Mast Therapeutics, Inc. (NYSEMKT:MSTX) Files An 8-K Entry into a Material Definitive Agreement

Mast Therapeutics, Inc. (NYSEMKT:MSTX) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement.

On January 6, 2017, Mast Therapeutics, Inc. (Mast or the
Company), Victoria Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Mast (Merger Sub), and Savara Inc., a
privately-held Delaware corporation focused on the treatment of
rare respiratory diseases (Savara), entered into an Agreement and
Plan of Merger and Reorganization (the Merger Agreement), to
which, among other things, subject to the satisfaction or waiver
of the conditions set forth in the Merger Agreement, Merger Sub
will merge with and into Savara, with Savara becoming a
wholly-owned subsidiary of the Company and the surviving
corporation of the merger (the Merger). The Merger is intended to
qualify for federal income tax purposes as a tax-free
reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended.

Subject to the terms and conditions of the Merger Agreement, at
the effective time of the Merger (the Effective Time), (a) each
outstanding share of Savara common stock, on an as-converted
basis taking into consideration all outstanding common stock,
preferred stock, restricted stock and all other securities
convertible or exercisable for Savara Common Stock, will be
converted into the right to receive the number of shares of the
Companys common stock (the Company Common Stock) equal to the
exchange ratio described below; (b) each outstanding Savara stock
option that has not previously been exercised prior to the
Effective Time will be assumed by the Company; and (c) each
outstanding warrant to acquire Savara capital stock that has not
previously been exercised prior to the Effective Time will be
assumed by the Company.

Under the exchange ratio formula in the Merger Agreement, as of
immediately after the Merger, but excluding the effect of certain
financings (as further described in the Merger Agreement), the
former Savara securityholders are expected to own approximately
76% of the aggregate number of shares of the Company Common Stock
issued and outstanding following the consummation of the Merger
(the Post-Closing Shares), and the stockholders of the Company as
of immediately prior to the Merger are expected to own
approximately 24% of the aggregate number of Post-Closing Shares.
This exchange ratio will be fixed prior to closing to reflect the
Companys and Savara capitalization as of immediately prior to
such time. In addition, to the extent the Companys net cash at
closing, as specifically defined in the Merger Agreement, is less
than zero dollars, the exchange ratio may be further adjusted in
a manner that would reduce the percentage of the aggregate number
of Post-Closing Shares held by stockholders of the Company as of
immediately prior to the Merger.

Immediately following the Merger, the name of the Company will be
changed from Mast Therapeutics, Inc. to Savara Inc. At the
Effective Time, the Merger Agreement contemplates that the Board
of Directors of the Company will consist of seven members, five
of which will be the current directors of Savara and two of which
will be independent directors designated by the Company, which
such members are expected to be two of the current directors of
the Company. The executive officers of the Company immediately
after the Effective Time will be designated by Savara with
Savaras Chief Executive Officer, Robert Neville, being the
Companys Chief Executive Officer and Savaras Chief Financial
Officer, David Lowrance, being the Companys Chief Financial
Officer.

The Merger Agreement contains customary representations,
warranties and covenants made by the Company and Savara,
including covenants relating to obtaining the requisite approvals
of the stockholders of the Company and Savara, indemnification of
directors and officers, and the Companys and Savaras conduct of
their respective businesses between the date of signing the
Merger Agreement and the closing of the Merger. Consummation of
the Merger is subject to certain closing conditions, including,
among other things, approval by the stockholders of the Company
and Savara. The Merger Agreement contains certain termination
rights for both the Company and Savara, and further provides
that, upon termination of the Merger Agreement under specified
circumstances, the Company may be required to pay Savara a
termination fee of $1.8 million or Savara may be required to pay
the Company a termination fee of $2.5 million.

The Merger Agreement contemplates that the Company will also seek
approval from its stockholders to effect a reverse stock split
intended to increase its trading price above the minimum
requirements of the NYSE MKT, LLC.Subject to stockholder
approval, the Company expects to implement the reverse stock
split at a ratio to be mutually agreed to by the Company and
Savara within the range approved by the Companys stockholders
immediately prior to the Effective Time.

In accordance with the terms of the Merger Agreement, (i) the
officers and directors of the Company have each entered into a
voting agreement with the Company (the Mast Voting Agreements),
and (ii) the officers, directors and certain affiliated
stockholders of Savara have each entered into a voting agreement
with Savara (the Savara Voting Agreements, together with the Mast
Voting Agreements, the Voting Agreements). The Voting Agreements
place certain restrictions on the transfer of the shares of the
Company and Savara held by the respective signatories thereto and
include covenants as to the voting of such shares in favor of
approving the transactions contemplated by the Merger Agreement
and against any actions that could adversely affect the
consummation of the Merger.

Concurrently with the execution of the Merger Agreement, the
officers and directors of the Company, and the officers,
directors and certain stockholders of Savara, each entered into
lock-up agreements (the Lock-Up Agreements) to which they have

agreed, among other things, not to sell or dispose of any shares
of Company Common Stock which are or will be beneficially owned
by them at the closing of the Merger with one third (1/3) of such
shares being released from such restrictions on each of (i) the
six (6) month anniversary, (ii) the eight (8) month anniversary
and (ii) the ten (10) month anniversary of the Effective Time.

The Merger Agreement, form of Mast Voting Agreement, form of
Savara Voting Agreement and form of Lock-Up Agreement have each
been included as an exhibit to this Current Report to provide the
Companys stockholders with information regarding their terms. The
assertions embodied in the representations and warranties
contained in the Merger Agreement are qualified by information in
confidential disclosure schedules delivered by the parties in
connection with the signing of the Merger Agreement. Moreover,
certain representations and warranties contained in these
agreements were made as of a specified date; may have been made
for the purposes of allocating contractual risk between the
parties to such agreements; and may be subject to contractual
standards of materiality different from what might be viewed as
material to the Companys stockholders. Accordingly, the
representations and warranties in these agreements should not be
relied on by any persons as characterizations of the actual state
of facts and circumstances of the Company or any other parties
thereto at the time they were made and should consider the
information in these agreements in conjunction with the entirety
of the factual disclosure about the Company in the Companys
public reports filed with the Securities and Exchange Commission,
or the SEC. Information concerning the subject matter of the
representations and warranties may change after the date of these
agreements, which subsequent information may or may not be fully
reflected in the Companys public disclosures. These agreements
should not be read alone, but should instead be read in
conjunction with each other and other information regarding the
Company.

The preceding summary does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement,
the form of Mast Voting Agreement, the form of Savara Voting
Agreement and the form of Lock-up Agreements, which are filed as
Exhibits 2.1, 2.2, 2.3 and 10.1, respectively, and which are
incorporated herein by reference.

Item 5.01 Changes in Control of Registrant.

The completion of the Merger will constitute a change in control
of the Company. The Merger is described in Item 1.01 of this Form
8-K, which is incorporated by reference into this Item 5.01.

Item 7.01 Regulation FD Disclosure.

The Company will hold a conference call on Monday, January 9,
2017, at 8:30 a.m. Eastern Time / 5:30 a.m. Pacific Time to
discuss the proposed transaction. Interested parties may access
the conference call by dialing (855) 239-3120 from the U.S.,
(855) 669-9657 from Canada, and (412) 542-4127 from outside the
U.S. and should request the Mast-Savara Conference Call. A live
webcast of the conference call will be available online from the
Investors section of the Companys website at
http://www.masttherapeutics.com/investors/events/. Replays of the
webcast will be available on the Companys website for 30 days.

The information furnished in Exhibit 99.2 to this report, which
relates to Savara and its development programs, may be presented
from time to time by Savara at various meetings with securities
market participants. The Company has not independently verified
the material in this presentation. The presentation shall not be
deemed filed for any purpose, including for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended
(the Exchange Act), or otherwise subject to the liabilities of
that Section.

The information in this Item 7.01, including Exhibit 99.2, shall
not be deemed incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities and
Exchange Act of 1934, as amended, regardless of any general
incorporation language in the filing.

By furnishing the information in this Item 7.01 of this Current
Report on Form 8-K, including Exhibit 99.2, the Company makes no
admission as to the materiality of such information. The
information contained herein is intended to be considered in the
context of the Company filings with the SEC and other public
announcements that the Company makes, by press release or
otherwise, from time to time. The Company undertakes no duty or
obligation to publicly update or revise the information contained
in this report, although it may do so from time to time as its
management believes is appropriate. Any such updating may be made
through the filing of other reports or documents with the SEC,
through press releases or through other public disclosure.

Item 8.01 Other Events.

On January 7, 2017, the Company issued a joint press release with
Savara relating to the Merger Agreement. A copy of the joint
press release is attached hereto as Exhibit 99.1 and is
incorporated by reference herein.

Additional Information about the Merger and Where to Find It

In connection with the Merger, the Company intends to file
relevant materials with the SEC, including a registration
statement on Form S-4 that will contain a prospectus, joint proxy
and information statement. Investors and security holders of the
Company and Savara are urged to read these materials when they
become available because they will contain important information
about the Company, Savara and the Merger. The joint proxy
statement, information statement, prospectus, and other relevant
materials (when they become available), and any other documents
filed by the Company with the SEC, may be obtained free of charge
at the SEC web

site at www.sec.gov. In addition, investors and security holders
may obtain free copies of the documents filed with the SEC by the
Company by directing a written request to: Mast Therapeutics,
Inc., 3611 Valley Centre Drive, Suite 500, San Diego, CA 92130,
Attention: Investor Relations. Investors and security holders are
urged to read the joint proxy statement, prospectus and the other
relevant materials when they become available before making any
voting or investment decision with respect to the Merger.

This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer
to buy any securities, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offering of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.

Participants in the Solicitation

The Company and its directors and executive officers and Savara
and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders
of the Company in connection with the proposed transaction.
Information regarding the special interests of these directors
and executive officers in the merger will be included in the
joint proxy statement/prospectus referred to above. Additional
information regarding the directors and executive officers of the
Company is also included in the Companys Annual Report on Form
10-K for the year ended December 31, 2015 and the proxy statement
for the Companys 2016 Annual Meeting of Stockholders. These
documents are available free of charge at the SEC web site
(www.sec.gov) and from the Company, Attn: Investor Relations, at
the address described above.

Item 9.01 Financial Statements and Exhibits.

Reference is made to the Exhibit Index included with this Current
Report on Form 8-K.

to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

Exhibit Index

*The schedules and exhibits to the merger agreement have been
omitted

About Mast Therapeutics, Inc. (NYSEMKT:MSTX)
Mast Therapeutics, Inc. is a biopharmaceutical company. The Company develops clinical-stage therapies for serious or life-threatening diseases with unmet needs. The Company focuses on developing new therapies for sickle cell disease, a chronic and genetic disorder classified as a rare, or orphan, disease in the United States of America and European Union, and for heart failure, a condition with an unmet need for treatment options. The Company’s segment is engaged in the business of developing therapies for serious or life-threatening diseases. The Company focuses on its Molecular Adhesion and Sealant Technology (MAST) platform, to develop MST-188 (vepoloxamer) Injection, its lead product candidate. The Company also develops AIR001, a sodium nitrite solution for intermittent inhalation through nebulizer. The Company’s AIR001 is in Phase II clinical development for the treatment of patients with HFpEF. Mast Therapeutics, Inc. (NYSEMKT:MSTX) Recent Trading Information
Mast Therapeutics, Inc. (NYSEMKT:MSTX) closed its last trading session up +0.061 at 0.160 with 4,447,888 shares trading hands.