Mast Therapeutics Inc (NYSEMKT: MSTX)
Mast Therapeutics has been an incredible stock to follow as of late, and for good reason. The stock has gained considerably recently. But what’s causing the gains? What are the risks? What’s the full story? Today, I’ll do my best to explain everything.
What’s Causing The Gains On MSTX?
With the massive gains in the stock, one of the first questions that come up with regard to Mast Therapeutics is what’s causing such strong movement? The reason for the gains we’re seeing is relatively simple to understand. The gains we’ve seen recently revolve around investor hopes with regard to vexoloxamer.
Vexoloxamer is the lead treatment candidate at MSTX and is currently in the process of a trial known as EPIC. The trial is designed to assess vexoloxamer as a treatment for sickle cell disease. However, the data from this study has been delayed for quite some time now, and the company recently announced that it is expecting about another month in delays. While investors reacted negatively at first, after Roth Capital Analyst Michael Higgins weighed in saying that he was not concerned, we started to see more dramatic gains in the stock. Here’s one of the statements that Higgins recently made with regard to MSTX:
“While EPIC results are being delayed roughly one month, the news follows a prior delay as investors’ patience is being tested. While there’s no signal of fundamental problems, the use of the ATM may also have pushed shares lower.”
There’s An Important Risk Here To Consider
While, for the most part, I see positivity surrounding MSTX, there is an important risk to consider here. I’ve been following the pharmaceutical industry for some time now, and I’ve seen plenty of clinical trials. One thing that I’ve noticed in the past is that if clinical trials end with overwhelmingly positive results, we tend to see the release of those results relatively quickly. The same applies when results are overwhelmingly negative. Ultimately, if the result isn’t mixed, it’s released quickly. With that said, chances are that when we see the results from the EPIC trial, we’re going to see at least some positive and at least some negative. There’s no way to know the balance at the moment, but, in my opinion, the longer the release is delayed, the more risky this becomes.
Another important risk to keep in mind is what this trial actually means for Mast Therapeutics. At the end of the day, the study has to be a success, and if not, they need to get their financial ducks in order quickly. In fact, if the results prove to be negative, MSTX will have to make $10 million in loan repayments. So, in the case that the trial misses the mark, not only would the negative affect on the stock be caused by a trial failure, it would be exacerbated by debt owed due to that failure.
What I’m Expecting To See
In the case of MSTX, while I do consider the risks and suggest moving with caution if you decide to do so, my opinion is relatively bullish. At the end of the day, there are risks here, and the continuing delays are adding to those risks. However, the reward potential here is absolutely amazing. The treatment is a much needed one in multiple indications, and an approval would likely mean massive profits. While this probably wouldn’t be a good option for the risk-wary investor, if you do have an appetite for risk, this could be a very strong play!
[Image Courtesy of Wikipedia]