Wednesday, 16 October 2013

Amarin Panel Decision IS Negative For Amarin, But For Acasti, Nothing Has Changed

Acasti Pharma 
TSX V: APO NASDAQ: ACST
Shares Outstanding: 79.4 million
Fully Diluted: 91.4 million
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Today, with 2 yes’ to 9 no’s Amarin’s FDA Advisory Panel overwhelmingly voted to not recommend an expanded label for Vascepa.  Amarin was seeking advisory approval for expanded use of Vascepa to treat patients with mixed dyslipidemia, or “high tryglycerides” (triglycerides in the 200-499 mg/dL range).  A person with mixed dyslipidemia is taking a cholesterol-lowering statin to lower LDL or "bad" cholesterol but still has moderately elevated levels of triglycerides, a fatty substance found in blood. People with mixed dyslipidemia are believed to be at higher risk for cardiovascular disease.

(Note that the ultimate approval decision rests with FDA and is expected to be announced on Dec. 20.)

As the investment community covering Amarin was expecting the “high triglycerides” indication to be approved for Amarin, this is a clear negative for Amarin.  However, for Acasti, it is a different situation.

Hugh Cleland, Portfolio Manager at Roadmap Capital, and significant Acasti shareholder, released the following on August 30th in anticipation of the FDA’s decision:

“GSK’s Lovaza was able to attain sales of $1.2billion/year while only having approval for the VERY HIGH indication. In fact, most of the prescriptions written for Lovaza are “off label” i.e., most of the Lovaza prescriptions are written “off label” for people with HIGH triglycerides, as opposed to people with VERY HIGH triglycerides. (The point being that an Omega-3 drug does NOT need to have HIGH triglycerides approved as an indication to have lots of HIGH triglycerides patients use it, and end up with sales over $1billion.)

As I have thought about Acasti’s future in the past (and now), I actually never assumed that HIGH triglycerides would be approved as an indication, because I have always known that it was not a slam-dunk that the FDA would approve HIGH triglycerides as an indication. I have always believed that being the “best in class” Omega-3 drug would result in having sales of over $1billion, even based upon CaPre “only” having FDA approval for the VERY HIGH triglycerides indication—because “off label” prescriptions would get us to that level. Now that this Phase II data (Open Label) has shown that we (with a very high probability) have the best Omega-3 drug in the HIGH triglycerides area, we know that Acasti—with the right pharma marketing partner—should be able to sell over $1billion of CaPre, even if the VERY HIGH triglycerides label is all that we end up having.

Simply put: if the FDA decides that the only indication that any company can get is for VERY HIGH triglycerides, then it is a slam-dunk that the company with the best HIGH triglycerides data will—with the right pharma partner—get the most sales. The great thing is that Acasti has the best data in the HIGH triglycerides population.

It may take a while for investors to grapple with the nuances around these issues—therein lies the current opportunity for investors willing to step in now. Nonetheless, we have now seen clinical data which reaffirms my belief that CaPre will be, at least, the “best-in-class” Omega-3 drug, and may even be something truly special. Remembering that GSK acquired Reliant (to acquire Lovaza) for $1.65 billion in 2008, and then ramped sales of Lovaza to over $1billion within 2 years, I expect that pivotal Phase III results which once and for all confer “best-in class” Omega-3 drug status upon CaPre should result in a takeout of Acasti for somewhere over $1billion (over $10/share), and perhaps somewhere in the multi-billion area. It is this logic and these facts which underpin my expectation that Acasti will be trading somewhere in the $10-$30 range within 1-2 years.”

Click here to view the Reuters report on the results -