Intrinsic value of Ionis Pharmaceuticals - IONS

Previous Close

$54.33

  Intrinsic Value

$495.91

stock screener

  Rating & Target

str. buy

+813%

  Value-price divergence*

+5000%

Previous close

$54.33

 
Intrinsic value

$495.91

 
Up/down potential

+813%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of IONS 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 7.0

 

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, %
  22.18
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  347
  555
  858
  1,283
  1,861
  2,626
  3,610
  4,846
  6,363
  8,188
  10,342
  12,842
  15,701
  18,924
  22,516
  26,475
  30,797
  35,476
  40,503
  45,872
  51,574
  57,601
  63,948
  70,609
  77,581
  84,864
  92,458
  100,366
  108,594
  117,150
  126,042
Variable operating expenses, $m
 
  334
  516
  772
  1,121
  1,581
  2,173
  2,917
  3,831
  4,929
  6,226
  7,731
  9,452
  11,393
  13,555
  15,938
  18,540
  21,356
  24,383
  27,615
  31,048
  34,676
  38,497
  42,506
  46,704
  51,088
  55,660
  60,420
  65,374
  70,524
  75,877
Fixed operating expenses, $m
 
  198
  203
  208
  213
  218
  224
  229
  235
  241
  247
  253
  260
  266
  273
  280
  287
  294
  301
  309
  316
  324
  332
  341
  349
  358
  367
  376
  385
  395
  405
Total operating expenses, $m
  397
  532
  719
  980
  1,334
  1,799
  2,397
  3,146
  4,066
  5,170
  6,473
  7,984
  9,712
  11,659
  13,828
  16,218
  18,827
  21,650
  24,684
  27,924
  31,364
  35,000
  38,829
  42,847
  47,053
  51,446
  56,027
  60,796
  65,759
  70,919
  76,282
Operating income, $m
  -50
  23
  139
  303
  528
  827
  1,213
  1,699
  2,297
  3,018
  3,869
  4,858
  5,989
  7,266
  8,689
  10,258
  11,971
  13,826
  15,819
  17,949
  20,210
  22,601
  25,119
  27,762
  30,528
  33,418
  36,431
  39,570
  42,835
  46,231
  49,760
EBITDA, $m
  -41
  34
  155
  327
  563
  877
  1,282
  1,791
  2,418
  3,173
  4,065
  5,102
  6,288
  7,625
  9,117
  10,761
  12,556
  14,500
  16,589
  18,820
  21,190
  23,696
  26,334
  29,103
  32,002
  35,030
  38,188
  41,477
  44,899
  48,457
  52,155
Interest expense (income), $m
  7
  21
  38
  63
  97
  145
  207
  288
  389
  514
  663
  840
  1,045
  1,279
  1,544
  1,838
  2,162
  2,517
  2,900
  3,312
  3,753
  4,220
  4,714
  5,234
  5,780
  6,352
  6,949
  7,571
  8,220
  8,894
  9,595
Earnings before tax, $m
  -84
  3
  101
  240
  430
  682
  1,006
  1,411
  1,908
  2,504
  3,206
  4,018
  4,944
  5,987
  7,145
  8,420
  9,808
  11,309
  12,919
  14,636
  16,458
  18,381
  20,405
  22,527
  24,748
  27,066
  29,483
  31,999
  34,616
  37,337
  40,165
Tax expense, $m
  3
  1
  27
  65
  116
  184
  272
  381
  515
  676
  865
  1,085
  1,335
  1,616
  1,929
  2,273
  2,648
  3,053
  3,488
  3,952
  4,444
  4,963
  5,509
  6,082
  6,682
  7,308
  7,960
  8,640
  9,346
  10,081
  10,844
Net income, $m
  -87
  2
  74
  175
  314
  498
  734
  1,030
  1,393
  1,828
  2,340
  2,933
  3,609
  4,370
  5,216
  6,146
  7,160
  8,255
  9,431
  10,684
  12,014
  13,418
  14,896
  16,445
  18,066
  19,758
  21,522
  23,359
  25,269
  27,256
  29,320

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  668
  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
  912
  1,461
  2,257
  3,376
  4,898
  6,911
  9,500
  12,752
  16,745
  21,546
  27,215
  33,795
  41,317
  49,801
  59,254
  69,672
  81,045
  93,357
  106,588
  120,716
  135,721
  151,582
  168,284
  185,812
  204,161
  223,326
  243,310
  264,122
  285,775
  308,289
  331,690
Adjusted assets (=assets-cash), $m
  244
  1,461
  2,257
  3,376
  4,898
  6,911
  9,500
  12,752
  16,745
  21,546
  27,215
  33,795
  41,317
  49,801
  59,254
  69,672
  81,045
  93,357
  106,588
  120,716
  135,721
  151,582
  168,284
  185,812
  204,161
  223,326
  243,310
  264,122
  285,775
  308,289
  331,690
Revenue / Adjusted assets
  1.422
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
Average production assets, $m
  66
  105
  163
  244
  354
  499
  686
  921
  1,209
  1,556
  1,965
  2,440
  2,983
  3,596
  4,278
  5,030
  5,851
  6,740
  7,696
  8,716
  9,799
  10,944
  12,150
  13,416
  14,740
  16,124
  17,567
  19,070
  20,633
  22,258
  23,948
Working capital, $m
  664
  -5
  -8
  -12
  -17
  -24
  -32
  -44
  -57
  -74
  -93
  -116
  -141
  -170
  -203
  -238
  -277
  -319
  -365
  -413
  -464
  -518
  -576
  -635
  -698
  -764
  -832
  -903
  -977
  -1,054
  -1,134
Total debt, $m
  589
  1,077
  1,786
  2,781
  4,136
  5,927
  8,232
  11,127
  14,680
  18,953
  23,998
  29,854
  36,549
  44,100
  52,513
  61,785
  71,907
  82,865
  94,640
  107,214
  120,569
  134,685
  149,549
  165,150
  181,480
  198,537
  216,323
  234,845
  254,117
  274,155
  294,981
Total liabilities, $m
  813
  1,300
  2,009
  3,004
  4,359
  6,150
  8,455
  11,350
  14,903
  19,176
  24,221
  30,077
  36,772
  44,323
  52,736
  62,008
  72,130
  83,088
  94,863
  107,437
  120,792
  134,908
  149,772
  165,373
  181,703
  198,760
  216,546
  235,068
  254,340
  274,378
  295,204
Total equity, $m
  100
  161
  248
  371
  539
  760
  1,045
  1,403
  1,842
  2,370
  2,994
  3,717
  4,545
  5,478
  6,518
  7,664
  8,915
  10,269
  11,725
  13,279
  14,929
  16,674
  18,511
  20,439
  22,458
  24,566
  26,764
  29,053
  31,435
  33,912
  36,486
Total liabilities and equity, $m
  913
  1,461
  2,257
  3,375
  4,898
  6,910
  9,500
  12,753
  16,745
  21,546
  27,215
  33,794
  41,317
  49,801
  59,254
  69,672
  81,045
  93,357
  106,588
  120,716
  135,721
  151,582
  168,283
  185,812
  204,161
  223,326
  243,310
  264,121
  285,775
  308,290
  331,690
Debt-to-equity ratio
  5.890
  6.700
  7.190
  7.490
  7.680
  7.800
  7.880
  7.930
  7.970
  8.000
  8.020
  8.030
  8.040
  8.050
  8.060
  8.060
  8.070
  8.070
  8.070
  8.070
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
  8.080
Adjusted equity ratio
  -2.328
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -87
  2
  74
  175
  314
  498
  734
  1,030
  1,393
  1,828
  2,340
  2,933
  3,609
  4,370
  5,216
  6,146
  7,160
  8,255
  9,431
  10,684
  12,014
  13,418
  14,896
  16,445
  18,066
  19,758
  21,522
  23,359
  25,269
  27,256
  29,320
Depreciation, amort., depletion, $m
  9
  11
  16
  24
  35
  50
  69
  92
  121
  156
  196
  244
  298
  360
  428
  503
  585
  674
  770
  872
  980
  1,094
  1,215
  1,342
  1,474
  1,612
  1,757
  1,907
  2,063
  2,226
  2,395
Funds from operations, $m
  -264
  12
  90
  200
  350
  548
  803
  1,122
  1,514
  1,983
  2,537
  3,177
  3,908
  4,730
  5,644
  6,649
  7,745
  8,930
  10,200
  11,556
  12,994
  14,513
  16,111
  17,787
  19,540
  21,371
  23,279
  25,266
  27,333
  29,482
  31,715
Change in working capital, $m
  -152
  -2
  -3
  -4
  -5
  -7
  -9
  -11
  -14
  -16
  -19
  -23
  -26
  -29
  -32
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -68
  -71
  -74
  -77
  -80
Cash from operations, $m
  -112
  14
  93
  204
  355
  555
  812
  1,133
  1,527
  2,000
  2,556
  3,200
  3,933
  4,759
  5,676
  6,685
  7,784
  8,972
  10,246
  11,604
  13,045
  14,567
  16,168
  17,847
  19,603
  21,436
  23,347
  25,337
  27,407
  29,559
  31,795
Maintenance CAPEX, $m
  0
  -7
  -11
  -16
  -24
  -35
  -50
  -69
  -92
  -121
  -156
  -196
  -244
  -298
  -360
  -428
  -503
  -585
  -674
  -770
  -872
  -980
  -1,094
  -1,215
  -1,342
  -1,474
  -1,612
  -1,757
  -1,907
  -2,063
  -2,226
New CAPEX, $m
  -7
  -39
  -57
  -81
  -110
  -145
  -187
  -235
  -288
  -347
  -409
  -475
  -543
  -613
  -682
  -752
  -821
  -889
  -955
  -1,020
  -1,083
  -1,145
  -1,206
  -1,266
  -1,325
  -1,384
  -1,443
  -1,503
  -1,563
  -1,626
  -1,690
Cash from investing activities, $m
  57
  -46
  -68
  -97
  -134
  -180
  -237
  -304
  -380
  -468
  -565
  -671
  -787
  -911
  -1,042
  -1,180
  -1,324
  -1,474
  -1,629
  -1,790
  -1,955
  -2,125
  -2,300
  -2,481
  -2,667
  -2,858
  -3,055
  -3,260
  -3,470
  -3,689
  -3,916
Free cash flow, $m
  -55
  -32
  25
  106
  220
  374
  575
  830
  1,147
  1,532
  1,991
  2,528
  3,146
  3,848
  4,634
  5,505
  6,460
  7,498
  8,616
  9,815
  11,090
  12,442
  13,867
  15,366
  16,936
  18,579
  20,292
  22,078
  23,936
  25,870
  27,880
Issuance/(repayment) of debt, $m
  -3
  488
  709
  995
  1,355
  1,791
  2,305
  2,894
  3,553
  4,273
  5,045
  5,856
  6,695
  7,551
  8,413
  9,272
  10,122
  10,958
  11,776
  12,574
  13,354
  14,117
  14,864
  15,601
  16,330
  17,057
  17,786
  18,522
  19,271
  20,038
  20,827
Issuance/(repurchase) of shares, $m
  13
  59
  14
  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  
  11
  547
  723
  995
  1,355
  1,791
  2,305
  2,894
  3,553
  4,273
  5,045
  5,856
  6,695
  7,551
  8,413
  9,272
  10,122
  10,958
  11,776
  12,574
  13,354
  14,117
  14,864
  15,601
  16,330
  17,057
  17,786
  18,522
  19,271
  20,038
  20,827
Total cash flow (excl. dividends), $m
  -44
  515
  747
  1,102
  1,575
  2,165
  2,880
  3,724
  4,700
  5,806
  7,036
  8,384
  9,841
  11,399
  13,047
  14,777
  16,582
  18,455
  20,392
  22,389
  24,445
  26,558
  28,732
  30,967
  33,266
  35,635
  38,078
  40,600
  43,208
  45,908
  48,706
Retained Cash Flow (-), $m
  101
  -61
  -88
  -123
  -167
  -221
  -285
  -358
  -439
  -528
  -624
  -724
  -827
  -933
  -1,040
  -1,146
  -1,251
  -1,354
  -1,455
  -1,554
  -1,651
  -1,745
  -1,837
  -1,928
  -2,018
  -2,108
  -2,198
  -2,289
  -2,382
  -2,477
  -2,574
Prev. year cash balance distribution, $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 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
 
  455
  660
  979
  1,408
  1,944
  2,595
  3,366
  4,261
  5,278
  6,412
  7,660
  9,014
  10,465
  12,007
  13,631
  15,331
  17,101
  18,937
  20,835
  22,794
  24,814
  26,895
  29,038
  31,248
  33,527
  35,880
  38,311
  40,826
  43,431
  46,132
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
 
  436
  604
  852
  1,159
  1,507
  1,883
  2,274
  2,663
  3,032
  3,362
  3,638
  3,847
  3,979
  4,031
  4,002
  3,896
  3,721
  3,487
  3,208
  2,896
  2,567
  2,232
  1,903
  1,592
  1,304
  1,047
  822
  632
  474
  347
Current shareholders' claim on cash, %
  100
  94.4
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6
  93.6

Ionis Pharmaceuticals, Inc., a RNA-targeted drug discovery and development company, develops drugs for patients with severe and rare diseases in the United States. The company markets KYNAMRO for the treatment of homozygous familial hypercholesterolemia, and Alicaforsen for ulcerative colitis and pouchitis. Its drugs in Phase III development include Nusinersen for the treatment of patients with spinal muscular atrophy; IONIS-TTRRx for the treatment of patients with various forms of TTR amyloidosis, including familial amyloid polyneuropathy, familial amyloid cardiomyopathy, and wild-type TTR amyloidosis; volanesorsen for the treatment of patients with familial chylomicronemia syndrome and familial partial lipodystrophy; Custirsen to treat cancer; and Plazomicin for the treatment of severe bacterial infection. The company’s products under development also include IONIS-DMPK-2.5 for myotonic dystrophy type 1; IONIS-HTT for huntington's disease; ATL1103 for acromegaly; IONIS-SOD1 for amyotrophic lateral sclerosis; IONIS-FXI (BAY 2306001) for clotting disorders; IONIS-APO(a)-L for high Lp; IONIS-ANGPTL3-L for mixed dyslipidemias; Apatorsen (OGX-427) and IONIS-STAT3-2.5 (AZD9150) for cancer; EXC 001 (PF-06473871) for scarring; ATL1102 for multiple sclerosis; RG-101 for hepatitis C virus infection; IONIS-GCGR and IONIS-PTP1B for type 2 diabetes; and IONIS-FGFR4 for obesity. In addition, it is developing IONIS-GCCR for cushing's syndrome; IONIS-PKK for hereditary angioedema; RG-012 for alport syndrome; IONIS-AR-2.5 (AZD5312) for prostate cancer; IONIS-GSK4-L for ocular disease; IONIS-HBV and IONIS-HBV-L for hepatitis B virus infection; and IONIS-DGAT2 for nonalcoholic steatohepatitis. It has strategic alliance with The University of Texas MD Anderson Cancer Center. The company was formerly known as Isis Pharmaceuticals, Inc. and changed its name to Ionis Pharmaceuticals, Inc. in December 2015. The company was founded in 1989 and is headquartered in Carlsbad, California.

FINANCIAL RATIOS  of  Ionis Pharmaceuticals (IONS)

Valuation Ratios
P/E Ratio -76
Price to Sales 19
Price to Book 66.1
Price to Tangible Book
Price to Cash Flow -59
Price to Free Cash Flow -55.5
Growth Rates
Sales Growth Rate 22.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio 668
Current Ratio 0.1
LT Debt to Equity 588%
Total Debt to Equity 589%
Interest Coverage -11
Management Effectiveness
Return On Assets -8.6%
Ret/ On Assets - 3 Yr. Avg. -7%
Return On Total Capital -12.8%
Ret/ On T. Cap. - 3 Yr. Avg. -10.4%
Return On Equity -57.8%
Return On Equity - 3 Yr. Avg. -36.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 16.4%
Gross Margin - 3 Yr. Avg. 5.8%
EBITDA Margin -19.6%
EBITDA Margin - 3 Yr. Avg. -20.9%
Operating Margin -14.4%
Oper. Margin - 3 Yr. Avg. -22.3%
Pre-Tax Margin -24.2%
Pre-Tax Margin - 3 Yr. Avg. -26.8%
Net Profit Margin -25.1%
Net Profit Margin - 3 Yr. Avg. -24.8%
Effective Tax Rate -3.6%
Eff/ Tax Rate - 3 Yr. Avg. 8.1%
Payout Ratio 0%

IONS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IONS stock intrinsic value calculation we used $347 million for the last fiscal year's total revenue generated by Ionis Pharmaceuticals. The default revenue input number comes from 2016 income statement of Ionis Pharmaceuticals. 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 IONS stock valuation model: a) initial revenue growth rate of 60% 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 IONS is calculated based on our internal credit rating of Ionis Pharmaceuticals, 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 Ionis Pharmaceuticals.
    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 IONS stock the variable cost ratio is equal to 60.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $193 million in the base year in the intrinsic value calculation for IONS 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 Ionis Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Ionis Pharmaceuticals. 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 IONS 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 IONS are equal to 19%.

Life of production assets of 10 years is the average useful life of capital assets used in Ionis Pharmaceuticals 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 IONS is equal to -0.9%. 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 - $100 million for Ionis Pharmaceuticals - 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 128.641 million for Ionis Pharmaceuticals 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 Ionis Pharmaceuticals at the current share price and the inputted number of shares is $7.0 billion.

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COMPANY NEWS

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▶ Changes in Ionis Pharmaceuticals Valuation after 1Q17   [Jun-09-17 04:47PM  Market Realist]
▶ Why Ionis Pharmaceuticals Inc. Swooned 6% in May   [Jun-06-17 10:13AM  Motley Fool]
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▶ Pharma Stock With Triple-Digit Growth Forming Blotchy Base   [May-24-17 12:12PM  Investor's Business Daily]
▶ How Ionis Helped Rival Alnylam But Tanked Itself On A Key Trial   [May-15-17 04:11PM  Investor's Business Daily]
▶ Safety Concerns Ding Ionis   [02:21PM  Morningstar]
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▶ Why Ionis is Tumbling   [01:29PM  Barrons.com]
▶ Ionis Pharmaceuticals tops 1Q profit forecasts   [10:47AM  Associated Press]
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▶ Ionis Pharmaceuticals: Big Data Coming Soon   [Apr-26-17 10:01AM  Motley Fool]
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▶ Why Ionis Pharmaceuticals Dropped 18.7% in March   [Apr-04-17 12:20PM  Motley Fool]
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Stock chart of IONS Financial statements of IONS Annual reports of IONS
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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