What Is The Value Of Mast Therapeutics Inc (NYSEMKT:MSTX)'s Remaining Program?

Mast Therapeutics Inc (NYSEMKT:MSTX) just took a massive hit on the outcome of its sickle cell disease (SCD) program. The company is down more than 80% on its pre-release capitalization, and sentiment looks set to weigh further on Mast near term.There might be an opportunity here, however.Last time we covered Mast, we focused primarily on how we would interpret the data that just caused the crash. As a secondary focus, we also targeted the company's kicker, a cardiovascular target called AIR001. This kicker has now been promoted to primary asset, and Mast's value now rests pretty much solely on this asset's prospects.As such, let's try and figure out just what its worth. If it's got potential, current prices might represent a cheap entry point to get in ahead of some upside potential as this asset moves through the development pathway. For reference, and before we get going, Mast is currently valued at a little over $21 million open market. Our aim, then, is to try and figure out whether there is $21 million or more worth of speculative value in AIR001's development program, and beyond.Before we get into this drug, however, we will just quickly touch on the failed program. Mast was studying the drug in two indications, the above-mentioned SCD and a heart failure indication. The former was the more advanced, and it was the phase 3 study in this indication that failed. The drug in question, vepoloxamer, failed against a number of endpoints, and Mast has decided to drop the entire program – both SCD and cardiovascular. It's going to save the company around $20 million in annual anticipated operating expenses during 2017, reducing estimates to around $9 million for the year.Most of that's history now, however.AIR001 is currently in three ongoing phase 2 studies investigating safety and efficacy across three variations of cardiovascular disease. It is essentially an inhalable version of sodium nitrite. Sodium nitrite gets turned into nitrous oxide in our system, and is a vasodilator. It works especially well in hypoxic regions, and these two qualities make it perfect (theoretically, at least) in treating cardiovascular conditions associated with lack of oxygen (hypoxia) and vasoconstriction.All three of the ongoing phase 2 trials relate to what's called "heart failure with a preserved ejection fraction" (HFpEF). The condition is basically heart failure as the result of a stiff ventricle.The first phase 2 is targeting HFpEF directly. The second is targeting pulmonary hypertension associated with HFpEF. The third, HFpEF undergoing cardiac rehabilitation for exercise training, to evaluate whether blinded treatment with AIR001 improves exercise capacity and hemodynamic reserve.The first of these is the gold standard.If the company can prove its drug effective in direct HFpEF treatment, there's a massive market potential. This type of heart failure accounts for nearly 50% of chronic heart failure, and scientists don't really know how to treat it. Right now, SOC involves firing a cocktail of therapies at it and hoping something sticks. As you might guess, this isn’t very effective.Here’s a quote from Quintiles:

"HFpEF currently represents one of the largest unmet needs in cardiovascular medicine. There is substantial need for new therapeutic approaches and strategies that target mechanisms specific for HFpEF, and the sooner we can ramp up investment in these efforts, the better."

As data hits from these trials, the market potential is certainly large enough to drive value above and beyond the company's current market capitalization. However, Mast's history of struggling to carry through to late stage trials will likely meet any positive results with skepticism, and so we are looking for a strong indication of efficacy to support a bullish hypothesis. Anything other than on this will likely not be enough for markets from a sentiment reversal perspective.So when is the next catalyst? Interim results from the second of the above-mentioned phase 2 studies have already been accepted for publication, and alongside a business update on September 26, Mast announced it will report these data very near term. We are looking to this report as insight into efficacy, and in turn, a potential upside revaluation. It's not going to be enough to close the gap, but it could get the ball rolling as the remainder of the program matures.We're watching the data outputs closely here to see if MSTX can buck its trend and get an asset through late stage development. Subscribe below and we will bring you our interpretation of any data as soon as it hits press, and before it moves markets.Disclosure: We have no position in MSTX and have not been compensated for this article.