Cardiol is reporting to determine the level of conviction on CardiolRx™’s potential future as an RP treatment that is warranted at this time.

Primary Endpoint, Pain NRS Score

In symptomatic patients receiving CardiolRx™, the primary endpoint of the study, pericarditis pain NRS score, decreased by 64% from baseline. Patients started at a mean of 5.8 on the 11-point NRS scale and declined to an average of 2.1 at 8 weeks. Notably, a score of 2 or lower on this scale indicates minimal or no pericardial chest pain. CardiolRx™ appears beneficial to RP patients, helping to resolve this primary pericarditis symptom. If there was a possible concern with the interpretation of the CardiolRx™ dataset, it may be that the reduction in pain on the NRS scale did not achieve the 84% decrease in pain NRS that was observed in the Arcalyst pilot study (and similar 83% reduction from baseline in its Phase 3 RHAPSODY trial). However, several caveats to this comparison must be noted. On average, the CardiolRx™ patients started at a higher absolute level of pericarditis pain (5.8) at baseline versus 4.5 for the patients in both Arcalyst trials; hence the patients in the CardiolRx™ study were sicker. In general, the pain NRS score is also a subjective measure, so the precision of this measurement may not be airtight, and certainly cross-trial comparisons must be taken with caution.  Importantly, the absolute reduction on the NRS pain scale of 3.7 points with CardiolRx™ from baseline is nearly identical to the absolute reduction observed in the Arcalyst pilot study (3.8 points). In addition, because of dose titration and differing pharmacokinetics, the pain reduction benefit from CardiolRx™ could still be improving at 8 weeks and therefore may reduce further with longer duration of treatment. All in all, the considerable 64% reduction from a very severe level of pericarditis pain implies that CardiolRx™ has activity within weeks of dosing and appears to confirm the therapeutic potential of CardiolRx™ in treating pericarditis. The therapeutic profile of CardiolRx™ also has significant potential advantages for patients and payors, namely, the drug is not an immunosuppressant (meaning no increased risk for infection and other potential medical complications with long term use), it is administered orally (Arcalyst is an injection), and it is more accessible as its cost to payors is likely to be less than 20% of the price of Arcalyst and as a result, it will be accessible to far more patients in the US as well as patients outside of the US (Europe, Latin America, etc), whereas Arcalyst is only available in the US.

Here is a side-by-side comparison of the CardiolRx™ data compared to the Arcalyst Pilot study (Figure 2 taken from Klein et al.¹).

In the Arcalyst figure, the gray line represents the pericarditis pain NRS score over time, starting at baseline of 4.5 as mentioned above, decreasing below 2 within two weeks and then leveling out at -3.8 points by end of treatment period. This was shown in only 9 patients on Arcalyst with NRS data at that time point, whereas Cardiol has pilot study data at 8 weeks in 27 patients. In the Arcalyst study, this pain analysis was restricted only to the patients who were symptomatic with minimum 1.0 mg/dL CRP at baseline and meeting the criteria for an active flare. A strength of the CardiolRx™ study was showing a pain benefit of -3.7 points in a much larger number of 27 patients with active flares, while also showing this considerable pain reduction even in patients who had less elevated CRP at baseline. The time-course of this pain resolution will be very important to visualize once Cardiol presents detailed data. We can see in the Arcalyst figure that pain NRS declines rapidly within the first 2 weeks of treatment using this powerful biologic immunosuppressant. The speed of onset of pain resolution following the 10 days dose titration will give more confidence to a drug effect with CardiolRx™, as a robust onset of pain relief typically encourages patient compliance to stay on the medication. Given that 100% of patients completed the CardiolRx™ Treatment Period, and 24 out of 27 patients opted into the extension period to stay on CardiolRx™ for additional 18 weeks, we suspect the pain resolution must have been sufficiently robust and noticeable in patients such that 90% of patients agreed to keep taking the medication for 4 more months. This bodes well for real-world compliance and safety.

Secondary Efficacy Endpoint, CRP reduction

C-reactive protein, or CRP, is a marker of systemic inflammation that is very often elevated in patients with an ongoing pericarditis episode and one of the drivers of the disease symptoms and pathology. Studies suggest at least 75% of patients with recurrent pericarditis have high CRP levels.^2,3 In MAvERIC-Pilot, in the subset of patients with high CRP (≥1.0 mg/dL) at baseline, CardiolRx™ reduced CRP dramatically from 5.71 down to 0.31 by the end of the 8-week treatment period. This represents a 95% reduction for this important marker. This compares favorably with the nearly 92% reduction of CRP observed in the treatment period of the Arcalyst pilot trial in a similar subset of symptomatic patients with CRP > 1.0 mg/dL at baseline (and subsequently, a 94% reduction in the Phase 3 trial after 6 weeks). Since CRP is an objective measure, this lends more credence to the efficacy of CardiolRx™ in RP and to the comparison across trials with Arcalyst.

Below is another side-by-side comparison for reference, this time with CardiolRx™’s CRP data next to the same figure from the Arcalyst Pilot study (Klein et al., 2020).

This time we are focusing on the purple line in the Arcalyst figure, which tracks the CRP level from baseline across the treatment period and beyond. This demonstrates a rapid decline with Arcalyst treatment, reaching a mean of less than 1 mg/dL by 2 weeks and falling from 4.62 down to 0.38 at the end of the treatment period. The numbers from CardiolRx™ (on the left panel) are very competitive here, showing a drop from a higher baseline of 5.71 down to a lower mean level than Arcalyst at 0.31. This result is exciting and suggests CardiolRx™ efficacy could be even higher than expected. If CardiolRx™’s efficacy rivals Arcalyst, it will become a major competitive threat and dominate this market as a convenient and safe oral drug. This substantial decrease in CRP that we are seeing with CardiolRx™ makes us very excited to see the recurrence rate data that we anticipate in late Q3 or early Q4 2024. The response rate CardiolRx™ is showing on both of the endpoints (pain and CRP) that Arcalyst hit in its pilot study suggests low likelihood of coincidence and high likelihood that CardiolRx™ is conferring meaningful therapeutic benefits to patients.

Previously we discussed the important role of the NLRP3 inflammasome on the inflammatory state and activation of IL-1 family cytokines underlying RP as well as preclinical evidence demonstrating CardiolRx™’s potent inhibition of NLRP3. There are numerous studies linking increased CRP to activation of the NLRP3 inflammasome, in some cases as an end-product,^4,5 and in other cases as an activator^6,7 (perhaps in a feedback loop). Given CardiolRx™’s apparent effect on CRP shown in MAvERIC-Pilot, this reflects anti-inflammatory activity that could be further upstream in addition to its direct inhibition of NLRP3, both confirming and building upon the hypothesized mechanism of action.

Secondary Efficacy Endpoint, CRP Normalization

Importantly, of those patients with at least 1.0 mg/dL CRP at baseline, 80% achieved CRP normalization by 8 weeks, as defined by CRP ≤ 0.5 mg/dL. This suggests that the low average CRP achieved by CardiolRx™ in the treatment period (0.31 mg/dL) was not skewed by outliers, and the majority of patients can be expected to benefit. An analogous measurement was not reported for Arcalyst, but our assumption is that the data would be similar. The median time to CRP normalization will be important to see in the follow-up data for comparison purposes (pre-planned as a secondary endpoint assessed at week 26). The combination of pain NRS score reduction, mean CRP reduction from baseline, and a high percentage of patients achieving CRP normalization gives us a high conviction that CardiolRx™ will be successful in the 26-week follow-up data and subsequently in a pivotal Phase 3 trial.

Safety

Cardiol reported that CardiolRx™ was assessed as generally safe and well-tolerated in the study, which is a good sign and reinforces one of the product’s features as a non-immunosuppressant drug. There was a serious adverse event (AE) reported in the Arcalyst pilot study that resulted in discontinuation of Arcalyst and was deemed possibly related to study drug by the investigator. As an immunosuppressant, it carries the risk of infections and possibly other medical complications with long term use. We will of course need more detail on the safety front for CardiolRx™, but the early signs suggest that the safety profile of CardiolRx™ can provide a significant competitive advantage. Following completion of MAvERIC-Pilot, full safety and AE data will be reported. MAvERIC-Pilot observed a very high rate of participation in the optional 18-week extension period at 89%, which suggests that the vast majority of patients were responding to the medication without significant side effects. It also indicates that patients were enthusiastic about the prospect of weaning off their background medications. This high level of participation will provide a strong data sample at the 26-week readout expected in late Q3 or early Q4, where additional important clinical data on CardiolRx™, including its impact on pericarditis recurrence rate, will be reported.

Summary

As we anticipated, the pilot study of CardiolRx™ in RP read out favorably at the 8-week primary endpoint mark, and the combination of positive endpoints gives us a strong conviction about the drug moving forward. We are not the only ones with conviction, as in the last few weeks, Cardiol CEO David Elsley spent about $100,000 of his own money and bought shares on the open market at about $2.03 USD per share after the stock fell following the data release. We were surprised by the stock falling after this readout as this matched our upside scenario. It is apparent to me that the market has misunderstood the significant positive implications of the primary endpoint data, leaving a large disconnect and opportunity for investors to take advantage of. We continue to emphasize the comparison with Arcalyst, which as a weekly injection comes with inconvenience, a very high price (list price US$270,000 per year), potential for severe side effects due to its immunosuppressive effects, and injection site reactions. As an oral drug, CardiolRx™ can be priced more reasonably while offering patients ease of use and normal immune system function. At the same time, CardiolRx™ is showing similar benefits on multiple endpoints in a very similar pilot study. Of course, the 26-week readout will be another test to see if these benefits are maintained and if the recurrence rate is reduced. If CardiolRx™ shows a comparable reduction in recurrence rate, as an oral drug it can break open the RP market. At approximately $145 million USD market cap as of this writing, the stock is undervalued and should be accumulated at these prices.

Valuation and Price Target

As noted, $145m USD in market cap does not properly reflect the potential of CardiolRx™ in recurrent pericarditis, not to mention the rest of the pipeline. After our last report, the stock moved from around $1.50 USD to $1.90 USD (for a time it was well over 2 dollars), but most of this move was in anticipation of the data, and $CRDL has now traded off its highs after the data release. The pericarditis program has been derisked to a significant degree with the primary endpoint data being released and the stock should have responded to reflect that, as we still think this valuation is far too low. The observed effects in pericarditis patients also provides additional support to the development of CardiolRx™ for myocarditis, as the ARCHER trial continues and is enrolling ahead of schedule. The company guided to the second half 2024 for presentation of the full MAvERIC-Pilot study results at a major cardiology conference. We would expect to see these data most likely at AHA in November. Since the trial was fully enrolled in February, it will be too tight a window to complete and analyze the full study and submit a latebreaker abstract in time for ESC in late August. However, ESC presents an unique opportunity for the company to interface with European KOLs, and we suspect they may present the 8-week treatment period primary endpoint data in more detail there, to market the coming global Phase 3 program to these experts.
Cardiol had just under $21 million USD cash and equivalents in the bank at the end of Q1, which they expect to fund operations into 2026. Estimated costs for a 100-120 patient Phase 3 trial in recurrent pericarditis is likely in the range of $15 million USD, but if data released at the AHA provide a major boost to the stock price, we could see management doing a small raise to shore up the balance sheet and build up funding for the rest of the pipeline and operations. We would want to own the stock before additional MAvERIC data is released in anticipation of a stock move prior to a raise. Assuming the company may try to raise USD $30 million, and accounting for the additional shares outstanding from warrant exercise, we would assign a USD $10 per share price target to Cardiol (around C$13.60). We think this >5x upside target is very achievable over the next year if the data readouts on CardiolRx™ continue to be strong.

Disclosure: Author is Long CRDL in the US & Canada markets.

REFERENCES

1. Klein AL, Lin D, Cremer PC, et al. Efficacy and safety of rilonacept for recurrent pericarditis: results from a phase II clinical trial. Heart 2020; 107: 488-496.
2. Ashram WY, Talab SK, Alotaibi RM, et al. Descriptive Study of Pericarditis Outcomes in Different Etiologies and Risk Factors: A Retrospective Record Review. Cureus 2022; 14: e27301.
3. Imazio M, Brucato A, Maestroni S, et al. Prevalence of C-reactive protein elevation and time course of normalization in acute pericarditis: implications for the diagnosis, therapy, and prognosis of pericarditis. Circulation 2011; 123: 1092-1097.
4. Yu M, Zhu Z-F, Yang F, et al. Abstract 11735: The Effect of Different NLRP3 Inflammasome Inhibitors on High-Sensitivity C-reactive Protein in Patients After Percutaneous Coronary Intervention. Circulation 2023; 148: A11735-A11735.
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6. Wang Y, Chen H, Guo J, Shao B, Wang J. WCN23-0350 C-REACTIVE PROTEIN PROMOTES DIABETIC NEPHROPATHY VIA SMAD3 MEDIATED NLRP3 INFLAMMASOME ACTIVATION. Kidney International Reports 2023; 8: S190.
7. Bian F, Yang XY, Xu G, Zheng T, Jin S. CRP-Induced NLRP3 Inflammasome Activation Increases LDL Transcytosis Across Endothelial Cells. Front Pharmacol 2019; 10: 40.