Mast Therapeutics, Inc. (NYSEMKT:MSTX), a clinical-stage biopharmaceutical company, today reported financial results for the quarter ended September 30, 2016.

“We are rapidly advancing the clinical development of AIR001 in heart failure with preserved ejection fraction. Notably, we were pleased to announce positive results this quarter on the first 10 out of 20 planned PH-HFpEF patients in an ongoing 50-patient study of AIR001 in pulmonary hypertension. We also are pleased that enrollment in the 100-patient study of AIR001 in HFpEF being conducted by the Heart Failure Clinical Research Network continues to be on track, with data from this Phase 2 proof-of-concept study anticipated in the fourth quarter of 2017,” stated Brian M. Culley, Chief Executive Officer.

“As reflected by our markedly reduced operating expenses last quarter, we have moved quickly to wind down our vepoloxamer programs in sickle cell disease and heart failure, so that our cash can be redeployed to development of AIR001. Because all three active clinical trials of AIR001 are being funded substantially by sources other than Mast, we anticipate that our 2017 operating expenses will be approximately $8 to $9 million, excluding share-based compensation expense. We also continue to work on our nonclinical study of vepoloxamer in ischemic stroke, which is entirely funded by a Small Business Innovation Research grant from the National Institute of Neurological Disorders and Stroke of the National Institutes of Health. We will continue to evaluate additional opportunities for partnerships which can bring value to shareholders,” continued Mr. Culley.

Third Quarter 2016 Operating Results

 The Company’s net loss for the third quarter of 2016 was $8.2 million, or $0.04 per share (basic and diluted), compared to a net loss of $9.9 million, or $0.06 per share (basic and diluted), for the same period in 2015.

The Company recognized $45,000 of revenue for the third quarter of 2016, representing reimbursement of costs related to the nonclinical study of vepoloxamer that is being funded by a grant from the National Institutes of Health (NIH).  The Company recognized no revenue for the same period in 2015.

Research and development (R&D) expenses for the third quarter of 2016 were $5.1 million, a decrease of $2.2 million, or 31%, compared to $7.3 million for the same period in 2015.  The decrease was due primarily to decreases of $1.6 million in external nonclinical study fees and expenses, $0.4 million in external clinical study fees and expenses and $0.2 million in personnel costs for the 2016 period.

The decrease in external nonclinical study fees and expenses was due primarily to decreases in research-related manufacturing costs for vepoloxamer ($1.2 million), nonclinical studies of vepoloxamer ($0.7 million) and research-related manufacturing for AIR001 ($0.1 million), offset by increased costs related to preparing a new drug application for vepoloxamer ($0.4 million), which project was discontinued in September 2016.  The decrease in external clinical study fees and expenses was due primarily to decreases in costs for the Phase 3 study of vepoloxamer in sickle cell disease ($0.8 million) and the Phase 2 study of vepoloxamer in acute limb ischemia, which the Company discontinued and began to wind down in the third quarter of 2015 ($0.1 million), offset by increased costs related to the Phase 2 studies of AIR001 in HFpEF ($0.4 million) and the Phase 2 study of vepoloxamer in heart failure ($0.1 million).

Selling, general and administrative (SG&A) expenses for the third quarter of 2016 were $2.1 million, a decrease of $0.4 million, or 13%, compared to $2.5 million for the same period in 2015. The decrease was primarily due to reduced personnel costs and fees for consulting and legal services compared to the 2015 period.

Interest expense was $0.9 million for the third quarter of 2016, compared to $0.1 million for the same period in 2015.  The increase in interest expense was primarily due to a full quarter of interest expense on a $15.0 million principal balance under our debt facility in 2016 versus a partial quarter in 2015, as well as increased amortization of debt issuance costs as a result of a change in the amortization schedule of such costs due to prepayment of $10.0 million of the principal balance in October 2016, which was triggered by negative top-line results in the Phase 3 study of vepoloxamer in September 2016.

 Year-to-Date Financial Results

The Company’s net loss for the nine months ended September 30, 2016 was $30.1 million, or $0.15 per share (basic and diluted), compared to a net loss of $29.7 million, or $0.18 per share (basic and diluted), for the same period in 2015.

The Company recognized $45,000 of revenue for the nine months ended September 30, 2016, representing reimbursement of costs related to the nonclinical study of vepoloxamer that is being funded by a grant from the NIH.  The Company recognized no revenue for the same period in 2015.

R&D expenses for the nine months ended September 30, 2016 were $20.7 million, a decrease of $0.4 million, or 2%, compared to $21.1 million for the same period in 2015. The decrease was due primarily to a decrease of $1.2 million in external nonclinical study fees and expenses, offset by increases of $0.6 million in external clinical study fees and expenses and $0.2 million in share-based compensation expense.

The $1.2 million decrease in external nonclinical study fees and expenses was due primarily to decreases in research-related manufacturing costs for vepoloxamer ($2.1 million) and costs for nonclinical studies of vepoloxamer ($1.0 million), offset by increases in costs related to preparing a new drug application for vepoloxamer ($1.8 million) and research-related manufacturing for AIR001 ($0.1 million). The $0.6 million increase in external clinical study fees and expenses was due primarily to increases in costs for the Phase 2 study of vepoloxamer in heart failure ($1.4 million) and the Phase 2 studies of AIR001 in HFpEF ($0.7 million), offset by a net decrease in costs associated with clinical studies of vepoloxamer for its development in sickle cell disease ($0.9 million) and the Phase 2 study of vepoloxamer in ALI ($0.5 million).

SG&A expenses for the nine months ended September 30, 2016 were $7.4 million, a decrease of $1.0 million, or 12%, compared to $8.4 million for the same period in 2015. The decrease was primarily due to reduced severance and share-based compensation expenses and fees for consulting and legal services compared to the 2015 period.

Interest expense was $2.0 million for the nine months ended September 30 2016, compared to $0.1 million for the same period in 2015.   The increase in interest expense was primarily due to a full nine months of interest expense on a $15 million principal balance under our debt facility in 2016 versus approximately a month in 2015, as well as increased amortization of debt issuance costs as a result of a change in the amortization schedule of such costs due to prepayment of $10 million of the principal balance in October 2016.

 Investor Conference Call

The Company will hold a conference call today, November 8, 2016, at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time to discuss its financial results for the third quarter of 2016 and provide a general business update.  Interested parties may access the conference call by dialing (855) 239-3120 from the U.S. and (412) 542-4127 from outside the U.S. and should request the Mast Therapeutics, Inc. Third Quarter 2016 Conference Call.  A live webcast of the conference call will be available online from the Investors section of Mast’s website at http://www.masttherapeutics.com/investors/events/. Replays of the webcast will be available on the Company’s

website for 30 days and a telephone replay will be available through November 15, 2016 by dialing (877) 344-7529 from the U.S. and (412) 317-0088 from outside the U.S. and entering replay access code 10096120.

About Mast Therapeutics

Mast Therapeutics, Inc. is a publicly traded biopharmaceutical company headquartered in San Diego, California. The Company has two clinical-stage investigational new drugs, AIR001 and vepoloxamer.  AIR001, a sodium nitrite solution for intermittent inhalation via nebulization, is in Phase 2 clinical development for the treatment of heart failure with preserved ejection fraction (HFpEF). More information can be found on the Company’s web site at www.masttherapeutics.com. Mast Therapeutics™ and the corporate logo are trademarks of Mast Therapeutics, Inc.