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Mast Therapeutics: A High Risk/High Reward Play


The market plunge that began last week in earnest continued as we are seeing the biggest opening decline in years to start the trading week.

High-beta sectors like small caps and biotechs are getting hit particularly hard. Most dip buyers in biotech should focus on the large-cap growth part of the space.

However, more aggressive investors can nibble on some smaller, most speculative plays. One of these is Mast Therapeutics, which is a promising but risky name in the sector to consider.

Well, no one can complain about a lack of excitement in the market lately. Equities posted their worst week since September 2011 last week. Trading this week began with a 1,000-point plunge in early Monday trading to begin the new week. High-beta sectors of the market are getting hit particularly hard.

Biotech indices were getting close to official "bear" territory with almost a 20% plunge from recent highs in intraday trading to begin Monday. I am nibbling during this decline in the sector. Mostly I am picking up some shares in large-cap growth names selling at reasonable valuations as I outlined yesterday.

Today, I want to talk about a small speculative concern I have picked up some additional shares in during the area's recent decline. This is a small-cap company with most of its market capitalization represented by cash on the balance sheet, a couple of interesting products in the pipeline and some recent positive coverage from analysts.

I rarely cover a company with such a low market capitalization and stock price as Mast Therapeutics (NYSEMKT:MSTX). However, the company has got a couple of "shout-outs" from analyst firms over the past two weeks. The company also has two interesting products in development. In addition, most of the company's ~$70 million in market capitalization consists of cash on its balance sheet.

Company Overview

Mast Therapeutics is a pharmaceutical company that is committed to showing the clinical benefit of improving...