Not long ago, I highlighted the risks and rewards of investing in pharmaceutical company Acasti Pharma (NASDAQ:ACST). Folks who choose to take a position in ACST stock should understand that it could decline sharply before staging a turnaround.
That’s the nature of biotech penny stocks. They’re known for making outsized moves in both directions, and that’s why it’s advisable to only maintain small position sizes in these stocks.
We’ll definitely analyze the recent price action in ACST stock, which has been pretty mind-blowing.
Perhaps more importantly, though, we’ll also address some company-specific news that might or might not persuade you to consider owning the stock.
A Closer Look at ACST Stock
I’m not even sure if “roller-coaster ride” is a sufficient phrase to describe how ACST stock has behaved over the past year.
Back in mid-March of 2020, the stock was trading at around 31 cents. The next thing you know, a buying frenzy ensued and the share price rocketed up to 90 cents in June.
Then, in late August, the bulls absolutely capitulated as ACST stock plunged suddenly to 24 cents. As it turns out, however, it would have been a good strategy to hold on to one’s shares.
That’s because there was a massive bull run in late 2020 and early 2021. On Feb. 20, 2021, the share price reached an astonishing 52-week high of $1.22.
This was evidently a case of “too high, too fast” as the ACST stock price promptly declined after that amazing run-up. The share price is at 60 cents now and, as we’ve seen, the sellers are capable of pushing the share price much lower than that.
Therefore, it’s recommended to allow the stock price to move lower and bottom out before taking a long position.
Negative Sentiment Priced In
While I am advising caution, I’ll still acknowledge that any good news could easily send the stock price soaring (again).
Indeed, I would assert that bad news and negative sentiment surrounding Acasti Pharma have already been priced into the stock.
In order to explain this further, let’s rewind a little bit. Acasti Pharma’s main product candidate is a prescription drug called CaPre.
One of the most important applications of CaPre is to treat severe hypertriglyceridemia (i.e., really high triglyceride blood levels). The drug uses krill oil to (hopefully) achieve this.
Unfortunately, August 2020 wasn’t such a great time for Acasti Pharma. Reportedly, the company revealed that a clinical study on CaPre had not met its primary endpoint.
On top of that, Acasti Pharma disclosed that it wouldn’t file a new drug application with the U.S. Food and Drug Administration for CaPre, and that it didn’t intend to conduct additional clinical trials for this product.
Major Capital Infusion
These disappointing events have been known and priced into ACST stock shares for a long time now. And when the general investor sentiment is at its lowest point, this could be a setup for a positive news surprise.
And in fact, there was a recent update that could be viewed as positive, depending on how you look at it.
This development isn’t about CaPre. It’s about a capital injection for Acasti Pharma, in the form of an at-the market equity offering program.
As the company reported, “since the last distributions reported on January 27, 2021, Acasti issued an aggregate of 20,159,229 common shares… over the NASDAQ Stock Market for aggregate gross proceeds to the Company of US$21.7 million.”
This is a two-sided coin, of course. On one hand, it means that Acasti Pharma has generated nearly $22 million, which can be used for a number of purposes.
On the other hand, the current shareholders might not appreciate the issuance of more than 20 million stock shares.
The Bottom Line
Perhaps you may feel that Acasti Pharma could really use that capital injection and will put it to good use. If so, then overall the event can be seen as “net positive,” as they say.
And yes, there’s been disappointing news regarding CaPre. Still, this is a known factor. And for all we know, a positive surprise could be just around the corner.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.