Intrinsic value of Biogen - BIIB

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$282.60

  Intrinsic Value

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  Value-price divergence*

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$282.60

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BIIB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 60.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.36
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
Revenue, $m
  11,449
  11,804
  12,192
  12,614
  13,070
  13,561
  14,087
  14,649
  15,248
  15,886
  16,563
  17,282
  18,043
  18,848
  19,699
  20,599
  21,548
  22,550
  23,606
  24,719
  25,891
  27,126
  28,426
  29,794
  31,233
  32,748
  34,340
  36,015
  37,776
  39,627
  41,573
Variable operating expenses, $m
 
  6,434
  6,633
  6,850
  7,084
  7,337
  7,607
  7,896
  8,204
  8,531
  8,880
  8,882
  9,273
  9,687
  10,125
  10,587
  11,075
  11,589
  12,132
  12,704
  13,307
  13,941
  14,609
  15,313
  16,052
  16,831
  17,649
  18,510
  19,415
  20,367
  21,367
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  6,298
  6,434
  6,633
  6,850
  7,084
  7,337
  7,607
  7,896
  8,204
  8,531
  8,880
  8,882
  9,273
  9,687
  10,125
  10,587
  11,075
  11,589
  12,132
  12,704
  13,307
  13,941
  14,609
  15,313
  16,052
  16,831
  17,649
  18,510
  19,415
  20,367
  21,367
Operating income, $m
  5,150
  5,370
  5,559
  5,764
  5,986
  6,224
  6,480
  6,753
  7,044
  7,354
  7,684
  8,400
  8,770
  9,161
  9,575
  10,012
  10,473
  10,960
  11,473
  12,014
  12,584
  13,184
  13,816
  14,481
  15,181
  15,917
  16,691
  17,505
  18,361
  19,261
  20,207
EBITDA, $m
  5,833
  6,208
  6,412
  6,634
  6,874
  7,132
  7,408
  7,704
  8,019
  8,354
  8,711
  9,088
  9,489
  9,912
  10,360
  10,833
  11,332
  11,859
  12,414
  13,000
  13,616
  14,265
  14,949
  15,669
  16,426
  17,222
  18,060
  18,940
  19,867
  20,840
  21,863
Interest expense (income), $m
  281
  280
  294
  310
  327
  345
  365
  386
  409
  433
  459
  486
  515
  546
  578
  612
  649
  687
  727
  770
  815
  862
  912
  964
  1,019
  1,077
  1,138
  1,202
  1,270
  1,341
  1,416
Earnings before tax, $m
  4,933
  5,090
  5,265
  5,454
  5,659
  5,879
  6,115
  6,367
  6,636
  6,921
  7,225
  7,914
  8,255
  8,615
  8,997
  9,399
  9,825
  10,273
  10,746
  11,245
  11,770
  12,322
  12,904
  13,517
  14,162
  14,840
  15,553
  16,303
  17,091
  17,920
  18,791
Tax expense, $m
  1,237
  1,374
  1,422
  1,473
  1,528
  1,587
  1,651
  1,719
  1,792
  1,869
  1,951
  2,137
  2,229
  2,326
  2,429
  2,538
  2,653
  2,774
  2,901
  3,036
  3,178
  3,327
  3,484
  3,650
  3,824
  4,007
  4,199
  4,402
  4,615
  4,838
  5,074
Net income, $m
  3,703
  3,716
  3,843
  3,982
  4,131
  4,292
  4,464
  4,648
  4,844
  5,053
  5,274
  5,777
  6,026
  6,289
  6,568
  6,862
  7,172
  7,499
  7,845
  8,208
  8,592
  8,995
  9,420
  9,867
  10,338
  10,833
  11,353
  11,901
  12,476
  13,081
  13,717

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,895
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  22,877
  18,530
  19,140
  19,803
  20,518
  21,289
  22,114
  22,997
  23,937
  24,938
  26,002
  27,130
  28,324
  29,589
  30,925
  32,337
  33,827
  35,400
  37,057
  38,805
  40,645
  42,584
  44,624
  46,772
  49,032
  51,409
  53,909
  56,539
  59,303
  62,209
  65,264
Adjusted assets (=assets-cash), $m
  17,982
  18,530
  19,140
  19,803
  20,518
  21,289
  22,114
  22,997
  23,937
  24,938
  26,002
  27,130
  28,324
  29,589
  30,925
  32,337
  33,827
  35,400
  37,057
  38,805
  40,645
  42,584
  44,624
  46,772
  49,032
  51,409
  53,909
  56,539
  59,303
  62,209
  65,264
Revenue / Adjusted assets
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
Average production assets, $m
  6,292
  6,492
  6,706
  6,938
  7,189
  7,458
  7,748
  8,057
  8,386
  8,737
  9,110
  9,505
  9,923
  10,366
  10,835
  11,329
  11,851
  12,402
  12,983
  13,595
  14,240
  14,919
  15,634
  16,387
  17,178
  18,011
  18,887
  19,808
  20,777
  21,795
  22,865
Working capital, $m
  5,312
  437
  451
  467
  484
  502
  521
  542
  564
  588
  613
  639
  668
  697
  729
  762
  797
  834
  873
  915
  958
  1,004
  1,052
  1,102
  1,156
  1,212
  1,271
  1,333
  1,398
  1,466
  1,538
Total debt, $m
  6,517
  6,843
  7,207
  7,602
  8,029
  8,489
  8,982
  9,509
  10,071
  10,668
  11,303
  11,976
  12,690
  13,444
  14,242
  15,085
  15,975
  16,914
  17,903
  18,946
  20,045
  21,202
  22,421
  23,703
  25,052
  26,471
  27,964
  29,534
  31,184
  32,919
  34,743
Total liabilities, $m
  10,737
  11,063
  11,427
  11,822
  12,249
  12,709
  13,202
  13,729
  14,291
  14,888
  15,523
  16,196
  16,910
  17,664
  18,462
  19,305
  20,195
  21,134
  22,123
  23,166
  24,265
  25,422
  26,641
  27,923
  29,272
  30,691
  32,184
  33,754
  35,404
  37,139
  38,963
Total equity, $m
  12,140
  7,468
  7,713
  7,980
  8,269
  8,579
  8,912
  9,268
  9,647
  10,050
  10,479
  10,933
  11,415
  11,924
  12,463
  13,032
  13,632
  14,266
  14,934
  15,638
  16,380
  17,161
  17,984
  18,849
  19,760
  20,718
  21,726
  22,785
  23,899
  25,070
  26,301
Total liabilities and equity, $m
  22,877
  18,531
  19,140
  19,802
  20,518
  21,288
  22,114
  22,997
  23,938
  24,938
  26,002
  27,129
  28,325
  29,588
  30,925
  32,337
  33,827
  35,400
  37,057
  38,804
  40,645
  42,583
  44,625
  46,772
  49,032
  51,409
  53,910
  56,539
  59,303
  62,209
  65,264
Debt-to-equity ratio
  0.537
  0.920
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.040
  1.060
  1.080
  1.100
  1.110
  1.130
  1.140
  1.160
  1.170
  1.190
  1.200
  1.210
  1.220
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.300
  1.310
  1.320
Adjusted equity ratio
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,703
  3,716
  3,843
  3,982
  4,131
  4,292
  4,464
  4,648
  4,844
  5,053
  5,274
  5,777
  6,026
  6,289
  6,568
  6,862
  7,172
  7,499
  7,845
  8,208
  8,592
  8,995
  9,420
  9,867
  10,338
  10,833
  11,353
  11,901
  12,476
  13,081
  13,717
Depreciation, amort., depletion, $m
  683
  837
  853
  870
  888
  907
  928
  951
  975
  1,000
  1,027
  689
  719
  751
  785
  821
  859
  899
  941
  985
  1,032
  1,081
  1,133
  1,187
  1,245
  1,305
  1,369
  1,435
  1,506
  1,579
  1,657
Funds from operations, $m
  4,595
  4,553
  4,696
  4,851
  5,019
  5,199
  5,392
  5,599
  5,819
  6,053
  6,301
  6,466
  6,745
  7,040
  7,353
  7,683
  8,031
  8,398
  8,785
  9,194
  9,624
  10,076
  10,553
  11,055
  11,583
  12,138
  12,722
  13,336
  13,982
  14,661
  15,374
Change in working capital, $m
  73
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
Cash from operations, $m
  4,522
  4,540
  4,682
  4,836
  5,002
  5,181
  5,373
  5,578
  5,796
  6,029
  6,276
  6,439
  6,717
  7,011
  7,321
  7,649
  7,996
  8,361
  8,746
  9,152
  9,580
  10,031
  10,505
  11,004
  11,530
  12,082
  12,663
  13,274
  13,917
  14,592
  15,302
Maintenance CAPEX, $m
  0
  -456
  -470
  -486
  -503
  -521
  -540
  -561
  -584
  -608
  -633
  -660
  -689
  -719
  -751
  -785
  -821
  -859
  -899
  -941
  -985
  -1,032
  -1,081
  -1,133
  -1,187
  -1,245
  -1,305
  -1,369
  -1,435
  -1,506
  -1,579
New CAPEX, $m
  -728
  -201
  -214
  -232
  -251
  -270
  -289
  -309
  -330
  -351
  -373
  -395
  -419
  -443
  -468
  -495
  -522
  -551
  -581
  -612
  -645
  -679
  -715
  -752
  -792
  -833
  -876
  -921
  -969
  -1,018
  -1,070
Cash from investing activities, $m
  -2,485
  -657
  -684
  -718
  -754
  -791
  -829
  -870
  -914
  -959
  -1,006
  -1,055
  -1,108
  -1,162
  -1,219
  -1,280
  -1,343
  -1,410
  -1,480
  -1,553
  -1,630
  -1,711
  -1,796
  -1,885
  -1,979
  -2,078
  -2,181
  -2,290
  -2,404
  -2,524
  -2,649
Free cash flow, $m
  2,037
  3,884
  3,998
  4,118
  4,248
  4,390
  4,543
  4,707
  4,883
  5,071
  5,270
  5,384
  5,609
  5,849
  6,102
  6,370
  6,653
  6,951
  7,267
  7,600
  7,950
  8,320
  8,709
  9,119
  9,550
  10,004
  10,482
  10,985
  11,513
  12,069
  12,653
Issuance/(repayment) of debt, $m
  -3
  331
  364
  395
  427
  460
  493
  527
  562
  598
  635
  673
  713
  755
  798
  843
  890
  939
  990
  1,043
  1,099
  1,157
  1,218
  1,282
  1,349
  1,419
  1,493
  1,570
  1,650
  1,735
  1,824
Issuance/(repurchase) of shares, $m
  -956
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -988
  331
  364
  395
  427
  460
  493
  527
  562
  598
  635
  673
  713
  755
  798
  843
  890
  939
  990
  1,043
  1,099
  1,157
  1,218
  1,282
  1,349
  1,419
  1,493
  1,570
  1,650
  1,735
  1,824
Total cash flow (excl. dividends), $m
  1,019
  4,214
  4,362
  4,513
  4,676
  4,850
  5,036
  5,234
  5,445
  5,668
  5,905
  6,057
  6,323
  6,603
  6,900
  7,212
  7,542
  7,890
  8,257
  8,643
  9,049
  9,477
  9,927
  10,401
  10,899
  11,424
  11,975
  12,554
  13,163
  13,804
  14,476
Retained Cash Flow (-), $m
  -2,767
  -218
  -246
  -267
  -288
  -310
  -333
  -356
  -379
  -403
  -429
  -455
  -481
  -509
  -539
  -569
  -601
  -634
  -668
  -704
  -742
  -781
  -822
  -866
  -911
  -958
  -1,008
  -1,060
  -1,114
  -1,171
  -1,231
Prev. year cash balance distribution, $m
 
  4,890
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,887
  4,116
  4,246
  4,387
  4,540
  4,703
  4,878
  5,065
  5,265
  5,477
  5,603
  5,841
  6,094
  6,361
  6,643
  6,942
  7,256
  7,588
  7,939
  8,307
  8,696
  9,105
  9,536
  9,989
  10,466
  10,967
  11,495
  12,049
  12,632
  13,245
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  8,520
  3,768
  3,695
  3,613
  3,519
  3,413
  3,296
  3,166
  3,024
  2,871
  2,661
  2,493
  2,317
  2,136
  1,950
  1,764
  1,579
  1,397
  1,222
  1,056
  899
  755
  625
  509
  407
  320
  247
  186
  138
  100
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Biogen Inc., a biopharmaceutical company, discovers, develops, manufactures, and delivers therapies for the treatment of neurological and autoimmune diseases worldwide. The company offers TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA, and FAMPYRA to treat multiple sclerosis (MS); FUMADERM for the treatment of plaque psoriasis; and SPINRAZA to treat spinal muscular atrophy. It also provides BENEPALI, an etanercept biosimilar referencing ENBREL; FLIXABI, an infliximab biosimilar referencing REMICADE; RITUXAN for the treatment of non-Hodgkin's lymphoma, chronic lymphocytic leukemia (CLL), and other conditions; GAZYVA to treat CLL and follicular lymphoma; and other potential anti-CD20 therapies. The company’s Phase III clinical trial products comprise GAZYVA for the treatment of front-line indolent non-hodgkin’s lymphoma; and Aducanumab and E2609 for Alzheimer’s disease. Its Phase II clinical trial products include BIIB074 for trigeminal neuralgia, lumbosacral radiculopathy, and erythromelalgia; BAN2401 for Alzheimer's disease; Opicinumab (anti-LINGO-1) for MS; TYSABRI for acute ischemic stroke; rAAV-XLRS for X-linked juvenile retinoschisis; BG00011 (STX-100) for idiopathic pulmonary fibrosis; and Dapirolizumab pegol and BIIB059 (Anti-BDCA02) for lupus. The company’s Phase I clinical trial products comprise BIIB061 for MS; BIIB054 for Parkinson's disease; BIIB067 (IONIS-SOD1Rx) for amyotrophic lateral sclerosis; and BIIB068 (BTK Inhibitor) for autoimmune disease. It has collaboration agreements with AbbVie, Inc.; Acorda Therapeutics, Inc.; Applied Genetic Technologies Corporation; Eisai Co., Ltd.; Genentech, Inc.; Ionis Pharmaceuticals, Inc.; Samsung Bioepis; and University of Pennsylvania. Biogen Inc. offers products through its sales force and marketing groups. The company was formerly known as Biogen Idec Inc. and changed its name to Biogen Inc. in March 2015. Biogen Inc. was founded in 1978 and is headquartered in Cambridge, Massachusetts.

FINANCIAL RATIOS  of  Biogen (BIIB)

Valuation Ratios
P/E Ratio 16.5
Price to Sales 5.3
Price to Book 5
Price to Tangible Book
Price to Cash Flow 13.5
Price to Free Cash Flow 16.1
Growth Rates
Sales Growth Rate 6.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.2%
Cap. Spend. - 3 Yr. Gr. Rate -27%
Financial Strength
Quick Ratio 979
Current Ratio 0.1
LT Debt to Equity 53.6%
Total Debt to Equity 53.7%
Interest Coverage 19
Management Effectiveness
Return On Assets 18.5%
Ret/ On Assets - 3 Yr. Avg. 20.8%
Return On Total Capital 21.4%
Ret/ On T. Cap. - 3 Yr. Avg. 25.3%
Return On Equity 34.4%
Return On Equity - 3 Yr. Avg. 33.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 87.1%
Gross Margin - 3 Yr. Avg. 87.8%
EBITDA Margin 51.5%
EBITDA Margin - 3 Yr. Avg. 50%
Operating Margin 45%
Oper. Margin - 3 Yr. Avg. 43.8%
Pre-Tax Margin 43.1%
Pre-Tax Margin - 3 Yr. Avg. 42.7%
Net Profit Margin 32.3%
Net Profit Margin - 3 Yr. Avg. 31.8%
Effective Tax Rate 25.1%
Eff/ Tax Rate - 3 Yr. Avg. 24.8%
Payout Ratio 0%

BIIB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BIIB stock intrinsic value calculation we used $11449 million for the last fiscal year's total revenue generated by Biogen. The default revenue input number comes from 2016 income statement of Biogen. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BIIB stock valuation model: a) initial revenue growth rate of 3.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BIIB is calculated based on our internal credit rating of Biogen, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Biogen.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BIIB stock the variable cost ratio is equal to 54.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BIIB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.3% for Biogen.

Corporate tax rate of 27% is the nominal tax rate for Biogen. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BIIB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BIIB are equal to 55%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Biogen operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BIIB is equal to 3.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $12140 million for Biogen - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 214.076 million for Biogen is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Biogen at the current share price and the inputted number of shares is $60.5 billion.


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COMPANY NEWS

▶ Biotech Stocks On Verge Of Next Major Move Up   [Jul-19-17 02:30PM  Investopedia]
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▶ 'Stars Align' For These Biotechs To Crush Earnings Consensus   [Jul-17-17 02:30PM  Investor's Business Daily]
▶ Biogen aims to block Tecfidera generics with flurry of lawsuits   [01:55PM  American City Business Journals]
▶ [$$] Biotechs in Focus Ahead of Earnings   [11:15AM  Barrons.com]
▶ Better Buy: Biogen Inc. vs. Celgene Corporation   [Jul-16-17 11:42AM  Motley Fool]
▶ Could Q2 Surprise Spike This Beleaguered Biotech's Stock?   [Jul-14-17 02:37PM  Investor's Business Daily]
▶ How Biogen Inc. Makes Most of Its Money   [04:39PM  Motley Fool]
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▶ Seeking Value in Biotech: Bioverativ   [12:14PM  GuruFocus.com]
▶ Tysabri Could Boost Biogens Revenue Growth   [Jun-28-17 05:35PM  Market Realist]
▶ Whats in Biogens Clinical Pipeline?   [02:35PM  Market Realist]
▶ 2 Pharma Buyout Targets That May Surprise You   [Jun-27-17 08:08AM  Motley Fool]
▶ Biogen, Inc. Value Analysis (NASDAQ:BIIB) : June 22, 2017   [Jun-22-17 04:53PM  Capital Cube]
▶ Futures: These 2 Big Breakouts Highlight New Market Leadership   [06:48AM  Investor's Business Daily]
▶ [$$] Pharma recovers composure as price concerns ease   [Jun-21-17 04:26PM  Financial Times]
▶ Biotech Breakouts: Biogen Spinoff Bioverativ In Buy Zone   [04:11PM  Investor's Business Daily]
▶ Amgen: In Defense of A Pipeline   [10:35AM  Barrons.com]
▶ Biotech Stock With 50% Profit Margin Nears Buy Zone   [11:31AM  Investor's Business Daily]
▶ Picks of Steel   [02:15PM  CNBC Videos]
▶ Biogen: "The Underperformance Stops Here"   [11:11AM  Barrons.com]
▶ Biotech Stocks To Watch And Pharma Industry News   [Jun-16-17 01:06PM  Investor's Business Daily]
▶ How analysts are interpreting Biogen's management shakeup   [Jun-14-17 10:10PM  American City Business Journals]
▶ Biogen: OopsThere Goes Another Executive   [11:54AM  Barrons.com]
▶ Biogen CFO Bolts to Alexion   [Jun-13-17 06:05PM  TheStreet.com]
▶ Biogen exodus continues as CFO set to join Alexion   [05:05PM  American City Business Journals]
▶ Biogen Announces Management Change   [04:15PM  Business Wire]
▶ How Ionis Pharmaceuticals Spinraza Performed in 1Q17   [Jun-12-17 10:37AM  Market Realist]
▶ 2 Reasons Why Biogen's Shares Slumped in May   [Jun-09-17 07:22AM  Motley Fool]
▶ Breakout Watch: Top Funds Buy This Biotech IPO With 196% Growth   [Jun-08-17 11:13AM  Investor's Business Daily]
▶ IPO Stock News And Analysis: Find Today's Top New Issues   [Jun-07-17 04:33PM  Investor's Business Daily]
▶ 3 Stocks That Could Be Life-Changers   [Jun-06-17 12:28PM  Motley Fool]
▶ Is This Biotech IPO And Biogen Spinoff About To Break Out?   [Jun-05-17 12:40PM  Investor's Business Daily]
▶ Biogen, Ionis Stocks Pop After Europe Approves $125,000 Drug   [Jun-01-17 04:15PM  Investor's Business Daily]
▶ Biogen rare infant disease drug Spinraza approved in E.U.   [09:50AM  American City Business Journals]
Stock chart of BIIB Financial statements of BIIB Annual reports of BIIB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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