Intrinsic value of Biogen - BIIB

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$272.94

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$272.94

 
Intrinsic value

$268.16

 
Up/down potential

-2%

 
Rating

hold

 
Value-price divergence* premium content

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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 59.9

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,449
  11,678
  11,947
  12,254
  12,598
  12,980
  13,399
  13,856
  14,350
  14,882
  15,453
  16,064
  16,716
  17,410
  18,148
  18,931
  19,760
  20,638
  21,567
  22,548
  23,584
  24,678
  25,830
  27,046
  28,326
  29,674
  31,094
  32,589
  34,161
  35,816
  37,556
Variable operating expenses, $m
 
  6,369
  6,507
  6,665
  6,842
  7,038
  7,254
  7,488
  7,742
  8,015
  8,309
  8,256
  8,591
  8,948
  9,327
  9,729
  10,156
  10,607
  11,084
  11,589
  12,121
  12,683
  13,276
  13,900
  14,558
  15,251
  15,981
  16,749
  17,557
  18,408
  19,302
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
  6,369
  6,507
  6,665
  6,842
  7,038
  7,254
  7,488
  7,742
  8,015
  8,309
  8,256
  8,591
  8,948
  9,327
  9,729
  10,156
  10,607
  11,084
  11,589
  12,121
  12,683
  13,276
  13,900
  14,558
  15,251
  15,981
  16,749
  17,557
  18,408
  19,302
Operating income, $m
  5,150
  5,309
  5,440
  5,589
  5,756
  5,942
  6,146
  6,368
  6,608
  6,866
  7,144
  7,808
  8,125
  8,462
  8,821
  9,201
  9,604
  10,031
  10,483
  10,960
  11,463
  11,994
  12,555
  13,145
  13,768
  14,423
  15,113
  15,840
  16,604
  17,408
  18,254
EBITDA, $m
  5,833
  6,141
  6,283
  6,444
  6,625
  6,826
  7,047
  7,287
  7,546
  7,826
  8,127
  8,448
  8,791
  9,156
  9,544
  9,956
  10,392
  10,854
  11,342
  11,858
  12,403
  12,978
  13,584
  14,223
  14,897
  15,606
  16,353
  17,138
  17,965
  18,836
  19,751
Interest expense (income), $m
  281
  280
  289
  300
  312
  326
  342
  359
  377
  397
  418
  441
  466
  492
  520
  550
  581
  615
  650
  688
  727
  769
  813
  860
  908
  960
  1,014
  1,072
  1,132
  1,195
  1,262
Earnings before tax, $m
  4,933
  5,029
  5,151
  5,289
  5,444
  5,616
  5,804
  6,009
  6,231
  6,470
  6,726
  7,367
  7,659
  7,970
  8,301
  8,651
  9,023
  9,416
  9,832
  10,272
  10,736
  11,225
  11,742
  12,286
  12,859
  13,463
  14,099
  14,768
  15,472
  16,213
  16,992
Tax expense, $m
  1,237
  1,358
  1,391
  1,428
  1,470
  1,516
  1,567
  1,622
  1,682
  1,747
  1,816
  1,989
  2,068
  2,152
  2,241
  2,336
  2,436
  2,542
  2,655
  2,773
  2,899
  3,031
  3,170
  3,317
  3,472
  3,635
  3,807
  3,987
  4,177
  4,377
  4,588
Net income, $m
  3,703
  3,671
  3,760
  3,861
  3,974
  4,100
  4,237
  4,387
  4,548
  4,723
  4,910
  5,378
  5,591
  5,818
  6,059
  6,315
  6,587
  6,874
  7,178
  7,498
  7,837
  8,195
  8,571
  8,969
  9,387
  9,828
  10,292
  10,781
  11,295
  11,835
  12,404

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
  18,333
  18,754
  19,236
  19,778
  20,377
  21,035
  21,751
  22,527
  23,362
  24,259
  25,218
  26,242
  27,331
  28,489
  29,718
  31,021
  32,399
  33,857
  35,398
  37,024
  38,740
  40,550
  42,458
  44,468
  46,585
  48,814
  51,160
  53,628
  56,226
  58,958
Adjusted assets (=assets-cash), $m
  17,982
  18,333
  18,754
  19,236
  19,778
  20,377
  21,035
  21,751
  22,527
  23,362
  24,259
  25,218
  26,242
  27,331
  28,489
  29,718
  31,021
  32,399
  33,857
  35,398
  37,024
  38,740
  40,550
  42,458
  44,468
  46,585
  48,814
  51,160
  53,628
  56,226
  58,958
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
  6,423
  6,571
  6,739
  6,929
  7,139
  7,370
  7,621
  7,892
  8,185
  8,499
  8,835
  9,194
  9,576
  9,981
  10,412
  10,868
  11,351
  11,862
  12,402
  12,971
  13,573
  14,207
  14,875
  15,579
  16,321
  17,102
  17,924
  18,789
  19,699
  20,656
Working capital, $m
  5,312
  432
  442
  453
  466
  480
  496
  513
  531
  551
  572
  594
  618
  644
  671
  700
  731
  764
  798
  834
  873
  913
  956
  1,001
  1,048
  1,098
  1,150
  1,206
  1,264
  1,325
  1,390
Total debt, $m
  6,517
  6,725
  6,976
  7,264
  7,587
  7,945
  8,338
  8,766
  9,229
  9,727
  10,263
  10,835
  11,446
  12,097
  12,788
  13,522
  14,299
  15,122
  15,993
  16,912
  17,883
  18,908
  19,988
  21,127
  22,327
  23,591
  24,922
  26,322
  27,796
  29,347
  30,978
Total liabilities, $m
  10,737
  10,945
  11,196
  11,484
  11,807
  12,165
  12,558
  12,986
  13,449
  13,947
  14,483
  15,055
  15,666
  16,317
  17,008
  17,742
  18,519
  19,342
  20,213
  21,132
  22,103
  23,128
  24,208
  25,347
  26,547
  27,811
  29,142
  30,542
  32,016
  33,567
  35,198
Total equity, $m
  12,140
  7,388
  7,558
  7,752
  7,970
  8,212
  8,477
  8,766
  9,078
  9,415
  9,776
  10,163
  10,575
  11,015
  11,481
  11,977
  12,501
  13,057
  13,644
  14,265
  14,921
  15,612
  16,342
  17,110
  17,921
  18,774
  19,672
  20,617
  21,612
  22,659
  23,760
Total liabilities and equity, $m
  22,877
  18,333
  18,754
  19,236
  19,777
  20,377
  21,035
  21,752
  22,527
  23,362
  24,259
  25,218
  26,241
  27,332
  28,489
  29,719
  31,020
  32,399
  33,857
  35,397
  37,024
  38,740
  40,550
  42,457
  44,468
  46,585
  48,814
  51,159
  53,628
  56,226
  58,958
Debt-to-equity ratio
  0.537
  0.910
  0.920
  0.940
  0.950
  0.970
  0.980
  1.000
  1.020
  1.030
  1.050
  1.070
  1.080
  1.100
  1.110
  1.130
  1.140
  1.160
  1.170
  1.190
  1.200
  1.210
  1.220
  1.230
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.300
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
  3,671
  3,760
  3,861
  3,974
  4,100
  4,237
  4,387
  4,548
  4,723
  4,910
  5,378
  5,591
  5,818
  6,059
  6,315
  6,587
  6,874
  7,178
  7,498
  7,837
  8,195
  8,571
  8,969
  9,387
  9,828
  10,292
  10,781
  11,295
  11,835
  12,404
Depreciation, amort., depletion, $m
  683
  832
  843
  855
  869
  884
  901
  919
  939
  960
  983
  640
  666
  694
  723
  754
  788
  823
  860
  899
  940
  984
  1,029
  1,078
  1,129
  1,183
  1,239
  1,299
  1,362
  1,427
  1,497
Funds from operations, $m
  4,595
  4,504
  4,603
  4,716
  4,843
  4,984
  5,138
  5,306
  5,487
  5,683
  5,893
  6,018
  6,257
  6,512
  6,783
  7,070
  7,374
  7,696
  8,037
  8,397
  8,777
  9,178
  9,601
  10,047
  10,516
  11,011
  11,531
  12,079
  12,656
  13,263
  13,901
Change in working capital, $m
  73
  8
  10
  11
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  64
Cash from operations, $m
  4,522
  4,514
  4,593
  4,705
  4,830
  4,970
  5,122
  5,289
  5,469
  5,663
  5,871
  5,995
  6,233
  6,486
  6,755
  7,041
  7,344
  7,664
  8,003
  8,361
  8,739
  9,138
  9,558
  10,002
  10,469
  10,961
  11,479
  12,024
  12,598
  13,202
  13,837
Maintenance CAPEX, $m
  0
  -456
  -465
  -476
  -488
  -502
  -517
  -534
  -552
  -572
  -593
  -616
  -640
  -666
  -694
  -723
  -754
  -788
  -823
  -860
  -899
  -940
  -984
  -1,029
  -1,078
  -1,129
  -1,183
  -1,239
  -1,299
  -1,362
  -1,427
New CAPEX, $m
  -728
  -131
  -148
  -169
  -190
  -210
  -230
  -251
  -272
  -293
  -314
  -336
  -359
  -382
  -406
  -431
  -456
  -483
  -511
  -540
  -570
  -601
  -634
  -668
  -704
  -742
  -781
  -822
  -865
  -910
  -957
Cash from investing activities, $m
  -2,485
  -587
  -613
  -645
  -678
  -712
  -747
  -785
  -824
  -865
  -907
  -952
  -999
  -1,048
  -1,100
  -1,154
  -1,210
  -1,271
  -1,334
  -1,400
  -1,469
  -1,541
  -1,618
  -1,697
  -1,782
  -1,871
  -1,964
  -2,061
  -2,164
  -2,272
  -2,384
Free cash flow, $m
  2,037
  3,926
  3,980
  4,060
  4,152
  4,257
  4,375
  4,504
  4,645
  4,798
  4,964
  5,043
  5,234
  5,438
  5,656
  5,887
  6,133
  6,393
  6,669
  6,962
  7,270
  7,596
  7,941
  8,304
  8,687
  9,090
  9,515
  9,963
  10,434
  10,930
  11,452
Issuance/(repayment) of debt, $m
  -3
  213
  252
  288
  323
  358
  393
  428
  463
  499
  535
  573
  611
  651
  691
  734
  778
  823
  870
  920
  971
  1,025
  1,080
  1,139
  1,200
  1,264
  1,331
  1,401
  1,474
  1,551
  1,631
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
  213
  252
  288
  323
  358
  393
  428
  463
  499
  535
  573
  611
  651
  691
  734
  778
  823
  870
  920
  971
  1,025
  1,080
  1,139
  1,200
  1,264
  1,331
  1,401
  1,474
  1,551
  1,631
Total cash flow (excl. dividends), $m
  1,019
  4,139
  4,232
  4,348
  4,476
  4,615
  4,767
  4,932
  5,108
  5,297
  5,499
  5,616
  5,845
  6,089
  6,347
  6,621
  6,910
  7,216
  7,540
  7,881
  8,241
  8,621
  9,021
  9,443
  9,887
  10,354
  10,846
  11,364
  11,908
  12,481
  13,083
Retained Cash Flow (-), $m
  -2,767
  -138
  -170
  -194
  -218
  -242
  -265
  -289
  -313
  -337
  -361
  -387
  -412
  -439
  -467
  -495
  -525
  -556
  -588
  -621
  -655
  -692
  -729
  -769
  -810
  -853
  -898
  -945
  -995
  -1,047
  -1,101
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
 
  8,891
  4,062
  4,153
  4,257
  4,374
  4,502
  4,643
  4,796
  4,961
  5,138
  5,229
  5,433
  5,650
  5,880
  6,126
  6,385
  6,661
  6,952
  7,260
  7,586
  7,929
  8,292
  8,674
  9,077
  9,501
  9,948
  10,418
  10,913
  11,434
  11,982
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
 
  8,524
  3,718
  3,615
  3,506
  3,390
  3,267
  3,137
  2,997
  2,850
  2,694
  2,483
  2,318
  2,148
  1,974
  1,798
  1,623
  1,449
  1,280
  1,118
  964
  820
  688
  568
  462
  370
  290
  224
  169
  125
  90
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 15.9
Price to Sales 5.1
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 15.5
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 2% 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 219.443 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 $59.9 billion.


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COMPANY NEWS

▶ 3 Stocks That Growth Investors Should Love   [Apr-23-17 11:01AM  Motley Fool]
▶ Street Watches To See If $125,000 Drug Boosts Biogen's Results   [Apr-21-17 04:13PM  Investor's Business Daily]
▶ What to expect from biotech   [Apr-20-17 05:53PM  CNBC Videos]
▶ Gilead Sciences: Who's Frustrated Now?   [11:42AM  Barrons.com]
▶ Biogen to unveil new data supporting broad use of infant disease drug   [Apr-18-17 10:55AM  American City Business Journals]
▶ How Biogen's Takeover Prospects Soured In Mere Months   [Apr-14-17 09:51AM  Investor's Business Daily]
▶ Could Bristol's Drug Help Biogen Take AbbVie In Alzheimer's?   [Apr-13-17 04:40PM  Investor's Business Daily]
▶ Biotech Movers: Synergy, Biogen, Insys   [09:21AM  TheStreet.com]
▶ How These Biotechs Could Save The Drug Sector In Q1 Or Not   [Apr-12-17 12:51PM  Investor's Business Daily]
▶ Roche Just Scored One of the Biggest Pharma Wins of 2017   [Apr-10-17 01:04PM  Motley Fool]
▶ How Roche's 'Game Changer' Drug Will Chip Away At Biogen, Novartis   [Apr-07-17 04:45PM  Investor's Business Daily]
▶ Acorda, Forward, Biogen Fall On Multiple Sclerosis Drug Fight   [Apr-03-17 04:43PM  Investor's Business Daily]
▶ Biogen wins another big Tecfidera patent case   [02:45PM  at bizjournals.com]
▶ Biogen wins another big Tecfidera patent case   [02:45PM  American City Business Journals]
▶ Can Vertex Keep Climbing?   [09:43AM  at Barrons.com]
▶ Roche's Ocrevus Wins FDA Approval for 2 Forms of Sclerosis   [Mar-29-17 05:43PM  at Investopedia]
▶ Cytokinetics SMA Drug Did Well in Early Study   [Mar-22-17 03:10PM  at Investopedia]
▶ [$$] Two Cheers for Biogens Court Victory   [12:07AM  at The Wall Street Journal]
▶ Biogen Wins Tecfidera Patent Case   [Mar-21-17 04:43PM  at Investopedia]
▶ [$$] Two Cheers for Biogen's Court Victory   [12:52PM  at The Wall Street Journal]
▶ The Biggest Loser: Biogen Tumbles 4.7%   [04:24PM  at Barrons.com]
▶ Biogen: Double Trouble?   [11:25AM  at Barrons.com]
Stock chart of BIIB Financial statements 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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