Acasti Pharma has 194% upside, Echelon Wealth says

All eyes will be on upcoming Phase III drug trials for Acasti Pharma’s (TSXV:ACST) cardiovascular drug, CaPre, which could be a big revenue generator, says analyst Douglas Loe of Echelon Wealth Partners, who maintains his “Speculative Buy” rating on the stock and a target price of $4.00.

Laval, Quebec-based Acasti Pharma recently reported its FQ318 financials for the December-end quarter, which highlighted the company’s increased cash position, thanks to the closing of a $13.6 million financing round in December. The funding will be enough to get its drug trials off the ground, says Loe, but probably not to finish the planned 500-patient Phase III trial for CaPre, an omega-3 phospholipid ester drug which is aimed at treating severe hypertriglyceridemia, a precursor to cardiovascular disease.

“There are no mysteries to our Acasti investment thesis, with our model and valuation still based on downstream economics for the firm’s lead (and only) clinical-stage cardiovascular drug asset CaPre and on our expectations that the drug can perform well on blood triglyceride lowering to justify future FDA/EMA approval, and that future commercial partners can be identified,” says Loe in a note to clients on February 14.

The analyst says that evidence of strong pharmacologic activity from Acasti’s previous patient trials, coupled with the fact that omega-3 formulations for treating cardiovascular disease are currently being pursued by at least two other major drug developers, indicates that there could be significant value at the end of the tunnel for Acasti.

“We are maintaining our ‘Speculative Buy’ rating and one-year PT to $4.00 on ACST, with our valuation still based on NPV (25% discount rate) and multiples of our F2022 adjusted EBITDA/fully-diluted EPS forecasts ($26.2M/$0.39, respectively),” says the analyst.

“Our model assumes that Acasti can conclude patient enrolment in the aforementioned 500-patient pivotal Phase III hypertriglyceridemia trial by FH120 and generate six-month serum triglyceride data by FH220, with FDA approval/launch by FH221 still an aggressive but in our view achievable milestone embedded in our forecasts,” says the analyst.

The one-year target price of $4.00 represents a 194 per cent projected return on investment as of publication date.