Among the leading gainers in the market today, Altamira Therapeutics (NASDAQ:CYTO) is certainly raising eyebrows. In earlier trading, shares of the biotech company focused on RNA-based therapeutics more than tripled. At the time of writing, CYTO stock has given up some of these gains but remains up more than 160% on the day.
This move appears to be a result of the company announcing a partial spinoff of its Bentrio business. This strategic positioning will reportedly allow the company to focus on its core RNA-based therapeutics. As a result of this spinoff, Altamira will still retain a minority stake of 45% and 25% of future licensing revenue. So, fear not, investors, Altamira still offers an upside if its over-the-counter allergy nasal spray (Bentrio) takes off.
Let’s dive more into what was announced and why investors are viewing this deal so positively today.
CYTO Stock Surges on Strategic Refocusing
The market’s view of why this spinoff is so positive appears to be tied to the cash consideration Altamira will receive as a result of the deal. In exchange for selling off 51% of this business (and 75% of future licensing revenue), Altamira receives $2.3 million in consideration. Given its market capitalization currently sits at around $2.27 million at the time of writing (after today’s surge), CYTO stock is still trading at less than the cash value of this deal.
This attractive valuation multiple, combined with the growth upside attached to the capital the company will use in advancing its core therapeutics, appears to be an attractive proposition for investors. Currently, the company has two flagship products in preclinical trials. These drugs, aimed at cancer and rheumatoid arthritis, could be blockbusters but will require significant capital to bring to market. This deal allows the company some runway to provide investors with some positive news, thus de-risking the stock.
That’s not to say that Altamira isn’t highly speculative. It is. But this deal, which has clearly created value for existing shareholders, ought to be cheered by the market. This is a small-cap stock I’ve put on my watch list as a result of this move, and I will monitor for updates moving forward.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.