BST Trade Alert: February 20, 2014
February 20, 2014
Recommendation:
Buy Acasti Pharma (NASDAQ: ACST) up to $1.40 per share.
About the Company:
Acasti is a Canadian biotech focusing on the development of new therapies for dyslipidemia (abnormalities in blood lipids) and cardiovascular disorders. It was founded in 2002 and is a subsidiary of Neptune Technologies & Bioresources(NASDAQ: NEPT).
The key to the company’s future success is its technology.
While competitor products are made from fish oil, Acasti’s products are derived from Neptune Krill Oil (NKO).
Krill are small shrimp-like crustaceans found throughout the world’s oceans. They provide an important food source for whales, seals, penguins, albatrosses, and many other birds.
But today, krill are also recognized for another important purpose. They are an emerging and potent source of marine omega-3 fatty acids that offer multiple health benefits.
What makes NKO so special?
The EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid) in NKO are primarily bonded to phospholipids (important building blocks of each cell membrane in the human body). This feature gives NKO significantly greater bioavailability than fish oils where the EPA and DHA are bonded to triglycerides.
In other words, the omega-3 in NKO is absorbed into the body more quickly and completely.
The distinctive nature of NKO omega-3 phospholipids is that they can easily disperse in both oil and water. Unlike omega-3 triglycerides found in fish oil, which are insoluble in water and do not disperse completely in the stomach, NKO allows an improved interaction with digestive enzymes.
Due to their insolubility, fish oils tend to float on top of stomach fluids causing fishy burps. It’s an unpleasant side effect that will not occur when taking NKO.
In addition, NKO contains astaxanthin. It’s a powerful antioxidant that protects cells from harmful free radicals and contributes to the overall stability of NKO.
With NKO as the foundation of its products, Acasti believes it has a significant advantage over the competition.
Speaking of products…
Despite its small size (market cap of $127 million), Acasti already has one product on the market and a potential blockbuster drug in mid-stage clinical development.
The company’s commercialized product is called Onemia…
It’s a medical food designed to help patients lower their risk of hyperlipidemia, atherosclerosis, diabetes, arthritis, and gastroenterology disorders. It consists of concentrated omega-3 phospholipids and antioxidants purified from krill oil.
Non-clinical studies by Acasti, supported by clinical testing on Neptune Krill Oil (NKO), have shown Onemia to be safe and effective. However, as a medical food, it must be administered under the supervision of a physician.
Onemia is only in the early stages of commercialization, but Acasti is positioning it as the product of choice in a multi-million dollar market. To date, it has been well received by physicians. And the company expects sales to take off as more doctors gain confidence in Onemia’s benefits.
We’ll break down Acasti’s prescription drug candidate in a moment.
But first, a look at the company’s financial situation.
Acasti was running low on funds at the end of the third quarter with a cash position of just $3.7 million. But it has since resolved that particular problem. Through a recent public offering and private placement, the company has raised $22 million.
This new cash hoard plus ongoing revenue from Onemia sales should be more than adequate to fund Acasti’s operations and clinical program during our trade. And the company’s reinvigorated financials should help attract investors to its stock.
No question about it, Acasti is an exciting biotech with huge upside potential.
The relationship with Neptune, a revenue-generating product, a potential home run product in mid-stage testing, and a solid financial position all combine to make this stock highly attractive to investors. And as you’ll see later on, the stock is a tremendous bargain at the moment.
Let’s now take a closer look at Acasti’s potential blockbuster drug…
About the Drug:
The company’s sole prescription drug candidate is called CaPre. It’s being developed initially to prevent and treat hypertriglyceridemia, a condition characterized by abnormally high levels of triglycerides.
However, Acasti believes the drug could ultimately be developed to prevent and treat other cardiometabolic disorders.
CaPre is a highly purified omega-3 phospholipid concentrate derived from krill oil. It contains EPA and DHA bound to phospholipids as well as free EPA and DHA.
The total concentration is approximately two-thirds phospholipids and approximately 30% EPA and DHA.
The company’s near-term strategy is to develop and commercialize CaPre in the US for the treatment of mild to moderate hypertriglyceridemia, and as a next step, the treatment of severe hypertriglyceridemia.
Going forward, Acasti hopes CaPre can be used in conjunction with positive lifestyle changes and be administered either alone or with other treatments such as statins. The company also hopes CaPre can potentially be used by statin-intolerant or statin-resistant patients.
Statins are a class of drug used to reduce cholesterol levels.
In addition to targeting the reduction of high to very high triglycerides, Acasti’s has an important long term objective for CaPre. That goal is to show CaPre can also reduce LDL (bad cholesterol) and raise HDL (good cholesterol).
Based on non-clinical and clinical studies to date, Acasti believe CaPre may provide significant benefits in all three areas. However, further clinical research is required in order to confirm an analogous efficacy in humans.
CaPre’s precursor, NKO, has demonstrated significant clinical benefits in all three areas.
Results from a recently completed phase 2 trial, show CaPre is on the right track.
The objective of the study was to evaluate the safety and efficacy of CaPre at different doses over a four-week period in patients with mild to severe hypertriglyceridemia as compared to the standard of care alone. Standard of care could include anything from lifestyle changes to lipid modifying agents like statins, ezetimibe, and fibrates.
Over 230 patients completed the eight weeks of treatment. From this patient population, 88% had mild to moderate baseline triglycerides between 200 and 500 mg/dL.
As you may have guessed, the study was a stunning success.
After only a four-week treatment period, CaPre achieved a statistically significant triglyceride reduction as compared to standard of care. Patients treated with 4g of CaPre a day over four weeks reached a mean triglyceride decrease of 15.5% from baseline and an absolute mean improvement of 18.1%.
The results also showed increased benefits after eight weeks of treatment. Patients on a daily dose of 4g of CaPre registered a mean triglyceride decrease of 21.6% and an absolute mean improvement of 14.3% compared to standard of care.
What’s more, no serious adverse events were reported and the data revealed a positive risk/benefit ratio for CaPre. In other words, patients on CaPre showed a lower incidence of adverse events compared to the standard of care group.
Best of all, CaPre became the first omega-3 phospholipid product to demonstrate a positive effect on both LDL and HDL levels. Patients on the daily dose of 4g of CaPre showed a mean LDL decrease of 8.3%, a non-HDL decrease of 14.3%, and a statistically significant HDL increase of 11.1%.
It’s a huge accomplishment.
You see, there are FDA approved drugs on the market currently, including products made from omega-3 fish oil, that would compete with CaPre. However, Acasti claims that CaPre is the only omega-3 phospholipid product being developed with potential to show clear clinical superiority in treating triglycerides, LDL, and HDL.
To date, no competing product currently on the market has demonstrated efficacy in treating all three indications.
So, what’s next for CaPre?
The next catalyst on tap for Acasti is results from the second phase 2 trial of CaPre. This trial is designed to assess the effect of CaPre on triglycerides compared to placebo in patients with mild to severe hypertriglyceridemia. The study involves over 400 patients who will be given either 1 or 2 grams of CaPre or 2 grams of placebo per day for 12 weeks.
Results from this trial are expected in the second half of 2014.
About the Market for This Drug:
The potential market for CaPre is absolutely mind-boggling.
Approximately 4 million people in the US have severe hypertriglyceridemia (triglyceride levels > 500 mg/dL). And over 40 million US adults have mild to moderate hypertriglyceridemia (triglyceride levels > 200 mg/dL).
According to Acasti, the total prescription omega-3 market generated over $2 billion in sales worldwide in 2012.
And if the company’s clinical development strategy for CaPre is successful, the drug could be approved for a much larger patient population than existing prescription drug fish oils. At present, those drugs are only approved to treat patients with very high triglyceride levels of > 500 mg/dL.
Clearly, CaPre has blockbuster sales potential!
About the Potential Catalyst:
Results from the second of two phase 2 trials of CaPre are expected in the second half of 2014.
About the Shares:
Right now we have a golden opportunity to purchase shares of ACST at a bargain basement price.
Around the time Acasti reported results from the first phase 2 trial, its shares sold off on heavy profit taking. The stock traded down from a 52-week high of $4.20 in late July to its current price of around $1.24.
In other words, ACST has upside of 239% to the 52-week high.
We think the stock is highly oversold at current levels, and therefore, offers huge upside potential. ACST should trend higher very soon as the highly anticipated results of the second phase 2 trial are expected in the latter half of this year.
And if the results are good, the stock should retest the 52-week high and perhaps even break through it.
As such, we recommend you grab your shares of ACST as soon as possible. Establish your position while the stock is flying under the radar and before it starts to move higher ahead of the upcoming results.
Key Facts:
| Company: | Acasti Pharma |
| Ticker: | ACST |
| Recent Price: | $1.24 |
| Market Cap: | $127 million |
| Avg. Daily Volume: | 512,487 shares |
Chart:
Category: BST Trade Alert
