Interview with Cardiol Therapeutics CEO David Elsley

Nick Hodge: Hi, this is Nick Hodge with Daily Profit Cycle. I'm sitting down with David Elsley, he's the President and CEO of Cardiol Therapeutics (TSX: CRDL)(OTC: CRTPF). It trades on the TSX under the ticker CRDL, and over the counter under the ticker CRTPF. I've been a shareholder of Cardiol for a number of years now, helped it raise some money when it was private and have watched it sort of get off the ground here. And I'm excited to see it headed to some new studies, which we'll talk about with David. But first of all, David, it's good to be back with you, and I was hoping you could provide us a brief overview for any new listeners or subscribers or anyone new to the Cardiol Therapeutics story, exactly what the company's mission is.

David Elsley: Absolutely. And firstly, thanks Nick for taking the time to get an update on the company. For those that aren't familiar, the Cardiol team has worked in the area of heart failure medicine for coming on 30 years now. Our focus has always been on one of the major culprits or underlying drivers of heart failure medicine, which is inflammation.

And what led us to develop Cardiol therapeutics was a discovery that was made at the National Institutes of Health in the US concerning what we find to be a very fascinating molecule, which is cannabidiol — or CBD as it's now widely known — and its ability to reverse inflammatory and fibrotic processes in cardiac tissue in an experimental model system. That was really a model of diabetic diastolic heart failure. And why that was so fascinating to us is that diastolic heart failure, to this day, remains an epidemic and a leading cause of death and disability in the western world or the developed world. It is the number one reason people are hospitalized each and every year in the United States driving above $30 billion in healthcare expenditures. 

So we have now focused the past several years on developing what we believe to be a leadership position in the pharmaceutical production of pure cannabidiol formulations. We now have a high concentration, or extra strength, formulation in clinical development, in acute inflammatory conditions, in cardiovascular disease patients. And then we have a new innovation, I look forward to talking more about today, which is an entirely new generation of technology that will deliver this molecule much like insulin is delivered subcutaneously. So we can put the drug directly into the systemic circulation, so more drug can make it to the site of disease more efficiently. And we believe this could be an entirely new way to treat a diastolic heart failure, which is probably the second largest market in the world today, next to diabetes.

Nick Hodge: You guys already have a pure CBD formulation, a pharmaceutical grade for sale under the brand name Cortalex in Canada through Shoppers. And you're expecting some results here that are going to show the safety of your medicine, and those results are going to underpin really the next couple of studies you have. So talk to me first about the results that we're awaiting. They're from a phase one Health Canada Study, if I remember correctly and they were trying to assess the safety and tolerability, and what you refer to as the pharmacokinetics of your medicine. Let's start there and then we'll progress into the next two studies. And then I'd love to hear more about the subcutaneous administration.

David Elsley: Yep, absolutely. So we have completed what we believe to be the largest randomized controlled clinical trial, studying the safety and pharmacokinetics of high dose cannabidiol in adults. 

I think it's important for your readership to understand that CBD has been approved by the Food and Drug Administration, or the FDA, for the treatment of rare pediatric epilepsy, such as Dravet's and LGS. GW Pharma, which developed that drug and provided an amazing contribution to epilepsy medicine, was recently acquired for $7.2 billion by Jazz Pharmaceuticals (NASDAQ: JAZZ), which I think really underscores the value proposition for developing this area of medicine.

We're taking the same experience, but we're applying it in devastating forms of heart disease, which are much larger markets, but they typically manifest themselves in adults as opposed to children. So we've had to develop all of the clinical development processes to demonstrate the products’ safety as well as pharmacokinetics, meaning the blood levels of the drug that we can achieve based on certain dosing levels.

We're pleased to have reported at the end of last year that we successfully completed our phase one program, despite a delay caused by the international shutdown of all non-COVID research studies because of the pandemic. So our study was delayed because of the pandemic, but we were fortunate to get it back up and running in the third quarter of last year. And we completed it actually in record time at the end of the year. We've now spent the past essentially six to eight weeks analyzing the data very carefully, and we look forward to reporting the data from that study imminently. And we would expect it to be out either by the end of this quarter or very early in April.

And as we did report in our December release, there were no significant safety concerns, which is obviously what we expected because cannabidiol has an extraordinary safety profile. We did not expect any safety concerns, but notwithstanding that, because we're planning to treat patients with very high dose medicine who are at high risk for major cardiovascular complications. We had to prove to the FDA and other regulators around the world, that the drug in high dose is safe. And I can confirm right now that we have confirmed that, but the actual specifics of how safe and the pharmacokinetic profiles, we will provide more information to that in our press release that should be forthcoming here imminently.

Nick Hodge: I look forward to seeing the results in the public domain, and I was going to say the same thing as a layman, I would assume that with the history of CBD that is known, that it would be determined safe for patients. And I would also say that it was very interesting to me, Jazz Pharmaceuticals acquiring GW at a $7.2 billion takeout valuation, and comparing that to Cardiol Therapeutics, and it's C$165 million market cap, and as I understand it, targeting larger potential markets with heart treatments.

And so as a shareholder, I obviously look forward to the value gap there being shrunk as we get some more data on what you're working on. And that's what I want to talk about next, because what's next is, as you mentioned already, is two other studies, one for acute myocarditis, and then one for COVID patients with preexisting cardiovascular disease. So, I'll let you take those in any order you want. And maybe you can tell us the timeline for each and sort of the work you've already done getting CROs in place and the teams you're sort of putting together for these trials.

David Elsley: Absolutely. So I'll start with the largest and most advanced program, which is the high risk cardiovascular patients who become COVID positive. Obviously the pandemic has challenged the world in many, many ways, but we're trying to make a contribution in the midst of it from a therapeutic perspective. Importantly, for everyone to understand, we are not targeting COVID-19, we'll leave that to the vaccines, and the antiviral therapies. What we're targeting is the immune response to the COVID viral infection in the cardiopulmonary system — or in the heart.

So if we look at a condition such as acute myocarditis, many of you may have known about an athlete who is in their prime, perfectly healthy, who all of a sudden came down with aggressive chest pain and either died suddenly, or was rushed to the emergency room for emergency intervention. That athlete most likely is being affected by what's called acute myocarditis, where you're for reasons we don't fully understand in medicine, a viral infection. Historically speaking, it would be the influenza virus or less well known viruses then influenza.

But now also the COVID virus is contributing to the increasing case load of myocarditis-like phenomena, where the heart is basically infected by a virus. And the immune system is activated to try to kill the virus and ends up attacking the cardiac tissue and causing profound inflammation. So this is what's happening in the context of COVID, you're getting a COVID infection in these patients who have a prior history of cardiovascular disease or risk factors for cardiovascular disease. And their mortality rates are 50 to 70% within the first 20 to 30 days. I don't think anybody really knows how the pandemic is going to play out, but I would suggest that it is going to be moderated somewhat by vaccination. But it's more than likely with all the variants coming on, we're going to be dealing with this more like a new, more deadly form of the seasonal flu, where you get outbreaks, intermittently, at various regions of the world.

And it's going to be imperative that there is a cardioprotective strategy, or therapy, available to provide protection to those patients during the acute phase of the disease. And we're not alone in this thinking. I mean, big pharma, Merck (NYSE: MRK), Pfizer (NYSE: PFZ), some of the biggest pharmaceutical companies in the world, are developing treatment strategies for COVID patients in that they believe this is something we're going to live with for many years to come. We're going to get better at managing it, but the strategy is going to be able to live with it rather than die of it, that's going to be the therapeutic strategy option.

We're very pleased that we are now in the process of initiating a landmark trial, this will be the largest randomized controlled clinical trial ever conducted with cannabidiol in 422 patients at major centers in the United States and possibly internationally. Because I think everyone is aware that we've got increasing outbreaks and lockdowns continuing in Europe, particularly Germany right now, and Latin America is severely affected, primarily Brazil, with more cases than they can even handle.

So we may involve international centers as well, but this trial will be up and running in the second quarter. We expect to recruit all of its patients in the subsequent two quarters. And this trial will complete in the second half of this year. We believe this trial is designed sufficiently to support a registrational or a new drug application. And to the extent that COVID is still a major problem, which we expect it will be, it is designed to support an emergency use authorization to utilize our therapy to protect the most vulnerable patients to the inflammatory insult caused by the immune system when it tries to address the COVID virus. So the other benefit of this trial is that we're looking at classical inflammation in the cardiovascular system, and this has opportunity to read through to other much larger market opportunities, such as heart failure, but also orphan drug eligible programs, such as acute myocarditis, which is the second program you have mentioned.

And importantly, we've now completed our phase one trial, which is the major supporting piece of information we required to submit for our second major clinical effort, which is in acute myocarditis, which pre-COVID and post-COVID, is a devastating form of inflammatory heart muscle disease, because it is the major cause of sudden cardiac death in young people, including children. It's the number one reason children die suddenly of cardiovascular complications is acute myocarditis. There is no standard of care for this treatment today.

The only real intervention when this disease does not go into spontaneous remission quickly is prednisone, which is a very toxic steroid that very few patients can tolerate because of its toxicity. And again, here, we believe that high-dose cannabidiol intervention because of its safety profile and its profound anti-inflammatory effects in the cardiovascular system, can protect these high-risk patients, these otherwise healthy young patients, against the inflammatory attack during the acute phase of the disease.

Then, theoretically, if we can achieve that, these patients go on to live a perfectly normal life. They don't progress to intensive care units. They don't progress to permanent heart failure or require a heart transplant or suffer, obviously end-stage, which leads to mortality. 

So these are the two major focal points on the acute setting with our high-dose oral prescription cannabidiol formulation that we look forward to developing during 2021. And in the context of COVID, we look forward to completing that study in 2021. In The context of acute myocarditis, completing that study in 2022. And this, we believe, will position this company as a leader from a cardiovascular inflammation point of view with cannabidiol medicine.

And as you mentioned, GW Pharma is acquisitioned by Jazz Pharmaceuticals has underscored and validated cannabidiol as a medicine and demonstrated to the world what the value of even a rare indication for this sort of medicine is. Our markets are orders of magnitude larger that we are serving to address here with our cannabidiol formulation. So we believe the value proposition to revalue this company in the context of our plans to migrate to NASDAQ, is certainly incumbent upon management to do that, because we believe there's a significant, hidden value in this organization that will be discovered once we broaden awareness in the US financial community.

Nick Hodge: You touched on my next question there, I couldn't help but notice that you had a report put out on the company recently by Leede Jones Gable with a C$12.50 price target. As we talk today, shares of Cardiol are trading below $5. Leede Jones is modeling in revenue for the first test for COVID-19, they’re modeling and revenue starting as early as 2022, and so, partly basing their C$12.50 cent price target on that. So I think you're not the only one looking for and expecting a re-rating of the stock. And just to touch on what you say with COVID being with us for a long time, I agree with that wholeheartedly as well, especially given the variants that we're seeing and the different therapies, antibodies, and otherwise, that are being developed to target other receptors and proteins, so we can have combination treatments and things down the road. So the vaccine isn't the end of this by all means.

So the last thing I wanted to ask you about was something you touched on there, and that's the NASDAQ up-listing, because you've got a much wider story to tell now. You've had warrants come in that sured up the treasury, the balance sheet, a little bit, and of course the NASDAQ is where companies go to get recognized, to make fundraising easier and to achieve multiples that shareholders like to see, especially when it relates to biotech companies. So you announced filing for a NASDAQ listing. Is there any update you can give there on a timeline and when that's expected?

David Elsley: Sure. So, as you mentioned, we have recently secured proceeds of approximately C$11 million now, it was over C$10 million when we announced it, but now it's closer to C$11 million in proceeds, from the exercise of warrants. So that has really fortified our balance sheet and our cash position, providing us with the necessary cash to execute efficiently on all of these programs, which we believe will drive significant value and increased awareness of this company. However, as you mentioned, for life sciences/biotechnology companies, by far, the largest marketplace from a capital markets, public market point of view, is the United States. We are currently traded on the senior exchange in Canada, which is the TSX, but the TSX does not really have a substantial biotechnology sector within it because the Canadian economy is not based around that primarily. 

The US, it's by far the largest market for healthcare products. It's the largest capital pools in the world to support healthcare and biotechnology and life sciences innovations. And it is that market where we believe this company will be appropriately valued, which long-term, provides multiple strategic options for the company, from a partnering perspective, from a lower access to capital going forward in the future, because it's a much deeper, more educated pool in terms of life sciences and biotechnology opportunities. And I think we can harken back to the example of GW Pharma. GW Pharma, for many years, traded on the London Stock Exchange at about a $100 million market cap. Then they migrated to the NASDAQ, and within one year they were valued at over $1 billion and really corporately, nothing changed other than the value they had created was recognized.

We've been at this now for several years, we've built what we believe to be the most advanced pharmaceutical platform in the world for cannabidiol-based medicines. We have the most sophisticated oral formulation, and we're about to be discussing further our new innovation around a subcutaneous formulation, which we believe will transform the treatment of heart failure, and it's incumbent upon us to make sure that we are properly recognized and valued for what we have achieved and discovered to date over many, many years.

And our view is only the NASDAQ can provide the platform for that, and we have made application. We're using one of the most experienced councils in the United States to shepherd that process through. Our plan is to be listed during the second quarter on the NASDAQ. We don't fully control that, and we can't obviously guarantee that, but that is the company's objective and plans.

Nick Hodge: Well, it's very exciting, first of all. The TSX is obviously dominated by resource companies, and we'd love to have you here in the United States on the NASDAQ. But you smartly mentioned the subcutaneous there again. And I was going to let you go without following up on that. Let's spend a minute on that before we truly do say goodbye. Why is that important, because that's a new piece of this story here?

David Elsley: Certainly. So I think, Nick, you're well aware that one of the challenges of cannabidiol is getting an effective dose into the systemic circulation because it's subject to what's called first pass metabolism. So when you take the medicine as an oral liquid, it's ingested through the gastrointestinal tract, and then it goes through the liver and the liver metabolizes a very large percentage of the drug. So much so that studies have shown that about 6 to 10% only gets into the drug. So if you take 100%, only 10% will make it into the systemic circulation where it can modify and fight disease. So, one of the challenges of working with other forms of delivery of this molecule, is it's lipophilic, meaning it's fat-soluble.

So, cannabidiol is what is called a fat-soluble drug. It's very poorly soluble. It won't solubilize or dissolve in water, but our blood system is aqueous, our systemic circulation is like water. So in order to introduce a drug into an aqueous medium, like our circulation system, you have to create a drug that has a viscosity like water, as opposed to like oil. So we have had to create an entirely new solvent system — a new way to formulate the cannabidiol molecule — so it has properties like water. It has the same viscosity as water, so it can be introduced subcutaneously like insulin. So now the drug does not have to go through the GI, or the gastrointestinal system and through the liver metabolism process, it can go directly into the systemic circulation.

And the first data that we presented on the efficiency of this was accepted at the virtual session of the American College of Cardiology, sessions that took place in March of 2020 during the pandemic virtually. And the data that we had accepted for presentation there demonstrated that not only could we reduce fibrosis and key markers of heart failure in an experimental model with a subcutaneous formulation, with 10 mgs per kilo of cannabidiol, which is the known therapeutic dose used in the epilepsy setting in children, but we also achieved the same effect with 1/10th of that dose, so 1 mgs per kilo.

We believe not only can we reduce the amount of drug required, we can more effectively target the drug at the site of disease. So here we are using less drug, therefore less potential side effects and more efficient drug targeting to the site or disease, so it's not metabolized by the liver. And from a compliance point of view, we're targeting this at heart failure. Heart failure patients are already on other medications. They have to remember to take their drug every day, and we believe if they had to add to that, a twice daily oral treatment, compliance would be poor. So here we believe this would be a once a week, subcutaneous treatment, takes less than two seconds to administer. And it would be administered much like insulin once a week. The drug would go directly into the systemic circulation, not cause any GI upset or any liver metabolism issues and effectively target the number one cause of death and disability in the western world today, which is heart failure. That's why we're very excited about it.

Nick Hodge: So the hydrophilic shell is all coming back to me now, I was caught up in the studies that are ongoing and upcoming. So what's the next step for the subcutaneous? You have the studies that you were just talking about, but what's the next step?

David Elsley: So our strategy is to have this in the clinical development. So the oral formulation is in phase two and phase three studies in clinical development, meaning we're in patients with disease. Our strategy is to move our subcutaneous formulation — our next generation for chronic inflammatory disease — into clinical development, the second half of this year. That would mean it's in patients. So we start at the phase one doing dose ranging studies to demonstrate the most efficient dose, and then in 2022, we look forward to moving it into patients with heart failure.

And then given that this is the second largest market next to diabetes, we believe this will be a partnerable asset for the Pfizer's, the Sanofi's, the Novartis's of the world, a very similar strategy to what MyoKardia followed with their innovation in rare cardiac disease, and they were acquired late last year by Bristol-Myers for $13 billion. So we believe we're in the right place with the right therapeutic intervention with oral therapy for acute, and subcutaneous for chronic meaning lifelong therapy. And we believe that's what big pharma will ultimately license from us and co-develop.

Nick Hodge: Great. Well, I appreciate the update, David, I look forward to having you back on perhaps later in the year after you're on the NASDAQ and after we know how safe your medicine is, and I'm content to leave it there. That's David Elsley, the President and CEO of Cardiol Therapeutics. David, I appreciate the time.

David Elsley: Great. Thanks very much, Nick.

Nick Hodge is the co-owner and publisher of Daily Profit Cycle and Resource Stock Digest. He's also the founder of Hodge Family Office, the umbrella organization for his three premium services: Hodge Family OfficeFamily Office Advantage, and Foundational Profits. He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.

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