Cardiol Therapeutics Inc. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. The audited consolidated financial statements are prepared under IFRS and presented in Canadian dollars unless otherwise noted. Cardiol is a clinical-stage biotechnology company developing cannabinoid-based anti-inflammatory and anti-fibrotic therapies for heart disease. It had no commercialized products.
Financial and operating results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $0 | $78,760 |
| General and administrative expense | $22.37 million | $27.87 million |
| Research and development expense | $18.96 million | $10.87 million |
| Net loss and comprehensive loss | $30.93 million | $31.64 million |
| Basic and diluted loss per share | $0.49 | $0.73 |
| Net cash used in operating activities | $27.22 million | $23.54 million |
| Cash and cash equivalents at year-end | $59.47 million | $83.90 million |
| Total assets | $62.03 million | $87.88 million |
| Total liabilities | $9.83 million | $11.64 million |
| Total equity | $52.20 million | $76.24 million |
Operating expenses were $41.34 million, compared with $38.66 million in 2021. The smaller reported net loss reflected, in part, a $6.24 million non-cash gain from the change in the fair value of derivative liabilities and a $2.76 million foreign-exchange gain. These items are not operating revenue. Interest income rose to $1.24 million from $106,001.
Cash declined by $24.43 million during 2022. Operating cash use increased year over year; the company also had $74,709 of investing cash outflow and $53,934 of financing cash outflow. Current assets were $61.44 million and current liabilities were $9.80 million. Financial liabilities included $9.33 million of accounts payable and accrued liabilities and a $72,871 lease liability. The filing reports no short- or long-term variable-interest debt.
There were 64,042,536 common shares outstanding at December 31, 2022. The company reported no share issuance under its US$50 million at-the-market program through the filing date.
Material changes and business developments
- R&D expense increased about 75% year over year, while G&A expense decreased about 20%. Management attributed its spending to the company’s research and development activities; no product sales were reported for 2022.
- Cardiol began enrolling patients in its Phase II ARCHER trial for acute myocarditis in August 2022. The planned study is designed to enroll 100 patients; the company budgeted approximately $8 million in additional costs to complete it.
- The company initiated a Phase II open-label pilot study in recurrent pericarditis in December 2022. It expects to enroll 25 patients and budgeted approximately $4 million in additional costs. The first patient was reported enrolled in January 2023, after the fiscal year.
- Cardiol discontinued its LANCER Phase II/III COVID-19 trial in October 2022, citing difficulty recruiting eligible patients and a lower-than-expected event rate, and said it would prioritize the myocarditis and pericarditis programs.
- The company developed a subcutaneous cannabidiol formulation in 2022; it was undergoing pharmacokinetic testing and remained at an early, preclinical stage.
Outlook, risks, and unusual items
Cardiol expects continued losses and negative operating cash flow while it conducts research and clinical trials. Management stated that it had sufficient working capital for planned spending and that it did not consider a material going-concern uncertainty to exist at year-end. The company nevertheless cautioned that further financing may be required; the filing does not provide a clear cash-runway estimate. Future development costs and timelines are uncertain, and the company may seek partners to fund later-stage development and commercialization.
- Clinical, regulatory, manufacturing, and recruitment risks are significant: no product candidate has received marketing approval, and trial outcomes and timing are uncertain.
- The company believes it was a passive foreign investment company (PFIC) for U.S. tax purposes in 2022 and expected it might remain one in 2023; status is determined annually and can affect U.S. investors’ taxes.
- In November 2022, Nasdaq notified the company that it did not meet the US$1.00 minimum bid-price requirement. It had until May 15, 2023 to regain compliance, with possible further time subject to Nasdaq requirements; delisting could affect liquidity and financing capacity. The notice did not affect its TSX listing.
- The 2022 ATM program permits sales of up to US$50 million of shares, at the company’s discretion, through March 8, 2024, and may result in shareholder dilution if used.
- The company identified foreign-exchange exposure: a 10% change in the U.S. dollar against the Canadian dollar was estimated to affect reported loss by approximately $4.41 million. It does not use derivatives to hedge this exposure.
- The audit report expressed an unmodified opinion on the financial statements. Management assessed disclosure controls and internal control over financial reporting as effective at year-end; the auditor was not engaged to attest to internal control effectiveness because the company qualifies as an emerging growth company.
Key facts investors should verify
- Current cash, operating cash burn, committed trial costs, and management’s updated estimate of funding needs and runway.
- Enrollment progress, trial-site activation, timing, and results for ARCHER and the recurrent pericarditis study; distinguish clinical evidence from preclinical findings.
- Whether the company regained and maintained Nasdaq minimum bid-price compliance after the stated deadline.
- Any subsequent share issuance, warrant or award dilution, or sales under the ATM program.
- Annual PFIC status and the availability of information needed by U.S. shareholders for any applicable tax elections.
- Amounts, milestones, and governance oversight for related-party research and manufacturing arrangements, including the relationship with Dalton.