elected to use market capitalization to drive the valuation analysis portion of the comparable companies’ valuation analysis
due to the stage of Asterias as a pre-revenue biotechnology company, including for the following reasons. First, industry convention
tends to use market value as the primary valuation metric for pre-revenue, development stage biotechnology companies. Second,
pre-revenue biotechnology companies finance periodically at irregular intervals of irregular dollar amounts corresponding to the
capital needs to reach their next clinical milestone(s). Third, determining the actual value of cash across multiple pre-revenue
drug development stage companies as cash is only relevant in context as a proxy for future dilution risk. Therefore, evaluating
cash on the balance sheet relative to cash required to reach the next clinical milestone is more relevant to accurately evaluate
analysis of the market capitalization of the peer group yielded an implied equity value of $95.8 million using the mean of the
peer group and an implied equity valuation of $62.9 million using the median of the peer group.
Cash Flow Analysis
performed a discounted cash flow analysis of Asterias to calculate the present value of Asterias based on the sum of the present
values of the projected available cash flow streams and the terminal value of the equity using the Forecasts used by Maxim.
its analysis, Maxim utilized the probability risk adjusted financial projections of Asterias included in the Forecasts used by
Maxim, which were provided by BioTime. The Forecasts used by Maxim provided to Maxim included three revenue streams: the first
was for Asterias’ cancer focused VAC-2 drug program which utilized a 5.1% probability of success rate; the second was the
revenue stream of Asterias neurologic focused U.S. OPC-1 program which utilized a 14.2% probability of success rate and lastly
a revenue stream of Asterias’ Japan OPC-1 program which utilized a 30.1% probability of success rate. BioTime provided Maxim
with data from January 1, 2018 through December 31, 2046 for Asterias’ OPC-1 drug program in both the U.S. and Japan and
data from January 1, 2018 through December 31, 2038 for Asterias’ VAC-2 drug program. Maxim has assumed that the financial
projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management
of BioTime and those financial projections originally produced by Asterias and modified by BioTime and then provided to Maxim.
projected values were discounted using a discount rate of 18.8% (equivalent to Asterias’ weighted average cost of capital
(“WACC”)). Maxim determined the intrinsic value assuming a Growth in Perpetuity of 1.0%, as provided by BioTime. In
determining the discount rates used in the discounted cash flow analysis, Maxim noted, among other things, factors such as inflation,
prevailing market interest rates, and the inherent business risk and rates of return required by investors.
result of the analysis yielded an intrinsic value of $216.9 million; after incorporating Asterias’ net cash, Maxim arrived
at an implied equity value of $220.4 million.
Premium Paid Analysis
performed an analysis of selected transactions to compare premiums paid in such transactions to the premium implied by the Exchange
Ratio in the Merger. The selected transactions represented 28 precedent public company transactions that closed between November
5, 2015 and November 5, 2018 in which the target company was a publicly traded healthcare company trading on a major U.S. exchange,
where the transaction value was less than $500 million and a majority stake in the target company was acquired. The precedent
deals include transactions in the overall healthcare sector as well as a subset of only biotechnology transactions. Maxim notes
that 8 of the 28 transactions analyzed were classified as biotechnology.
calculated the implied share price premium derived from the share prices directly before the announcements of both the healthcare
and subset of biotechnology transactions. Maxim then applied the range of implied premium from the biotechnology transactions
to the price of Asterias Common Stock of $1.18 as of November 6, 2018.