Sell Catalyst Biosciences (CBIO)

February 28, 2023

Price: $0.36

Summary

Yesterday after the market close, CG Biopharma announced that it is acquiring Catalyst Bio’s hematology pipeline drugs in development. Any proceeds generated from the asset sale will accrue to Catalyst Bio CVR holders (which has already been distributed) but CBIO’s stock price has jumped from 0.24 to 0.36 in the pre-market due to investor confusion. CBIO’s reverse merger transaction (CBIO shareholders will own 2.5% of the new company) with GNI Group values CBIO at $0.23 or $8.5MM. Given the stock is trading in the pre-market at $0.36, I’m recommending selling CBIO. The recommendation is officially closed but we will likely receive a payout from the CVR in June/July (my estimate is $0.30). I estimate the total return of this recommendation to be 58% ( [0.36+0.30+0.24] / 0.58 ).

Additional Details

Yesterday after the market close, CG Biopharma announced that it is acquiring Catalyst Bio’s hematology pipeline drugs in development.

The terms weren’t released last night, but Catalyst Bio issued a press release this morning disclosing the terms are $1MM upfront and $5MM payable on February 28, 2025.

The other interesting update from the press release is that the GNI Group reported year end results which showed revenue of $102MM And a net profit of $23MM.

CBIO’s 2.5% stake in GNI Group through the reverse merger is worth $8.5MM. This implies an equity value of $340MM for GNI Group. This seems like quite a reasonable valuation (P/E of 15x) for a company with a really promising pipeline.

Nonetheless, I’m happy to sell CBIO today in the mid $0.30 range given the investor confusion about to whom sale proceeds will accrue.

But I will keep the company on my watch list in case it sells off as I think it could be interesting.

Disclosure/Disclaimer:

Rich Howe, owner of Stock Spin-off Investing (“SSOI”), owns CBIO shares but plans to sell them over time. All expressions of opinion are subject to change without notice. This article is provided for informational purposes. We do not warrant the completeness or accuracy of this content. Please do your own due diligence and consult with an investment adviser before buying or selling any stock mentioned on www.stockspinoffinvesting.com.