Fairness opinions › Medical Devices and Supplies › 2017

Miramar Labs acquired by Sientra: fairness opinion by Canaccord Genuity

Announced June 12, 2017 · Tender offer · Cash plus CVR · SC 14D9 filed June 26, 2017

Medical Devices and Supplies Medical Devices

Enterprise value

$29.4M

EV / LTM EBITDA

—

EBITDA $-6.0M · -25% margin

EV / LTM revenue

1.21x

revenue $24.3M

DCF discount rate

17.4%

Deal terms

ConsiderationCash plus CVR

Price per share$0.31

Premium—

Premium basis—

StructureTender offer

Termination fee$0.1M

Reverse termination fee—

Go-shopNone

Outside date—

FilingSC 14D9 · EDGAR index

CVR: CVR of up to $0.7058 per share: $0.0147 per CVR if cumulative worldwide Net Sales of the Product after closing exceed $50.0 million (Milestone #1) and $0.6911 per CVR if cumulative worldwide Net Sales exceed $80.0 million (Milestone #2)

Cash Portion of $0.3149 per share plus one CVR per share; Canaccord Genuity calculated illustrative present value of total consideration of $0.6703 per share (CVR discounted at 17.4%)

Implied value per share by method vs. $0.31 offer

Selected companies — EV / LTM Revenue $-0.18 – $0.05

Precedent transactions — EV / LTM Revenue $-0.61 – $-0.58

Implied Present Value of Consideration $0.67

Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.

Opinion of Canaccord Genuity to the target board

Delivered June 11, 2017 · Fee $1.2M ($0.8M contingent on closing), $0.3M on delivery of the opinion

Selected public companies (6)

Avinger, Inc. · Alliqua BioMedical, Inc. · Dynatronics Corporation · Retractable Technologies, Inc. · Tandem Diabetes Care, Inc. · TearLab Corporation

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / LTM Revenue	0.8x	1.0x	1.6x	—	$-0.18–$0.05

Selected precedent transactions (6)

Date	Target	Acquirer	Multiple
2016-07-28	BioD, LLC	Derma Sciences, Inc.	—
2016-01-10	Stability Inc.	MiMedx Group, Inc.	—
2014-09-08	Ellman International, Inc.	Cynosure, Inc.	—
2014-02-20	New Star Lasers, Inc.	Syneron Medical Ltd.	—
2011-06-28	HOYA ConBio	Cynosure, Inc.	—
2009-09-09	Candela Corporation	Syneron Medical Ltd.	—

Multiple	Low	Median	High	Range applied	Implied per share
EV / LTM Revenue	0.3x	0.8x	1.2x	—	$-0.61–$-0.58

Other analyses

Analysis	Summary	Implied per share
Implied Present Value of Consideration	Added the $0.3149 Cash Portion to the present value of the CVR Portion (up to $0.7058 per share). Milestone #1 ($50.0M cumulative Net Sales) projected to be achieved in Parent's Q1 2020 and Milestone #2 ($80.0M) in Q3 2021, assuming a July 21, 2017 closing, LTM quarterly revenue through March 31, 2017 with no growth, and payment 45 days after the relevant quarter end; discounted at 17.4% (WACC). Resulting illustrative value of consideration: $0.6703 per share.	$0.67

Aggregate fee of approximately $1.2 million: $50,000 retainer (already paid), $300,000 payable upon delivery of opinion, and a success fee upon consummation of the Offer equal to $1.2 million less the prior fees (i.e., $850,000). Engagement letter dated December 22, 2016; expense reimbursement and indemnification also provided.

3,000+ healthcare deal-level valuation multiples

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	CAGR
Revenue	$37.0M	$54.8M	$70.6M	$95.3M	37.1%
Revenue growth	52.3%	48.1%	28.8%	35.0%
EBITDA	$0.2M	$9.4M	$16.2M	$23.3M	388.4%
EBITDA growth	—	4600.0%	72.3%	43.8%
EBITDA margin	1%	17%	23%	24%
Implied EV / EBITDA	146.8x	3.1x	1.8x	1.3x

Year-1 growth is against LTM at announcement ($24.3M revenue, $-6.0M EBITDA); later years are year over year.

No multi-year management projections or DCF were disclosed. Canaccord Genuity used LTM revenue for the period ended March 31, 2017 for its multiple analyses and, for the CVR present-value analysis, projected cumulative post-closing Net Sales assuming no growth from the Company's historical quarterly revenue for the four quarters ended March 31, 2017, yielding projected Milestone #1 achievement in Parent's Q1 2020 and Milestone #2 in Q3 2021. Management also estimated cash of $0.0 million and total debt, accrued royalties and accrued legal fees at closing of $21.0 million.

Process notes

Tender offer (Offer and Merger) with cash plus contingent value rights; Canaccord Genuity was the sole financial advisor, delivering an oral opinion at the June 11, 2017 board meeting confirmed in writing that same date. Comparable company and precedent transaction analyses produced negative or near-zero implied per-share equity values (due to ~$21.0 million of debt and liabilities), below the $0.3149 cash and $0.6703 total illustrative consideration. Termination fee payable to Parent for a Superior Offer is only $100,000; excluded holders include parties to Tender and Support Agreements and the Note Amendment. No DCF was performed.

Other Medical Devices and Supplies fairness opinions

NxStage Medical / Fresenius Medical Care AG & Co. KGaA 2017 · 29.7x EV/EBITDA
Exactech / TPG 2017 · 15.0x EV/EBITDA
Entellus Medical / StrykerCorp. 2017
Spectranetics / Philips 2017
ZELTIQ Aesthetics / Allergan 2017 · 32.9x EV/EBITDA
C. R. Bard / Becton Dickinson 2017 · 20.1x EV/EBITDA

All Medical Devices and Supplies opinions → · Canaccord Genuity opinions