SEC Filings

AVEXIS, INC. filed this Form S-1/A on 02/09/2016
Entire Document

Table of Contents

AveXis, Inc.

Notes to Consolidated Financial Statements (Continued)

12. Stock-based Compensation (Continued)

    October 9, 2013 Valuation

          In order to estimate the value of the Company's common stock as of October 9, 2013, the Company determined the aggregate equity value of its business using the income approach (discounted cash flow analysis).

          The income approach measures the value of an asset by the present value of its future economic benefits. These benefits can include earnings, cost savings, tax deductions and proceeds from its disposition. Value indications are developed by discounting expected future cash flows to their present value at a rate of return that incorporates the risks associated with the particular investment. The following table summarizes the significant assumptions used to determine the fair value of the Company's common stock of $1.04 per share as of October 9, 2013:

Equity value of the Company

  $ 9,100,000  

Discount adjustment applied to cash flows

    70 %

Weighted average cost of capital

    12 %

Discount for lack of marketability

    15 %

    January 28, 2014 Valuation

          In order to estimate the value of the Company's common stock as of January 28, 2014, the Company determined the aggregate equity value of its business using a linear interpolation of the October 9, 2013 valuation and the March 7, 2014 common stock valuation (see below) in deriving the fair of its common stock of $1.51 per share as of January 28, 2014. The Company's board of directors considered this methodology appropriate given the Company's progress in its research and development programs during this period, the status of license negotiations with third parties, its financial position and external market conditions impacting the industry.

    March 7, 2014 Valuation

          On March 7, 2014, the Company entered into an arms-length transaction to issue and sell its Class B-1 preferred stock at a price per share of $2.47. The Company's common stock valuation as of such date was prepared using both an option-pricing method, or OPM, and a probability-weighted expected return method, or PWERM, depending on the form and timing of an expected future liquidity event. The combination of the two approaches to arrive at a concluded fair value estimate of the common stock is known as a hybrid approach. The hybrid approach applies and weights the method that is best suited to the form of liquidity and what is known about the range of possible future equity values given the timing and form of a future event. The PWERM looks to a specific future range of total equity values based on an initial public offering. The OPM looks to a sale event and distinguishes between equity classes rather than future equity values. The OPM treats the common stock and Class B-1 preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the Class B-1 preferred stock liquidation preference at the time of the liquidity event, such as a strategic sale or a merger. The PWERM is a scenario-based methodology that estimates the fair value of the common stock based upon an analysis of future values for the company, assuming various outcomes. The


© AveXis, Inc. All Rights Reserved.