Intrinsic value of Pacira Pharmaceuticals - PCRX

Previous Close

$33.05

  Intrinsic Value

$7.41

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

-7%

Previous close

$33.05

 
Intrinsic value

$7.41

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

-7%

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

We calculate the intrinsic value of PCRX 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 1.3

 

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, %
  10.84
  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
  276
  282
  288
  295
  304
  313
  323
  334
  346
  359
  373
  387
  403
  420
  437
  456
  476
  498
  520
  544
  569
  595
  623
  652
  683
  715
  750
  786
  824
  863
  905
Variable operating expenses, $m
 
  271
  277
  284
  292
  301
  311
  321
  332
  344
  357
  367
  382
  397
  414
  432
  451
  471
  492
  515
  538
  563
  590
  617
  647
  677
  710
  744
  780
  818
  857
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
  308
  271
  277
  284
  292
  301
  311
  321
  332
  344
  357
  367
  382
  397
  414
  432
  451
  471
  492
  515
  538
  563
  590
  617
  647
  677
  710
  744
  780
  818
  857
Operating income, $m
  -32
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
EBITDA, $m
  -19
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  75
  78
Interest expense (income), $m
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
Earnings before tax, $m
  -38
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Tax expense, $m
  0
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
Net income, $m
  -38
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  173
  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
  391
  222
  227
  233
  240
  247
  255
  264
  273
  283
  294
  306
  318
  332
  346
  360
  376
  393
  411
  429
  449
  470
  492
  515
  539
  565
  592
  621
  650
  682
  715
Adjusted assets (=assets-cash), $m
  218
  222
  227
  233
  240
  247
  255
  264
  273
  283
  294
  306
  318
  332
  346
  360
  376
  393
  411
  429
  449
  470
  492
  515
  539
  565
  592
  621
  650
  682
  715
Revenue / Adjusted assets
  1.266
  1.270
  1.269
  1.266
  1.267
  1.267
  1.267
  1.265
  1.267
  1.269
  1.269
  1.265
  1.267
  1.265
  1.263
  1.267
  1.266
  1.267
  1.265
  1.268
  1.267
  1.266
  1.266
  1.266
  1.267
  1.265
  1.267
  1.266
  1.268
  1.265
  1.266
Average production assets, $m
  96
  97
  100
  102
  105
  108
  112
  116
  120
  124
  129
  134
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  215
  226
  236
  248
  259
  272
  285
  299
  313
Working capital, $m
  198
  26
  26
  27
  28
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  75
  79
  82
Total debt, $m
  109
  112
  116
  121
  126
  132
  138
  145
  153
  161
  169
  178
  188
  199
  210
  221
  234
  247
  261
  276
  291
  308
  325
  343
  363
  383
  404
  427
  450
  475
  501
Total liabilities, $m
  172
  175
  179
  184
  189
  195
  201
  208
  216
  224
  232
  241
  251
  262
  273
  284
  297
  310
  324
  339
  354
  371
  388
  406
  426
  446
  467
  490
  513
  538
  564
Total equity, $m
  219
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Total liabilities and equity, $m
  391
  222
  227
  233
  240
  247
  255
  264
  274
  284
  294
  306
  318
  332
  346
  360
  376
  393
  411
  430
  449
  470
  492
  515
  540
  565
  592
  621
  650
  682
  715
Debt-to-equity ratio
  0.498
  2.400
  2.430
  2.460
  2.490
  2.530
  2.570
  2.610
  2.650
  2.690
  2.720
  2.760
  2.800
  2.840
  2.880
  2.910
  2.950
  2.980
  3.010
  3.040
  3.070
  3.100
  3.130
  3.160
  3.190
  3.210
  3.240
  3.260
  3.280
  3.300
  3.320
Adjusted equity ratio
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211
  0.211

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
Depreciation, amort., depletion, $m
  13
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Funds from operations, $m
  55
  19
  19
  19
  20
  20
  21
  22
  22
  23
  24
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
Change in working capital, $m
  22
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  33
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  22
  23
  24
  25
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
Maintenance CAPEX, $m
  0
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
New CAPEX, $m
  -25
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
Cash from investing activities, $m
  -62
  -11
  -11
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -42
  -44
Free cash flow, $m
  -29
  7
  7
  6
  6
  6
  6
  6
  6
  6
  6
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
Issuance/(repayment) of debt, $m
  0
  3
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
Issuance/(repurchase) of shares, $m
  6
  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  
  7
  3
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
Total cash flow (excl. dividends), $m
  -21
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
Retained Cash Flow (-), $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Prev. year cash balance distribution, $m
 
  173
  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
 
  182
  10
  10
  10
  10
  11
  11
  11
  12
  12
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
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
 
  175
  9
  9
  8
  8
  8
  7
  7
  7
  6
  5
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
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
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Pacira Pharmaceuticals, Inc. is a holding company. The Company is a pharmaceutical company focused on the development, manufacture and commercialization of pharmaceutical products, based on its DepoFoam extended release drug delivery technology, for use primarily in hospitals and ambulatory surgery centers. Its lead product candidate is EXPAREL (bupivacaine liposome injectable suspension), which consists of bupivacaine, an amide-type local anesthetic, encapsulated in DepoFoam and is indicated for single-dose infiltration into the surgical site to produce postsurgical analgesia. In addition to EXPAREL, DepoFoam is also the basis for its other Food and Drug Administration-approved commercial product, DepoCyt(e), which it manufactures for its commercial partners, as well as its product candidates. The Company's other product candidates include DepoMeloxicam (DepoMLX) and DepoTranexamic Acid (DepoTXA). DepoCyt(e) is indicated for the intrathecal treatment of lymphomatous meningitis.

FINANCIAL RATIOS  of  Pacira Pharmaceuticals (PCRX)

Valuation Ratios
P/E Ratio -32.6
Price to Sales 4.5
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 37.5
Price to Free Cash Flow 154.8
Growth Rates
Sales Growth Rate 10.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.5%
Cap. Spend. - 3 Yr. Gr. Rate 15.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 49.8%
Total Debt to Equity 49.8%
Interest Coverage -9
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -3.6%
Return On Total Capital -11.7%
Ret/ On T. Cap. - 3 Yr. Avg. -5.9%
Return On Equity -17.4%
Return On Equity - 3 Yr. Avg. -9.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 60.1%
Gross Margin - 3 Yr. Avg. 63.9%
EBITDA Margin -7.6%
EBITDA Margin - 3 Yr. Avg. -0.1%
Operating Margin -11.6%
Oper. Margin - 3 Yr. Avg. -3.5%
Pre-Tax Margin -13.8%
Pre-Tax Margin - 3 Yr. Avg. -6.7%
Net Profit Margin -13.8%
Net Profit Margin - 3 Yr. Avg. -6.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PCRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCRX stock intrinsic value calculation we used $276 million for the last fiscal year's total revenue generated by Pacira Pharmaceuticals. The default revenue input number comes from 2016 income statement of Pacira 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 PCRX 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 PCRX is calculated based on our internal credit rating of Pacira 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 Pacira 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 PCRX stock the variable cost ratio is equal to 96.4%.

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 PCRX 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 3.8% for Pacira Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Pacira 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 PCRX 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 PCRX are equal to 34.6%.

Life of production assets of 10.3 years is the average useful life of capital assets used in Pacira 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 PCRX is equal to 9.1%. 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 - $219 million for Pacira 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 38.881 million for Pacira 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 Pacira Pharmaceuticals at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Steven Cohen Plunges Into Opioid Replacement Maker Pacira   [Aug-24-17 06:21PM  GuruFocus.com]
▶ [$$] Maverick Therapeutics Taps Former Pacira Executive as CEO   [Aug-10-17 06:31PM  The Wall Street Journal]
▶ Pacira reports 2Q loss   [Aug-02-17 10:51PM  Associated Press]
▶ Paul Tudor Jones' Top 4 Health Care Buys   [May-18-17 04:05PM  GuruFocus.com]
▶ Pacira reports 1Q loss   [May-04-17 08:41AM  Associated Press]
▶ Can Pacira Pharmaceuticals' Exparel Reduce Opioid Abuse?   [Apr-19-17 08:24AM  Motley Fool]
▶ Can Drugmakers Cure the Opioid Crisis?   [Apr-18-17 07:24AM  Motley Fool]
▶ MonoSol Rx Appoints James S. Scibetta to Board of Directors   [Apr-11-17 08:30AM  GlobeNewswire]
▶ Anesthesia Can't Save This Biotech From Feeling Pain: Analyst   [Mar-23-17 04:22PM  Investor's Business Daily]
▶ Is Pacira Pharmaceuticals' Balance Sheet Safe?   [Mar-09-17 07:00AM  Motley Fool]
▶ Why Pacira Pharmaceuticals Shares Are Soaring 13.6% Higher   [Mar-01-17 04:34PM  at Motley Fool]
Financial statements of PCRX
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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