Sell Acasti Pharma, says Echelon Wealth

The news is bad for Acasti Pharma (Acasti Pharma Stock Quote, Chart, News TSX:ACST), according to Echelon Wealth analyst Douglas Loe, who on Monday changed his rating from “Speculative Buy” to “Sell” on the basis of new study results.

Acasti Pharma is a Quebec-based drug developer focused on its proprietary omega-3 phospholipid ester CaPre, for which the company just released on Monday data for its Phase 3 hypertriglyceridemia TRILOGY II trial.

Shares of Acasti plummeted on Monday as CaPre was found to have missed its primary endpoint, which was observation of a statistically significant reduction in serum triglyceride levels from baseline and compared to placebo at a 12-week follow-up.

Acasti’s TRILOGY 1 trial, reported on in January 2020, had also missed its primary endpoint.

The TRILOGY II study found a 30.4 per cent average reduction in triglyceride levels among all patients (compared to 30.5 per cent in TRILOGY I), but the unadjusted, placebo-corrected reduction was 12.4 per cent, which achieved a “p” value of 0.19 and thus was deemed statistically insignificant.

As a result, Acasti said it will not file a New Drug Application with the US FDA and it does not plan to conduct additional clinical trials for CaPre.

“We are very disappointed in the outcome of the Trilogy 2 study,” said Acasti CEO Jan D’Alvise, in a press release. “Based on what we have seen in the preliminary topline data, we believe TRILOGY 2 was likely not affected by the same “Pre-Randomization Triglyceride Normalization” effect that we saw in TRILOGY 1.”

“While the triglyceride reduction observed in the control arm was less than what was observed in the Trilogy 1 Study, it still remains one of the highest seen amongst the previously conducted triglyceride reduction studies, and may be explained by the excellent background standard of care that is being provided to these patients today,” he said.

In his report on the findings, Loe said the data have clearly spoken, leaving little reason to dwell on the two TRILOGY studies. At the same time, the analyst seemed a bit mystified by the chain of events, saying, “We do reflect with some curiosity on how an EPA-containing omega-3 formulation did not show benefit on a seminal serum biomarker endpoint on which virtually all other previously-tested omega-3 formulations (including mixed DHA-containing formulations like AstraZeneca’s Epanova and Glaxo’s/Reliant’s Lovaza) performed to approvable standard. The culprit was shifting foundational triglyceride levels in placebo-treated patients that might be explainable through follow-up by shifts in lifestyle or nutritional macroenvironment to which TRILOGY II patients were subjected.”

Loe said that CaPre is the only clinical-stage asset in Acasti’s closet and since his model now no longer ascribes value to CaPre, he is changing his rating to “Sell” and is giving a new price target of $0.15 per share (previously $1.40), based solely on the company’s fiscal Q1 2021 net cash of $12.1 million and its basic outstanding shares at the quarter’s end of 96.9 million. At press time, the new target represented a return of negative 84 per cent.

Loe said, “We believe that the firm could be a reasonable public entity that an aspiring private drug developer could exploit as a go-public platform, or its cumulative tax losses could be of modest value to a net income-positive pharmaceutical firm seeking to mitigate its tax burden. Cumulative net loss at end-of-FQ121 was $131.0 million. But for now, our ACST valuation is not based on any fundamental clinical activities or profitability measures on which we would conventionally base valuation.”