Acasti Pharma could have a winner on its hands, says Encode Ideas

Biopharm company Acasti Pharma (Acasti Pharma Stock Quote, Chart, News NASDAQ:ACST) has a boatload of commercial potential in its omega-3 fatty acid product CaPre, currently in Phase 3 study. That’s according to healthcare-focused research firm Encode Ideas, who released a report on Acasti on Monday, calling the stock a high-risk investment idea.

Heart disease, the number one cause of death for American men and women, has hypertriglyceridemia as a potential risk factor for coronary artery disease, and while a number of lifestyle changes have been shown to have therapeutic benefits with regard to hypertriglyceridemia, the main treatment options include fibrates, niacin and omega-3 fatty acids, which can lower triglycerides and raise high density lipoprotein cholesterol levels.

Several prescription omega-3 have already been approved for use in the United States, including Lovaza, Omtryg, Vascepa and Epanova.

Currently, Laval, Quebec-based Acasti has CaPre, a krill oil-derived mixture of polyunsaturated fatty acids, in two Phase 3 trials (so far, Acasti has carried out six clinical trials including the two Phase 3 trials) with an aim to get US FDA approval, with top-line data from the first becoming available in December and from the second in January.

Encode Ideas says that if the primary triglyceride-lowering endpoints are met in both Phase 3 studies —and assuming an acceptable safety profile— there is a “good probability” that CaPre will be approved by the FDA in 2021.

“The theoretical timing of a CaPre launch in 2021 is ideal, with the omega-3 market thriving due to the likely label expansion for Amarin’s Vascepa, based on the compelling REDUCE-IT study, and the possible commercial launch of AstraZeneca’s Epanova,” reads the Encode report.

“Even with an inferior label relative to Vascepa, and likely Epanova, we believe that CaPre can carve out a niche in what should be a vibrant omega-3 market,” it says.

“In this scenario, we see CaPre competing in the vibrant omega-3 market with a differentiated story compared to the incumbent products. Having demonstrated meaningful benefits in one or more key secondary and/or exploratory endpoints, CaPre, once approved, should have a compelling narrative beyond TG lowering, even with an inferior label,” it says.

At the same time, the report calls for a cautious approach to the stock heading into the first Phase 3 readout in December, saying that results from two Phase 2 studies with CaPre left some unanswered questions, particularly relating to the probability of CaPre meeting the primary triglyceride-lowering endpoint in the two Phase 3 studies.

“We feel that some investors are demonstrating undue faith that CaPre will work simply because it is an omega-3. In our opinion, this argument is intellectually remiss, and investors should take a closer look at the Phase 2 evidence before betting too heavily on Phase 3 success. We think it is prudent to take a wait-and-see approach towards owning Acasti,” the report says.

The report goes on to compare Acasti’s CaPre with Amarin’s Vascepa, which had Phase 3 data out in 2010 and 2011. When Amarin — a single-asset company then and now — released the data, the stock went from $3.55 per share to $5.85. In April 2011, Amarin reported its second positive Phase 3 study and then traded to $17 per share.

Year-to-date, Acasti is currently up 141 per cent.