PRIME
SERIES
It is a
sneaky disease with few obvious symptoms of its own, but it affects as many as one
third of the adults in the United States alone.
HyperTriGlyceridemia (HTG) is
mouthful and it means a person has too many lipids or fatty molecules in their
blood. These particular fatty molecules
called triglycerides are important energy sources for work and play. However, an excess of triglycerides poses health
risks such as plaque build-up in the arteries that eventually can lead to cardiovascular
disease.
A
biotechnology innovator in Quebec, Canada
- Acasti Pharma, Inc. (ACST:
Nasdaq)
-
wants to help HTG patients with a proprietary remedy based on omega-3
oil in krill, a crustacean found abundantly in all the world’s oceans. The company recently completed enrollment in
a double blind study that is aimed at proving its prescription drug candidate CaPre can lower triglyceride levels in
the blood of patients with severe HTG.
The phase three clinical trial that Acasti calls TRILOGY is expected to be completed by the end of 2019, after which
the company’s scientists will assemble their data and submit a ‘new drug
application’ to the U.S. Food and Drug Administration. A timely review could allow Acasti to begin
selling CaPre as early as 2021.
Acasti’s modest share price circling
$1.00 per share belies the real possibility that the company is on the cusp of
entering a large disease market with a promising therapy. It is timely to get better acquainted with
this upstart biotech and its crustacean fat fighter.
Growing
Patient Population with Unmet Needs
Everyone
requires at least some triglycerides in their blood for energy. However,
excessive accumulation is a concern and places patients at high risk for
pancreatitis, atherosclerosis or cardiovascular disease. Indeed, triglycerides at the severe level are the third leading cause of
pancreatitis in the U.S. Analysis of
data from related studies has found a significant association of triglycerides with
cardiovascular disease, beginning with the seminal work by Hokanson and Austin
published in 1996.
 |
| Illustration of Triglycerides in Blood |
Genetic
defects that lead to disorderly metabolism can cause an excessive accumulation
of triglycerides. However, in our modern
times the real culprits in the disease are fatty, high calorie diets, alcohol
abuse and too little exercise. The
prevalence of HTG has increased several-fold over the past few decades, mostly
as a result of the obesity epidemic. According
to the American Heart Association, 40 million adults in the U.S. have an excess
of triglycerides in their blood of more than 200 milligrams per deciliter. About four million of these folks have
severe triglyceride accumulation in their bloodstreams of more than 500 mg/dl.
Treatment
of underlying problems such as poor diet or excessive alcohol consumption can
at least partially correct HTG. However,
lifestyle changes alone may not be enough to bring triglycerides back below the
preferred 150 mg/dl level recommended by doctors. Fibrates, niacin and omega-3 fish oil are the
main pharmacological agents for managing HTG.
Unfortunately,
currently available treatments for HTG have limitations. For example:
·
Concerns
over reduced control over blood sugar levels may limit the use of niacin in
patients with diabetes. Additionally, the
use of niacin is limited because of the risk of side effects from blood vessel
dilation or constriction and elevation of liver enzyme levels.
·
Over-the-counter
fish oil remedies are available, but only prescription-strength doses of
omega-3 oils of two grams per day can really make any significant change in triglyceride
levels in the blood. Worse yet omega-3 dietary
supplements often contain impurities, including triglycerides - the
very culprit HTG suffers are trying to avoid.
·
Some
prescription omega-3 preparations require concurrent fatty food consumption and
thus conflict with restricted diets of over-weight or diabetic patients or work
against medications aimed at reducing cholesterol levels in the blood.
Better
Omega-3 Therapy
It appears
there is need for improvement for the growing number of people at risk for HTG. Acasti has developed a therapy based on
omega-3 fatty acids from krill oil. These
omega-3 fatty acids are composed primarily of two acids that are known to have numerous
positive health effects - eicosapentaenoic acid or EPA and
docosahexaenoic acid or DHA. Importantly, in the natural krill oil source
used by Acasti, EPA and DHA are combined with phospholipid esters and free
fatty acids that facilitate direct absorption in the human body. This means the effectiveness of CaPre is not dependent upon the patient’s
food consumption and will not conflict with restricted diets. The therapy is taken orally as a capsule
once or twice daily.
 |
| Krill |
During
earlier Phase II clinical trials, Acasti was able to prove its CaPre therapeutic could safely and
effectively reduce triglyceride levels in the blood of patients with mild to
severe HTG. Additionally, the studies
showed that CaPre has no ill effect
on low-density lipoprotein cholesterol (LDL-C) that doctors call ‘bad’ cholesterol. CaPre
was also found to increase the ‘good’ cholesterol or high-density lipoprotein
cholesterol (HDL-C) that brings smiles to doctors’ faces. The studies also showed that CaPre has the potential to help diabetes
patients by decreasing a marker for blood sugar control called hemoglobin A1c,
a form of hemoglobin that is bound to glucose.
Acasti
pharma hopes to duplicate these results in a Phase III clinical trial dubbed TRILOGY that was begun in 2017. Enrollment of 500 patients is proceeding on
schedule to have the study completed as planned by year-end 2019. Designed to evaluate safety and efficacy of CaPre with patients suffering from
severe HTG, the study is fully randomized, placebo-controlled and
double-blinded.
The
company is building a formidable moat around its business by safeguarding its
intellectual property. Numerous patents
have been awarded in the U.S., Europe and other jurisdictions that protect both
the composition of Acasti’s phospholipid compound and the method of use
reducing blood lipids. Additional applications
are pending.
Well
Travelled Road to Market
When
Acasti comes to market with CaPre it
will be met at the gate by several well established players already focused on the
severe HTG patient population that is the target of Acasti’s current Phase III
study.
·
AstraZeneca’s
Epanova is a carboxylic acid and the first FDA approved prescription omega-3
therapy for severe HTG. AstraZeneca
acquired the drug with its acquisition of Omthera Pharmaceuticals for $443
million in 2013. AstraZeneca is pairing Epanova
with its own Crestor cholesterol remedy.
·
GlaxoSmithKline
also entered the market with an omega-3 acid ethyl ester called Lovaza, which
reportedly generated sales over $900 million in 2012, the last year before
generics versions were allowed. GSK came
by Lovaza through the acquisition of Reliant Pharmaceuticals for $1.65 billion
in 2007.
·
Amarin’s
Vascepa is the first prescription omega-3 fatty acid therapy based on pure EPA omega-3
fatty acid. Since approval in 2013 and
through the end of 2018, Amarin sold over five million Vascepa prescriptions.
At
least two of these companies are building on earlier work with additional
clinical trials. AstraZeneca is currently conducting a study featuring its
Epanova omega-3 therapy taken with a statin.
Called the STRENGTH trial, it includes 13,000 patients that exhibit
HTG. The trial’s endpoint is intended to
prove a reduction in cardiovascular risk.
Another
key study was conducted by Amarin to test its Vascepa in lowering the risk of
cardiovascular events beyond LDL cholesterol management. Called the REDUCE-IT study, Amarin presented
data at the Scientific Sessions of the American Heart Association in November
2018. Vascepa as an add-on to statin
therapy was found to reduce major adverse cardiovascular events by 25%.
Commercial
Strategy
Acasti’s
leadership is unfazed by the appearance of competitive threat. Management has
even found a way to benefit from the groundbreaking work completed by those
already in the market. In 2017, Acasti
commissioned a market research study by Destum Market Research that was based
on interviews with key opinion leaders with knowledge of Amarin’s REDUCE-IT
study and AstraZeneca’s STRENGTH trial.
Respondents
indicated they would increase their own prescribing of omega-3 therapies by 35%
in patients with severe HTG and by more than 40% in patients with just high
triglycerides. A whopping 100% of
respondents held the view that there is a significant unmet need in HTG
treatment because current therapies fall short of expectations. Importantly, the Destum study found that respondent
physicians would switch 80% of their patients with mild to moderately elevated triglycerides
and 82% of their severe HTD patients to CaPre
if it offered reduction of triglycerides and ‘bad’ cholesterol while increasing
‘good’ cholesterol.
The
results of the independent survey make clear physicians are keenly sensitive to
cardiovascular risks for their patients and are eager for therapies that could
benefit a wide range of patients. The
survey also suggested that physicians may be prepared to extend usage of
omega-3 therapies beyond the current label application for severe HTG.
Acasti
management has prepared detailed comparisons of CaPre and the omega-3 therapies already on the market, such as
Amarin’s Vascepa and GSK’s Lovasa. Point
by point management can demonstrate to physicians CaPre’s advantages over the incumbents.
The
company expects physicians to be impressed with the compatibility of CaPre with their recommendations for
low-fat and low-calorie diets needed by overweight and diabetic patients. A dosage of CaPre can be effective no matter what or when the patient eats. Omega-3 fatty acids from fish oil such as used
in Amarin’s Vascepa and AstraZeneca’s Lovaza require the consumption of foods
with adequate fat content to deliver a therapeutic benefit -
foods that could be ill advised for people already at risk for heart
attack or diabetes.
The
company also plans to capitalize on CaPre’s
performance relative to cholesterol and blood glucose. The linkage of poor diet and inactivity to
HTG, cholesterol and diabetes means that a large and growing number of patients
are confronted with all three health threats.
According to the Centers for Disease Control and Prevention, more than
100 million American adults have total cholesterol levels above the healthy
level of 200 milligrams per deciliter.
An equal number of people have diabetes or are at higher risk for the
disease.
To
market and sell CaPre, Acasti
management intends to rely on an in-house team of marketing and sales personnel
supplemented by outside consultants. The
strategy is to initially target the cardiologist population, which according to
the American College of Cardiology totals around 23,000 in the U.S. Eventually the marketing and sales program
could be extended to primary care physicians.
Revenue
and Profit Potential
Acasti
Pharma management has not yet provided guidance on pricing for CaPre.
It is not likely the company will release pricing strategies until
regulatory approval in the U.S. market is imminent. Since the NDA is planned for submission in mid-2020,
FDA action is not expected until mid-2021.
Investors
can consider market opportunity to gauge the potential for CaPre. Management cites IMS
NSP Audit data that pegged the severe HTG treatment market at $750 million in
2015. We also note that industry trade
firm GOED reported that in 2015, consumers spent $31 billion worldwide on
products with added EPA and DHA, providing a broad measure of the interest in
omega-3 oils.
Profits
may ultimately be impacted by Acasti’s plan to use a contract manufacturer to
produce CaPre. A qualified manufacturer is already using
Acasti’s proprietary processing and encapsulation techniques that enhance the
quality and effectiveness of its krill-sourced omega-3 fatty acids.
Alternatively,
investors can get perspective on the potential economics for CaPre from products already on the
market. As a smaller company Amarin
provides the most transparency in sales and profits margins. Amarin reported a total of $229 million in
sales in the year 2018, most of which was attributed to Vascepa. Gross margin on product sales was 77% in
2018, revealing the strong profit potential in omega-3 fish oil therapies. According to Symphony Health Analytics, Amarin’s
Vascepa omega-3 therapeutic sells for approximately $300 for a one month
supply.
Financial
Strength
Clinical
trials and marketing campaigns require large budgets. Since CaPre
will be Acasti’s first commercial product and has not yet received regulatory
approval, the company is not yet generating sales or cash flows, an ample cash
kitty is needed. The company used CN$10
million (US$7.4 million) in cash resources during the quarter ending December
2018, the most recently reported period of financial results.
During 2018,
Acasti tapped both U.S. and Canadian capital markets in three separate deals,
raising approximately CN$58.4 million (US$43.3 million) in net proceeds through
the issuance of common stock. At the end
of December 2018, the company had CN$28.9 million (US$21.4 million) in cash on
its balance sheet and another CN$16.7 million (US$12.4 million) in marketable
securities.
Management
has suggested that current capital resources are adequate to complete the TRILOGY clinical trial, but additional
funds will be needed to fund a marketing and sales effort for CaPre.
Funding will also be needed for additional clinical trials if the
company decides to expand CaPre label
claims to HTG patients with moderate triglyceride levels or for blood glucose
applications. The imperative to raise
additional capital presents both a risk of dilution for shareholders as well as
an opportunity to take a stake in a company with a promising future.
Acasti
has access to an additional US$30.0 million in capital through an ‘at-the-market’
stock sales agreement with a major investment banking firm. Nonetheless, management balks at using it
before results from the TRILOGY trial
are available to support better valuation metrics. Instead, the team is courting strategic
partners for licensing and commercialization rights. Such deals could involve advance payments or
equity investments on more favorable terms.
It is most likely any license or rights agreements would not be formed until
2020 after the TRILOGY trial is
completed.
Crustacean
Catalyst
Revenue
from sales of CaPre is not expected
until second half 2021. This
value-creating development for shareholders is dependent upon Acasti filing an
NDA for CaPre in mid-2020 and
receiving a response from the U.S. FDA within the usual one-year time
frame. The news of approval alone could
propel Acasti shares higher, even if the company has still not disclosed
pricing plans for CaPre or provided guidance
on market share targets.
Krill
is a tiny crustacean, but it could help deliver a whale of a success for Acasti
Pharma shareholders.
Neither the author of the Small Cap Strategist
web log, Crystal Equity Research nor its affiliates have a beneficial interest
in the companies mentioned herein. Companies
mentioned in the Prime Series may have relationships with sponsors of the Small
Cap Strategies web log.
|
SELECTED
PEER COMPANIES
|
||||||
|
Company
|
SYM
|
Price
|
Mkt Cap
|
Sales
|
EPS
|
PE
|
|
Amarin
Corporation
|
AMRN
|
$17.60
|
$5.8B
|
$258.6M
|
($0.38)
|
Neg
|
|
AstraZeneca,
Plc.
|
AZN
|
$38.61
|
$102.3B
|
$22.4B
|
$0.95
|
40.64
|
|
Eli Lilly and
Company
|
LLY
|
$117.98
|
$108.6B
|
$24.7B
|
$6.16
|
19.17
|
|
Esperion
Therapeutics
|
ESPR
|
$41.05
|
$1.4B
|
$145.4M
|
($2.55)
|
Neg
|
|
GlaxoSmithKline
Plc.
|
GSK
|
$40.20
|
$101.7B
|
$30.8B
|
$0.99
|
40.52
|
|
Merck &
Co., Inc.
|
MRK
|
$80.98
|
$208.5B
|
$43.1B
|
$3.17
|
25.57
|
|
Pfizer, Inc.
|
PFE
|
$41.99
|
$233.1B
|
$53.9B
|
$1.95
|
21.57
|
|
Acasti Pharma, Inc.
|
ACST
|
$0.90
|
$70.7M
|
na
|
($1.22)
|
Neg
|
|
*All figures in
USD; Market cap and sales in billions or millions as indicated
|
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