Mast Therapeutics Inc (NYSEMKT:MSTX) has merged with Savara to establish a team targeting lung/heart inhalation therapies market. As per the merger deal, MSTX shareholders will own 24% of the new firm. The initial market cap of the combined entity was projected to be $151.5 million.
The combined firm will be named Savara, Inc. and it will be directed by Savara’s existing management team. It will trade under a new symbol upon closure of the deal. Savara brings to the new entity Molgradex and AeroVanc, both boasting orphan drug status. Mast will contribute its “AIR001” heart failure drug, and also cash. A prerequisite for the agreement to complete is for Mast to opt for a reverse stock split of its unpaid shares to meet NYSE’s listing requirements.
The deal is anticipated to close during 2Q2017. Mast’s shareholders will get an adjustment depending on the amount of cash the firm will bring at closing. The January 9, merger conference call stated nothing different, except that Savara plans to file a form S-4 in mid-February listing its financial condition. Mast CEO Brian Culley reported that the firm will send its shareholders proxy documents pertaining to the merger and the imminent reverse split in 2-3 weeks.
The biggest winners in this agreement are Savara’s stockholders as they are getting “AIR001,” a prospective multi-billion-dollar medication, for a fraction of what actually it is worth. Mast shareholders will also gain because they are getting a considerable premium for their shares. The new firm has a well-regarded management and strong team, and the upside of the combined entity is significant relative to the projected initial merger valuation.
Reverse split may scare many investors, however this reverse split is different as it is intended to break away from a directionless and dying Mast enterprise to be part of a growing and thriving firm with considerable upside potential.