Does Acasti Stock Have a Future?

Acasti Pharma (NASDAQ:ACST) is a classic example of the extreme volatility of small-cap biotech stocks. It was only in late December that the shares were fetching $2.87, up from $1 a year earlier. But now ACST stock is trading around 79 cents, with a market cap of about $70 million. To provide some context, in 2013 the shares were trading around $40.

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Founded in 2002, Acasti specializes in developing prescription drugs that use omega-3 fatty acids derived from krill oil. Keep in mind that those acids have been shown to effectively reduce triglycerides, thereby helping to make people’s hearts healthier.

The problem is that the underlying science is extremely complex and challenging. That was certainly highlighted recently when Acasti received disappointing results from a Phase 3 clinical trial of its CaPre drug.  The drug was supposed to treat patients who suffer from severe hypertriglyceridemia, in which triglyceride blood levels range from 500 mg/dL to 1500 mg/dL.

As for the trial, it did have some positive outcomes. For example, the drug produced a 30.5% median reduction in triglyceride levels over a 12-week term. The median triglyceride reduction of patients taking the drug in combination with a statin was 42.2%, versus a 31.5% median reduction for those taking a placebo and a statin.

So what went wrong? According to Acasti’s press release: “Both the placebo and CaPre study groups experienced significant reductions in triglycerides within the first four weeks from baseline, and even though the difference at 12 and 26 weeks was in favor of CaPre, due to the unexpectedly large placebo response, TRILOGY 1 did not reach statistical significance.”

Despite this setback, Acasti is not giving up. The company is analyzing the data to determine the reasons for the endpoint miss.  The remaining top-line data from the trial will be released in the next couple of weeks, and the FDA is expected to issue more analysis about the secondary endpoints of the trial within the next couple months.  Additional positive data could emerge, boosting ACST stock.

But I think investors should be extremely cautious about ACST. Just look at AstraZeneca (NYSE:AZN), whose fish-derived heart drug Epanova also failed to meet its primary endpoint in a clinical trial. In fact, the company decided to stop developing the drug, resulting in a $100 million writeoff.

The Bottom Line on ACST Stock

ACST is all about CaPre. So if the drug is not progressing sufficiently, the company’s prospects will certainly be ominous.

It’s also important to point out that Acasti’s rival, Amarin  (NASDAQ:AMRN), is continuing to make headway with its fish-oil drug, Vascepa. During the latest reported quarter, Vascepa’s sales soared 103% year-over-year to $112.4 million.  That will definitely make things tougher on ACST.

Also,  consider that Amarin recently received FDA approval for an expanded indication for Vascepa. The drug was shown to be effective for patients who have elevated triglyceride levels of ≥150 mg/dL. According to Dr. Deepak Bhatt, an executive director of the Interventional Cardiovascular Programs at Brigham and Women’s Hospital Heart and Vascular Center, the treatment “represents one of the most important developments in the prevention and treatment of cardiovascular disease since statins…”

Vascepa’s annual sales could reach $4 billion within the next three or four years.  In other words, for investors looking for a play on the cardiovascular market, Amarin looks like a pretty good option, while ACST stock looks like a name that they should avoid.

Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical IntroductionFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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