It may only be February, but for Acasti Pharma (NASDAQ:ACST) investors, it’s already been a long year. Acasti Pharma stock, incredibly enough, is down 80% year-to-date, and now trades for just 50 cents per share.
The reason for Acasti’s decline is clear. The company’s lead product, CaPre, recently came up short in clinical trials. This dimmed investors’ hopes that Acasti will be the next big thing in the omega-3 fatty acids space.
At 50 cents per share, the bigger question is whether Acasti can even survive.
What Is CaPre?
According to Acasti, CaPre is a form of krill oil. It’s medicinally interesting because it contains a high quantity of polyunsaturated fatty acids “PUFAs” and in particular, omega-3 fatty acids. These fatty acids have long been correlated with improved human health. If you’ve seen all the discussion about why you should include more fish in your diet, this is a big part of the reason why.
Krill, for those unfamiliar, are a small type of fish that are related to shrimp. Krill fish are widely consumed in Asia, but are not as popular elsewhere. Thus, many humans may be missing the benefits of these small fish in their diets. And thus, we have the case for CaPre.
Acasti suggests that CaPre could be useful in raising “good” HDL cholesterol, improving glucose markers for diabetes and reducing triglycerides, among other things. There are numerous potential clinical benefits to the consumption of oils derived from fish. However, Acasti has focused its clinical research on the effort to lower triglycerides. If successful there, it could likely have a positive impact on peoples’ heart health. That’s because excessive triglyceride levels are strongly linked to heart disease.
CaPre Comes Up Short
Last month, Acasti reported results from its TRILOGY trial. It found that at 12 weeks and 26 weeks into usage, CaPre reached 31% and 37% reductions in triglyceride levels, respectively. When combined with a statin treatment, this figure rose to an even more impressive 42%. Sounds good, right?
Unfortunately for Acasti, this was not sufficient to reach statistical significance. As management explained on a recent conference call, the placebo — in this case corn starch — achieved a surprising 27% reduction in triglyceride levels. This made the difference compared to CaPre too small to be statistically conclusive. Management believes it is highly unlikely that the corn starch used in this trial was responsible for improving health markers.
This means that the placebo was unusually effective either due to random chance, or due to less-than-ideal decisions made when putting the trial together. To that end, management noted that a far higher portion of patients were diabetic in the Acasti TRILOGY trial as compared to competitor Amarin’s (NASDAQ:AMRN) Marine trial for its Vascepa fish oil product.
In any case, Acasti is doing an audit of the clinical sites used in the trial to get to the bottom of what went wrong. It intends to talk to the FDA about analyzing the statistical data from the next phase of the TRILOGY trial in light of the problems that arose in January.
Acasti’s Financial Situation
Given the grim share price, investors are right to be nervous about Acasti’s financial situation. That said, management says that the company is still viable for the time being and won’t need to raise money in the near term.
As of Dec. 31, 2019, Acasti still had $25.7 million in cash. And CEO Jan D’Alvise essentially said that Acasti’s cash should last through the end of 2020. Thus, the company has time to obtain more trial results and meet with the FDA again before needing to raise more money.
That’s a small relief for shareholders. As it is, if the company is forced to issue a secondary offering at current market prices, it would create a painful amount of dilution.
My Verdict on ACST
You can never say never with this sort of company. Oftentimes, investors leave companies like this for dead. But as long as clinical trials are ongoing, things could turn around. Amarin itself saw its shares lag in the low single digits for years as its data hadn’t been impressive. Yet it was able to convince the FDA to give the green light to Vascepa, and the rest is history.
But it’s highly speculative to think Acasti stock will be able to manage a similar recovery. Based on the first phase of CaPre’s TRILOGY trial, it’s not clear what all went wrong. The clock is ticking for management to figure it out and get the drug back on track before the cash runs out in a year or so. Meanwhile, Amarin’s first-mover advantage in the space continues to grow, as Vascepa gains more market share. Acasti stock may seem cheap at 50 cents, but there’s actually a lot of risk even at this low price.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he had no positions in any of the aforementioned securities.