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Edited Transcript of APO.V earnings conference call or presentation 14-Aug-19 5:00pm GMT

Q1 2020 Acasti Pharma Inc Earnings Call

LAVAL Aug 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Acasti Pharma Inc earnings conference call or presentation Wednesday, August 14, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brian James Groch

Acasti Pharma Inc. - Chief Commercial Officer

* Janelle D' Alvise

Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director

* Jean-François Boily

Acasti Pharma Inc. - VP of Finance

* Pierre Lemieux

Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer

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Conference Call Participants

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* Christopher K. Potter

Northern Border Advisors - President

* George B. Zavoico

B. Riley FBR, Inc., Research Division - Analyst

* Leland James Gershell

Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst

* Nathan S. Weinstein

Aegis Capital Corporation, Research Division - Analyst

* David K. Waldman

Crescendo Communications, LLC - President & CEO

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and thank you all for joining us for this Acasti Pharma First Quarter 2020 Earnings Conference Call. (Operator Instructions) Also a reminder, today's webinar is being recorded. (Operator Instructions) And now to get us started with opening remarks and introductions, I am pleased to turn the floor to David Waldman, Investor Relations for Acasti Pharma. Welcome, David.

(technical difficulty)

(Operator Instructions) Ladies and gentlemen, I do apologize for the delay and I believe we may have lost connection with our primary speaker site. Please standby one the line one moment while we attempt to reconnect.

And ladies and gentlemen, this is your operator, [Jim]. Please standby on the line while we attempt to reconnect.

Ladies and gentleman, thank you all for your patience. David, please go ahead. Your audience is listening.

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David K. Waldman, Crescendo Communications, LLC - President & CEO [2]

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Thank you. Good afternoon, everyone, and welcome to Acasti Pharma's first quarter fiscal 2020 conference call. On the call with us this afternoon are Jan D' Alvise, President and CEO; Pierre Lemieux, Chief Operating Officer, Chief Scientific Officer and co-founder; Brian Groch, Chief Commercial Officer; and Jean-François Boily, Vice President of Finance.

If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020.

I'd also like to remind everyone that statements on this conference call that are not statements of historical or current fact constitute forward-looking information within the meaning of the Canadian securities laws and forward-looking statements within the meaning of U.S. federal security laws. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of Acasti to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.

In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms believes, belief, excepts, intends, anticipates, potential, should, may, will, plans, continue or other similar expressions to be uncertain and forward-looking. Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this conference call.

Forward-looking statements in this conference call include but are not limited to information or statements about Acasti's strategy, future operations, prospects and the plans of management. Acasti's ability conduct all required clinical and nonclinical trials for CaPre, including the timing and results of those trials, the timing and the outcome of licensing negotiations, CaPre’s potential to become the best-in-class cardiovascular drug for treating hypertriglyceridemia, CaPre’s potential to meet or exceed the target primary endpoint, Acasti's ability to commercially launch CaPre and Acasti's ability to fund its continued operations. The forward-looking statements contained in this conference call are expressly qualified in their entirety by this cautionary statement; the Cautionary Note Regarding Forward-Looking Information section contained in Acasti's latest annual report on Form 20-F; and most recent management's discussion and analysis, which are available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov and on the Investor Relations section of Acasti's website at www.acastipharma.com.

All forward-looking statements in this conference call are made as of the date of this conference call. Acasti does not undertake to update any such forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained herein are also subject to general -- subject generally to assumptions and risks and uncertainties that are described from time to time in Acasti's public securities filings with the Securities and Exchange Commission and the Canadian Securities Commission, including Acasti's latest annual report on Form 20-F and most recent MD&A.

I'd now like to turn the call over to Jan D' Alvise. Please go ahead, Jan.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [3]

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Thank you, David, and I want to welcome everyone on the call today. Let me start by saying, I'm pleased to report that our TRILOGY Phase III trials continue to progress and both trials remain on schedule and within budget. Importantly and as previously reported, both of our TRILOGY studies have achieved 100% randomization, and now 68% of the patients have completed their 6-month plan on either CaPre or placebo. The fact that both studies have now reached full randomization means that the last patient, last visit in the TRILOGY 1 study is on track to take place in November, and the last patient, last visit in the TRILOGY 2 trial is on track to take place in December. It's then anticipated to take several weeks for final data cleanup prior to moving on to database lock. Once the database is locked, we expect to report top line results for TRILOGY 1 in December 2019, and the top line for TRILOGY 2 in January 2020.

I'm going to talk more about these trials and how we plan to report our top line results in just a moment. But first, I'd like to remind everyone how CaPre is uniquely different from other therapeutic omega-3s. As we discussed on previous calls, an important differentiator of our formulation is the phospholipid component contained in CaPre, which is uniquely sourced from krill. In fact, about 2/3s of our composition is made up of purified and concentrated phospholipids, while the remaining 1/3 is a combination of highly purified EPA and DHA, either delivered as free fatty acids or esterified to phospholipids and also sourced from krill.

The phospholipids not only allow for rapid absorption of the omega-3s, but they also deliver some of the potentially differentiating clinical benefits that we saw in Phase II such as the lowering of LDL and hemoglobin A1c. Unlike the prescription ethyl ester omega-3 such as VASCEPA and LOVAZA, CaPre does not require a fatty meal to facilitate absorption. This was well demonstrated in our earlier PK Bridging study among subjects in the fasting state, where CaPre showed significantly better bioavailability and absorption than LOVAZA as measured by blood levels of EPA and DHA. This data was recently published in the Journal of Clinical Therapeutics, which we believe further illustrates the superior absorption of CaPre compared to the other ethyl ester omega-3 drugs currently on the market, especially for patients with elevated triglycerides who really should remain on a low-fat diet.

Now I want to emphasize, in all of our studies today, CaPre has no negative side effects or safety concerns. And I'm pleased to report that the dropout rates continue to be lower than expected in both of our TRILOGY trials. We believe the low dropout rates could translate into potentially better patient compliance.

In our market research, prescribing physicians have said that the current fish oil prescription omega-3s can be hard to swallow as they tend to stick in the throat and have a nasty strong fishy taste. CaPre is not a fish oil and it's packaged in a hard-gel capsule, which not only may be easier to swallow but it may be more tolerable as well.

Now let me explain how we're planning to report our data from our 2 Phase III TRILOGY studies. Top line results will include a readout of the primary endpoint, which is intended to show CaPre’s overall impact on lowering triglycerides after 12 weeks compared to placebo. And as a reminder, the TRILOGY studies are designed to provide at least 90% statistical power to detect a difference of at least a 20% decrease from baseline in triglycerides between CaPre and placebo. This is the key target endpoint that we need to achieve in order to proceed with the submission of our NDA to the FDA.

The placebo that we're using in the TRILOGY trials is a simple cornstarch, which is inert and consequently is expected to have a neutral effect on key biomarkers of patients in the placebo group. We currently don't expect top line results to include any secondary or exploratory endpoints. These results are expected to follow after the release of the top line results of TRILOGY 2, which is anticipated in late January 2020.

According to the statistical analysis plan which has now been submitted to the FDA, the primary endpoint must first be positive, having achieved statistical significance prior to proceeding to analyze the most important secondary and exploratory endpoints. We currently expect that these additional key endpoints will then be analyzed in the following order: first, we'll analyze the -- and report out the additional important triglycerides secondary endpoints, which will include triglyceride reduction at week 26, so this is measured at the end of the study and is intended to show CaPre’s persistence of effect. We'll also be including triglyceride reduction in various subgroups to show consistency of effect, such as patients stratified with baseline qualifying triglyceride levels of between 500 and 750 versus those who had baseline levels greater than 750. And also a comparison of triglyceride reduction in patients using and not using statins at baseline. Our Phase II data and many other previous omega-3 studies have shown that statins can have a positive and synergistic effect with omega-3s. And when taken together, they tend to increase the amount of triglyceride lowering in these patients.

Secondly, we'll want to report out results on non-HDL-cholesterol; then followed by VLDL and then HDL; and then finally, LDL and hemoglobin A1c. It's important to note that the TRILOGY protocol requires our physician investigators to determine if patients who presented at screening with high LDL and/or high hemoglobin A1c levels be put on standard therapies such as statins or short-acting diabetes meds. If so, those patients had to show that their LDL and hemoglobin A1c levels had stabilized prior to being randomized into the TRILOGY study. Therefore, we hope to show any incremental benefited CaPre above and beyond the standard of care. The results with both LDL and hemoglobin A1c will require subgroup analyses, which will be done by combining CaPre results from diabetic patients and separately CaPre results from patients with high LDL from both studies to reach adequate statistical power to detect the difference from the respective placebo groups, if one exists.

Now Acasti expects that the remaining numerous secondary and exploratory endpoints, along with various additional subgroup analyses, should be completed before the end of March 2020. In addition to our preliminary top line data, we'll seek to present the full data set, which will include results for all of our key secondary and exploratory endpoints of interest such as non-HDL, VLDL, HDL, LDL-cholesterol and hemoglobin A1c and others. And we plan to present these at key scientific meetings in the first half of 2020, potentially including the American College of Cardiology in March, the National Lipid Association in May and the American Diabetes Association in June. We plan to communicate more information in the months ahead on how and when all of the TRILOGY results will be reported once the statistical analysis plan is finalized.

Now given the positive results we saw from our Phase II trials in a total of 675 patients, we are eagerly awaiting the completion of the results from our 2 TRILOGY clinical studies. Our Phase II trials show not only a significant reduction of triglycerides, but also indicated that CaPre may have a positive effect on other major lipid markers such as VLDL, LDL, HDL and hemoglobin A1c in patients with diabetes. And again, this is what we refer to as our trifecta effect.

And as previously disclosed, we also believe that our Phase III trials are well designed due to the fact that the patients enrolled have much higher baseline triglycerides levels. All of course are above 500 milligrams per deciliter as compared to our Phase II trials, where most had mild to moderately elevated triglyceride levels significantly below 500. And based on the large body of clinical data and patients with high triglycerides, the higher the starting baseline level, typically the greater the magnitude of triglyceride reduction is seen when given the therapeutic omega-3.

The patients randomized to CaPre and TRILOGY will receive 4 grams per day and remain on drug for 6 months, while our Phase II studies included patients who received a range of doses from 1 gram to 4 grams per day for only 8 to 12 weeks. This is an -- important, given the favorable dose response we saw in our Phase II studies.

Now assuming TRILOGY replicates our Phase II data, we believe CaPre has the potential to address an important market need for an effective, safe and well-absorbing omega-3 therapeutic that could have a positive impact on major blood lipids and hemoglobin A1c. And therefore, potentially improve the lives of millions of patients with cardiometabolic disease. Additionally, based on recent third-party outcome data, we believe the potential exists to expand CaPre’s initial indication to the roughly 70 million to 80 million patients in the United States with elevated triglyceride levels above 130, although this will likely require at least one additional study in the future.

We also continue to expand our IP portfolio by adding additional allowed patents to our 20-plus patents already issued in major countries around the world. As previously noted on our year-end conference call in May, we received notices of allowance for both composition of matter and method of used patents by the Mexican, Chilean and Israeli patent offices. This follows broad composition of matter and method of use patents that were awarded by the European patent office at the beginning of this year, which are valid now until 2030 and cover the major countries in Western Europe. More recently in June, we announced a notice of allowance for a second patent in the People's Republic of China. This is the third largest pharmaceutical market in the world. China represents an important market for Acasti, not only due to its size but also the high prevalence of hypertriglyceridemia and the need for an effective, safe and efficiently absorbed drug for the treatment of cardiometabolic-related diseases.

There are currently no approved omega-3 drugs available in China and therefore it would represent a greenfield market opportunity for a high-quality, well-studied and differentiated product like CaPre. This new patent expands our existing clients and is valid at least until 2030.

The timing of this patent is also ideal as we near completion of the TRILOGY Phase III clinical trials for CaPre, begin preparing for commercialization and advancement of our strategic discussions. On a separate note, we have received a number of questions over the last week or so from investors regarding Amarin's recent announcement that they received notification by the FDA of the agency's intention to hold an advisory committee, or AdCom, meeting for a supplemental NDA application that seeks a label expansion for VASCEPA based on the positive outcome data from REDUCE-IT. While we're really not in a position to comment on the FDA's decision, we are not surprised that the FDA would want an AdCom since this will potentially be the first drug in this class to receive an expanded label. It really makes sense that the FDA would want KOL input into the review and discussion of the data and the prospective label for VASCEPA.

Having said that, we don't see this impacting our TRILOGY program and we remain confident in the overall important role of the therapeutic omega-3s can play in treating and preventing heart disease. Again, if we can replicate our Phase II data in TRILOGY, we continue to believe that CaPre has the potential to become the best-in-class omega-3 for treating patients with severe hypertriglyceridemia.

Now before I close my prepared remarks, I'd like to take a moment to address our balance sheet. As of June 30, 2019, we had $25.4 million of cash, cash equivalents and marketable securities. As we near completion of our Phase III clinical activities, our monthly cash burn is declining. And we believe we are currently sufficiently capitalized beyond the completion of the Phase III trials. This includes funding that will support continued work to prepare our NDA for CaPre, which we plan to submit to the FDA in mid-2020, assuming our Phase III study successfully achieve their primary endpoint.

We also believe our current cash position is sufficient to support the planned expansion of business development and U.S. commercial launch activities well into next year. More recently, we received approximately $8.1 million in additional proceeds from the exercise of warrants since July 1, which further extends our current runway through at least June of 2020.

We currently have no plans to raise additional capital in the public market in advance of our Phase III results. We are, however, considering a variety of strategic and non-dilutive funding options which could further extend our cash runway. We will provide further updates on this front at an appropriate time.

Finally, we continue to progress discussions with a number of major pharma companies regarding potential commercialization partnerships in key countries around the world. Assuming positive results, management expects those discussions to gain momentum early next year, after our Phase III results are announced.

We believe that having the data in hand from our Phase III trials puts us in a much stronger position to negotiate any potential partnership deals. That said, our strategy in the U.S. is not dependent on partnerships. We're planning our U.S. launch strategy with the assumption that we will bring CaPre to market through a very focused and targeted go-to-market strategy. We will only enter into commercial agreements with the right strategic partners and only if we believe those deals are in the best long-term interest of our shareholders.

So on that note, I'll now turn the call over to Jean-François, who will discuss the Q1 financials in more detail.

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Jean-François Boily, Acasti Pharma Inc. - VP of Finance [4]

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Thank you, Jan, and good afternoon, everyone. So turning to our results for the quarter.

R&D expenses before depreciation, amortization and stock-based compensation expense were $7.4 million for the quarter ended June 30, 2019. That was down from $8.1 million in the quarter ended June 30 of 2018. The $0.7 million decrease was primarily attributable to a $0.6 million decrease in clinical research contracts and $200,000 decrease in legal fees for contracting in due diligence. That was partially offset by an increase in salary and benefit for $100,000 due to higher headcount.

The lower research contract expenses is primarily attributed to the advancement of the Phase III clinical trial program, as it's getting closer to completion.

Our general and administrative expenses before stock-based compensation expense were $1.3 million for the quarter ended June 30, 2019 compared to $0.9 million for the quarter ended June 30, 2018. The net increase was mainly due to a $200,000 increase insuring expenses, as well as increased legal fees and salaries and benefits due to higher headcount.

Our loss from operating activities for the first quarter of June 30, 2019 was $10.6 million compared to a loss from operating activities of $9.9 million for the quarter ended June 30, 2018. The approximately $0.7 million increase was related to an increased level of spending to support our U.S. market development and commercial prelaunch activity, and an increase in insurance expenses offset by the planned deceleration of our clinical Phase III program.

Our net loss for the first quarter ended June 30, 2019 was $11.8 million or $0.15 per share compared to a net loss of $7.4 million or $0.23 per share for the quarter ended June 30, 2018. The higher net loss of $4.3 million was primarily due to a $3.6 million increase in financial loss, due mostly to the $4.5 million change in fair value of the warrant derivative liability, partially offset by a decrease in financing fees of $0.7 million and an increase in interest income of $200,000. Also contributing to the net loss was the formation of our commercial leadership team during the second quarter of fiscal year 2019 to support expanded business and market development activities.

Additional administrative fees incurred in connection with increased insurance costs and accounting and legal fees and the implementation of a new ERP system.

Cash and cash equivalents of $20.9 million and marketable security of $4.5 million totaled $25.4 million as of June 30, 2019, which decreased by $9 million compared to the quarter ended March 31, 2019, which was our year-end. The decrease was primarily due to the company's cash used in operating activities for $9.2 million. Based on management's current expectation and projection, and as stated above, Acasti believes that our existing cash will fully fund the company's operations beyond the completion of our Phase III trials through at least June of 2020. And in addition, as Jan mentioned and as we have reported on previous calls, we now receive approximately $8.1 million in additional proceed from recent exercise of warrants since July 1, 2019, which further extends our runway again through at least June of 2020.

Operator, we'll now open the call to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll go first to the line of Leland Gershell with Oppenheimer & Co.

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Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [2]

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First, couple of questions on the nature of the enrollment into the current TRILOGY trials. You'd mentioned that the dropout rate was lower than you had anticipated. Are you able to comment on what that is?

And secondly, in terms of the patient makeup, the prior Phase IIs had a certain number of patients who were on statins and also a certain number who were diabetic. If you could relate the enrollment of the TRILOGY studies to those in terms of those proportions, that would be very helpful. And I have a follow-up.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [3]

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Okay, Leland, thanks. I'm going to turn the question over to Pierre, our expert on the clinical trial.

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [4]

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Yes. Thank you for the question, Leland. So in terms of the dropout rates, so what we had planned in our product (inaudible) at least a 15%, and it's based on the historic data not only from us but also from competitors.

And we're below 15%. So we're roughly around 9%, 10%. So -- which is I think a good sign of good compliance so far.

Now in terms of the -- if I try -- if I look at the -- compare the Phase III trials and the percentage of patients being on statin. So in that population, we're studying in severe hypertriglyceridemia. So I would say roughly maybe 30% of these patients will be on the statin. So that's what -- if you look at the literature and if we look at our -- when the patients were actually being screened, this is a percentage of the patients that we're going to have on statins. So that's -- and in terms of diabetic patients, again, at screening, it's -- I would say it's roughly 35% to 40% of the patients we have are -- have an HbA1c above [6.5], which is considered a threshold where patients are declared, if you will, diabetic.

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Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [5]

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Okay. That's very helpful. And then just in terms of other uses for CaPre. I think there had been mention that some preclinical studies were ongoing, looking at expansion indications. Just wanted to know, if you could remind us what those may be that you're looking at and when we might see some initial data from those -- from the studies?

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [6]

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Yes. See, the idea here with our pre-clinical -- or R&D activities, I should say, is to explore further the potential of CaPre. Like we said, we're suspecting and this is what we're hoping to confirm in our Phase III trials that we have some indication that our product has an impact on diabetes, on glucose management. And so for us, it's important to explain that. So we're doing some R&D experiments to really come up with an explanation, some mechanism of action explanation. And at the same time, we know that our product will impact the liver and where the triglycerides are actually being accumulated and generated.

So as you know, there's a lot of interest in NASH and fatty liver in general, NAFLD, and this is something we're exploring. So again, those are pure R&D, I would say, experiments where we are studying not only the impact of our product but also how the product is actually working. So it allows us really to dissect the animals and the mechanism of action of our product. So that's going to be interesting to share with you guys.

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Operator [7]

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And we'll go next to Nathan Weinstein with Aegis Capital.

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Nathan S. Weinstein, Aegis Capital Corporation, Research Division - Analyst [8]

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So just a couple of questions. One at a high level, looking at omega-3 as a potential class effect, can you make any comments or expectations around the strength of trial? And then do you think the class effect awareness is growing in the market?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [9]

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Yes. Brian, do you want to take that?

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Brian James Groch, Acasti Pharma Inc. - Chief Commercial Officer [10]

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Sure. Thanks for the question. Certainly, I think that if strength is positive, that will definitely bode well for the class. Certainly right now, we see the market continuing to grow month over month, and it's moving in the right direction. For us, certainly we're pretty bullish on strength. We think that it's going to be positive. And we believe that it'll continue to expand the market very similar to what you saw in the statin market in the embryonic stages of that market as it developed and other statins entered the market, there was continued growth based on those outcomes trials.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [11]

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Yes. And I just might add, I mean I think there's a bit of confusion still in the marketplace. There have been previous outcome trials done not in a high-risk population, meaning patients with high triglycerides and low HDL, essentially the REDUCE-IT population, these other trials were done in more of a general population and didn't show, as a whole, compelling outcome results. But again, if you looked at subgroup analyses of the -- again, the -- kind of the REDUCE-IT subgroup of patients with -- who started at baseline with high triglycerides and low HDL, you saw a pretty compelling reduction in cardiovascular events. So I think it's going to be very important now to have 2 studies that were well designed in this high-risk population. And we think it's about getting the right drugs at the right dose to the right patients. And again, this is a big population, probably close to 80 million people in the United States. And with the second outcome trial being positive, we're certainly hearing from physicians that the percentage of physicians who will believe that it's now a class effect will increase significantly. So thanks, Nathan. Did you have any follow-up?

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Nathan S. Weinstein, Aegis Capital Corporation, Research Division - Analyst [12]

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Yes. Actually I had another question. Just thinking about the secondary and exploratory endpoints for when it's time to learn about those, for some of those other lipid markers, did their -- would we have some like percentage levels that we'd be looking at that would be favorable? Or do we just kind of want to see directional improvement in those? Or what are we looking for there?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [13]

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Pierre, do you want to...

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [14]

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Yes. Well, in terms of the secondary endpoints and exploratory endpoints, so in terms of LDL, so what we've seen in our Phase II trial was either a neutral or reduction of LDL. So in terms of directional efficacy, so we would expect a 5% to 7% reduction of LDL. On the HDL side, it's more easier to predict because we know that there is a clear correlation between phospholipid treatment and HDL increase. So I would expect at least a 5% to 10% increase on the good cholesterol, which is the HDL.

Now on the HbA1c, it's a bit more difficult, so we'll need to wait for the 2 trials to be pulled in order to increase the power of those population because it's not per se a diabetic trial. So we're going to need to pull those 2 populations together. The patients are above [6.5]. And then, again, it's difficult to predict what's we're going to be observing. But a small improvement on HbA1c is always a big improvement for diabetic patients. So if it's only 1% improvement on -- in absolute numbers on HbA1c, that's going to be....

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [15]

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Actually, that would be huge.

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [16]

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That would be a great -- yes. That would be a home run, I would say.

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Operator [17]

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(Operator Instructions) We'll move next to the line of George Zavoico with B. Riley FBR.

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [18]

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Do you see yourselves doing an efficacy trial with CaPre going forward? I know

(technical difficulty)

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [19]

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Hello? Operator...

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [20]

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I'm sorry. Did you drop off? I am sorry.

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Operator [21]

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(inaudible) I do see that he's still connected. Mr. Zavoico, are you there ?

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [22]

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Yes. I am still here. Sorry about that. I must have dropped off. So the question was about, do you foresee doing an efficacy trial in CaPre after TRILOGY? Because the 6 months in TRILOGY isn't really enough to see a big difference.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [23]

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So I assume you -- by efficacy trial, you mean a cardiovascular outcome trial? Is that the question?

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [24]

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That's right. Yes.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [25]

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Okay. Yes. I think we're waiting to see the results of strength. If strength is positive, again, based on our market research, we know that a overwhelming percentage of physicians, probably 70% to 80% of physicians have indicated that they will now believe that these omega-3s have a class effect. So this outcome benefit is due to a class effect, in which case we may not have to do an outcome trial. So if strength is not positive, of course it is probably going to be attributed to the LDL effect. And in that case, we don't have a -- we have a very positive LDL effect. But I think the question will still be out, it will raise this bigger question about omega-3s in general and can we really say this is a class effect. So in that case, we may have to do an outcome trial. But we don't anticipate doing that ourselves. In that case, we would probably do one with a strategic partner.

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [26]

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That would be a much larger trial. But having said that, if -- with superior biomarker results, presumably as you've predicted, I would imagine you might want to see if you have superior efficacy results on cardiovascular events compared to some of the other omega-3s as well.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [27]

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We would love to do that. Obviously. Because those improvements in the broad cardiometabolic profile should translate into improved outcomes. But it's a big, expensive trial. And again, not one that we would undertake in the short term. But it's going to be interesting to see how this market expands. And if it does grow the way we expect and we get the right kind of strategic partners, I suspect for those reasons, they're going to want to help us fund a large cardiovascular outcome trial. But I do think we're going to be able to go to market and -- very much like Lipitor back in the statin days, they were in the market and got substantial market share. They got up to 40-plus percent market share, $8 billion in revenue without an outcome trial. Because at that point, physicians recognized that this was a class effect with the statins. So it's really -- the key question is around if we can replicate the outcome results with strength, I think it's -- physicians are very quickly going to view this is as a class effect.

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [28]

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Okay. And next question I have is regarding your commercial plans. Because presumably you'll be -- you'll have all the data and be working on your NDA submission and perhaps even -- well, you will be working on commercialization plans with positive results by this time next year. So my question is, are you satisfied with everything you've got in place already for CMC? Your manufacturing is all in place and you're ready to do or you've already done the consistency lots? Where do you stand on the CMC portion of the NDA?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [29]

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Yes. Absolutely. We're in very good shape there. We're fully ramped up at commercial scale. We can -- we're currently producing 20 to 30 tons a year. We have a plan before launch to double that capacity. So we'll probably get to -- actually 60 to 80 tons, which will be sufficient. We're going to be building our validation lots here shortly. And we expect we'll get our final inspection -- FDA inspection next year. But all of the CMC components of our NDA are completed. And we're in good shape there. Really, we have I would say at least 50% of our NDA package completed at this point. So we're -- we continue to be very confident that we can file our NDA on schedule by mid-next year. So really all -- we want to have everything done and be ready to just drop in the Phase III results once we get them and then we should be ready to file. So good question. Thanks, George.

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [30]

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That's terrific. Could you just also -- it's all krill. How many krill oil suppliers do you have? Do -- do you have one? If it's one, is it reliable? If it's 2, do you feel like you need to have 2?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [31]

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Yes. That's a really good question. There's actually many. And I'll let Pierre field that one because he's the guy that's dealing with all these suppliers.

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [32]

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Yes, a very good question. So -- I mean currently there's probably a dozen of those suppliers (inaudible) in the world. And -- but we're not bound to any one in particular. So we have access to Norwegian suppliers, but also some Asian suppliers. And that's good. The krill oil coming from Asia is getting a better quality, but also at a very interesting price. So for us, the strategy is not to be bound only to one but to have multiple suppliers, and this is what we've been developing over the last -- I would say last year, make sure that we're not in jeopardy if one supplier goes down or if something happens. And talking by experience here. So yes, I mean this is -- it's not much of a concern anymore. So having those new suppliers showing up with extremely good quality and with competitive pricing as well, which is good for our cost of good.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [33]

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Yes. And then -- oh, go ahead, George.

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George B. Zavoico, B. Riley FBR, Inc., Research Division - Analyst [34]

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I was going to say just out of curiosity, to produce 230 tons of CaPre, how many tons of krill do you need?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [35]

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About double that. It's about a 50% ratio, yes.

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Operator [36]

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(Operator Instructions) We'll go next to Chris Potter with Northern Border.

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Christopher K. Potter, Northern Border Advisors - President [37]

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I know there's a big difference between CaPre and just regular krill oil supplements, but I'm not sure I can effectively or accurately articulate the differences. Can you just talk about that in kind of simplistic terms?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [38]

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Yes, sure. Thanks, Chris, for the question. There is actually a big difference. The dietary supplements are made of raw krill oil, which is essentially our starting material. So we buy that raw krill oil by the 55-gallon drum size. And then we put it through a very proprietary process of sequential extraction, purification, separating out the omega-3s and the phospholipids, getting it to a very, very high state of purity and potency. So it's really concentrated. And then we recombine the omega-3s with the phospholipids into our unique and proprietary formula for CaPre. So the stuff that you buy over-the-counter is actually full of a lot of contaminants. One of the major contaminants is triglycerides. So you really want to remove that and there's other stuff in there that's not ideal. And so we end up with a much more concentrated product with not only a much higher level of omega-3s but very importantly a much higher level of phospholipids.

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Operator [39]

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And we'll take our next question from the line of [Joseph Belcher].

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Unidentified Analyst, [40]

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Can you hear me?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [41]

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We can.

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Unidentified Analyst, [42]

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I just had a quick question about your krill supply, actually. Now I know specifically that the krill oil you guys are dealing with, is there any specific species or limitations in regard to that? Or is it more of a general krill oil, a mixture? As in your supplier -- I'm sorry, essentially what I'm asking is your suppliers, is -- are you looking at a specific species for your suppliers? Or is it any krill supplier at all?

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [43]

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Yes. It's actually a really good question, I am going to let Pierre...

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Pierre Lemieux, Acasti Pharma Inc. - Co-Founder and COO & Chief Scientific Officer [44]

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Yes. It's a good question. I mean all the krill that is being captured right now come from Antarctica. And the species there is Euphausia superba. And that's the species that we're using. It's of very high quality and it's captured in pristine water, as you can imagine. So for us, it's very important to, first of all, to respect the quota as well that are actually being fished by the suppliers. But also for us to be able to tap into the best quality krill possible, it's the -- it's key. And this is something that we're committed to. And there's a large amount of krill there. So there's no shortening -- shortage, I should say, of krill supply in those waters. You can have different species. Euphausia pacifica, for instance, that is in the Pacific. Or even in the St. Lawrence River. But this is not what where we're sourcing the krill that we are buying. So it's really limited to Antarctica, but there's no shortage of krill in those waters and everything is being controlled by organizations that monitoring -- that are monitoring the supplies of natural krill.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [45]

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Yes. And maybe just to add to that. I mean as this market rapidly expands, supply is -- and sustainability is a major issue. And again, we are very fortunate in using a source of our omega-3s and phospholipids that's very available and is managed in a highly sustainable manner versus the fish oil, which is much higher species, larger fish and essentially are 100% farmed today. So...

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Unidentified Analyst, [46]

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Yes. That was one of my concerns. A lot of the -- one of the problems with fish oil currently is you're not -- you're never really too sure what fish oil you're dealing with. They tend to mix around. So (inaudible) about you guys' supply with that.

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Operator [47]

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And at this time, there are no further questions from the phone audience. I'll turn it back to our leadership team for any additional or closing remarks.

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Janelle D' Alvise, Acasti Pharma Inc. - President, CEO, Corporate Secretary & Director [48]

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Okay. Thank you. Appreciate all the questions. And just to wrap up, our TRILOGY programs remains on schedule. We're eagerly awaiting our top line data, which we anticipate now is only 4 short months away. We continue progressing to plan on all operational fronts as we advance preparations for our NDA submission next year and commercial launch in the U.S. in 2021, assuming our Phase III studies are successful and achieve their primary endpoint. Additionally, our cash runway has been extended due to recent warrant exercises, which have also helped to improve our balance sheet. And as a result, we continue to be confident in the long-term outlook for Acasti.

So again, thank you so much for joining us today, and we look forward to providing further updates in the near future.

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Operator [49]

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Thank you, Jan, and thank you to our phone audience for joining us today. This does conclude today's meeting, and we thank you all for joining.

You may now disconnect, and we hope that you enjoy the rest of your day.