Intrinsic value of Dermira - DERM

Previous Close

$28.74

  Intrinsic Value

$1.52

stock screener

  Rating & Target

str. sell

-95%

  Value-price divergence*

-56%

Previous close

$28.74

 
Intrinsic value

$1.52

 
Up/down potential

-95%

 
Rating

str. sell

 
Value-price divergence*

-56%

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

We calculate the intrinsic value of DERM 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 1.2

 

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, %
  228.57
  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
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
Variable operating expenses, $m
 
  58
  59
  61
  63
  65
  67
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  123
  128
  134
  141
  147
  155
  162
  170
  178
  187
Fixed operating expenses, $m
 
  74
  76
  78
  79
  81
  83
  86
  88
  90
  92
  94
  97
  99
  102
  104
  107
  110
  112
  115
  118
  121
  124
  127
  130
  133
  137
  140
  144
  147
  151
Total operating expenses, $m
  113
  132
  135
  139
  142
  146
  150
  155
  159
  164
  169
  174
  180
  186
  192
  198
  205
  213
  219
  227
  235
  244
  252
  261
  271
  280
  292
  302
  314
  325
  338
Operating income, $m
  -91
  -108
  -111
  -114
  -117
  -120
  -123
  -127
  -130
  -134
  -138
  -142
  -146
  -151
  -155
  -160
  -165
  -171
  -176
  -182
  -188
  -194
  -200
  -207
  -214
  -221
  -229
  -237
  -245
  -253
  -262
EBITDA, $m
  -91
  -108
  -111
  -114
  -117
  -120
  -123
  -126
  -130
  -134
  -138
  -142
  -146
  -151
  -155
  -160
  -165
  -170
  -176
  -182
  -187
  -194
  -200
  -207
  -214
  -221
  -228
  -236
  -244
  -253
  -262
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
Earnings before tax, $m
  -89
  -108
  -111
  -114
  -117
  -120
  -123
  -127
  -130
  -134
  -138
  -142
  -147
  -151
  -156
  -161
  -166
  -172
  -177
  -183
  -189
  -196
  -202
  -209
  -216
  -224
  -232
  -240
  -248
  -257
  -266
Tax expense, $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
  0
Net income, $m
  -89
  -108
  -111
  -114
  -117
  -120
  -123
  -127
  -130
  -134
  -138
  -142
  -147
  -151
  -156
  -161
  -166
  -172
  -177
  -183
  -189
  -196
  -202
  -209
  -216
  -224
  -232
  -240
  -248
  -257
  -266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  252
  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
  313
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Adjusted assets (=assets-cash), $m
  61
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Revenue / Adjusted assets
  0.377
  0.371
  0.375
  0.385
  0.373
  0.377
  0.380
  0.378
  0.382
  0.380
  0.378
  0.372
  0.382
  0.376
  0.371
  0.376
  0.381
  0.373
  0.374
  0.375
  0.373
  0.382
  0.377
  0.375
  0.377
  0.380
  0.373
  0.374
  0.379
  0.377
  0.375
Average production assets, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
Working capital, $m
  249
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
Total debt, $m
  0
  -10
  -9
  -7
  -6
  -4
  -2
  0
  3
  5
  8
  11
  14
  17
  21
  25
  29
  33
  37
  42
  47
  52
  58
  64
  70
  76
  83
  90
  98
  106
  114
Total liabilities, $m
  65
  56
  57
  59
  60
  62
  64
  66
  69
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
  172
  180
Total equity, $m
  247
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
Total liabilities and equity, $m
  312
  62
  63
  66
  67
  69
  71
  73
  77
  79
  82
  86
  89
  92
  97
  101
  106
  110
  114
  120
  126
  131
  138
  144
  151
  158
  166
  173
  182
  191
  200
Debt-to-equity ratio
  0.000
  -1.610
  -1.370
  -1.110
  -0.830
  -0.540
  -0.240
  0.060
  0.370
  0.680
  0.980
  1.290
  1.590
  1.890
  2.180
  2.460
  2.730
  3.000
  3.260
  3.510
  3.750
  3.980
  4.200
  4.420
  4.630
  4.830
  5.020
  5.200
  5.370
  5.540
  5.700
Adjusted equity ratio
  -0.082
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -89
  -108
  -111
  -114
  -117
  -120
  -123
  -127
  -130
  -134
  -138
  -142
  -147
  -151
  -156
  -161
  -166
  -172
  -177
  -183
  -189
  -196
  -202
  -209
  -216
  -224
  -232
  -240
  -248
  -257
  -266
Depreciation, amort., depletion, $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
  0
Funds from operations, $m
  -73
  -108
  -111
  -113
  -116
  -120
  -123
  -126
  -130
  -134
  -138
  -142
  -146
  -151
  -156
  -161
  -166
  -171
  -177
  -183
  -189
  -195
  -202
  -209
  -216
  -223
  -231
  -239
  -248
  -256
  -265
Change in working capital, $m
  1
  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 operations, $m
  -74
  -108
  -110
  -113
  -116
  -119
  -123
  -126
  -130
  -134
  -138
  -142
  -146
  -151
  -156
  -161
  -166
  -171
  -177
  -183
  -189
  -195
  -202
  -208
  -216
  -223
  -231
  -239
  -247
  -256
  -265
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -1
  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 investing activities, $m
  -130
  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
Free cash flow, $m
  -204
  -108
  -111
  -113
  -116
  -120
  -123
  -126
  -130
  -134
  -138
  -142
  -147
  -151
  -156
  -161
  -166
  -172
  -177
  -183
  -189
  -195
  -202
  -209
  -216
  -224
  -231
  -239
  -248
  -257
  -266
Issuance/(repayment) of debt, $m
  0
  -10
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
Issuance/(repurchase) of shares, $m
  139
  120
  111
  114
  117
  120
  123
  127
  131
  134
  139
  143
  147
  152
  156
  161
  167
  172
  178
  184
  190
  196
  203
  210
  217
  224
  232
  240
  249
  258
  267
Cash from financing (excl. dividends), $m  
  139
  110
  112
  115
  119
  122
  125
  129
  133
  137
  142
  146
  150
  155
  160
  165
  171
  176
  182
  189
  195
  201
  209
  216
  223
  230
  239
  247
  257
  266
  275
Total cash flow (excl. dividends), $m
  -65
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Retained Cash Flow (-), $m
  -62
  -120
  -111
  -114
  -117
  -120
  -123
  -127
  -131
  -134
  -139
  -143
  -147
  -152
  -156
  -161
  -167
  -172
  -178
  -184
  -190
  -196
  -203
  -210
  -217
  -224
  -232
  -240
  -249
  -258
  -267
Prev. year cash balance distribution, $m
 
  252
  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
 
  134
  -109
  -112
  -115
  -118
  -121
  -124
  -128
  -131
  -135
  -139
  -143
  -148
  -152
  -157
  -162
  -167
  -173
  -178
  -184
  -190
  -197
  -203
  -210
  -217
  -225
  -232
  -240
  -249
  -257
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
 
  128
  -100
  -97
  -95
  -91
  -88
  -84
  -80
  -76
  -71
  -66
  -61
  -56
  -51
  -46
  -41
  -36
  -32
  -27
  -23
  -20
  -16
  -13
  -11
  -8
  -7
  -5
  -4
  -3
  -2
Current shareholders' claim on cash, %
  100
  50.0
  10.5
  2.2
  0.5
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Dermira, Inc. is a biopharmaceutical company. The Company is focused on the development of therapeutic solutions in medical dermatology to treat skin conditions, such as hyperhidrosis, psoriasis and acne. Its portfolio includes three late-stage product candidates: Cimzia (certolizumab pegol), glycopyrronium tosylate and olumacostat glasaretil. Cimzia is an injectable biologic tumor necrosis factor-alpha inhibitor, or TNF inhibitor that is approved and marketed for the treatment of numerous inflammatory diseases spanning multiple medical specialties, including rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis and Crohn's disease, in multiple countries, including the United States. Glycopyrronium tosylate is a small molecule anticholinergic product for topical application for the treatment of primary axillary hyperhidrosis. Olumacostat glasaretil is a small molecule that targets sebum production following topical application for the treatment of acne.

FINANCIAL RATIOS  of  Dermira (DERM)

Valuation Ratios
P/E Ratio -11.5
Price to Sales 44.5
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow -13.8
Price to Free Cash Flow -13.7
Growth Rates
Sales Growth Rate 228.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -33.3%
Ret/ On Assets - 3 Yr. Avg. -34.5%
Return On Total Capital -41.2%
Ret/ On T. Cap. - 3 Yr. Avg. -41.7%
Return On Equity -41.2%
Return On Equity - 3 Yr. Avg. -42.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -387%
EBITDA Margin - 3 Yr. Avg. -657.6%
Operating Margin -391.3%
Oper. Margin - 3 Yr. Avg. -663.8%
Pre-Tax Margin -387%
Pre-Tax Margin - 3 Yr. Avg. -657.6%
Net Profit Margin -387%
Net Profit Margin - 3 Yr. Avg. -652.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0.4%
Payout Ratio 0%

DERM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DERM stock intrinsic value calculation we used $23 million for the last fiscal year's total revenue generated by Dermira. The default revenue input number comes from 2016 income statement of Dermira. 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 DERM 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 DERM is calculated based on our internal credit rating of Dermira, 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 Dermira.
    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 DERM stock the variable cost ratio is equal to 247.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $72 million in the base year in the intrinsic value calculation for DERM 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 3.5% for Dermira.

Corporate tax rate of 27% is the nominal tax rate for Dermira. 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 DERM 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 DERM are equal to 6.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Dermira 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 DERM is equal to -13%. 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 - $247 million for Dermira - 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 40.596 million for Dermira 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 Dermira at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Is It The Right Time To Buy Dermira Inc (DERM)?   [Sep-08-17 08:20PM  Simply Wall St.]
▶ Dermira reports 2Q loss   [Aug-07-17 10:48PM  Associated Press]
▶ ETFs with exposure to Dermira, Inc. : July 24, 2017   [Jul-24-17 03:21PM  Capital Cube]
▶ ETFs with exposure to Dermira, Inc. : July 14, 2017   [Jul-14-17 01:55PM  Capital Cube]
▶ Teva Pharma, Eagle Pharma, Depomed Among Slew Getting Price Haircuts   [May-25-17 04:10PM  Investor's Business Daily]
▶ Biotech And Pharma Industry And Stock News   [01:38PM  Investor's Business Daily]
▶ Dermira reports 1Q loss   [May-08-17 05:34PM  Associated Press]
▶ Xenon Pharma Dumps Acne Drug After Study Failure   [Mar-24-17 09:00AM  Investopedia]
▶ Dermira Psoriasis Drug Cimzia Did Well In Study   [Jan-19-17 01:10PM  at Investopedia]
▶ Dermira Provides Corporate Update   [Jan-06-17 07:30AM  GlobeNewswire]
▶ Dermira Initiates Phase 3 Clinical Program in Acne   [Jan-03-17 07:30AM  GlobeNewswire]
▶ Is Merit Medical Systems, Inc. (MMSI) A Good Stock To Buy?   [Dec-05-16 06:14AM  at Insider Monkey]
▶ Is Bottomline Technologies (EPAY) A Good Stock To Buy?   [Dec-04-16 10:46PM  at Insider Monkey]
▶ Dermira to Present at Stifel 2016 Healthcare Conference   [Nov-09-16 04:05PM  GlobeNewswire]
Financial statements of DERM
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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