Mast Therapeutics Inc (NYSEMKT:MSTX): Here's What We're Watching

Mast Therapeutics Inc (NYSEMKT:MSTX) had a pretty rough July, down 30% on the month's highs as we headed into the Wednesday US session open. However, the company has got a few near term catalysts up its sleeves, and could quickly recover and more if things go its way.Here's what we are watching near term.Before we get going, a quick introduction for those not familiar with the company. Mast is a development stage biotech company with two primary product candidates – Vepoloxamer, its lead and AIR001.Vepoloxamer is targeting sickle cell disease, and a phase III for the drug completed earlier this year. People with sickle cell disease have red blood cells that stick together as a result of them sickling, or changing shape into a crescent formation. This causes blockages in blood vessels, and in turn, the issues commonly associated with the disease. Vepoloxamer helps resolve the surface tension issues that creates the sickling and the sticking together, and by proxy, can treat the condition. At least that's what Mast hopes. Top line from the phase III is expected in September (this was initially reported as Q1, then Q2 and now September) and gives us our first major catalyst.AIR001 is a heart failure candidate, and a phase II study literally just kicked off to investigate its impact in one of the most common form of heart failures – heart failure with preserved ejection fraction, or HFpEF. It's a 100-person study, and the primary endpoint is what's called the peak oxygen consumption, measured after four weeks of treatment with the drug. We're looking for increased oxygen consumption as an indication of efficacy, and the potential meeting of this primary endpoint (as well as a flurry of secondaries, which will serve as a kicker if the primary is met and but probably won't mean too much if the drug fails the primary) as our second major catalyst. This one builds on data pit together as the result of two successful phase IIa trials, both of which looked at AIR001 in cardiovascular conditions, one of which focused on exactly this indication. In these trials the drug was demonstrated to have a statistically significant clinical benefit over placebo, and a favorable safety profile, so we thing that it's got a great chance of performing in this extension phase II. Primary completion for this one is July 2017, and we should see some interim around the turn of the year.Finally, Mast kicked off a phase II in the first of the two discussed candidates, Vepoloxamer, back in 2015. This one is also a cardiovascular indication, targeting chronic heart failure. It's double blind, and its pitching Vepoloxamer against placebo across a thirty-day period in 150 patients. There are six primary endpoints, each relating to a different element of the patient's condition – six minute walk test, ventricular volume, AEs, Borg dyspnea, living questionnaire (Minnesota) and some biomarkers. In each, the company applies a baseline score (which is established before treatment takes place) and then takes a comparable score at the end of the treatment period. The change in the scores are then combined to offer up a sort of mean range improvement, and this is what will be measured against placebo. We're looking to a statistically significant difference in the improvement in patients that take the drug and those that take placebo (obviously weighted towards the active arm) as indicative of efficacy.Primary completion on this one is March 2017, so we should see some topline at the start of the second quarter of next year.Mast doesn’t generate any revenues, and cash on hand isn’t that great for a company that is going to be looking to carry two candidates into phase IIIs within twelve months, as well as submitting an NDA to the FDA. This means we'll likely see a capital raise, and this raise will almost certainly be dilutive. That's the primary risk here. We believe, however, that the value offered by the capital in terms of taking the drugs through to commercialization (assuming topline comes out positive on the above mentioned milestones) will outweigh the value lost on dilution (assuming the company can get reasonable terms).We're going to be alerting our readers as each of these milestones (and any others between now and then) come in. Don't miss out – sign up to our free small cap newsletter below and get the data, and our interpretation, before the markets move.Disclosure: We have no position in MSTX and have not been compensated for this article.