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Mast Therapeutics Inc (NYSEMKT:MSTX) Has Major Upside Potential On A Near Term Catalyst

Mast Therapeutics Inc (NYSEMKT:MSTX) Has Major Upside Potential On A Near Term Catalyst
Written by
Chris Sandburg
Published on
December 20, 2016
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Last time we covered Mast Therapeutics Inc (NYSEMKT:MSTX), the company had just taken a severe hit. Its lead development program, a target seeking approval in sickle cell disease (SCD), failed to meet its primary endpoint in a pivotal trial, and Mast went from trading at $.60 a share to $.12 overnight. That's an 80% decline. We noted that we felt the decline was something of an oversell, given the company's secondary pipeline, and that, in turn, there was the potential for a discount entry to Mast's less mature assets.Well, the lead of these assets is flying through the development process, and we're about to get a host of data that could close the gap on the SCD decline, and more.Here's what we're looking out for.The asset in question is called AIR001, and it's a heart failure target. It's under investigation as part of three separate phase II trials, all relating to a specific type of the condition called heart failure with preserved ejection fraction (HFpEF). The first phase II 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.At the time of our previous coverage, we pointed to an interim release from the pulmonary hypertension trial as a report to keep an eye on. This hit press, and reads very well. It's not the headline release, however – the headliner is the direct HFpEF study, and it's this one that is going to kick start the company's recovery if it hits on its predefined endpoints.So what's the drug?It's called AIR001, as mentioned, and it's an inhalable formulation of sodium nitrite. When inhaled, the nitrite turns into nitric oxide (NO) and this NO is a vasodilator. Increased vasodilation leads to lower blood pressure and – by proxy – increased strain tolerance on the heart. To date, there have been some pretty solid data, both in vivo and vitro, pointing towards efficacy.The HFpEF study that we are focusing on is designed to investigate AIR001's potential to improve the clinical responses to exercise training in individuals with HFpEF. It will enroll circa 68 patients, and each patient will undergo twelve weeks of cardiac rehabilitation, including exercise training, and will be randomized to receive either AIR001 or placebo inhalation solution through the training period.The primary endpoint of the study will be the change in exercise capacity as measured by peak oxygen consumption, and it's this end that we're watching closely as indicative of the drug's (and when we say this, we really mean the company's) success or failure. Enrollment started at the beginning of December, and shouldn’t be too taxing – HfpEF is a common condition (hence the importance of this trial to Mast) and the company should be able to wrap up the first phase of the study pretty quickly. Beyond that, there's twelve weeks of dosing, and then, let's say, a couple of weeks of data aggregation. This puts the topline data release from the study as somewhere around the middle of the second quarter.What's the downside risk?Cash shouldn't be an issue, at least through to the completion of the current studies, but we may see some dilution during 2018. Debt comes in at $3.5 million (after the $10 million prepayment of a debt facility), which is scheduled to be repaid in equal monthly installments of principal and interest through January 1, 2019. As such, debt isn’t too much of a problem either. The primary risk, therefore, is the trial outcome. If this one goes the way of the SCD study, Mast has a very thin pipeline on which to fall back.We will be updating our subscribers as soon as we know more. For the latest updates on MSTX, sign up below!Disclosure: We have no position in MSTX and have not been compensated for this article.

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