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Why this small cap biotech ASX share zoomed higher on Tuesday

James Mickleboro
healthcare shares

The Cynata Therapeutics Ltd (ASX: CYP) share price was on form on Tuesday.

The clinical-stage biotechnology company’s shares finished the day 5% higher at $1.20.

This stretches its year to date gain to almost 15%.

Why did the Cynata share price surge higher on Tuesday?

The catalyst for Cynata’s gain was news that the cell therapeutics specialist has received a ~$1.9 million R&D Tax Incentive Refund for the 2018/2019 financial year.

This refund increases the company’s cash position, which stood at $9.2 million at the end of the September quarter.

Management advised that it will allow further resources to be invested towards its robust and substantial Phase 2 clinical trial programs for the critical limb ischemia and osteoarthritis products. It will also support the anticipated Phase 2 trial for CYP-001 in graft-versus-host disease to be conducted by Japan’s Fujifilm.

Why is the Cynata share price already up 15% in 2020?

With no other news out of the company so far this year, I suspect that some investors have been taking advantage of a pullback in its share price over the last few months and buying shares.

Cynata’s shares fell heavily over the latter part of last year following the collapse of takeover talks between it and Sumitomo Dainippon Pharma Co.

The company received an indicative, non-binding and conditional proposal from Sumitomo on June 20 regarding a possible acquisition of all its shares at a price of $2.00 per share in cash by way of a scheme of arrangement.

However, on October 17 the two parties withdrew from discussions after being unable to reach an agreement on terms.

Today’s gain means that Cynata’s shares are now trading back at the level pre-takeover offer. But that could change if its Phase 2 clinical trial programs are a success.

Both the critical limb ischemia and osteoarthritis trials are scheduled to take place during the first half of calendar year 2020 and could be worth watching out for.

The post Why this small cap biotech ASX share zoomed higher on Tuesday appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020