A little over a month ago, owning Mast Therapeutics, Inc. (NYSE: MSTX) was nothing but pure misery. Shares plunged from $0.63 to $0.43 in one day, when details of a dilutive public offering were unveiled. As is so often the case though, the market may have overshot with the selling effort that KO's MSTX. Though putting more shares 'out there' mathematically meant existing shareholders would have to share more of the company's upside with newcomers, what's slowly coming to light is that the inflow of new cash is still more advantageous to those prior shareholders; the company would progress little without it.
MSTXis a micro cap biotech name, primarily known for its work on a drug simply known as MST-188. The lead candidate in the Mast Therapeutics pipeline is a treatment for ischemic tissue injury, or predominantly, a drug aimed at the complications that often stem from sickle cell disease. The company's also got two other drugs in the hopper, both aimed at cancer. Neither is in Phase 3 testing though, and therefore not in a position to be a driving force for the stock.
Though it's rarely highlighted, sickle cell disease isn't a minor market, in the United States, or anywhere else. More than $1.0 billion is spent on treating it every year in the U.S. alone, and that's despite the fact that there's no true, dedicated drug that treats it exceedingly well. Mast Therapeutics Inc. is hoping to change that, and so far, MST-188 looks like it just might. Though details of early results are too complicated to explain here, suffice it to say that the drug is in Phase 2 testing for a reason. More than 2/3 of trial drugs that reach Phase 3 end up winning the FDA's approval.
Be that as it may, it's not like MSTX is going to get the new drug approved anytime soon. It's going to need some near-term catalysts to get it going again, especially after last month's hit. Thing is, it has them. Piper Jaffray labeled the stock as 'overweight', and Vista Partners has established a price target of $2.55. ! That's a 430% premium on the current share price.
While it may not get there overnight, the current chart of Mast Therapeutics, says it's pointed in that direction. In fact, the chart of MSTX may be the most compelling part of all about the stock right now.
After getting sucker-punched, many stocks continue to drift lower. Not this one. MSTX began to move upward again the very next day, and hasn't stopped. Granted, it's been a slow rise, but a persistent one. This week, the stock's managed to find support at the 20-day moving average line, bolstering the rally effort in motion. There's still a huge chunk of the June gap left to fill, however, and everything about the stock suggests it'll at least be able to do that.
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