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Valuation versus Share Pricing

Aastrom Biosciences (NASDAQ:ASTM) develops autologous cellular therapies for the treatment of severe and chronic cardiovascular diseases.

ASTM has made significant progress during the past 12 months and is now in a much stronger position to execute on clinical programs while anticipating an IRB approval to begin clinical trial of their autologous cell therapies, ixmyelocel-T. Critical Limb Ischemia (CLI) has a potentially enormous market opportunity. In the U.S. alone, there are an estimated 250,000 CLI patients potentially heading toward a major amputation or even death as a result of their severe disease and the lack of treatment options. 1 year mortality in this population is high, estimated at 25%. The number jumps to 70% at year 5.

Much has been written by various analysts and pundits, as shares of ASTM trade to the upside … even … in anticipation of an offering and still the trading volume remains up. Shares of ASTM had declined nearly 30% over the past months, despite very positive results from the P2b RESTORE-CLI trial.

At the end of the year, a selling wave moved across most sector companies exacerbated by investors looking to sell, square and cover positions which created less liquid conditions in many markets.ASTM has experienced a recent rise and fall in share price; current $1.97, 1/20/12 <having hit $2.15 on 1/19/12> from the end-of-year price of $1.82.

The blended valuation model implies a pricing of $4.21 given the average weighted shares outstanding of 38.64M.

We derived our current valuation by using a Blended Price Valuation Table which includes a Sum of the Parts (SOTP) analysis, a direct comparable analysis layered with a sector comparable analysis. Our SOTP scenario is extremely conservative (with a 10% discount) and details a Sum of The Parts value of $6.78 and when merged with a direct comparables implied value analysis of $3.56 reinforced by a stem cell sector implied value perspective of $1.94 implies a blended valuation of $4.21 given the current shares outstanding of 38.64 M. The Average Blended Price Valuation of $4.21 is significantly above this stocks current price of $1.97 and is still below of the 52 week trading range of $2.01 - $3.47. We note the average market capitalization of designated comparables is $137.48M or about 1.8 X the multiple of ASTM's market cap of $76.09. In a review of their overall sector stem cell companies, ASTM has a 1.2 X multiple and an implied fair value of $2.30.

Another interesting statistic is that over the past year, CEO Tim Mayleben has bought personally (open market purchase) 133, 000 shares.

The Bottom Line: I believe the current market pricing is just beginning to re-actualize ASTM's valuation and share price's potential having finished the calamitous and volatile year for all stem cell sector companies at $1.94.

Source: Aastrom's Renewed Momentum And Appreciation Before Anticipated Offering