This Small-Cap Biotech Company Steals FDA's Heart with Orphan Drug Designation

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In the realm of medical innovation, the quest to address rare heart diseases stands as a priority, embraced by regulatory bodies like the U.S. Food and Drug Administration (FDA). One small-cap biotech/life sciences company in clinical-stage is focused on the research and clinical development of anti-inflammatory and anti-fibrotic therapies for the treatment of such rare heart diseases.

Cardiol Therapeutics Inc. (CRDL) (CRDL.TO) is currently conducting Phase 2 clinical trials for two orphan drug-eligible rare heart conditions – recurrent pericarditis and acute myocarditis. Their lead drug candidate being tested in both trials is CardiolRx™, an oral solution. Last week, the company was granted Orphan Drug Designation (ODD) for the treatment of pericarditis, which includes recurrent pericarditis. Cardiol followed this achievement with announcing it completed enrollment in its Phase 2 MAvERIC-Pilot study in patients with recurrent pericarditis. 

Against this backdrop of regulatory support, initiatives like the MAvERIC-Pilot study emerge as beacons of hope, specifically targeting recurrent pericarditis – a condition characterized by inflammation of the pericardium following viral infections. This Phase II open-label pilot study investigating the safety and efficacy of CardiolRx™, marks a significant stride towards addressing the unmet medical needs of individuals grappling with this debilitating ailment.

How did the market value Cardiol’s recent achievement? The ODD designation was immediately impactful. CRDL stock closed February 14 at $1.04. A day later, the day of the announcement, it closed at $1.48, a 42% rise on 3.51 million shares traded. After a few days since the announcement, the stock has held strong and most recently closed at a new 52-week high of $1.67.

Cardiol Therapeutics experienced what might be considered an outsized bump from the ODD grant compared to the average, and we will see what the next few days of trading bring with the announced completion of enrollment in the Phase 2 MAvERIC-Pilot study. Interestingly, the company has flown a bit under the radar with the investment community at large up until this point. A year ago, Cardiol’s market capitalization was in the USD$33 million range despite initiating two Phase 2 trials and having a promising novel drug formulation for the treatment of heart failure in the pipeline. And although the company’s market cap has now tripled to about USD$108 million, there is much evidence to suggest that Cardiol’s upward climb has only begun.

The impact of ODD on similar life science companies demonstrates a potential pathway that Cardiol Therapeutics could follow, as shown below.

Myokardia developed an orphan drug, Mavacamten, to treat a rare form of heart disease. From 2016 through 2020, Myokardia took Mavacamten from ODD through Phase 2 and 3 clinical trials and was acquired by Bristol Myers Squibb. The stock price was about $12 at the time of the ODD, and the company was ultimately acquired for $225/share.

GW Pharmaceuticals developed Epidiolex, a drug with a similar active pharmaceutical ingredient as CardiolRx™, for the treatment of two rare forms of childhood epilepsy. From the beginning of a Phase 2/3 trial in 2014 into 2018 when the Epidiolex was approved by the FDA, the stock price rose from $63 to $138. In 2021, Jazz Pharmaceuticals bought GW Pharma for a large premium of $220/share.

Kiniksa Pharmaceuticals licensed Rilonacept from Regeneron in the hopes it could treat recurrent pericarditis, the same condition that Cardiol received ODD for. It was granted Breakthrough Therapy designation in 2019, and ODD in 2020. In 2021, Rilonacept (trade name ARCALYST)  was approved by the FDA. Kiniksa’s market cap rose from $380 million in 2019 to $1.375 billion at the time of approval, and Rilonacept remains its only approved drug.

For Cardiol, as with the comparable companies listed above, positive results from Phase 2 trials can be key to maintaining upward momentum. Additionally, investors may look at Cardiol’s two concurrent trials, one for recurrent pericarditis and the other for acute myocarditis, as a bit of a bonus opportunity. While these trials progress, CardiolRx™ is also eligible for ODD for the treatment of acute myocarditis. A potential second ODD could significantly boost Cardiol’s prospects, especially considering the relatively small size of the company.

With the granting of its first Orphan Drug Designation, Cardiol is now on the map of players in the pharmaceutical development space. With its two Phase 2 trials and the potential for a second ODD, there is much to look forward to as the company navigates its way toward drug approval. Each step of advancement offers the possibility of significant value creation, and investors are advised to be on the lookout for such announcements from Cardiol Therapeutics (CRDL) (CRDL.TO).
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