Carbylan Therapeutics Inc (NASDAQ:CBYL) Waiting On A Deal

Carbylan Therapeutics Inc (NASDAQ:CBYL) has been steadily climbing higher on the hopes that a deal is announced soon. Shares of CBYL had fallen off a cliff back in February after the company announced that Hydros-TA only got half the job done in a late-stage study on arthritis of the knee. Then in March, CBYL announced that it hired Wedbush Pacgrow to advise on strategic alternatives for the company. Alternatives to be considered include the potential for an acquisition, merger, strategic partnership or other strategic transaction. Now, shareholders are waiting to see if they're holding a winning lottery ticket with shares of Carbylan.Carbylan describes itself as "a clinical-stage specialty pharmaceutical company focused on the development and commercialization of novel and proprietary combination therapies that address significant unmet clinical needs. The Company's lead product candidate, Hydros-TA, is a proprietary, cross-linked combination of low dose corticosteroid and novel hyaluronic acid viscosupplement, designed to provide both rapid and sustained osteoarthritis pain relief via a single intra-articular injection."Hydros-TA is a hydrogel that incorporates a low dose steroid. The large-sized particles remain in the joint for an extended period following injection. The steroid provides short term pain relief while the hyaluronic acid hydrogel provides long term (six months) pain relief. On the plus side, patients treated with Hydros-TA showed a statistically valid improvement in a pain measure called the WOMAC A pain score at Week 2 compared to Hydros (hyaluronic acid alone). In addition, Hydros-TA maintained pain reduction over 26 weeks versus baseline. On the negative side, patients in the TA (triamcinolone acetonide) arm also showed prolonged pain reduction over 26 weeks versus baseline which prevented Hydro-TA from demonstrating a statistically valid difference in pain reduction, the second endpoint. The results for TA, a corticosteroid, were unexpected and contrary to clinical experience and published literature.Last month, CBYL announced that it had suspended further clinical development of Hydros-TA. In conjunction with the plan to pursue a strategic transaction, Carbylan also announced an immediate reduction in its workforce of 14 employees of its current 17 employees in order to preserve capital and further streamline the company’s operations in preparation for a potential strategic transaction.

Carbylan currently projects that it will have approximately $25-$30 million of net cash available for the potential strategic transaction. This projection is based on the company's current expectations and assumptions, including the consummation of a transaction by the end of the third quarter of 2016, and the actual amount of net cash available could differ materially from the company's current estimate.

While it is a sad to see CBYL pursue a strategic transaction, there is value in the NASDAQ listing and the company's cash balance. Management and the board are at least trying to preserve some shareholder value. At $.94 per share, CBYL has a current market cap of $24 million, which is less than the cash on hand. There were also positives with Hydros-TA, so there is still value there. CBYL would be an ideal fit for a private pharma company in a takeover situation, which is what we expect to happen. Obviously, some traders are thinking the same as us and why shares have been slowly ticking higher. We expect an announcement within the next 60 days and expect a deal to happen. While it will be painful for long suffering shareholders, at least there will be at least some recovery and it won't be a total loss. We will be updating Insider Financial as soon as we know more. For continuing coverage on CBYL, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in CBYL and have not been compensated for this article.