As a biotech play, Acasti Pharma (NASDAQ:ACST) has its short-term problems, but why those problems are a real problem for Acasti Pharma stock is worth looking into more deeply.
There are plenty of reasons why investors frequently embrace the biotechnology space. Chief among those reasons is the possibility that a company hits on a unique new drug or therapy, sending its shares soaring. On a related note, some biotech firms can notch success in the first two phases of clinical trials, making them credible acquisition targets in the process.
Of course, the reverse of those scenarios can come into play when it comes to biotech stocks. A drug may fail in clinical trials or a competitor can get its product to market first. As Acasti Pharma is showing investors, those are punishing situations.
Acasti’s Phase 3 trial of CaPre, aimed at patients with high levels of triglycerides, isn’t working out, explaining why the stock is down 69.11% to start 2020.
One of the primary causes of concern with the Trilogy 1 Phase 3 trial of CaPre was that there were unanticipated levels of placebo response. Said another way, patients got a cornstarch pill, which of course would be far less expensive than any drug, and had a positive reaction to it.
The company mentioned that it could provide an update on the Trilogy 1 Phase 3 trial of CaPre situation perhaps later this month or in March, but that doesn’t mean the update is going to bring good news and salvage the near-term case for Acasti Pharma stock.
Headed for Heartache
In a twist of irony, I’m writing about Acasti, which is trying to make good on a cardiovascular treatment, just days before Valentine’s Day when hearts, heart emojis, heart-shaped boxes and other heart fare have their day in the spotlight.
However, the pleasantries end there because, in addition to its own failings in this niche, Acasti has to contend with competitors that are executing well, namely Amarin (NASDAQ:AMRN). Amarin is the only company in this category that has successfully brought a treatment to market that has been clinically proven to reduce cardiovascular disease.
One way of looking at Amarin’s success in this space as it pertains to Acasti stock is the following: Amarin has essentially chased AstraZeneca (NYSE:AZN) out of this arena. AstraZeneca is a $130 billion company and it’s folding its hand, at least for now, against Amarin. That doesn’t bode well for the $66.57 million Acasti.
There are at least two more reasons why Acasti could remain a vexing proposition for investors. First, there’s the obvious, which is the company isn’t dead. It’s not unheard of in the biotechnology industry for a drug or therapy to initially be a dud only to eventually become a success. To be sure, that scenario isn’t an everyday thing, but it has happened.
Second, assuming Acasti can get its act together, there’s a massive opportunity in the cardiovascular drug market. Globally, heart disease is the number one cause of death in both men and women. Estimates vary, but on the bullish end of things, this market could be worth $91 billion by 2025.
Bottom Line on Acasti Pharma Stock
Perhaps Acasti’s audit on the aforementioned placebo effect in its clinical trial will turn up easy-to-solve issues that can get the trial back on track, but even that isn’t guaranteed to boost the stock. Amarin’s Vascepa has a significant head start and is moving to attain and retain dominance in this particular market segment.
The bottom line is that there are plenty of low-priced, small-cap stocks in the biotechnology universe that haven’t made trial announcements that investors can speculate on. Those are risky ideas, but they may be more fruitful trades than hoping Acasti pens a redemption story anytime soon.
As of this writing, Todd Shriber did not own any of the aforementioned securities.