Maxim Group Downgrades Mast Therapeutics (MSTX) to Hold Following Vepoloxamer Phase 3 Miss
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Maxim downgrades Mast Therapeutics (Nasdaq: MSTX) from Buy to Hold and removes its $5 price target.
The firm noted today:
- We got it wrong...vepoloxamer demonstrated no clinical efficacy in EPIC. Mast expects to terminate all clinical development of vepoloxamer, including a phase II study in heart failure.
- The damage is done. Following the expected $10M in operating expenses in 3Q and the $10M debt payment triggered by the EPIC data, we estimate the company now has $15M on the balance sheet. The company is now in capital preservation mode and plans to cut expenses to ~$1M per month, leaving roughly a year's worth of capital. Given the decline in valuation, the stock is now trading near cash.
- Conclusion: Where does Mast go from here? The remaining asset in the pipeline is AIR001, a nitric oxide nebulizer for heart failure currently in a phase II study funded largely by the Heart Failure Network (only $3M in cost to Mast). However, this trial is in early stages of enrollment with data not likely until 2018. The company will evaluate if any residual value remains for vepoloxamer. At MSTX's current valuation, we believe the damage is done. We will wait to see the complete data from the EPIC trial and understand if the heart failure study might move forward. We are downgrading to Hold from Buy and removing our previous price target of $5.
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