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Item 1. Business

2021-06-22 compared with 2020-06-29 · 158 added, 1467 removed, 5 unchanged (100% of the section changed)

We are a biopharmaceutical innovator focused

on the research, development and commercialization of prescription drugs using OM3 fatty acids delivered both as free fatty acids

and bound-to-phospholipid esters, derived from krill oil.

OM3 fatty acids have extensive clinical evidence of safety and efficacy

in lowering triglycerides, or TGs, in patients with hypertriglyceridemia, or HTG.

Our lead product candidate is CaPre, an OM3

phospholipid therapeutic, which we are developing initially for the treatment of sHTG, a condition characterized by very high

or severe levels of TGs in the bloodstream (≥

In accordance with a study published in 2009 in the Archives of Internal

Medicine by Ford et al., it is estimated that three to four million people in the United States have sHTG.

In primary qualitative

market research studies commissioned by Acasti in August 2016 and November 2017 by DP Analytics, a division of Destum Partners,

and in April 2019 by a well-respected third party provider, key opinion leaders, or KOLs, high volume prescribers, or HVPs, and

pharmacy benefit managers, or PBMs, who were interviewed indicated a significant unmet medical need exists for an effective, safe

and well-absorbing OM3 therapeutic that can also demonstrate a positive impact on the major blood lipids associated with cardiovascular

disease risk.

We believe that CaPre may address this unmet medical need if our TRILOGY Phase 3 clinical program is successful

in reproducing what we observed in our Phase 2 clinical data.

See “—Our Clinical Data”

and “—Our

TRILOGY Phase 3 Program”.

We also believe the potential exists to

expand CaPre’s initial indication to the roughly 44.4 million patients in the United States with elevated TGs in the mild

to moderate range (e.g., blood levels between 200 - 499 mg/dL), although at least one additional clinical trial would likely be

required to support FDA approval of a supplemental NDA to expand CaPre’s indication to this segment.

Data from our Phase

2 studies indicated that CaPre may have a positive effect in diabetes and other inflammatory and cardiometabolic diseases;

consequently,

we may also seek to identify new potential indications for CaPre that may be appropriate for future studies and pipeline expansion.

In addition, we may also seek to in-license other cardiometabolic or other primary care-focused drug candidates for drug development

and commercialization.

In four clinical trials conducted to date,

we saw the following consistent results with CaPre, and we are seeking to demonstrate similar safety and efficacy in our TRILOGY

Phase 3 program:

significant reduction of TGs and non-high density lipoprotein cholesterol (non-HDL-C) levels in the blood of patients with mild to sHTG;

no deleterious effect on low-density lipoprotein cholesterol (LDL-C), or “bad” cholesterol, with the potential to reduce LDL-C;

potential to increase high-density lipoprotein cholesterol (HDL-C), or “good” cholesterol;

potential to benefit diabetes patients by decreasing hemoglobin A1c (HbA1c), a marker of glucose control;

good bioavailability (absorption by the body), even under fasting conditions;

no significant food effect when taken with either low-fat or high-fat meals;

an overall safety profile similar to that demonstrated by currently marketed OM3s.

We believe that if we are able to reproduce

these results in our TRILOGY Phase 3 program, that this could potentially set CaPre apart from current FDA-approved fish oil-derived

OM3 treatment options, and it could give us a significant clinical and marketing advantage.

We are a biopharmaceutical

innovator that has historically focused on the research, development and commercialization of cardiometabolic prescription drugs using

omega-3, or OM3 fatty acids delivered both as free fatty acids and bound-to-phospholipid esters, derived from krill oil.

OM3 fatty acids

have extensive clinical evidence of safety and efficacy in lowering triglycerides in patients with hypertriglyceridemia, or HTG.

product candidate was CaPre, an OM3 phospholipid therapeutic.

As a result of disappointing results from our two TRILOGY phase 3 trials,

we publicly disclosed that our board had commenced a formal process to explore and evaluate a range of strategic alternatives to enhance

shareholder value, and that it had engaged Oppenheimer & Co.

as its financial advisor to assist in that process.

Since that announcement,

we continue to maintain an active pharmaceutical development business, including retaining key research and development, finance and administrative

We have completed a pooled analysis of the TRILOGY data and we have prepared a manuscript for publication, which has been submitted

to a major journal.

We continue to manage ongoing regulatory filing obligations with the Federal Drug Administration, or the FDA, and,

evaluate potential strategic partnerships for the continued clinical development of CaPre.

We also continue to maintain and further develop

valuable CaPre assets including additional patent filings and ongoing prosecutions, and maintenance of our commercial manufacturing equipment.

Since September 2020, we increased our available cash by approximately $54.4 million through financing activities, which has served to

strengthen Acasti’s balance sheet while providing additional flexibility and leverage while we worked through our strategic evaluation

process and advancement of a potential commercial partnership for CaPre.

On May 7, 2021, we announced our intent to acquire Grace through

an acquisition.

Grace is a New Jersey-based life sciences company focused on novel and innovative drug delivery technologies designed

to improve clinical outcomes in rare and orphan disease treatments.

Grace’s scientific and product development efforts are focused

in cardiovascular, central nervous system and gastrointestinal disorders.

Recent Developments

As we have previously disclosed, we filed a Type C meeting request

at the end of March 2020 with the FDA.

We subsequently submitted our briefing package on April 29, 2020 to the FDA.

package was intended to provide the FDA with a review of the relevant TRILOGY 1 clinical data and audit findings, with the objective

of gaining alignment on the interpretation of the TRILOGY 1 results and implications for TRILOGY 2.

We also sought the FDA’s

input on our proposed revisions to the pre-specified TRILOGY 2 Statistical Analysis Plan, or SAP, and their input on a plan for

pooling the data from TRILOGY 1 and TRILOGY 2 to support an NDA filing.

On June 19, 2020, we announced that the FDA had provided us with

a written response to our meeting request and briefing package.

The FDA confirmed that it will require pivotal efficacy analyses

to be performed on the full Intent to Treat, or ITT, population as contemplated in the original SAP, and it supported the conduct

of post-hoc analyses in TRILOGY 1 for exploratory purposes.

Consistent with our prior disclosures and depending on the outcome

of TRILOGY 2, an additional clinical study may still be needed prior to an NDA submission.

We and our expert advisors are carefully

considering the FDA’s comments on the TRILOGY 1 data and will conduct further post-hoc analysis based on the FDA’s

Based on the written feedback received

from the FDA, we intend to now finalize the SAP for TRILOGY 2, which we plan to submit to the FDA by the end of July 2020.

to remain blinded to the TRILOGY 2 clinical data and we continue to expect to report topline data from TRILOGY 2 by the end of

The key secondary and exploratory endpoints from both TRILOGY 1 and TRILOGY 2 trials would still be expected as soon

as possible after the unblinding of TRILOGY 2 results.

Additional details on our post-hoc data

analyses of TRILOGY 1 results and clinical site and laboratory audit findings are summarized below, along with our planned next

steps for unblinding TRILOGY 2 results.

See “—

TRILOGY 1 Findings based on Post-Hoc Analyses and Audits.”

On April 30, 2020, we announced

that we had received notice of issuance of a composition of matter patent awarded by the Intellectual Property Office in Hong Kong.

This new patent expands our intellectual property portfolio by granting claims for any composition containing eicosapentaenoic

acid, or EPA, and docosahexaenoic acid, or DHA, where at least 50% of the composition consists of phospholipids.

About Hypertriglyceridemia (HTG)

According to the American Heart Association

Scientific Statement on Triglycerides and Cardiovascular Disease from 2011, TG levels provide important information as a marker

associated with the risk for heart disease and stroke, especially when an individual also has low levels of HDL-C and elevated

levels of LDL-C.

HTG can be caused by both genetic and environmental factors, including obesity, sedentary lifestyle and high-fat

HTG is also associated with comorbid conditions such as chronic renal failure, pancreatitis, nephrotic syndrome, and diabetes.

Multiple epidemiological, clinical, genetic studies suggest that patients with elevated TG levels (≥

200 mg/dL) are at a greater

risk of coronary artery disease, or CAD, and pancreatitis, a life-threatening condition, as compared to those with normal TG levels.

The genes regulating TGs and LDL-C are equally strong predictors of CAD.

Other studies suggest that lowering and managing TG levels

may reduce these risks.

In addition, the Japan EPA Lipid Intervention Study, or JELIS, demonstrated the long-term benefit of an

OM3 EPA in preventing major coronary events in hypercholesterolemic patients receiving statin treatment.

JELIS found a 19% relative

risk reduction in major coronary events in patients with relatively normal TGs but a more pronounced 53% reduction in the subgroup

of patients with TGs > 150mg/dL and HDL-C < 40mg/dL.

Meta-analyses published by Alexander et al.

(Mayo Clinic Proceedings,

2017) and Maki et al.

(Journal of Clinical Lipidology, 2016) suggest that EPA and DHA may be associated with reducing coronary

heart disease risk to a greater extent in populations with elevated TG levels, and that drugs lowering TG and TG-rich lipoproteins

may reduce cardiovascular event risk in patients with elevated TG levels, particularly if associated with low HDL-C.

2018, Amarin published the results of its REDUCE-IT cardiovascular outcome trial, or CVOT, which showed that a therapeutic dose

of VASCEPA at 4 grams per day, taken on top of a statin, reduced residual cardiovascular risk by 25%.

Based on this data, in December

2019, the FDA granted Amarin an expanded label for VASCEPA that allows its use in patients with mild to moderate HTG (200 –

The table below lists several CVOT studies done over approximately the last 13 years, and supports the hypothesis that

the right dose of any drug (e.g.

OM3, fibrate or niacin) that reduces TG levels in at risk patients (e.g.

those with elevated

TGs and low HDL-C), can significantly reduce their cardiovascular risk.

CaPre is a highly purified, proprietary krill oil-derived mixture

containing polyunsaturated fatty acids, or PUFAs, primarily composed of OM3 fatty acids, principally EPA and DHA, present as a

combination of phospholipid esters and free fatty acids.

EPA and DHA are well known to be complementary and beneficial for human

health, and according to numerous recent clinical studies, may promote healthy heart, brain and visual function (Kwantes and Grundmann,

Journal of Dietary Supplements, 2014), and may also contribute to reducing inflammation and blood levels of TGs (Ulven and Holven,

Vascular Health and Risk Management, 2015).

Krill is a rich natural source of phospholipids and OM3 fatty acids.

The EPA and DHA

contained in CaPre are delivered as a combination of OM3s as free fatty acids and OM3s bound to phospholipid esters.

allow these PUFAs to reach the small intestine where they undergo rapid absorption and transformation into complex fat molecules

that are required for lipid transport into the bloodstream.

We believe that EPA and DHA are more efficiently transported by phospholipids

sourced from krill oil than the EPA and DHA contained in fish oil, which are transported either by TGs (as in dietary supplements)

or as ethyl esters as in other prescription OM3 drugs (such as LOVAZA and VASCEPA).

These OM3 ethyl ester prescription products

must undergo additional digestion before they are ready for transport into the bloodstream.

The digestion and absorption of OM3

ethyl ester drugs requires a particular enzymatic process that is highly dependent on the fat content of a meal –

the fat content, the better the OM3 ethyl ester absorption.

High fat content meals are not recommended in patients with HTG.

believe that CaPre’s superior absorption profile could represent a significant clinical advantage, since taking it with a

low-fat meal represents a healthier and more realistic regimen for patients with HTG who must follow a restricted low-fat diet.

CaPre is intended to be used as a therapy combined with positive lifestyle changes, such as a healthy diet and exercise, and can

be administered either alone or with other drug treatment regimens such as fibrates and/or statins (a class of drug used to reduce

CaPre is intended to be taken orally once or twice per day in capsule form.

Potential Market for CaPre

We believe a significant opportunity exists

for OM3 market expansion because, among other things:

Cardiovascular diseases, or CVD, and stroke are the leading causes of morbidity and mortality in the United States.

The burden of CVD and stroke in terms of life-years lost, diminished quality of life, and direct and indirect medical costs also remains enormous.

According to the American Heart Association, in 2016, CVD cost the American healthcare system $555.0 billion.

By 2035, this cost is estimated by the American Heart Association to increase to $1.1 trillion;

Evidence suggests potential for OM3s in other cardiometabolic indications, such as diabetes and high blood pressure;

Subgroup analyses from outcome studies conducted since 2007 such as JELIS, ACCORD-Lipid and AIM-HIGH, have all shown that patients who entered these studies with high TGs (above 150 mg/dL) and low HDL (below 40 mg/dL) and received a TG-lowering medication (either an OM3, fibrate or niacin) saw a relative cardiovascular risk reduction of 31 –

53% by the end of the study when compared to placebo or standard of care;

In February 2019, following the release of Amarin’s REDUCE-IT results in September 2018, Cantor Fitzgerald projected that based on their market research survey with 100 physicians, prescriptions for OM3s were expected to grow significantly in 2019.

Audited prescription data from Symphony Health Analytics showed that by August 2019, the U.S.

market for OM3 therapeutics had reached an annualized run rate of more than $1.65 billion, up from $1.4 billion for the full year of 2018.

According to the American Heart Association,

the prevalence of HTG in the United States and globally correlates to the aging of the population and the increasing incidence

of obesity and diabetes.

Market participants, including the American Heart Association, have estimated that one-third of adults

(approximately 70 million people) in the United States have elevated levels of TGs (TGs >150 mg/dL) (Ford, Archives of Internal

Medicine, 2009;

169(6):572-578), including approximately 3 to 4 million people diagnosed with sHTG (Miller et al.

2011 and Maki et al.

Lipid, 2012).

Moreover, according to Ford, Archives of Internal Medicine in a study conducted between

1999 and 2004, 18% of adults in the United States, corresponding to approximately 40 million people, had elevated TG levels equal

to or greater than 200 mg/dL, of which only 3.6% were treated specifically with TG-lowering medication (Ford, Archives of Internal

Medicine, 2009;

169(6):572-578;

Kapoor and Miller, ACC, 2016, Christian et al.

Cardiology, 2011).

We believe this data indicates

there is a large underserved market opportunity for CaPre.

CaPre’s target market in the United States for treatment of HTG was

estimated by Symphony Health Analytics Audit data to be approximately $1.4 billion in 2018, with approximately 4.5 million prescriptions

written annually.

The total global market for treatment of HTG was estimated by GOED Proprietary Research in 2015 to be approximately

$2.3 billion annually.

Until late 2019, all marketed OM3 products had been approved by the FDA only for patients with sHTG.

December 13, 2019, the FDA granted Amarin an expanded label for patients with TG levels above 150mg/dL, who also have established

CVD or diabetes, and two or more additional risk factors for CVD, based upon the results of their REDUCE-IT outcome study.

this expanded labeling for VASCEPA, we believe there is the potential to greatly expand the treatable market for OM3s in the United

States to the approximately 70 million people with TGs above 150 mg/dL.

It is not yet known whether the discontinuance by AstraZeneca

of its Phase 3 STRENGTH CVOT for its OM3 drug EPANOVA (announced on January 13, 2020) will have an adverse effect on the size or

growth rate of this potential treatable market.

The REDUCE-IT and STRENGTH CVOT studies were designed to evaluate the long-term

benefit of lowering TGs on CVD risk with prescription drugs containing OM3 fatty acids in patients with mild to moderately elevated

TGs, low HDL-C, and concurrently taking a statin.

Additional clinical trials would likely be required for CaPre to also expand

its label claims to this segment.

CaPre currently has two FDA-approved and

marketed branded competitors, LOVAZA and VASCEPA.

Generic LOVAZA became available on the U.S.

market in 2013.

In spite of generic

LOVAZA options, 2017 audited prescription data from IMS NSP indicates that approximately 70% of OM3 prescriptions were written

for branded products (predominantly VASCEPA).

According to Symphony Health Analytics Audit data from August 2019, the U.S.

market for HTG is valued at more than $1.65 billion.

However, the number of prescriptions written for branded OM3s is now increasing

significantly since Amarin announced its REDUCE-IT results in late 2018 and has recently received expanded label claims.

prescription growth for Amarin’s VASCEPA grew by 78% in 2019 compared to 2018.

According to Amarin, they have forecasted

net revenue in 2020 of $650 million to $700 million, mostly from sales of VASCEPA in the United States.

However, if Amarin loses

its appeal of the U.S.

District Court for the District of Nevada’s March 30, 2020 decision invalidating its patent on the

basis of obviousness, then additional generic versions of VASCEPA could enter the market in the next few years.

We conduct market research at least annually

with physicians and payers to monitor market developments, reimbursement and clinical practice.

Except as otherwise indicated,

all of the information that follows under this section has been derived from secondary sources, including audited U.S.

data, and from qualitative U.S.

primary market research with physicians and payers conducted for us by Destum, and more recently

by a well-respected third party survey provider.

Destum utilized secondary market data and reports to develop market

projections for us, and they also conducted primary qualitative market research with physicians and third-party payers, such as

pharmacy benefit managers, or PBMs.

One-on-one in-depth phone interviews conducted in November 2017 lasting on average 30-60 minutes

were conducted with 22 physicians and 5 PBMs.

Key insights and data were collected by Destum on current clinical practice for treating

patients with HTG, and physician and payer perceptions of the current unmet medical and key economic needs in this space.

All interviews

were conducted by the same individual at Destum to ensure consistency in the collection of key information.

Destum utilized OM3

prescription data from 2009 to 2017 to estimate the size of CaPre’s potential market.

Based on discussions with the PBMs,

Destum also assumed CaPre would be viewed favorably by payers at launch (e.g., Tier 2 or 3, depending on payer plan, which is comparable

to LOVAZA and VASCEPA) provided CaPre is similarly priced.

Upon completing the screening questionnaire and being approved for inclusion

in Destum’s study, key opinion leaders, or KOLs, and high volume prescribers, or HVPs, were provided with a study questionnaire

and were asked to comment on a target profile for a potential new OM3 “Product X”

delivering a “trifecta”

of cardio-metabolic benefits similar to the potential efficacy and safety benefits demonstrated by CaPre in our two Phase 1 pharmacokinetic

studies and two Phase 2 clinical trials, which we refer to as the “Target Product Profile.”

Respondents were told that

the unidentified product was being prepared for a Phase 3 program designed to confirm with statistical significance the product’s

safety and efficacy in patients with sHTG.

The Target Product Profile was used by Destum strictly for market research analysis

purposes and should not be construed as an indication of future performance of CaPre and should not be read as an expectation or

guarantee of future performance or results of CaPre, and will not necessarily be an accurate indication of whether or not such

results will be achieved by CaPre in our TRILOGY Phase 3 program.

In the market research conducted for us,

KOLs and HVPs interviewed by Destum were asked to assess the level of unmet medical need associated with treating patients with

sHTG based on currently available treatment options.

91% of physicians interviewed by Destum in 2016 indicated that they believe

that the current unmet medical need for treating HTG was moderate to high.

That number increased to 100% in the subsequent December

2017 research.

The reasons identified by these physicians for their dissatisfaction with the currently available OM3s included

insufficient lowering of TGs (a complaint principally related to VASCEPA), negative LDL-C effects (a complaint principally related

to LOVAZA), the “food effect” or reduced absorption of both LOVAZA and VASCEPA when taken with a low-fat meal (or the

corollary to this concern, which is that their patients had to take either drug with a fatty meal to get full efficacy benefit),

gastrointestinal side effects, and the fishy taste from these fish oil-derived OM3s.

Physicians reported that their patients have

difficulty swallowing the large 1 gram softgel capsules of VASCEPA and LOVAZA, and they worried about these issues contributing

to patient non-compliance.

Despite the availability of other drug classes to treat sHTG, interviewed physicians indicated that

they would welcome the introduction of new and improved OM3 products, particularly if they can address these perceived deficiencies.

Interviewed physicians responded favorably

to the blinded Target Product Profile of CaPre in the Destum Market Research studies.

In the study conducted in December 2017,

they indicated that they would prescribe a new OM3 drug with the Target Product Profile to approximately 82% of their patients

in the sHTG patient population and 68% of their patients in the high HTG segment within two years of the new OM3 drug’s approval.

Approximately 60% of the interviewed physicians indicated that they would switch to a drug with the Target Product Profile primarily

due to the “trifecta effect” of reducing TGs and LDL-C while elevating HDL-C, and the remaining 40% indicated they

would switch primarily due to a drug with the Target Product Profile due to the effective reduction of TGs alone.

In connection

with their responses, the interviewed physicians were instructed to assume the drug with the Target Product Profile and all currently

available OM3 products were priced similarly and not subject to any reimbursement or coverage hurdles (e.g., all products were

on an equal health care coverage playing field).

This assumption was subsequently supported by our interviews with leading PBMs

in the United States.

This market research was updated again in March 2019 to reflect the

more current views of physicians and third party payers following the publication of the REDUCE-IT study results.

primary qualitative market research project was conducted by a well-respected third party survey provider, and the design of the

study was similar to the Destum project, with one-on-one interviews lasting approximately 60 minutes in duration.

These interviews

were conducted with 10 physicians and 20 pharmacy directors, covering 179,913,005 commercial lives across the United States, consistent

with the current payer mix for the OM3 market.

CaPre was evaluated positively by physicians with particular value placed on its

potential to lower TGs, LDL-C and HbA1c (this was seen as unique, and especially valued), and to increase HDL-C, as well as its

potentially superior tolerability features (e.g., easier to swallow when compared to the ethyl ester fish oils, and no fishy taste

or “burpiness”).

On average, physicians indicated that they would begin prescribing CaPre 3 months after launch, and

would evaluate its performance in their initial patients after 3 to 6 months of use.

Depending on favorable experience in initial

use, some physicians indicated peak use could begin as quickly as 12 to 18 months after launch.

Physicians expect CaPre to be priced

similar to VASCEPA, and to have an out-of-pocket cost after insurance reimbursement of approximately $10-$50.

Payers also viewed

CaPre favorably, and did not anticipate any major reimbursement restrictions, with likely coverage at Tier 2 or 3 depending on

the payer plan.

The Redbook published by Thomson Reuters

i s widely used by healthcare professionals to assess the latest drug product

pricing and packaging information on prescription and over-the-counter drug products.

Based on recent Redbook pricing data

from May 5, 2020, the average wholesale pricing for branded VASCEPA is currently approximately US$397 per month.

Amarin has raised

prices for VASCEPA annually since its launch in late 2013.

PBMs typically offer “Preferred Brand”

status (Tier 2 or

Tier 3) for VASCEPA.

By the end of 2018, VASCEPA had reached about 45% market share in the United States, in spite of generic

competition from LOVAZA.

Amarin continues to gain market share in the United States and, as of August 2019 based on Symphony Health

Analytics prescription audit date, Amarin had reached about 64% of market share based on dollars, and had about 53% of market

share based on units.

This growth is principally coming from market expansion along with some erosion of generic sales.

We plan to continue to regularly conduct

additional market research with KOLs, HVPs, primary care physicians and payers to further develop and refine our understanding

of the potential market for CaPre ahead of potential commercial launch in the United States.

Our Nonclinical Research

In addition to our Phase 2 and 3 clinical

trials, we carried out an extensive nonclinical program to demonstrate the safety of CaPre in a defined set of studies required

These studies were carried out by contract research organizations in compliance with the FDA’s Good Laboratory

Practices, or GLP, and conducted on various species of animals recommended by the FDA to investigate the long-term effects of CaPre

at doses of up to 65 grams of human equivalent dose over 39 weeks.

In these studies, hematological, biochemical, coagulation and

overall health parameters of CaPre were evaluated and no toxic effects were observed in any of the segments of the studies.

studies focused on the potential toxic effects of CaPre on vital systems, such as the cardiovascular, respiratory and central nervous

system, as evaluated by behavioral studies of the various species.

These studies showed that CaPre did not have any adverse or

toxic effects on any of the vital systems investigated, again up to doses well above the equivalent recommended clinical dose of

To rule out short term toxic effects of CaPre on genes, genomic toxicity studies were undertaken on accepted cellular and

animal models.

These studies showed no toxic effects of CaPre on any of the genetic markers indicative of potential gene altering

toxic effects.

We believe the studies conducted to date

indicate that CaPre is well-tolerated and shows no toxic effects on any of the physiological and vital systems of the tested animals

or their genes at doses well above CaPre’s anticipated clinical therapeutic dose of 4 grams daily.

In parallel to our TRILOGY Phase 3

program, we also conducted additional nonclinical studies, including a pre- and postnatal development study in rodents and a

26-week oral carcinogenicity study in transgenic homozygous rasH2 mice.

Both study protocols were designed to support an NDA

filing for CaPre and were pre-approved by the FDA by means of a special protocol assessment through the FDA’s Executive

Carcinogenicity Assessment Committee.

Both studies have now been completed and there was no evidence of a carcinogenic

potential of NKPL66, which is CaPre’s active pharmaceutical ingredient, or API, in the transgenic Hemizygous rasH2 mice

following daily oral gavage at doses up to 2000 mg/kg/day.

In addition, administration of NKPL66, once daily oral gavage, was

well tolerated in F0 female rats with no evidence of maternal toxicity and no effects on maternal performance.

there were no effects on the development of F1 generation.

In addition to the non-clinical studies described above, which

are required to support NDA filing, we also conducted an additional non-clinical study in mice to gain additional insights into

CaPre’s potentially unique mechanism of action in diabetes.

In our Phase 2 studies in humans, a statistically significant

reduction of hemoglobin A1c (HbA1c) was seen in the 4 gram treatment arm of our COLT Phase 2 clinical trial.

This is the same dose

that is currently being tested in our TRILOGY Phase 3 program in humans.

This positive HbA1c result in our COLT phase 2 clinical

trial was unexpected at the time, and potentially unique to CaPre, as other therapeutic OM3s had previously shown a range of outcomes,

from no effect to a potentially deleterious effect, on glucose metabolism in diabetic or pre-diabetic patients.

The main objective

for this mechanistic diabetes mouse study was to assess if CaPre acts on glucose and/or insulin in some unique manner, and to compare

results head-to-head with icosapent ethyl (VASCEPA) and metformin, a widely-prescribed diabetic medication.

We collaborated with

Marette, who is the Director of the Pfizer Chair to study the pathogenesis of insulin resistance and cardiometabolic

diseases at the University Laval, Quebec, and conducted the study in widely used and well accepted animal models in diet-induced

obese C57BL6 and dyslipidemic LDLrKO mice to compare the mechanisms of action of CaPre versus icosapent ethyl and metformin on

insulin resistance and type 2 diabetes.

Marette is a widely-published researcher of cardiometabolic disease.

The preliminary

findings obtained for the diabetes mouse study showed that CaPre may promote insulin secretion as seen by statistically significant

results produced in a standard glucose challenge test, thus suggesting a mechanism of action different and unique when compared

to metformin, which does not promote insulin secretion.

Furthermore, icosapent ethyl showed no effect on insulin or any improvement

in glucose metabolism or management.

Key additional findings from this diabetic mouse study are:

· CaPre increased insulin production in association with increased c-peptide levels, suggesting that

this effect is linked to greater insulin secretion by ß cells.

This effect was also associated with a tendency for lower

glucose responses during a glucose challenge test.

CaPre exhibited a dose response, where the higher the dose the more insulin

was secreted.

· Both CaPre and icosapent ethyl significantly increased plasma 18RS-HEPE, (a metabolite of EPA and

a precursor of Resolvin E1) as compared to the untreated control and metformin groups.

Despite the lower levels of EPA in CaPre’s

composition, the actual levels of 18RS-HEPE reached in the blood were higher for CaPre than levels produced by icosapent ethyl.

Again, a dose response effect was seen with CaPre.

18RS-HEPE and Resolvin E1 are both resolving mediators of OM3s, and particularly

EPA, and they are involved in the resolution of inflammation that is triggered in many chronic diseases, including obesity and

· Both high-dose (human equivalent dose of 4 grams/day), and low-dose

(human equivalent dose of 2 grams/day) of CaPre significantly increased plasma levels of 17S-HDHA and PDX (two metabolites of DHA)

as compared to the untreated control group.

The effects of high-dose CaPre on PDX was very robust and significant, and much greater

than those of icosapent ethyl, which showed virtually no response.

Research has shown that increased levels of PDX improves insulin

sensitivity in various models of insulin resistance and diabetes by several mechanisms, including by limiting inflammation in metabolic

tissues, as well as by enhancing skeletal muscle IL-6 secretion, AMP activated protein kinase activation and glucose uptake, and

by enhancing insulin's ability to suppress hepatic glucose production, which is also elevated in diabetic patients.

Data from the diabetic mouse study are

still being compiled and finalized.

A second study is underway in a fatty liver/NASH disease model to further confirm the

findings of the diabetes study, and may potentially provide more insight into the mechanism of action of CaPre on the plasma lipid

profile, and in fatty liver disease by further comparing the impact of CaPre on plasma TGs, LDL-C and HDL-C, as well as on hepatic

lipid accumulation versus that of icosapent ethyl and metformin.

We have also filed additional patents covering unique aspects

and new potential therapeutic applications of this expanded understanding of CaPre’s mechanism of action.

Our Clinical Data

CaPre is being developed for the treatment

of patients with sHTG.

In two Phase 2 clinical trials conducted by us in Canada (our COLT and TRIFECTA trials), CaPre was well-tolerated

at all doses tested, with no serious adverse events that were considered treatment-related.

Among the reported adverse events with

an occurrence of greater than 2% of subjects and greater than placebo, only diarrhea had an incidence of 2.2%.

In both Phase 2 clinical trials, CaPre significantly lowered TGs

in patients with mild to sHTG.

Importantly, in these studies, CaPre also demonstrated no deleterious effect on LDL-C (unlike LOVAZA

and EPANOVA, which had been shown to significantly increase LDL-C in patients with sHTG).

Further, our Phase 2 data indicated that

unlike LOVAZA, CaPre may actually reduce LDL-C with a 4 gram per day dose (a dose equivalent to VASCEPA and LOVAZA).

LDL-C is undesirable

because it accumulates in the walls of blood vessels, where it can cause blockages (atherosclerosis).

Clinically, the phospholipids

may potentially not only improve the absorption, distribution, and metabolism of OM3s, but they may also decrease the synthesis

of LDL cholesterol in the liver, impede or block cholesterol absorption, and stimulate lipid secretion from bile.

2 trials, CaPre also significantly reduced non-HDL-C (all cholesterol contained in the bloodstream except HDL-C), which is also

considered to be a marker of cardiovascular disease.

The COLT trial data showed a mean increase of 7.7% in HDL-C with CaPre at

4 grams per day (p=0.07).

Further analysis of the data from our TRILOGY Phase 3 program will be required to demonstrate CaPre’s

statistical significance with respect to lowering LDL-C and increasing HDL-C.

Finally, we saw a statistically significant reduction

of HbA1c in the CaPre 4g treatment group in the COLT study after only 8 weeks on drug in a diabetic population of patients with

HbA1c levels at or below 7.0% at baseline.

This interesting and potentially differentiating effect is being investigated more thoroughly

in our TRILOGY Phase 3 program, where a larger proportion of the patients are diabetic, with HbA1c levels up to 9.5%, and they

will be followed for 6 months.

We believe that these multiple potential cardiometabolic benefits,

if confirmed in our TRILOGY Phase 3 program, could be significant differentiators for CaPre in the marketplace, as no currently

approved OM3 drug has shown an ability to positively modulate all four of these important blood lipids (TGs, non-HDL-C, LDL-C and

HDL-C) in the treatment of patients with dyslipidemia.

We also believe that if supported by additional clinical trials, CaPre has

the potential to become the best-in-class OM3 compound for the treatment of mild to moderate HTG.

On September 14, 2016, we announced positive

data from our completed comparative bioavailability study, or the “Bridging Study”.

The Bridging Study was an open-label,

randomized, four-way, cross-over, bioavailability study comparing CaPre, given as a single dose of 4 grams in fasting and fed (high-fat)

states, as compared to the FDA-approved HTG drug LOVAZA (OM3-acid ethyl esters) in 56 healthy volunteers.

The protocol was reviewed

and approved by the FDA.

The primary objective of the Bridging Study was to compare the bioavailability of CaPre to LOVAZA, each

administered as a single 4-gram dose with a high-fat meal, which is the condition under which administration of OM3 drugs will

yield the highest levels of EPA and DHA in the blood, and therefore has the highest potential for toxicity.

For us to rely on the

long-term safety data of LOVAZA to support a 505(b)(2) NDA for CaPre, our results had to show that the blood levels of EPA and

DHA resulting from a single 4-gram dose of CaPre, are not significantly higher than those from a single 4-gram dose of LOVAZA under

fed (high-fat meal) conditions.

The Bridging Study met all of its objectives and demonstrated that the levels of EPA and DHA following

administration of CaPre did not exceed corresponding levels following administration of LOVAZA in subjects who were fed a high-fat

We expect that these results will support a claim by us that CaPre and LOVAZA have a comparable safety profile.

subjects in a fasting state, CaPre demonstrated better bioavailability than LOVAZA, as measured by significantly higher blood levels

of EPA and DHA.

Since most HTG patients must follow a restricted low-fat diet, we believe that CaPre’s strong bioavailability

profile could provide a more effective clinical solution for these patients.

We summarized and submitted data from our Bridging Study to the

FDA for review and discussed it with the FDA at an End of Phase 2 meeting during the first quarter of 2017.

We also presented our

Bridging Study data at the National Lipid Association Conference in May 2017, and this data was subsequently published in the peer-reviewed

Journal of Clinical Therapeutics in 2019.

The graph below illustrates that the Bridging Study achieved all of its objectives:

Absorption of EPA and DHA as ethyl ester formulations in the currently

available prescription OM3 drugs derived from fish oil (such as LOVAZA and VASCEPA) requires the breakdown of the ethyl esters

by pancreatic enzymes (lipases) to be released into the blood.

These particular enzymes are produced in response to the consumption

of high-fat content meals, leading to optimal absorption of DHA and/or EPA.

As a result, these OM3 ethyl ester formulations have

demonstrated lower absorption and bioavailability when taken with a low-fat meal or on an empty stomach.

As shown in our CAP13-101

study described further below, absorption of CaPre, which is formulated as a combination of OM3 phospholipids and free fatty acids,

is not meaningfully affected by the fat content of a meal consumed prior to drug administration.

Since a low-fat diet is typically

a critical component for treatment of patients with sHTG, we believe that being able to effectively combine CaPre with a low-fat

diet could give CaPre a significant clinical and marketing advantage over the ethyl ester-based OM3s, such as LOVAZA and VASCEPA,

that must be taken with a high-fat meal to achieve optimal absorption.

Our CAP13-101 study was an open-label,

randomized, multiple-dose, single-center, parallel-design study in healthy volunteers.

42 subjects were enrolled into 3 groups

of 14 subjects who took 1 gram, 2 grams or 4 grams of CaPre, administered once a day, 30 minutes after breakfast.

The objectives

of the study were to determine the pharmacokinetic, or PK, profile and safety on Day 1 following a single oral dose and Day 14

following multiple oral doses of CaPre in individuals pursuing a low-fat diet (therapeutic lifestyle change diet).

The effect of

a high-fat meal on the bioavailability of CaPre was also evaluated at Day 15.

Blood samples were collected for assessment of EPA

and DHA total lipids in plasma to derive the PK parameters.

The PK profile of CaPre following multiple 4-gram doses obtained in

the CAP13-101 study at Day 14 was compared to the results obtained in a similar PK study (Offman 2013 - ECLIPSE 2) where LOVAZA

was also administered at 4 grams a day for 14 days with a low-fat diet.

Although CaPre contains approximately 2.5 times less EPA

and DHA compared to LOVAZA (approximately 310 mg/1g capsule for CaPre versus 770 mg/1g capsule for LOVAZA), when administered with

a low-fat meal, CaPre plasma levels of EPA and DHA are very similar to those of LOVAZA.

This is indicated by the area under the

plasma drug concentration against time curve, or AUC, and the maximal plasma drug concentration.

This study gives us confidence

in the dosing and design of our TRILOGY Phase 3 program, as we believe blood levels of EPA and DHA should translate into efficacy

of TG reduction.

Our CAP 13-101 study gives us confidence that 4 grams/day of CaPre could be as effective in lowering TGs as LOVAZA.

We anticipate that our TRILOGY Phase 3 clinical program will confirm if this hypothesis is correct.

As illustrated by the two graphs below,

CaPre reached similar blood and therapeutic levels to LOVAZA after 14 daily doses of CaPre at 4 grams/day, despite CaPre containing

2.5 times less EPA and DHA compared to LOVAZA:

The graph below illustrates that the bioavailability

of CaPre (total EPA+DHA levels in the blood) does not appear to be meaningfully affected by the fat content of a meal after multiple

daily doses of CaPre at 4 grams/day (< 20% difference in AUC).

We believe that CaPre’s strong bioavailability could represent

a significant clinical advantage since taking it with a low-fat meal represents a more realistic and attractive regimen for patients

with HTG who must follow a restricted low-fat diet.

Our CAP13-101 Study for CaPre Pharmacokinetics

Shows No Significant Food Effect

The graph below presents a summary of the

effects of CaPre on patient lipid profiles as obtained in our completed TRIFECTA and COLT Phase 2 clinical trials.

90% of the patients

in these clinical trials had mild to moderate HTG (levels between 200 - 499 mg/dL) and only 10% of patients had sHTG (levels between

500 and 877 mg/dL), which was the maximum level of TGs permitted by Health Canada’s study protocol.

Only 30% of the participating

patients were taking statins, which we believe is important because statins appear to enhance the TG-lowering effect of OM3s.

contrast, in our competitors’ summary data that follows, 100% of the patients in those studies with mild to moderate HTG

were taking statins with their OM3s.

The summary data from our COLT and TRIFECTA

clinical trials shows that CaPre significantly reduces TGs, but unlike some other prescription EPA/DHA-based OM3s, it has no deleterious

effect on LDL-C and may potentially increase HDL-C (p=0.07), which we refer to as the “trifecta effect”.

response was seen for all of the major lipid markers;

the greater the dose of CaPre, the greater the beneficial effect of CaPre.

Our Phase 2 Study Results Show CaPre

Dose Response and Potential for “Trifecta” Lipid Effect

results reached statistical significance

for 1g (N=130) & 2g (N=128) and COLT for 4g (N=62).

HDL-C results at 4g from COLT approached statistical significance at P=0.07.

We conducted a subgroup analysis including only patients with sHTG,

consisting of approximately 10% of the patients from our TRIFECTA study, to compare the effects of CaPre versus other OM3 drugs

in the initial target population of patients with sHTG.

Despite being given at a lower dose (only 1 gram and 2 grams), CaPre’s

results compared very well with data from independent studies for the other prescription OM3 drugs that are FDA-approved for the

treatment of sHTG at higher doses of 2 grams and 4 grams.

While the results of this subgroup analysis were not statistically significant

for CaPre (potentially due to the small sample size), numerically, the results compared well with the other OM3 drugs, even though

CaPre was given at a much lower dose.

The results for LDL-C, HDL-C and non-HDL-C levels in the subgroup shown in the table below

are based on descriptive statistics only and are solely directional, meaning that no statistical testing was conducted, and so

no “p”

values were generated.

Note also that VASCEPA’s TG-lowering results from Amarin’s MARINE study were

inflated due to a significant placebo effect that increased TGs in the placebo group as compared to baseline levels.

This resulted

in VASCEPA’s placebo-corrected TG reduction being overstated by about 10%.

Since statins appear to enhance the TG-lowering

property of OM3 drugs, we conducted a subgroup analysis that only included patients who were taking a statin at baseline in the

COLT and TRIFECTA studies (approximately 30% of the population of both trials, combined).

The graph below compares the TG-lowering

effects of CaPre to other OM3s, all on a background of a statin drug, and shows that CaPre’s TG-lowering effects compare

well with other FDA-approved OM3 drugs.

We believe it is noteworthy that only 39 patients on 2 grams of CaPre in our TRIFECTA study

(out of a total of 128) and only 22 patients on 4 grams of CaPre in our COLT study (out of 62) were taking statins.

The CaPre 2-gram bar graph in the table

below shows the results from patients in our TRIFECTA trial who were taking statins.

A statistically significant reduction in TGs

(-25.7% placebo-corrected) was seen in that statin subgroup.

The CaPre 4-gram bar graph in the table below shows patient results

only from our COLT trial (as there was no 4-gram component for our TRIFECTA trial).

None of the results were statistically significant

at 4 grams of CaPre, potentially due to the small number of patients (22) in the statin subgroup.

As seen in the larger full study analyses

in the tables above, CaPre does not show any deleterious effect on LDL, and shows the potential to decrease LDL and increase HDL

These observations will need to be confirmed in our TRILOGY Phase 3 program.

VASCEPA’s TG-lowering results from Amarin’s ANCHOR study were also

inflated due to the use of mineral oil in their placebo group, which resulted in an increase of TG over baseline.

This resulted

in VASCEPA’s placebo-corrected TG reduction being overstated by about 6% in this study.

In summary, in addition to effectively

reducing TG levels in patients with mild to sHTG, clinical data collected by us to date indicates that CaPre may also have:

beneficial clinical effects on other blood lipids, such as HDL-C (good cholesterol) and non-HDL-C;

no deleterious effect on, and may potentially reduce, LDL-C (bad cholesterol) levels;

potential to benefit diabetes patients by reducing HbA1c, an important marker of diabetes;

absorption capability that, unlike VASCEPA and LOVAZA, is not meaningfully affected by the fat content of a meal consumed prior to drug administration, providing patients with the reassurance that following their physician-recommended low-fat diet will still result in high absorption.

We believe that these features could set

CaPre apart from currently available FDA-approved OM3 treatment options in the marketplace and could give us a significant clinical

and marketing advantage.

CaPre’s potential clinical benefits

as compared to currently available FDA-approved OM3 treatment options are summarized in the table below and indicate that CaPre

may deliver a more complete lipid management solution for patients with sHTG:

Our TRILOGY Phase 3 Program

In March 2017, we announced our plans to

proceed with our TRILOGY Phase 3 program following our End-of-Phase 2 meeting with the FDA in February 2017.

Based on the guidance

we received from the FDA, we implemented two pivotal, randomized, placebo-controlled, double-blinded Phase 3 studies to evaluate

the safety and efficacy of CaPre in patients with sHTG.

These 26-week studies are evaluating CaPre’s ability to lower TGs

from baseline in approximately 500 patients (approximately 250 per study) randomized to either 4 grams daily or placebo.

The FDA’s

feedback supported our plan to conduct two studies in parallel, potentially reducing the cost and shortening the time to an NDA

These studies were conducted in approximately 125 sites across North America.

The primary endpoint of these studies is

to determine the efficacy of CaPre at 4 grams/day compared to placebo in lowering TGs after 12 weeks in sHTG patients, and to confirm

safety and persistence of TG-lowering effect by following these patients for the full 26 weeks.

The study was designed to provide

at least 90% statistical power to detect a difference of at least a 20% decrease from baseline in TGs between CaPre and placebo.

In addition, the TRILOGY Phase 3 studies included numerous secondary and exploratory endpoints, which are designed to assess the

effect of CaPre on the broader lipid profile and certain metabolic, inflammatory and CVD risk markers.

In November 2017, we announced that Dariush

Mozaffarian, M.D., Dr.P.H., agreed to serve as the principal investigator of our TRILOGY Phase 3 clinical program.

is a cardiologist and epidemiologist serving as the Jean Mayer Professor of Nutrition & Medicine, and the Dean of the Friedman

School of Nutrition Science & Policy at Tuft’s University.

His widely-published research focuses on how diets, such as

those rich in OM3s, and lifestyle influence cardiometabolic health and how effective policies can improve health and wellness.

Late in 2017, based on feedback from the FDA, we finalized our Chemistry,

Manufacturing, and Controls plans that support our TRILOGY Phase 3 program.

The protocol for the TRILOGY 1 and 2 trials had input

from and was approved by the FDA, and was essentially of the same standard design as has been used by all other companies having

run previous trials in sHTG.

In parallel with our Phase 3 clinical trial planning, additional cGMP production lots of our NKPL66

API and CaPre were manufactured, enabling us to build the CaPre and placebo inventory required to support the activated clinical

trial sites and complete patient randomization.

In the first calendar quarter of 2018, additional RKO was purchased and additional

lots of CaPre were manufactured with this material for use in our TRILOGY Phase 3 program.

With manufacturing of clinical trial

material completed in 2019, our technical resources have been allocated to other activities related to the scale-up of manufacturing

for a potential commercial launch of CaPre in early 2022.

Working with a major clinical research

organization, we initiated our TRILOGY Phase 3 program and began site activation and patient enrollment at the end of 2017.

TRILOGY studies continued to progress on schedule throughout 2018 and 2019, and by the end of September 2019, both Phase 3 TRILOGY

trials had reached 100% patient randomization at clinical sites across the United States, Canada and Mexico.

The last visit for

the last patient randomized in TRILOGY 1 occurred at the end of November 2019, and the last visit for the last patient randomized

in TRILOGY 2 occurred in early January 2020.

The following chart illustrates the design

and dosing of our TRILOGY Phase 3 program for CaPre.

Our first Phase 3 clinical trial, designated

as TRILOGY 1, was conducted exclusively in the United States and was fully randomized with a final total of 242 patients.

13, 2020, we released topline results for TRILOGY 1, which, despite meaningful TG-lowering in the CaPre arm of the study, did not

reach statistical significance due to an unusually large placebo effect described in more detail below.

Our second Phase 3 clinical

trial, designated TRILOGY 2, which is also fully randomized with a total of 278 patients, is being conducted in the United States,

Canada and Mexico, and remains blinded pending proposed modifications to the SAP based on feedback from the FDA.

We expect to report

TRILOGY 2 topline results by the end of August 2020.

TRILOGY 1 & 2 Topline Results

On January 13, 2020, we announced preliminary

topline results for the primary endpoint (TG reduction at 12 and 26 weeks) from our Phase 3 TRILOGY 1 trial for CaPre.

We reported a 30.5% median reduction in

TG levels among all patients receiving CaPre, compared to a 27.5% median reduction in TG levels among patients receiving placebo

We also reported a 42.2% median reduction in TGs among patients receiving CaPre while on background statin therapy

at 12 weeks, compared to a 31.5% median reduction in TG levels among patients receiving placebo and on background statin therapy.

In addition, we reported a 36.7% median reduction in TG levels among patients receiving CaPre at 26 weeks (end of the study),

compared to a 28.0% median reduction in TG levels among patients receiving placebo.

Both the placebo and CaPre study groups experienced

significant reductions in TGs within the first four weeks from baseline, and even though the difference at 12 and 26 weeks was

in favor of CaPre, due to the unexpectedly large placebo response, TRILOGY 1 did not reach statistical significance.

profile of CaPre in TRILOGY 1 was similar to placebo, as there was no significant difference in treatment-related serious adverse

events in the trial.

Results for all of the secondary and exploratory endpoints as well as topline results for TRILOGY 2 have

subsequently been delayed, pending our investigation into the unusually large placebo effect observed in TRILOGY 1.

The observed reductions in TG levels in the TRILOGY 1 placebo group

were far greater than that seen in any previous TG-lowering trial with a prescription OM3.

The placebo used in the TRILOGY trials

is simple cornstarch, which is a complex carbohydrate with a low glycemic index, and consequently would be expected to have a neutral

effect on key biomarkers of patients in the placebo group.

In similar previously conducted TG-lowering trials involving prescription

OM3 preparations, the placebo responses (using corn oil, olive oil, or vegetable oil) ranged from a change of +16% to -17% across

18 interventions arms, with 14 of 18 arms ranging between +10% to -10%.

Note that a low fat diet contains approximately 55% of

energy as carbohydrates, and represents approximately 180-220g of carbohydrates per day.

Consequently, an additional 4 grams/day

of cornstarch (representing roughly 2% of daily intake) would not significantly add to this expected daily intake.

cornstarch is generally regarded as safe (GRAS) and is a commonly used placebo in the pharma industry (the so-called “sugar

pill”) that is well known to be an inert and inactive excipient, with low nutritive value.

This justification was also noted

A table summarizing the placebo and active

TG-lowering results from all of these previous HTG trials is presented below:

With more investigation, we noted

that 5 sites out of the total 54 enrolling sites disproportionately contributed to this placebo response and accounted for

approximately 36% of the 242 patients enrolled in the TRILOGY 1 trial.

By comparison, the TRILOGY 2 trial was conducted at 71

sites in Canada, Mexico and the United States that enrolled a total of 278 patients.

The 5 sites also participated in the

TRILOGY 2 trial;

however, these sites accounted for only 12% of the total patients, with the majority of these patients

coming from only two sites.

Despite monitoring activities conducted throughout the TRILOGY 1 trial

to ensure adherence to the protocol and to identify protocol violations, we subsequently identified some unexpected and inconsistent

findings that we believed may have negatively contributed to the overall topline results.

These findings were explored via a comprehensive

and rigorous review of the data and patient medical records, and on site audits of the five sites conducted by an independent team

To support this effort, we, our independent contract research organization, or CRO, that conducted the TRILOGY trials,

our principal investigator Dr.

Mozaffarian, and other clinical and regulatory advisors, conducted a thorough review of all data

from patients taking both CaPre and placebo.

These site audits and the post-hoc investigations of the data were completed in March

2020, and a Type C meeting request was filed with the FDA on April 1, 2020 with the intent to discuss the TRILOGY 1 data and gain

alignment with the FDA on the interpretation of the results.

We sought the FDA’s input on our proposed revisions to the pre-specified

TRILOGY 2 SAP, and a proposal for pooling the data from the TRILOGY 1 and TRILOGY 2 clinical trials in support of an NDA filing.

All of the findings and data were summarized and compiled into a briefing package that was filed with the FDA on April 29, 2020.

Given the need to complete the audits

and extensive post-hoc review of the TRILOGY 1 data and to obtain FDA feedback, we decided to postpone the unblinding of the topline

results for TRILOGY 2 until the third calendar quarter of 2020.

Accordingly, key secondary and exploratory endpoints from both

TRILOGY 1 and TRILOGY 2 trials are expected as soon as possible after the unblinding of TRILOGY 2 results.

We continue to remain

blinded to the TRILOGY 2 data, and now that we have feedback from the FDA, we intend to finalize the SAP and submit it to the

FDA by the end of July 2020 and expect to report topline results by the end of August 2020.

TRILOGY 1 Findings based on Post-Hoc Analyses

Following reporting of the TRILOGY 1 topline results in January 2020,

we conducted a series of data investigations and analyses, which confirmed no apparent aberration in treatment allocation, capsule

contents, mismatched randomization, or systematic errors in the unblinding or final transfer of laboratory data prior to the biostatistical

We confirmed that the CaPre and placebo groups were similar in demographic and baseline characteristics and found no

imbalances that could account for the unusually high placebo response.

As part of the investigation, we analyzed various other

factors between treatment arms, such as washout or discontinuation of lipid-lowering medications at screening, use of lipid-lowering

medications at randomization and subsequent change in these medications during the study, use of anti-diabetic medication at randomization,

and subsequent change during the study.

The protocol for TRILOGY 1 and TRILOGY 2 had input from and was approved by the FDA, and

was essentially of the same standard design as has been used by all other companies running trials in drug candidates for the treatment

Our protocol required patients to either be washed out or stabilized on any medications that could lower TGs during the

four to six week study screening period, before they entered the two to three week qualifying period prior to study randomization.

Overall, it was found that subjects in the placebo arm had slightly lower rates of discontinuation (or wash-out) of lipid-lowering

medications at screening (about 45% in the placebo group vs 50% in the CaPre group).

We also explored in a sub-group analysis the

treatment effect of discontinuation of lipid-lowering medications, and it did not reveal any differences.

The overall use of lipid-lowering

medications was very similar between subjects in the placebo arm (42%) and CaPre arm (45%), and the overall use of anti-diabetic

medication was also similar between the two arms (45% in placebo vs 52% in CaPre).

It is unlikely that differences in these concomitant

medications could explain the placebo response observed in the TRILOGY 1 trial.

A Phenomenon that we Refer

to as Triglyceride “Normalization”

was Identified between the Qualification and Randomization Periods –

Prior to Patients Starting on Drug or Placebo

Subsequent analysis of the TRILOGY 1 clinical data revealed a rapid, significant

and sustained reduction in TG levels during the patient qualification period, which took place between screening and the time of

patient randomization (that is, prior to patients starting on either drug or placebo).

We refer to this phenomenon as “Pre-Randomization

TG Normalization”.

This phenomenon, which to our knowledge has not been reported in any other TG studies, resulted in an

artefactual overestimation of TG reduction in both treatment groups.

However, the Pre-Randomization TG Normalization was much greater

in the placebo group as compared to the CaPre group, resulting in a significant underestimation of the post-randomization treatment

effect of the active drug in TRILOGY 1 and further compromising the ability of the study to detect a clinically significant drug

treatment effect.

TG values are normally quite variable,

and it is expected that the intra-individual TG variation in subjects on a healthy, low fat National Cholesterol Education Program

diet may be 10% or greater (going in either direction) within a one- to two-week period.

Thus, it is standard practice to include

two or three pre-randomization TG measurements in the determination of the baseline for the calculation of the primary endpoint.

The pre-randomization reduction in TGs across all subjects in TRILOGY 1 was approximately 20%, with 25% of all subjects experiencing

a reduction equal to or greater than 38%.

The median TG normalization reached 30% or more in 12 out of 54 sites (or in 22% of

all randomizing sites);

in all, much greater than the 10% variation that would have been expected based on physiological variability.

In addition, natural variability would have resulted in both increases and decreases in individual levels which would largely

offset each other, limiting aggregate variability below 10%.

The magnitude of pre-randomization reduction in TG levels seen in

TRILOGY 1 indicated a largely unidirectional variability, which was not likely due solely to physiological intra-individual variation,

and we therefore consider to be artefactual.

The unexpected and large magnitude of

this pre-randomization TG normalization phenomenon resulted in about 40% of all randomized and eligible subjects having TG levels

at randomization (Visit 4 or “Week 0”) that fell below the protocol-specified average qualification lower threshold

500 mg/dL for patients with sHTG.

Based on the above observations, we believe that the pre-randomization

normalization in TG levels substantially impacted the outcome of TRILOGY 1, and the ability of the study to accurately determine

the therapeutic impact of CaPre as measured by the pre-specified primary endpoint.

Specifically, we believe that the use of an

average of 3 values for the calculation of the baseline TG levels corresponding to time points during qualification (e.g., at Week

minus 2, and Week minus 1 prior to randomization), and Week 0 (at randomization), resulted in an overestimation of the TG reduction,

particularly in the placebo group –

with significant TG reduction occurring in many patients even before either drug or placebo

were started.

We conducted post-hoc analyses of the primary

endpoint using a revised, single point baseline value from Week 0 (Visit 4), the date of randomization, which is referred to as

the “Revised Baseline.”

Furthermore, only those subjects meeting the protocol-specified TG threshold of ≥

1500 mg/dL at Week 0 were included in this post-hoc analyses.

This revised approach for calculating the baseline TG levels corrected

for a significant amount of the pre-randomization TG reduction in the subjects that were most affected by this normalization phenomenon.

After patients with TG values < 500 mg/dL and > 1500 mg/dL on the date of randomization were removed, a total

of 143 subjects remained (originally N = 242), including 42 subjects in the placebo group (originally N = 69), and 101 subjects

remained in the CaPre group (originally N = 173), and were included in the post-hoc analyses, representing 61% and 58% of all randomized

subjects, respectively.

In this post-hoc analysis of subjects

with TG levels meeting the protocol-specified TG threshold of >500 mg/dL and < 1500 mg/dL at Week 0, subjects receiving

CaPre showed a 28.1% median reduction in TG levels compared to a 15.4% median reduction among subjects receiving placebo after

12 weeks (this represents the primary endpoint, and a non-adjusted absolute difference of 12.7%;

As compared to the

original analysis, the Revised Baseline attenuated the placebo response by approximately 12 percentage points (from -27.5% to

-15.4%), while the response in the CaPre arm remained mostly unaffected (reduced from -30.0% to -28.1%).

After 26 weeks of double-blind

treatment, the efficacy of CaPre showed good persistency of effect with a 32.6% median reduction compared with a 14.6% median

reduction in the placebo group, reaching a non-adjusted difference of -18.0%, which trended toward statistical significance (p

As compared to the original analysis, the Revised Baseline attenuated the placebo response at 26 weeks by approximately

13 percentage points (from -28.0% to -14.6%), while the response in the CaPre arm remained mostly unaffected (reduced from -36.7%

The median TG reductions for CaPre as demonstrated using this post-hoc methodology compare favorably to those of previous

published studies of other FDA approved drugs for sHTG.

The subgroup of subjects with Revised

Baseline TG levels above 750 mg/dL at Visit 4 (Week 0) represented 41% of the subjects retained in the post-hoc analyses.

this group, the median TG reduction in the subjects receiving CaPre was larger, as would be expected, reaching 36.3% and 43.0%

at Week 12 and Week 26, respectively.

In comparison, the median TG reduction for the placebo group was 11.8% at Week 12 and 14.4%

at Week 26, resulting in non-adjusted differences of 24.5% and 28.6% respectively in favor of CaPre (p = 0.22 and 0.15, respectively).

Not surprisingly, a post-hoc power calculation

revealed that these substantially smaller sample sizes resulted in reduced statistical power to detect a treatment difference

of 20% as specified in the original SAP.

We believe that these post-hoc results suggest clinical relevance even if statistical

significance was not demonstrated, as it is plausible that the trend revealed in the post-hoc analysis may have achieved statistical

significance with a larger sample size.

In summary, the post-hoc analyses of TRILOGY

1 data using the Week 0 (Visit 4) value as a Revised Baseline in subjects with TG ≥

500 mg/dL and ≤

1500 mg/dL at Week 0

showed a strong trend towards correcting for the unexpectedly large placebo response observed in the original analysis, without

major changes in the CaPre response observed, and we believe allows for a clearer understanding of the impact on the TG primary

endpoint and the potential therapeutic effect of CaPre.

However, the median difference in TG levels between CaPre and placebo

from the TRILOGY 1 post-hoc analyses still fell short of reaching statistical significance at the Week 12 primary endpoint in

this patient-adjusted sample.

Response from

the FDA on our Meeting Request and Briefing Package and Next Steps

We provided all of the TRILOGY 1 background

information and accompanying data to the FDA in a Type C briefing package filed on April 29, 2020.

The FDA provided us with a written

response to our Type C Meeting request and briefing package, and confirmed that it will require pivotal efficacy analyses for TRILOGY

2 to be performed on the full Intent to Treat, or ITT, population as contemplated in the original SAP, and the FDA supported the

conduct of post-hoc analyses in TRILOGY 1 for exploratory purposes.

Consistent with our prior disclosures and depending on the

outcome of TRILOGY 2, an additional clinical study may still be needed prior to an NDA submission for CaPre.

We and our expert

advisors are now carefully considering the FDA’s comments on the TRILOGY 1 data and will conduct further post-hoc analysis

based on the FDA’s feedback.

Our Regulatory Strategy for CaPre

Our strategy is to develop CaPre initially

for the treatment of sHTG.

The TRILOGY Phase 3 program was designed to evaluate the clinical effect of CaPre on TGs, non-HDL-C,

LDL-C, and HDL-C levels together with a variety of other cardiometabolic biomarkers in patients with sHTG.

If our TRILOGY Phase 3 program is successful,

we intend to pursue a 505(b)(2) regulatory pathway towards an NDA approval in the United States.

A 505(b)(2) regulatory pathway

is defined in the U.S.

Federal Food Drug and Cosmetic Act, or FDCA, as an NDA containing investigations of safety and effectiveness

that are being relied upon for approval and were not, in whole, conducted by or for the applicant, and for which the applicant

has not obtained a right of reference.

505(b)(2) regulatory pathways differ from a typical NDA because they allow a sponsor to

rely, at least in part, on the FDA’s findings of safety and/or effectiveness for a previously- approved drug.

pursue the 505(b)(2) regulatory pathway as a strategy to leverage the large body of safety data for LOVAZA, which could accelerate

and streamline the development of CaPre and reduce associated costs and risks.

We conducted our two TRILOGY Phase 3 studies to

independently assess CaPre’s effectiveness in lowering TGs, and its broader effect in patients with cardiometabolic disease.

Consequently, the use of this 505(b)(2) pathway still allows CaPre to retain its New Chemical Entity, or NCE, status due to its

novel, patented OM3 free fatty acid/phospholipid ester formulation.

In connection with our intended use of

the 505(b)(2) pathway, the FDA supported our proposal to conduct our Bridging Study that compared CaPre (which has an OM3 free

fatty acid/phospholipid composition) with LOVAZA (which has an OM3-acid ethyl esters composition) in healthy volunteers.

2017, we met with the FDA at an End-of-Phase 2 meeting where our Bridging Study data was discussed.

We confirmed with the FDA

the 505(b)(2) regulatory approach to use the safety data for LOVAZA and finalized the study design for our TRILOGY Phase 3 program

that would be required for NDA approval.

If our primary endpoint of TG lowering shows statistical significance in TRILOGY 2, we plan

to continue discussions with the FDA regarding whether pooled results from the primary analysis populations of TRILOGY 1 and 2

can be used to file an NDA.

The following development and regulatory timeline assumes that another clinical study would not be

However, in the event that the FDA should require another study, NDA approval and launch could be delayed by at least

18 to 24 months.

Our Intellectual Property Strategy

Under a license agreement we entered into

with Neptune in August 2008, which was later amended on February 9, 2009 and March 7, 2013 (the “License Agreement”),

we received an exclusive license to use certain intellectual property of Neptune (which includes several patents) to develop and

commercialize CaPre and our novel APIs for use in pharmaceutical and medical food applications in the cardiometabolic field.

term of the License Agreement expires on the date of the last-to-expire licensed patents in 2022.

As the result of a royalty prepayment

transaction we entered into with Neptune on December 4, 2012, we are not required to pay any royalties to Neptune under the License

Agreement during its term for the use of the licensed intellectual property.

Upon the expiry of the License Agreement

and related patents, we believe that CaPre will be covered under our own issued and pending patents, and we do not believe that

we will afterwards require any licenses to support the commercialization of CaPre.

We currently have patents granted and allowed in the following

jurisdictions:

United States, Canada, Russia, Belgium, Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Italy,

Netherlands, Norway, Portugal, Sweden, Japan, Israel, Australia, China, Mexico, Panama, Saudi Arabia, Taiwan, South Africa, Chile,

South Korea and Hong Kong.

We continue to expand our own intellectual property patent portfolio.

We have filed patent applications

in more than 20 jurisdictions, including with the European Patent Office (but excluding the individual countries where we have

subsequently registered), and in all major countries in North America, Asia and Australia for our “Concentrated Therapeutic

Phospholipid Composition”, or proprietary composition, to treat HTG.

We currently have more than 20 issued or allowed patents

(including in registered European countries) and numerous patent applications pending.

A patent is generally valid for 20 years

from the date of first filing.

However, patent terms can be subject to extensions in some jurisdictions in order to compensate,

for example, for delays caused by the patent office during prosecution of the patent application or for regulatory delays during

the pre-market approval process.

On January 9, 2019, we announced a Certificate

for a European Patent had been issued by the European Patent Office.

The granted patent is valid until 2030 and relates to a concentrated

phospholipid composition and method of using the same for modulating blood lipids.

This patent was validated in Belgium, Switzerland,

Germany, Denmark, Spain, Finland, France, United Kingdom, Italy, Netherlands, Norway, Portugal and Sweden.

In May 2019, we announced that we had received

notices of allowances for both composition of matter and methods of use patents by the Mexican, Chilean and the Israeli Patent

In June 2019, we r eceived

a notice of allowance for our second patent to be awarded in the People’s Republic of China.

In March 2020, we were awarded

a notice of allowance for an additional composition of matter and method of use patent from

Patent and Trademark Office, our 4th patent to be awarded in the United States, along with a notice of allowance for a

composition of matter and method of use patent that was awarded by the Mexican Patent Office, our 3rd patent to be awarded in Mexico.

addition, we also received a favorable decision issued by the Japan Patent Office following an opposition proceeding filed by a

third party against our divisional application, confirming its validity.

This decision resulted in the allowance of our second

major patent in Japan.

In April 2020, we received a notice of allowance for our second patent to be awarded by the Canadian

Intellectual Property Office and a certificate of patent for our first composition of matter patent to be awarded by the Intellectual

Property Office in Hong Kong.

These new patents expand our existing claims to include any composition containing EPA and DHA where

at least 50% of the composition consists of phospholipids.

In addition to these allowed patents, two P atent

Cooperation Treaty, or PCT, applications that cover our encapsulation apparatus and manufacturing process have been filed

in all territories under the PCT, while maintaining industrial trade secrets and know-how.

PCT is an international patent law treaty established in 1970.

It provides a unified procedure for filing patent applications to

protect inventions in each of its contracting states.

A patent application filed under the PCT is called an international application,

or PCT application.

We converted a provisional application covering our starting material composition, known as RKO, for

the use of CaPre manufacturing into a PCT application.

The corresponding PCT application was filed on February 7, 2020.

10, 2020, we filed a provisional application to cover other indications of CaPre in inflammatory-related diseases entitled “Composition

that promote pro-resolving mediators”.

On April 16, 2020, we filed a provisional application to cover an analytical inline

process technology utilizing near-infrared spectroscopy for real-time quality monitoring of OM3 formulations.

We believe all of these patents and patent

applications increase potential commercial opportunities for CaPre, including through possible licensing and partnership opportunities.

We are committed to building a global portfolio of patents to ensure long-lasting and comprehensive intellectual property protection

and to safeguard potentially valuable market expansion opportunities.

Our patent No.

600167 in New Zealand, which

is in force until 2030 and relates to a concentrated phospholipid composition comprising 60% or greater PL concentration and method

of using the same for treating cardiovascular diseases, has been opposed by BIO-MER Ltd.

The evidentiary stage in the New Zealand

patent opposition has been completed.

We are still waiting for the date of the hearing.

In our view, no new prior art has been

presented that was not already considered in other jurisdictions, such as in the United States, where our patents are in force.

We received a notice issued from the Japan

Patent Office indicating that a third party had filed an opposition against our Japanese Patent No.

A claim amendment

was subsequently filed by us, and we were successful in overcoming the prior art cited in the opposition.

Consequently, this opposition

was abandoned.

The trademark CaPre® is registered

in the United States, Canada, Australia, China, Japan and Europe.

We are currently in the process of developing a new brand name

and logo for CaPre for launch into the U.S.

That name, once it is developed, will be trademarked in all of the major jurisdictions

around the world.

Our Business and Commercialization Strategy

Key elements of our business and commercialization

strategy include initially obtaining regulatory approval for CaPre in the United States for sHTG.

We plan to launch CaPre ourselves

market, if regulatory approval is obtained.

Our preferred strategy outside the United States is to commercialize CaPre

through regional or country-specific strategic partnerships, and to potentially seek support and funding from each partner for

in-country clinical development, registration and commercialization activities.

We believe that a late development-stage and differentiated

drug candidate like CaPre could be attractive to various global, regional or specialty pharmaceutical companies, and we are taking

a targeted approach to partnering and licensing in various geographies.

Our key commercialization goals include:

complete our TRILOGY Phase 3 program and, assuming the results are positive, file an NDA by early 2021 to obtain regulatory approval for CaPre in the United States, initially for the treatment of sHTG, with the potential to afterwards expand CaPre’s indication to the treatment of high TGs (although at least one additional clinical trial would likely be required to expand CaPre’s indication to this segment);

continue to strengthen our patent portfolio and other intellectual property rights;

continue planning for the launch of CaPre in the United States;

continue to pursue strategic opportunities outside of the United States, such as licensing or similar transactions, joint ventures, partnerships, strategic alliances or alternative financing transactions, to provide development capital, market access and other strategic sources of capital;

continue to search for additional new assets for in-licensing or acquisition that could be synergistic with CaPre, and leverage our commercial organization.

We expect that additional time and capital

will be required to complete the filing of an NDA to obtain FDA approval for CaPre in the United States, and to complete business

development collaborations, marketing and other pre-commercialization activities before reaching the commercial launch of CaPre

in the United States.

The biotechnology and pharmaceutical industries

are highly competitive.

There are many pharmaceutical companies, biotechnology companies, public and private universities and research

organizations actively engaged in the research and development of products that may be similar to CaPre.

We believe that the number

of companies seeking to develop products and therapies similar to CaPre will likely increase, particularly based on the positive

REDUCE-IT CVOT results by Amarin.

Our competitors in the United States and

globally include large, well-established pharmaceutical companies, specialty pharmaceutical sales and marketing companies, and

specialized cardiovascular treatment companies.

GlaxoSmithKline plc, which currently sells branded LOVAZA, a prescription-only

OM3 fatty acid indicated for patients with sHTG, was approved by the FDA in 2004 and has been available in the U.S.

Multiple generic versions of LOVAZA are now available in the United States.

Amarin launched its prescription-only OM3 drug

VASCEPA in 2013, and based on a recent Symphony Health Analytics prescription audit, Amarin had reached approximately 64% market

share based on U.S.

dollars, and approximately 53% of market share based on units by August 2019.

On March 30, 2020, the U.S.

District Court for the District of Nevada ruled in favor of two generic companies (Hikma Pharma and Dr.

Reddy’s Laboratories)

by deciding that Amarin’s patent claims for VASCEPA were found to be invalid for being obvious in view of prior art.

has filed an appeal, and both parties have requested the U.S.

Court of Appeals for the Federal Circuit to review Amarin's appeal

on an expedited schedule, with a decision expected later this year.

Should Amarin lose this appeal, we would expect generic

versions of VASCEPA to enter the market within the next year.

In addition, EPANOVA (OM3-carboxylic acids) capsules, a free fatty

acid form of OM3 (comprised of 55% EPA and 20% DHA), is FDA-approved for patients with sHTG.

another OM3-acid fatty acid composition developed by Trygg Pharma AS, received FDA approval for sHTG.

Neither EPANOVA nor Omtryg

have yet been commercially launched.

OMTRYG’s results were inferior to LOVAZA and VASCEPA, and STRENGTH, the long

term CVOT trial sponsored by AstraZeneca, was terminated early for reasons that have not yet been reported.

Matinas Biopharma

recently started their development program for MAT9001, an OM3 free fatty acid that consists primarily of EPA and docosapentaenoic

Other large companies with products that would compete indirectly with CaPre include AbbVie, Inc., which currently sells

TRICOR and TRILIPIX for the treatment of sHTG, and NIASPAN, which is primarily used to raise HDL-C but is also used to lower TGs.

Generic versions of TRICOR, TRILIPIX, and NIASPAN are also now available in the United States.

In addition, we are aware of a

number of other pharmaceutical companies that are developing non-OM3 products that, if approved and marketed, could compete with

Raw Materials

We use semi-refined RKO as our primary raw material to produce

Krill are generally harvested in Antarctic waters.

Krill represent the world’s most abundant biomass, which is monitored

by industry regulators to help ensure sustainable cultivation.

Historically, we had sourced all of our RKO from Neptune.

2017, Neptune announced it was discontinuing krill oil production, and sold its krill oil inventory and intellectual property to

In the three-month period ending December 31, 2017, we purchased a reserve of RKO from Neptune and Aker that was used in

the production of CaPre capsules for our TRILOGY Phase 3 clinical program.

Additional RKO was purchased from Aker in 2019, which

was also used in our TRILOGY Phase 3 program, and will be used to build early commercial inventory.

There are several alternative

suppliers of RKO that we have confirmed can meet our specifications for CaPre.

Combined, they have more than adequate production

capacity to meet our future commercial needs.

Employees, Specialized Skills and Knowledge

Our management team consists of professionals from business development,

sales and marketing, clinical development, pharmaceutical manufacturing, finance and science backgrounds.

Our research team includes

scientists with expertise in pharmaceutical development, chemistry, manufacturing and controls, nonclinical and clinical studies,

pharmacology, regulatory affairs, quality assurance/quality control, intellectual property and strategic alliances.

employ 32 full-time and part-time employees, with the majority working out of our headquarters in Laval Quebec, Canada and at our

laboratory in Sherbrooke, Quebec, Canada.

We began investing in a commercial leadership team in 2018, and now have 5 senior-level

employees based in the United States.

We generally require all of our employees to enter into invention assignment, non-disclosure

and non-compete agreements.

We also rely on third-party consultants and contractors from time to time.

Our employees are not covered

by any collective bargaining agreement nor represented by a trade union.

Additional Information About Our Phase

2 Clinical Trials

Our COLT Trial

Our COLT clinical trial, which was completed

in 2014, was a randomized, open-label, dose-ranging, multi-center trial in Canada designed to assess the safety and efficacy of

CaPre in the treatment of patients with TG levels between 200-877 mg/dL.

The primary objectives of the COLT study were to evaluate

the safety and efficacy of 0.5 gram, 1 gram, 2 grams and 4 grams of CaPre per day in reducing fasting plasma TGs over 4 and 8 weeks,

as compared to the standard of care alone.

The secondary objectives of the COLT study

were to evaluate:

the effect of CaPre on fasting plasma TGs in patients with TGs between 200-499 mg/dL (mild to moderate HTG);

the dose dependent effect on fasting plasma TGs in patients with TGs between 500-877 mg/dL (sHTG);

the effect of CaPre on fasting plasma levels of LDL-C (direct measurement), HDL-C, non-HDL-C, hs-CRP and OM3 index.

The final results of the COLT trial indicated

that CaPre was safe and effective in reducing TGs in patients with mild to sHTG with significant mean (average) TG reductions above

20% after 8 weeks of treatment with daily doses of 4 grams and 2 grams.

Demographics and baseline characteristics of the patient

population were balanced in terms of age, race and gender.

A total of 288 patients were enrolled and randomized and 270 patients

completed the study, which exceeded our targeted number of evaluable patients.

From this patient population, approximately 90%

had mild to moderate HTG.

The proportion of patients treated with

CaPre that experienced one or more adverse events in the COLT trial was similar to that of the standard of care group (30.0% versus

34.5%, respectively).

A substantial majority of adverse events were mild (82.3%) and no severe treatment-related adverse effects

were reported.

Only one patient was discontinued from the study due to an adverse event of moderate intensity.

While the rate of

gastrointestinal side effects was higher in the CaPre groups compared to standard of care alone and appeared to increase in a dose-related

manner, none of the subjects participating in the study suffered from a serious adverse event.

The COLT study results showed that

even at higher doses, CaPre is safe and well tolerated with only transient and predominantly mild adverse events occurring at low

The COLT trial met its primary objective

of showing CaPre to be safe and effective in reducing TGs in patients with mild to sHTG.

After only a 4-week treatment, CaPre achieved

a statistically significant TG reduction as compared to standard of care alone.

Standard of care could be any treatment physicians

considered appropriate in a real-life clinical setting and included lifestyle modifications as well as statins and/or ezetimibe.

Patients treated with 4 grams of CaPre per day over 4 weeks reached a mean TG decrease of 15.4% from baseline and a mean improvement

of 18.0% over the standard of care.

Results also showed increased benefits after 8 weeks of treatment, with patients on a daily

dose of 4 grams of CaPre registering a mean TG decrease of 21.6% from baseline and a mean improvement of 14.4% over the standard

After 8 weeks of treatment, patients treated

with 1 gram of CaPre for the first 4 weeks of treatment and 2 grams for the following 4 weeks, showed a statistically significant

TG mean improvement of 16.2% over the standard of care, corresponding to a 23.3% reduction for the 1-2 grams patient population

as compared to a 7.1% reduction for the standard of care.

After 8 weeks of treatment, patients treated with 2 grams of CaPre for

the entire 8 weeks showed statistically significant TG mean improvements of 14.8% over the standard of care, corresponding to a

22.0% reduction for the 2 grams group as compared to a 7.1% reduction for the standard of care.

Also, after 8 weeks of treatment,

patients treated with 4 grams for the entire 8 weeks showed statistically significant TG, non-HDL-C and HbA1C mean reductions of

14.4% and 9.8% and 15.0%, respectively, as compared to standard of care.

The 4-gram group showed mean improvements in:

Improvement of TG levels of 14.4%, corresponds to a reduction of 21.6% as compared to a reduction of a 7.1% for the standard of care group;

Improvement of non-HDL-C of 9.8%, corresponds to a reduction of 12.0% as compared to a reduction of 2.3% for the standard of care group;

Improvements of HbA1C of 15.0%, corresponds to a reduction of 3.5% as compared to an increase of 11.5% for the standard of care group.

In addition, all combined doses of CaPre

showed a statistically significant treatment effect on HDL-C levels, with an increase of 7.4% as compared to standard of care.

Trends (p-value < 0.1) were also noted on patients treated with 4 grams of CaPre for the entire 8-week treatment period with

mean reduction of total cholesterol of 7.0% and increase of HDL-C levels of 7.7%, as compared to the standard of care.

of the COLT trial indicated that CaPre has no significant deleterious effect on LDL-C levels.

Our TRIFECTA Trial

Our TRIFECTA clinical trial, which was

completed in 2015, was a 12-week, randomized, placebo-controlled, double-blind, dose-ranging trial in Canada, designed to assess

the safety and efficacy of CaPre at a dose of 1 gram or 2 grams on fasting plasma TGs as compared to a placebo in patients with

TG levels between 200-877 mg/dL.

A total of 387 patients were randomized and 365 patients completed the 12-week study, consistent

with our targeted number of evaluable patients.

From this patient population, approximately 90% had mild to moderate HTG with baseline

TGs between 200 and 499 mg/dL.

The remainder had sHTG with baseline TGs between 500 and 877 mg/dL.

Approximately 30% of patients

were on lipid-lowering medications, such as statins, and approximately 10% were diabetic.

Similar to our COLT study, the primary

objective of the TRIFECTA study was to evaluate the effect of CaPre on fasting plasma TGs in patients with TGs between 200-877

mg/dL and to assess the tolerability and safety of CaPre.

The secondary objectives of the TRIFECTA study were to evaluate:

the effect of CaPre on fasting plasma TGs in patients with TGs between 200-499 mg/dL;

the dose dependent effect on fasting plasma TGs in patients with TGs between 500-877 mg/dL;

the effect of CaPre in patients with mild to moderate HTG and sHTG on fasting plasma levels of LDL-C (direct measurement), and on fasting plasma levels of HDL-C, non-HDL-C, hs-CRP and OM3 index.

CaPre successfully met the TRIFECTA study’s

primary objective.

The placebo-corrected percentage change in TGs were decreases of 9.1% (p=0.049) and 9.7% (p=0.044) for 1 gram

and 2 grams of CaPre, respectively.

Key secondary objectives were also met:

there was a statistically significant decrease in non-HDL-C versus placebo (p=0.038), with the 2-gram group decreasing by 5.3% from baseline versus placebo over the 12-week period;

HDL-C slightly increased at both the 1-gram and 2-gram levels;

LDL-C and slightly decreased at the 2-gram level.

Finally, a statistically significant dose

response increase in the OM3 index for patients on 1 gram and 2 grams versus placebo was noted.

The OM3 index reflects the percentage

of EPA and DHA in red blood cell fatty acids and the risk of cardiovascular disease is considered to be lower as the OM3 index

CaPre was found to be safe and well tolerated

at all doses tested, with no serious adverse events that were considered treatment- related.

Out of 387 randomized patients, a

total of 7 (1.8%) were discontinued as a result of adverse events, three were on placebo, two were on 1 gram and two were on 2

grams of CaPre.

The predominant incidence was gastrointestinal-related, with no difference between CaPre and placebo.

profiles of patients on CaPre and placebo were similar.

Government Regulation

United States Drug Development

Government authorities in the United States,

at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development,

testing, manufacture, quality control, approval, labeling, packaging, storage, record- keeping, promotion, advertising, distribution,

post-approval monitoring and reporting, marketing and export and import of drug products such as CaPre.

Generally, before a new

drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format

specific to each regulatory authority, submitted for review and approved by the regulatory authority.

FDA Regulatory Process

In the United States, the FDA regulates drugs under the FDCA, and

its implementing regulations.

Drugs are also subject to other federal, state and local statutes and regulations.

The process of

obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations

require the expenditure of substantial time and financial resources.

In order to be marketed in the United States,

CaPre must be approved by the FDA through the NDA review process.

The process required before a drug may be marketed in the United

States generally involves the following:

completion of extensive nonclinical (animal) and formulation studies in

accordance with applicable regulations, including the FDA’s GLP regulations;

submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin in the United States;

performance of adequate and well-controlled clinical trials in accordance with the applicable IND and other clinical study- related regulations, such as current Good Clinical Practices, or cGCP, to establish the safety and efficacy of the proposed drug for its proposed indication;

submission of an NDA for a new drug;

satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug is produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

satisfactory completion of potential FDA audit of the nonclinical and/or clinical trial sites that generated the data in support of the NDA;

FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.

The data required to support an NDA is

generated in two distinct development stages:

nonclinical and clinical.

The nonclinical development stage generally involves synthesizing

or otherwise producing the active component, developing the formulation and determining the manufacturing process, as well as carrying

out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing.

The sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available

clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND, which is a request for authorization

from the FDA to administer an investigational drug product to humans.

The IND automatically becomes effective 30 days after receipt

by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials.

The FDA may also place the IND

on clinical hold within that 30-day time period.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns

before the clinical trial can begin.

A clinical hold may be imposed at any time before or during a clinical trial due to safety

concerns or non-compliance.

The clinical stage of development first

involves the administration of the investigational drug to healthy volunteers and then to patients with the disease being targeted

with the drug, all done under the supervision of qualified investigators, generally physicians not employed by or under the trial

sponsor’s control, in accordance with cGCP.

All research subjects must provide their informed consent for their participation

in any clinical trial.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical

trial, dosing procedures, subject selection and exclusion criteria, data collection, and the parameters to be used to monitor subject

safety and assess the investigational drug’s efficacy.

Each protocol, and any subsequent amendments to the protocol or new

investigator’s information, must be submitted to the FDA as part of the IND.

Further, each clinical trial must be reviewed

and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial

will be conducted.

An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether

the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.

The IRB also approves the informed consent form that must be provided to each clinical trial subject or its legal representative.

There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries,

as well as reporting of safety information under the IND.

Clinical studies are generally conducted

in three sequential phases that may overlap, known as Phase 1, Phase 2 and Phase 3 clinical trials.

Phase 1 generally involves

a small number of healthy volunteers who are initially exposed to a single dose and then multiple doses of the investigational

The primary purpose of these studies is to assess the metabolism, pharmacologic action, side effect tolerability and safety

Phase 2 trials typically involve studies in disease-affected patients to determine the dose required to produce the

desired benefits.

At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as

identification of possible adverse effects and safety risks and preliminary evaluation of efficacy.

Phase 3 clinical trials generally

involve large numbers of patients at multiple sites, often in multiple countries (from several hundred to several thousand subjects)

and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety

in use, and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval.

Phase 3 clinical trials should, if possible, include comparisons with placebo and may include a comparison to approved therapies.

The duration of treatment is often extended to mimic the actual use of a product during marketing.

Generally, two adequate and

well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA (Pivotal Studies).

Progress reports detailing the results

of the clinical trials must be submitted at least annually to the FDA.

In addition, written IND safety reports must be submitted

to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that

suggests a significant risk for human subjects.

The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any

time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health

Additionally, some clinical trials are

overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring

board or committee.

This group provides oversight and will determine whether or not a trial may move forward at designated check

points based on review of interim data from the study.

A clinical trial may be terminated or suspended based on evolving business

objectives and/or competitive climate.

The manufacturing process must be capable

of consistently producing quality batches of the investigational drug and, among other things, must develop methods for testing

the identity, strength, quality and purity of the final drug product.

The sponsor must develop appropriate labeling that sets forth

the conditions of intended use.

Additionally, appropriate packaging must be selected and tested and stability studies must be conducted

to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

Post-approval studies, sometimes referred

to as Phase 4 clinical trials, may be conducted after initial marketing approval.

These studies are used to gain additional experience

from the treatment of patients in the intended therapeutic indication.

In certain instances, the FDA may mandate the performance

of Phase 4 studies as part of a post-approval commitment, such as pediatric studies.

NDA and FDA Review Process

Nonclinical and clinical information is

filed with the FDA in an NDA along with proposed labeling.

The NDA is a request for approval to market the drug and must contain

proof of safety, purity, potency and efficacy, which is demonstrated by extensive nonclinical and clinical testing.

Data may come

from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of

alternative sources, including studies initiated by investigators.

To support marketing approval, the data submitted must be sufficient

in quality and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the

The submission of an NDA is subject to

the payment of substantial user fees;

a waiver of such fees may be obtained under certain limited circumstances.

FDA approval of

an NDA must be obtained before marketing a drug in the United States.

In addition, under the Pediatric Research Equity Act, an

NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in

all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product

is safe and effective.

The FDA may grant deferrals for submission of data or full or partial waivers.

The FDA reviews all NDAs submitted before

it accepts them for filing and may request additional information.

The FDA must make a decision on accepting an NDA for filing

within 60 days of receipt.

Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA.

goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA has ten months from the filing

date in which to complete its initial review of a standard NDA and respond to the applicant.

This review typically takes 12 months

from the date the NDA is submitted to the FDA including the screening which takes a period of 60 days.

The FDA does not always

meet its PDUFA goal dates for standard NDAs, and the review process may be significantly extended by FDA requests for additional

information or clarification.

After the NDA submission is accepted for

filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended

use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity,

strength, quality and purity.

The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions

with the FDA.

Before approving an NDA, the FDA will conduct

a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs.

FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP

requirements and adequate to assure consistent production of the product within required specifications.

In addition, before approving

an NDA, the FDA may also audit data from clinical trials to ensure compliance with cGCP requirements.

After the FDA evaluates the

application, manufacturing process and manufacturing facilities, it will issue a Complete Response Letter, or CRL.

A CRL indicates

that the review cycle of the application is complete and whether the application is approved and, when applicable, the CRL describes

the specific deficiencies in the NDA and may require additional clinical data and/or an additional Phase 3 clinical trial(s), and/or

other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing.

The applicant

may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.

such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

If a product receives marketing approval,

the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,

which could restrict the commercial value of the product.

Further, the FDA may require that certain contraindications, warnings

or precautions be included in the product labeling, may condition the approval of the NDA on other changes to the proposed labeling,

or may require a Risk Evaluation and Mitigation Strategy (REMS), which could limit the ability to market the drug once approved.

The FDA may also require the development of adequate controls and specifications, or a commitment to conduct post-market testing

or clinical trials and surveillance to monitor the effects of approved products.

Post-Marketing Requirements

Following approval of a new product, a

pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things,

monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product

and reporting Field Alert information relating to bacteriological contamination, significant deterioration of the product or failure

of distributed product to meet specifications, providing the regulatory authorities with updated safety and efficacy information,

product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among

others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are

not described in the drug’s approved labeling, or “off-label use”, limitations on industry-sponsored scientific

and educational activities, and requirements for promotional activities involving the internet.

Although physicians may prescribe

legally available drugs for off-label uses, manufacturers and distributors may not market or promote such off-label uses.

Modifications

or enhancements to the product or its labeling or changes of the site of manufacture are often subject to the approval of the FDA

and other regulators, which may or may not be received or may result in a lengthy review process.

In some cases, these changes

will require the submission of clinical data and the payment of a user fee.

Patent Term Restoration and

Marketing Exclusivity

Depending upon the timing, duration and

specifics of the FDA approval of our prescription drug candidates, some of our U.S.

patents may be eligible for limited patent

term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman

The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost

during product development and the FDA regulatory review process.

However, patent term restoration cannot extend the remaining

term of a patent beyond a total of 14 years from the product’s approval date.

The patent term restoration period is generally

one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date

of an NDA and the approval of that application.

Only one patent applicable to an approved drug is eligible for the extension and

the application for the extension must be submitted prior to the expiration of the patent.

The USPTO in consultation with the FDA,

reviews and approves the application for any patent term extension or restoration.

In the future, we intend to apply for restoration

of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending

on the expected length of the clinical trials and other factors involved in the filing and review of the relevant NDA.

Drug Regulation

In Canada, biopharmaceutical product candidates are regulated by

the Food and Drugs Act and the related rules and regulations, which are enforced by the Therapeutic Products Directorate of Health

In order to obtain approval for commercializing new drugs in Canada, the sponsor must satisfy many regulatory conditions.

The sponsor must first complete preclinical studies in order to file a clinical trial application, or CTA, in Canada.

will then receive different clearance authorizations to proceed with Phase 1 clinical trials, which can then lead to Phase 2 and

Phase 3 clinical trials.

Once all three phases of trials are completed, the sponsor must file a registration file named a new drug

submission, or NDS, in Canada.

If the NDS demonstrates that the product was developed in accordance with the regulatory authorities’

rules, regulations and guidelines and demonstrates favorable safety and efficacy and receives a favorable risk/benefit analysis,

then the regulatory authorities issue a notice of compliance, which allows the sponsor to market the product.

In addition to regulations in the United

States and Canada, we are subject to a variety of regulations governing clinical studies and commercial sales and distribution

of our products in other jurisdictions around the world.

These laws and regulations typically require the licensing of manufacturing

and contract research facilities, carefully controlled research and testing of product candidates and governmental review and approval

of results prior to marketing therapeutic product candidates.

Additionally, they require adherence to the FDA’s GLP, good

clinical practices and good manufacturing practices during production.

The process of new drug approvals by regulators in the United

States, Canada and the European Union are generally considered to be among the most rigorous in the world.

Whether or not FDA or Health Canada approval

is obtained for a product, we must obtain approval from the comparable regulatory authorities of other countries before we can

commence clinical studies or marketing of the product in those countries.

The approval process varies from country to country and

the time may be longer or shorter than that required for the FDA or Health Canada approval.

The requirements governing the conduct

of clinical studies, product licensing, pricing and reimbursement vary greatly from country to country.

In some international markets,

additional clinical trials may be required prior to the filing or approval of marketing applications within the country.

Active Pharmaceutical Ingredient

The FDA will regulate finished products

containing APIs developed or under development by us.

Depending on its intended uses, a finished product containing the API may

be regulated as a drug under the procedures described above.

In general, the regulatory requirements in other countries also depend

on the nature of the finished product and do not focus on the API itself.

Fiscal Year 2020 Developments

On April 1, 2019, we announced publication of CaPre’s bioavailability study in a leading

peer-reviewed journal.

This study further validated our prior study results demonstrating that the bioavailability of CaPre is

significantly better than LOVAZA when taken with a low-fat meal.

On June 4, 2019, we announced that our TRILOGY 2 clinical trial had achieved 100% randomization,

and that more than 60% of patients who had previously been randomized in our Phase 3 TRILOGY trials had completed their 6-month

treatment plans.

On September 9, 2019, we announced that we were awarded up to $750,000 in non-dilutive and nonrepayable

funding, as well as technical and business advisory services, from the National Research Council of Canada Industrial Research

Assistance Program to apply towards eligible research and development disbursements for our commercial production platform for

On September 30, 2019, we announced that 100% of the required total patients for our two TRILOGY

Phase 3 clinical trials had been randomized, and nearly 80% of the patients in both trials combined had completed their 6-month

On September 30, 2019, we determined that we would migrate from reporting in IFRS to U.S.

effective beginning with this annual report in connection with becoming a U.S.

domestic registrant.

On November 4, 2019, we announced that we had partnered with Aker to deliver to us RKO under a

two-year, fixed price supply agreement.

On November 7, 2019, we announced the publication of a CaPre pharmacokinetics study entitled, “Evaluation

of OM3-PL/FFA Pharmacokinetics After Single and Multiple Oral Doses in Healthy Volunteers”

in a leading peer-reviewed journal,

Clinical Therapeutics.

The study showed that the bioavailability of CaPre did not appear to be meaningfully affected by the fat

content of a meal consumed before dose administration.

On November 18, 2019, we released preliminary new animal study data which provided additional insights

into CaPre’s potential mechanism of action in diabetes.

The preliminary findings obtained for the diabetes mouse study showed

that CaPre may promote insulin secretion as seen by statistically significant results produced in a standard glucose challenge

test, thus suggesting a mechanism of action different and unique when compared to metformin, which does not promote insulin secretion.

· On November 26, 2019, we announced that the last patient completed their final visit in our TRILOGY

1 Phase 3 trial of CaPre.

· On December 18, 2019, we incorporated a new wholly-owned subsidiary named Acasti Innovation AG

under the laws of Switzerland for the purpose of future development of our intellectual property and global distribution of our

· On December 23, 2019, we provided an update on the expected delay into January 2020 of topline

results for our TRILOGY 1 Phase 3 trial of CaPre.

The reporting of TRILOGY 1 was postponed due to an unexpected delay in data processing

and transfer from the central testing laboratory to the statistical consultants for independent and external validation.

problem was identified by the CRO data management group, it triggered an immediate hold on the data transfer to the CRO statistical

group and initiated a full quality review by the CRO of the processes and procedures involved at the central testing laboratory.

This review was completed in early January 2020, and topline results for TRILOGY 1 were subsequently released on January 13, 2020.

A more comprehensive audit of the central laboratory was subsequently completed in the first calendar quarter of 2020.

· On January 9, 2020, we announced that the last patient completed their final visit in our TRILOGY

2 Phase 3 trial of CaPre.

On January 13, 2020, we reported topline results for our TRILOGY 1 Phase 3 trial of CaPre, which,

despite showing a meaningful reduction of TGs in the CaPre arm, did not reach statistical significance due to an unusually large

placebo effect.

On February 10, 2020, we provided an update on our TRILOGY 1 and TRILOGY 2 Phase 3 trials of CaPre.

We disclosed that detailed examination of the TRILOGY 1 Phase 3 trial results for CaPre was underway, including specific clinical

site audits and an audit of the central testing laboratory.

We also announced that once the full analysis of TRILOGY 1 is completed,

we intended to request a meeting with the FDA to discuss the data and seek guidance on how to modify the SAP for our TRILOGY 2

trial before unblinding the TRILOGY 2 trial results.

On March 11, 2020, we announced that a notice of allowance for new composition of matter and method

of use patents had been received from the U.S.

and Mexican patent offices.

On April 1, 2020, we announced that a Type C meeting request had been submitted to the FDA, with

a meeting expected in the second half of June 2020.

On April 1, 2020, we also announced the annual grant of stock options to employees, executives

and directors as part of our annual performance review in accordance with our Long Term Incentive Plan.

On April 30, 2020, we announced that we had submitted a briefing package to the FDA on April 29,

2020 for its review.

On June 19, 2020, we announced that the FDA had provided us with a written response to our Type

C Meeting request and briefing package.

Our two Phase 3 clinical trials, designated as

TRILOGY 1 & 2 randomized a total of 242 and 278 patients respectively, and were designed to evaluate the efficacy, safety and tolerability

of CaPre in patients with severe hypertriglyceridemia.

The top-line results were announced on January 13, 2020, and August 31, 2020 respectively,

and neither TRILOGY 1 nor TRILOGY 2 met their primary endpoint for lowering triglycerides at 12 weeks.

CaPre was well tolerated in TRILOGY,

with a safety profile similar to placebo, and consistent with our previously conducted Phase 2 and 3 studies.

Given the outcome of the

TRILOGY studies we will not file a New Drug Application (NDA) with the U.S.

Food and Drug Administration (FDA) for patients with severe

hypertriglyceridemia, and we do not plan to conduct additional clinical trials for CaPre.

Instead, we plan to continue to advance discussions

with third parties who are interested in pursuing clinical development and regulatory approval for CaPre.

Engaged Oppenheimer & Co.

to Assist in Strategic Review

On September 29, 2020, we announced that we had commenced a formal process

to explore and evaluate strategic alternatives to enhance shareholder value.

Towards this end, we engaged Oppenheimer & Co., Inc.

as our financial advisor to assist in the process.

We have devoted significant time and resources to identifying and evaluating strategic

alternatives, which led to the announced pending transaction with Grace.

However, there can be no assurance that our proposed merger with

Grace will close, or of the timing of any such outcome.

We have also devoted significant time and resources to identify and evaluate potential

strategic partnerships for CaPre;

however, there can be no assurance that such activities will result in any agreements or transactions

that will enhance shareholder value.

We do not intend to make any further disclosures regarding the strategic process for CaPre unless

and until a specific course of action is approved by our board of directors.

Definitive Agreement to Acquire Grace Therapeutics, Inc .

On May 7, 2021, we announced a definitive agreement

to acquire Grace.

Subject to the completion of the Proposed Transaction, we will acquire Grace’s pipeline of drug candidates addressing

critical unmet medical needs for the treatment of rare and orphan diseases.

The Proposed Transaction has been approved by the boards of

directors of both companies and is supported by a majority of Grace stockholders through voting and lock-up agreements with Acasti.

transaction remains subject to approval of our shareholders, as well as applicable stock exchanges.

In connection with the Proposed Transaction, we

will acquire Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets

supported by an intellectual property portfolio consisting of more than 40 granted and pending patents in various jurisdictions worldwide.

Grace’s product candidates aim to improve clinical outcomes by applying proprietary formulation and drug delivery technologies to

existing pharmaceutical compounds to achieve improvements over the current standard of care, or to provide treatment for diseases with

no currently approved therapy.

Grace’s three lead programs have all received Orphan Drug Designation from the FDA, which could

provide up to seven years of marketing exclusivity in the United States upon the FDA’s approval of the NDA, provided that certain

conditions are met.

Management and Operations

Subject to shareholder approval of the Proposed

Transaction, the combined companies will be led by Jan D’Alvise as President and Chief Executive Officer (“CEO”) and

will continue to maintain our corporate headquarters in Laval, Quebec, Canada.

It is expected that all Grace employees will transition

to Acasti and they will continue to maintain an R&D laboratory and commercial presence in North Brunswick, New Jersey.

The new board

of directors of the combined company will be composed of 4 representatives from Acasti and 3 representatives from Grace.

About the Proposed Transaction

Pending approval by our shareholders as well as

applicable stock exchange approvals, Grace will merge with a new wholly owned subsidiary of Acasti.

Grace stockholders will receive newly

issued Acasti common shares pursuant to an equity exchange ratio formula set forth in the merger agreement.

Under the terms of the definitive

agreement, immediately following the consummation of the Proposed Transaction, Acasti’s shareholders on a pro forma basis would

own approximately 55% of the combined company’s common shares, and Grace’s stockholders would own approximately 45% of the

combined company’s common shares, in each case calculated on a fully-diluted basis, subject to upward adjustments in favor of Acasti

shareholders based on each company’s capitalization and net cash balance as set forth in the merger agreement.

For illustrative

purposes, assuming no adjustments for each company’s capitalization and net cash balance and based on 208,375,549 Acasti common

shares currently issued and outstanding, an aggregate of up to 170,489,086 Acasti common would be issued to Grace stockholders as consideration

for the Proposed Transaction.

In connection with the entering into the merger

agreement, all significant stockholders of Grace have entered into voting and lock-up agreements with Acasti pursuant to which they have

agreed, amongst other things to (i) vote their shares of Grace in favor of the Proposed Transaction, (ii) be subject to lock-up provisions

for a period of 12 months (subject to certain exceptions), and (iii) support the election of board nominees specified in the voting and

lock-up agreements through to the 2023 annual general meeting of shareholders.

The Proposed Transaction is expected to close

in calendar the third quarter of 2021, immediately following approval by the Acasti shareholders, subject to any applicable U.S.

and Exchange Commission (“SEC”) review and stock exchange approvals, as well as satisfaction of other closing conditions by

each company specified in the definitive agreement.

Oppenheimer & Co.

is acting as the Acasti’s

financial advisor for the Proposed Transaction and Osler, Hoskin & Harcourt, LLP is serving as its legal counsel.

William Blair &

Company, LLC is serving as financial advisor to Grace, with Reed Smith, LLP serving as its legal counsel.

The Proposed Transaction is an arm’s length

transaction in accordance with the policies of the TSX Venture Exchange.

Nasdaq Update

On May 11, 2021, Acasti received written notice

from the Nasdaq Listing Qualifications Department notifying Acasti that based upon Acasti’s non-compliance with the $1.00 bid price

requirement set forth in Nasdaq Listing Rule 5550(a) as of May 10, 2021, Acasti common shares were subject to delisting unless Acasti

timely requests a hearing before the Nasdaq Hearings Panel.

Acasti requested a hearing, which stayed any further action by Nasdaq pending

the conclusion of the hearing process.

At the hearing on June 17, 2021, Acasti presented

a detailed plan of compliance for the Nasdaq Listing Panel’s consideration, which included Acasti’s commitment to implement

a share consolidation in connection with the Proposed Transaction.

Acasti expects to receive the Nasdaq Listing Panel’s decision

within 30 days after the hearing date.

There can be no assurance that Nasdaq will accept Acasti’s plan or that Acasti will be able

to regain compliance with Nasdaq’s listing rules or maintain compliance with any other Nasdaq requirement in the future.

by Nasdaq of (i) the continued listing of Acasti’s common shares on Nasdaq following the effective time and (ii) the listing of

the Acasti common shares being issued in connection with the merger on Nasdaq at or prior to the effective time are conditions to the

closing of the merger.

COVID-19 Update

To date, the ongoing COVID-19 pandemic has not caused significant disruptions

to our business operations and research and development activities.

The extent to which the COVID-19 pandemic impacts our business and prospects

will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning

the severity of the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact, among others.

Corporate Structure

Acasti was incorporated on February 1, 2002 under Part 1A of the

Companies Act (Québec) under the name “9113-0310 Québec Inc.”

On February 14, 2011, the Business

Corporations Act (Québec), or QBCA, came into effect and replaced the Companies Act (Québec).

governed by the QBCA.

On August 7, 2008, pursuant to a Certificate of Amendment, we changed our name to “Acasti Pharma

Inc.”, our share capital description, the provisions regarding the restriction on securities transfers and our borrowing

On November 7, 2008, pursuant to a Certificate of Amendment, we changed the provisions regarding our borrowing powers.

We became a reporting issuer in the Province of Québec on November 17, 2008.

On December 18, 2019, we incorporated

a new wholly-owned subsidiary named Acasti Innovation AG, or AIAG, under the laws of Switzerland for the purpose of future development

of our intellectual property and for global distribution of our products.

Acasti was incorporated on February 1, 2002 under Part 1A of the Companies

Act (Québec) under the name “9113-0310 Québec Inc.” On February 14, 2011, the Business Corporations

Act (Québec), or QBCA, came into effect and replaced the Companies Act (Québec).

We are now governed by the QBCA.

On August 7, 2008, pursuant to a Certificate of Amendment, we changed our name to “Acasti Pharma Inc.”, our share capital

description, the provisions regarding the restriction on securities transfers and our borrowing powers.

On November 7, 2008, pursuant

to a Certificate of Amendment, we changed the provisions regarding our borrowing powers.

We became a reporting issuer in the Province

of Québec on November 17, 2008.

On December 18, 2019, we incorporated a new wholly owned subsidiary named Acasti Innovation

AG, or AIAG, under the laws of Switzerland for the purpose of future development of our intellectual property and for global distribution

of our products.

AIAG currently does not have any operations.

Available Information

This annual report on Form 10-K, our quarterly

reports on Form 10-Q, our current reports on Form 8-K, and any amendments to these reports are filed, or will be filed, as applicable,

with the Securities and Exchange Commission, or SEC, and the Canadian Securities Administrators, or CSA.

These reports are available

free of charge on our website, www.acastipharma.com, as soon as reasonably practicable after we electronically file such reports

with or furnish such reports to the SEC and the CSA.

Information contained on, or accessible through, our website is not a part

of this annual report, and the inclusion of our website address in this document is an inactive textual reference.

Additionally, our filings with the SEC

may be accessed through the SEC’s website at www.sec.gov and our filings with the CSA may be accessed through the CSA’s

System for Electronic Document Analysis and Retrieval at www.sedar.com.

This annual report on Form 10-K, our quarterly reports on Form 10-Q, our

current reports on Form 8-K, and any amendments to these reports are filed, or will be filed, as applicable, with the SEC, and the Canadian

Securities Administrators, or CSA.

These reports are available free of charge on our website, www.acastipharma.com, as soon as reasonably

practicable after we electronically file such reports with or furnish such reports to the SEC and the CSA.

Information contained on, or

accessible through, our website is not a part of this annual report, and the inclusion of our website address in this document is an inactive

textual reference.

Additionally, our filings with the SEC may be accessed through the SEC’s

website at www.sec.gov and our filings with the CSA may be accessed through the CSA’s System for Electronic Document Analysis and

Retrieval at www.sedar.com.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business