Krill Oil Based Drug Candidate Could Unseat Glaxo's Blockbuster Lovaza

| About: Neptune Technologies (NEPT)

Elevated triglyceride levels contribute independently to increased risk of cardiovascular disease. Furthermore, severe hypertriglyceridemia is associated with an increased risk of several other serious health conditions- each of which present sizeable market opportunities for pharmaceutical companies trying to solve the complicated puzzle.

These elevated triglyceride levels are a common disorder in the United States and are often caused or exacerbated by uncontrolled diabetes mellitus, obesity, and many of the sedentary habits which are more prevalent in industrialized societies than in developing nations.

Dr. Harlan W. Waksal, who helped launch and later re-build ImClone Systems Incorporated into a successful biotech powerhouse (and now a wholly-owned subsidiary of Eli Lilly and Company) sees the same potential at Neptune Biotech's (NEPT) subsidiary, Acasti Pharma Inc.(TSX-V.APO).

In fact, when he first learned about Neptune's work with Neptune Krill Oils, he immediately recognized a substantial opportunity.

"I did get excited about it," explains Dr. Waksal. "I was presented the company by a friend of mine. His portfolio included the parent company of Acasti, called Neptune. In looking at that portfolio is was
very clear that Neptune had a potential product in the area of cardiovascular, that I thought was not only unique, but something that could be a billion dollar type of product."

"Why was that exciting for me? It is rare that somebody comes across a potential drug that has a safety profile, that is already well understood. We're working with something called the Phospholipid Omega 3 coming from Krill- a small crustacean that we fish from Antarctica."

The fact that the Krill Oil product has been sold in health food stores and "has already been in humans as a nutraceutical through Neptune," further convinced Waksal that getting the drug candidate through an FDA regulatory process might prove to be less risky and lengthy.

"Everybody's into Omega 3's," says Waksal. "You can't go into any kind of store anymore without seeing Omega 3 fortified eggs or milk, cheeses, cereals, it goes right across the board and of course you can also buy it as a supplement.

"Fish oil supplements would fill the wall of any room. There are that many of them. Krill oils are very very rare you don't see a lot of them, there are very few in any stores. And they're very different and unique from anything that's taking place in the fish oil. Part of that reason is because the composition is so different, This phospholipid component of it makes it so unique. So its a rare opportunity to get to work with a company that had already a strong patent position-- and has grown stronger in the last six month period of time. That has a product candidate that is safe-- there have never been any kind of side effect issues at all with the krill oil. And in addition to that, a product candidate that is clearly able to address a clinical need-- namely
triglyceridemia (the presence of triglycerides in the blood).

"There is already a drug on the market, GlaxoSmithKline's (NYSE:GSK) Lovaza, which sells about 1.3 billion dollars in annual sales-- for lowering triglycerides in individuals that have very high triglyceride levels. So Omega 3's are known to work, and there are other companies working with fish oils that have already shown the same kind of thing."

The soft spoken Waksal is not selling or hyping the drug development program as the possible multi-bagger that biotech speculators dream of. On the contrary, he knows form experience that generating data is the key to attracting partnerships and interest from Big Pharma.

"For me, to be able to develop a drug with good patent protection, with great safety profile and with and with an indication that I know what I need to do to get there and I know what the FDA requires for us to get there, is very exciting and very enticing. Because of that and because of data that they were able to generate from earlier studies, I was excited about getting involved with this company."

Waksal also seems to downplay the possibility that this drug candidate could actually disrupt the current market for statins-- HMG-CoA reductase inhibitors which tend to be full of side effects-- are a class of drugs used to lower cholesterol levels, but the upside proposition offered here is clear.

"We're focusing on triglycerides, and that is a little different than the whole lipid profile, explains Dr. Waksal. "Statins are addressing a different aspect, they're addressing the bad cholesterol, the ldl. The
market for the statins is about $35 billion. For fish oils it's very different.

"The overall fish oil market for 2012 will be somewhere around $8 billion. Of that $8 billion, however, you have to break down what is the prescription aspect of that. And the prescription market is $1.3 billion
for one prescription drug, the Lovaza, the fish oil. That's how much it comprises. So this is an area that is growing and changing and will continue to evolve.

The best-selling statin is Lipitor-- which is manufactured by Pfizer (NYSE:PFE). As of 2010, a number of statins are on the market: atorvastatin (Lipitor and Torvast), fluvastatin (Lescol), lovastatin (Mevacor, Altocor, Altoprev), pitavastatin (Livalo, Pitava), pravastatin (Pravachol, Selektine, Lipostat), rosuvastatin (Crestor) and simvastatin (Zocor, Lipex).

"My personal feeling about this is that we're in the midst of an epidemic," says Dr. Waksal. "An epidemic with obesity, with fast food, with diabetes, and this is a growing and growing area because of the mean implication of those things is an increase of triglycerides and drugs that can counter that are going to be increasingly desired because the ramification of having triglyceridemia is having coronary artery disease. And if we can do things
to go ahead and stop that, that's a great thing. My belief is, beyond the fish oils, that our drug will have an ability to be taken at a lower dose, have greater implications in terms of its ability to be tighter
to a patient's need because you're going to be able to go to a higher does; won't require being taken with any kind of food or fats like the current drugs that our out there. And I think that, overall, this market area is going to grow very dramatically. And so, I believe that we have the potential of having, what I consider, a blockbuster-type of drug that could be greater than a billion dollars in value.

For now, U.S. investors who can't easily buy shares of the Toronto Exchange-only traded Acasti Pharma, may want to consider picking up shares of the parent company, Neptune instead. NEPT shares trade in the U.S. on the Nasdaq and since Acasti is 60%-owned by Neptune and its shareholders, you get a multiple-shot at success by placing your bet there- especially at today's prices. We anticipate these prices won't last at these levels for much longer, given several key upcoming catalysts.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.