Mast Therapeutics: Why I Own This 50 Cent Biotech Stock — Bret Jensen

I have gotten a few questions recently on Mast Therapeutics (NYSEMKT:MSTX). This company is high risk/high reward play whose stock goes for miserly ~50 cents a share. It is the lowest priced stock I have in my portfolio. Despite a price level that usually connotes a penny stock, Mast has a market capitalization of approximately $80 million. I do like the risk profile of the company’s prospects but is a bit too risky to include at the present time in the Biotech Forum portfolio. Let’s take a look at Mast Therapeutics and its potential as a largely binary investment.

Company Overview:
Mast Therapeutics is a pharmaceutical company that is committed to showing the clinical benefit of improving blood flow and sealing cell membranes in the treatment of dysfunctional circulatory diseases. I would not be surprised to see the company doing a reverse stock split at some point to boost the shares back above the $1.00 a share level.

Key Trial Underway:
Currently the company’s main drug candidate vepoloxamer (MST-188) is in a phase III trial for the treatment of sickle cell disease. The compound holds Orphan Drug status in both the United States and Europe which would be hugely beneficial should trial results be positive. Orphan Drug status provides seven years of exclusively on a commercialized product. Sickle cell disease is a hereditary blood disorder that primarily affects African-Americans in the United States.

Worldwide almost 300,000 children are born with a form of sickle-cell disease every year, mostly in sub-Saharan Africa. In 2013, over 175,000 deaths globally were attributed to this disease. Results from trials should be released in the first quarter of next year. Mast has a large head start over competitors as it is farther along in its development in targeting this disease than any other company. This would be the first new treatment if approved in almost two decades.

Outlook:
The company has other trials ongoing including one for chronic heart failure using MST-188 that just started Phase II trials. The primary near term catalyst is results from the sickle cell trials. Approval would likely eventually mean at least $200 million in annual sales, which would be a huge driver within a company with just $80 million market capitalization. Of which, more than one third is in cash which the company is using to fund development.

Canaccord Genuity and Roth Capital have both reiterated “Buy” ratings and $3.00 a share price targets on Mast in October, implying 500% upside pending positive catalysts. Even if approval chances are one in three, this is an attractive risk/reward profile and I believe outcome is more 50/50. This makes Mast worthy of consideration of a small positive for aggressive growth investors. SPECULATIVE BUY

Thank You & Happy Hunting
Bret Jensen
Editor, Biotech Forum

NOTE: For anyone wanting my free report on three of the most attractive Large Cap Growth plays in biotech, just go to shotguninvesting.com and register. These are three of my core holdings within my own biotech portfolio and ones I plan to hold for 3–5 years.

Disclosure: I am/we are long MSTX.



Originally published at seekingalpha.com.