Company: MIRA
Filing Date: 2025-08-08
Form Type: DEFM14A
Source: 0001641172-25-022816
Chunk: 56

Company: MIRA PHARMACEUTICALS, INC.
Filing Date: 2025-08-08
Form: DEFM14A
Chunk 56
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 Risk-Adjusted Net Present Value, or the rNPV Analysis method. This method enhances standard discounted cash flow, or DCF Analysis, analysis by adjusting cash flow projections for the probability of success, i.e., adjusting for the probability of successfully advancing through clinical trials and regulatory approval. As a result, this method is also referred to as the expected net present value (eNPV) method.

According to the income approach, the value of an economic asset is derived from the future cash flows arising from it. The basic principle underlying the income approach is that an asset/company is an active ongoing concern premise and will operate in the future. The aim of the income approach is to reach the current value based on the company’s forecast cash flows.

The main valuation methodology in the income approach is the DCF Analysis. This method’s principle is that the value of the asset is the present value of free cash flow which is generated during the forecast period (finite or infinite). The first step in this approach is to build a cash flow projection of the entity (based on the entity’s business model). In the second phase, to determine the value of the asset, it is required to set an appropriate discount rate which is the basis for discounting future cash flows and translating them into current values. The discount rate reflects the level of activity’s risk. As much as the entity’s activity is risky (i.e., the level of uncertainty that exists to realization is lower) then it is required to choose a higher discount rate. As much as the discount rate is higher, then the cash flow’s present value will be lower.

Among the various early-stage biotech valuation methods, the rNPV Analysis method is the most appropriate. This method is suited for valuing preclinical and clinical stage biotech assets, novel pharma and biotech drugs undergoing development, and other life sciences assets that undergo phased development.

The mechanics of rNPV involve (1) estimating clinical trial and approval probabilities; (2) adjusting cash flow projections for risk using these probabilities; (3) discounting risk-adjusted cash flows to present value; and (4) summing risk-adjusted cash flows to derive rNPV. This captures the risks inherent in biotech drug development. rNPV provides a more accurate asset valuation than basic DCF Analysis as it enables conducting pharma and biotech valuation based on the stage (preclinical, Phase 1-3) of development of assets. As mentioned in the company description, SKNY is currently in the process of developing