We are bullish on Acasti Pharma, a small specialty pharma company that is developing IV nimodipine for treatment of acute subarachnoid hemorrhages. Some readers may remember our prior write-up on Fennec Pharmaceutials (FENC), which was successful and had a similar theme. For some quick background, the current form of Acasti was created in 2021 through the acquisition of private biotech Grace Therapeutics, which occurred after Acasti had failed a Phase 3 trial in severe hypertriglyceridemia. Acasti used its remaining cash to acquire Grace and to develop its three therapeutic candidates: GTX-104, GTX-102, and GTX-101. The lead asset, GTX-104, is an intravenous infusion of water insoluble nimodipine intended to treat acute subarachnoid hemorrhage (aSAH). This asset is the primary value driver for the company and the source of our interest.
In September 2023, Acasti Pharma raised a PIPE that was intended to enable the company to finish their Phase 3 trial for GTX-104 and submit a New Drug Application to the FDA for approval. In October of 2023, the company enrolled the first patient in this study, and they have continued to execute on pace for an NDA submission (if successful) in the first half of 2025. On June 27, Acasti announced that they had achieved 50% of their target enrollment into the study, maintaining their guidance for topline data timing.
Acute Subarachnoid Hemorrhage and GTX-1041
There are ~50k cases of aSAH annually in the US. The condition most commonly arises when a brain aneurysm ruptures, which results in bleeding in the brain. 10-15% of patients die before reaching the hospital, and death or dependence (as measured by the Glasgow Outcome Scale) occurs in ~70% of patients. The current standard of care recommended by the national guidelines for aSAH is oral nimodipine, but there are several key drawbacks to this medication. Most patients are unconscious, which makes it difficult for them to swallow an oral pill. Thus, physicians typically need to use a nasogastric tube which requires dissolving the medication and causes variability in dosing from patient to patient. Dosing variability is further exacerbated by uncontrolled food effect. Patients must also receive two capsules every four hours, creating undue strain on healthcare providers in an intensive care setting. Our due diligence has indicated that these drawbacks are substantial for healthcare providers, who would strongly push for an IV option.
As an IV formulation of nimodipine, GTX-104 is easier to administer, eliminates food effect, is administered less frequently, allows for more predictable dosing, and can reduce medication errors and nursing burden. It also has 100% bioavailability vs just 13% for the oral form. We believe that this is a natural fit for providers and would be strongly preferred to oral nimodipine.
Market Sizing and IP2
Current oral nimodipine sales in the US are split between the oral capsule and a liquid oral formulation. According to estimates from Acasti, the capsule usually costs ~$40/day, and the liquid formulation costs between $450-$500/day. Treatment guidelines indicate that patients receive nimodipine for 21 days, but actual usage typically ends up closer to 14 days per aSAH occurrence. If we assume that Acasti could price at a slight premium to the liquid formulation of nimodipine, they could set an average price of $650/day for an average of 14 days per patient ($9,100 total per occurrence). At 50k cases per year, this provides a $455mm annual TAM. Taking a conservative penetration estimate, we get a sizeable market for an $11.6mm enterprise value company with no current competition.
As far as usage patterns go, ~70% of aSAH patients are treated in 370 hospitals in specialty stroke centers. As a result of patient concentration, Acasti projects that they can launch with ~40 sales reps to cover these centers. Additionally, the aSAH incidence in the EU is ~55k patients per year along with ~150k patients annually in China. These markets provide additional potential upside.
Because of the concentrated commercialization approach, we are optimistic about the market opportunity for Acasti. Over the past several years, specialty pharma companies have developed a reputation for commercializing poorly, primarily due to their attempts to penetrate broad markets with diffuse prescriber bases (often times primary care). These types of launches tend to require large, expensive sales forces and frequently compete against lower priced options in mild disease indications, resulting in poor penetration. However, we are more sanguine about the ability for specialty pharma companies to penetrate small markets with concentrated prescribers and severe diseases. These commercialization forces can be smaller, have more touchpoints with prescribers, and more easily penetrate the market.
And finally, on the intellectual property side, GTX-104 has received Orphan Drug Designation from the FDA, providing seven years of marketing exclusivity in the US and up to 10 years in Europe. Acasti also has composition and method-of-use patents that will attempt to preserve patent exclusivity beyond orphan drug exclusivity. Neither we nor the company are aware of any current competitors pursuing the aSAH opportunity.
GTX-104 Development Timeline3
After the in-licensing of three programs from Grace Therapeutics, Acasti began to progress GTX-104 in the clinic. The first step was a pharmacokinetic bridging study to compare the relative bioavailability of GTX-104 to oral nimodipine in 50 healthy subjects. Acasti announced positive interim results from the first 20 patients of this study in December of 2021 and announced positive final results in May of 2022. This study met all endpoints, which showed safety and comparable bioavailability of GTX-104 to oral nimodipine. Importantly, patients’ blood plasma showed significantly lower variability in concentration levels for GTX-104 when compared to oral nimodipine, key validation of the drug’s value proposition.
With these data in hand, Acasti scheduled a meeting with the FDA to discuss the Phase 3 development plan to support filing for approval under the 505(b)(2) pathway. This meeting occurred in the first quarter of 2023, with the conclusion that Acasti would plan to run a single 18-month safety study for GTX-104 under the 505(b)(2) pathway, referencing Nimotop oral capsules. The study would be 1:1 randomized with an estimated 25-30 sites in the US. The company then submitted the full Phase 3 protocol to the FDA for review.
Concurrent with this update, Acasti also announced that their current CEO would step down and Prashant Kohli would succeed as CEO. Kohli was previously the VP of Commercial Operations at Grace Therapeutics before the acquisition by Acasti and had served as Chief Commercial Officer of Acasti since 2022. Shortly after this change, the company built out additional C-suite positions, hiring a Chief Medical Officer and a VP of Clinical Operations. We viewed these organizational changes as a positive in aligning the company more closely to focus on GTX-104 and the aSAH opportunity.
In July of 2023, the company received feedback from the FDA that solidified their Phase 3 plans. The finalized protocol specified that the trial would plan to enroll 100 patients in 25 hospitals in the US. It would be 1:1 randomized, comparing GTX-104 to oral nimodipine with the primary endpoint of safety as measured by comparative adverse events, including hypotension, between the two groups. The name of the trial is STRIVE-ON, and Acasti dosed the first patient in October of 2023. Recently, the company announced in June that they had reached 50% enrollment in the study.
This brings us to today – as of March 31, 2024, Acasti had $23mm in cash, which they forecasted would last into the second quarter of 2026. The company also announced plans in 2023 to seek strategic alternatives for the other two assets that they originally acquired from Grace Therapeutics, GTX-102 and GTX-101, to streamline the company’s focus and reduce cash burn.
PIPE Financing4
In late 2023, the company’s cash balance did not provide a margin of safety to reach their projected milestones, so the company raised a $7.5mm financing, including $2.5mm of participation by the company’s chairman, that would ensure a strong balance sheet through STRIVE-ON data and NDA filing.
After this financing, the stock rallied and has traded in the $2-$3 range since. Today, at $3.01/share, the company has a fully diluted market cap of $42.3mm (assuming all NDA-milestone warrants are exercised) with a cash balance of $23mm ($30.6mm if all warrants are exercised), resulting in a fully diluted enterprise value of $11.6mm. Compared to its potential market opportunity, we believe that the company is significantly undervalued.
Fair Value Estimate5
Given our estimate of a $455mm TAM, even a conservative penetration estimate (20%) and peak sales multiple (2.5x) results in a projected $228mm enterprise value at the time of commercial launch. Forecasting an additional raise of $20mm to help with commercialization (at an assumed offering price of $4.50/share) along with warrant exercises, we estimate that Acasti would have 18.49mm fully diluted shares outstanding at approval. With an estimated $30mm on the balance sheet, this results in a future per share price of $13.96. Discounted to present at a 14% discount rate for 2.5 years, we get $10.06/share in net present value.
As far as comparable companies go, Fennec Pharmaceuticals (FENC) has a similar specialty pharma approach to Acasti. Their drug for hearing loss is currently on the market with a targeted distribution model and 7 years of orphan drug exclusivity. The peak sales for FENC’s target market are likely similar or even slightly below Acasti’s, and FENC currently trades at a $165mm market cap with $51mm in cash and $30mm in debt.
Additionally, we believe that there is an opportunity for M&A, as Acasti would be an attractive acquisition target for a small spec pharma or generics business that has already developed an ER/hospital salesforce.
Key Risks
As with any biotech investment, execution is critical. We believe that clinical risk is minimal, given the prior bridging study that Acasti conducted. We also believe that clinical trial execution risk is low, given the concentrated specialty centers that care for the majority of patients and Acasti utilizing 25 trial sites to enroll 100 patients. Accordingly, the recent update on reaching 50% enrollment was encouraging. With that said, trial execution will be important given the challenging financing environment for small cap biotech companies.
The commercial launch of GTX-104 is also a key risk, but we think this can be mitigated by the company’s trial plans and outreach. Since the market for aSAH is concentrated and Acasti is running their pivotal trial in many of the country’s top centers, this will give these hospitals early access to the ease of use and convenience of GTX-104. It also gives these hospitals experience with the product from a pharmacoeconomic perspective, which will be important for later formulary adoption.
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