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Mast (MSTX) Is Buyout Target For Big Pharma

|Includes: Savara Inc. (SVRA)

Mast (MSTX) is a Likely Acquisition Target for Big Pharma

There is a great need for new, medical advancement in the treatment of sickle cell disease.

According to MAST CEO Culley, "Many people are unaware that MST-188 is the most clinically-advanced new drug in development for SCD. But as such, we have the honor of leading a growing and important field, which unfortunately has historically suffered from too little awareness or investment. Remarkably, there has been only one FDA-approved drug for SCD and that approval came a whopping 16 years ago. Surely, patients deserve better."

Big Pharma has shown their propensity to acquire and or partner with small companies developing orphan status drugs for rare diseases like sickle cell disease.

One example is Pfizer's $340 million pact with GlycoMimetics to develop GMI-1070.

Another is Baxter's (NYSE:BAX) recent acquisition of AesRx, LLC, a private U.S. biopharmaceutical company focused on orphan drug targets, including the development and commercialization of Aes-103, an investigational prophylactic treatment for sickle cell disease.

Interestingly, both of these cases involved big pharma partnering or acquiring a smaller company while these sickle cell drug candidates were in Phase 2.

In contrast, Mast is currently in Phase 3 for MST-188 in sickle cell disease and in Phase 2 for MST-188 in occlusive arterial disease. Additionally, Mast's MST-188 for sickle cell disease has already achieved orphan drug status for SCD in both the U.S. and EU, as well as fast track status with the FDA making it a very attractive candidate for acquisition.

Based on recent partnership and acquisition activity by big pharma in the specialty, rare disease area of biotech, Mast Therapeutics is becoming an attractive candidate with a promising new drug undergoing mid and late stage trials in multiple indications.

Investors have a limited window of opportunity to invest in this exciting, small company early before the full value is realized by premium buyout or share price appreciation as investors pour into the stock prior to Phase 3 readout in the coming months.

Just last week, Roth initiated coverage of MSTX at "BUY" with a $3.00 price target. Canaccord also has a "BUY" rating and $3.00 price target on MSTX.

And institutions are building huge positions in the stock too with over 20 million shares added to institutional positions versus only 230,957 shares sold. Top institutional owners of MSTX include Franklin, Baker Brothers, Sabby, Vanguard, BVF, and Alyeska.

With $57 million of cash and equivalents on hand (as of 12/31/14) and existing U.S. and EU orphan drug designation for another indication (sickle cell disease) of MST-188 currently in Phase 3 trial, the risk of ownership and significant loss at this small market cap of $82 million is very low in my opinion.

The risk/reward equation points very favorably to reward with possible weakness/downside risk at year-to-date closing lows of $0.43 and possible upside rewards at the most recent analyst price target of $3.00.

Disclosure: The author is long MSTX.