Intrinsic value of SciClone Pharmaceuticals - SCLN

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$9.40

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$9.40

 
Intrinsic value

$10.59

 
Up/down potential

+13%

 
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 SCLN 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 0.5

 

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, %
  1.91
  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
  4.87
Revenue, $m
  160
  164
  168
  173
  178
  184
  190
  197
  204
  212
  220
  229
  239
  249
  259
  271
  283
  295
  309
  323
  338
  354
  371
  388
  407
  426
  446
  468
  491
  515
  540
Variable operating expenses, $m
 
  122
  125
  128
  132
  136
  141
  146
  151
  157
  163
  166
  173
  180
  188
  196
  205
  214
  224
  234
  245
  256
  269
  281
  295
  309
  324
  339
  356
  373
  391
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
  127
  122
  125
  128
  132
  136
  141
  146
  151
  157
  163
  166
  173
  180
  188
  196
  205
  214
  224
  234
  245
  256
  269
  281
  295
  309
  324
  339
  356
  373
  391
Operating income, $m
  33
  42
  43
  44
  46
  47
  49
  51
  53
  55
  58
  63
  66
  68
  71
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  142
  149
EBITDA, $m
  34
  45
  46
  48
  49
  51
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  135
  142
  149
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
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
Earnings before tax, $m
  34
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  106
  111
  116
  121
  127
  133
  140
  147
Tax expense, $m
  3
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
Net income, $m
  31
  31
  31
  32
  33
  35
  36
  37
  39
  40
  42
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  134
  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
  242
  111
  113
  117
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  262
  275
  288
  301
  316
  331
  347
  364
Adjusted assets (=assets-cash), $m
  108
  111
  113
  117
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  183
  191
  200
  209
  218
  228
  239
  250
  262
  275
  288
  301
  316
  331
  347
  364
Revenue / Adjusted assets
  1.481
  1.477
  1.487
  1.479
  1.483
  1.484
  1.484
  1.481
  1.478
  1.483
  1.477
  1.477
  1.484
  1.482
  1.480
  1.481
  1.482
  1.475
  1.478
  1.482
  1.482
  1.481
  1.484
  1.481
  1.480
  1.479
  1.482
  1.481
  1.483
  1.484
  1.484
Average production assets, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
Working capital, $m
  170
  37
  38
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  116
  121
Total debt, $m
  0
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  48
  52
  56
  60
  64
Total liabilities, $m
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
Total equity, $m
  215
  83
  85
  87
  90
  93
  96
  100
  103
  107
  111
  116
  121
  126
  131
  137
  143
  150
  156
  164
  171
  179
  188
  197
  206
  216
  226
  237
  249
  261
  273
Total liabilities and equity, $m
  242
  111
  113
  116
  120
  124
  128
  133
  137
  143
  148
  155
  161
  168
  175
  183
  191
  200
  208
  219
  228
  239
  251
  263
  275
  288
  301
  316
  332
  348
  364
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
Adjusted equity ratio
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  31
  31
  32
  33
  35
  36
  37
  39
  40
  42
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
Depreciation, amort., depletion, $m
  1
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  31
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
Change in working capital, $m
  -4
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash from operations, $m
  35
  32
  34
  35
  35
  36
  38
  39
  40
  42
  43
  44
  46
  48
  49
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  102
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
  -3
  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
  32
  32
  34
  34
  35
  36
  37
  39
  40
  41
  43
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
Issuance/(repayment) of debt, $m
  0
  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
  4
  4
Issuance/(repurchase) of shares, $m
  2
  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  
  2
  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
  4
  4
Total cash flow (excl. dividends), $m
  33
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
Retained Cash Flow (-), $m
  -35
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
Prev. year cash balance distribution, $m
 
  134
  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
 
  165
  32
  33
  34
  34
  35
  36
  37
  39
  40
  41
  42
  44
  46
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
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
 
  158
  29
  29
  28
  27
  26
  25
  23
  22
  21
  19
  18
  17
  15
  14
  13
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
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

SciClone Pharmaceuticals, Inc., a specialty pharmaceutical company, provides therapies for oncology, infectious diseases, and cardiovascular disorders in the People’s Republic of China, the United States, and Hong Kong. Its lead product is ZADAXIN, which is used for the treatment of hepatitis B and hepatitis C viruses, and certain cancers, as well as for use as an immune system enhancer. In addition, the company focuses on developing ZADAXIN for the treatment of sepsis. SciClone Pharmaceuticals, Inc. markets and sells ZADAXIN through distribution arrangements, local importers, and distributors. It markets and distributes products, such as DC Bead, Holoxan, Mesna, Endoxan, Methotrexate, Estracyt, Farlutal, Neucardin, ProFlow, Angiomax, and Cleviprex. The company has an agreement with MEDA Pharma GmbH & Co. KG for the development of Tramadol. SciClone Pharmaceuticals, Inc. was founded in 1989 and is headquartered in Foster City, California.

FINANCIAL RATIOS  of  SciClone Pharmaceuticals (SCLN)

Valuation Ratios
P/E Ratio 15.5
Price to Sales 3
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow 14.2
Growth Rates
Sales Growth Rate 1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
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 13.5%
Ret/ On Assets - 3 Yr. Avg. 14%
Return On Total Capital 15.7%
Ret/ On T. Cap. - 3 Yr. Avg. 16.5%
Return On Equity 15.7%
Return On Equity - 3 Yr. Avg. 16.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 85.6%
Gross Margin - 3 Yr. Avg. 84.9%
EBITDA Margin 21.9%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 20.6%
Oper. Margin - 3 Yr. Avg. 21.8%
Pre-Tax Margin 21.3%
Pre-Tax Margin - 3 Yr. Avg. 19.9%
Net Profit Margin 19.4%
Net Profit Margin - 3 Yr. Avg. 18.8%
Effective Tax Rate 8.8%
Eff/ Tax Rate - 3 Yr. Avg. 5.3%
Payout Ratio 0%

SCLN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCLN stock intrinsic value calculation we used $160 million for the last fiscal year's total revenue generated by SciClone Pharmaceuticals. The default revenue input number comes from 2016 income statement of SciClone 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 SCLN stock valuation model: a) initial revenue growth rate of 2.3% 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 SCLN is calculated based on our internal credit rating of SciClone 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 SciClone 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 SCLN stock the variable cost ratio is equal to 74.4%.

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 SCLN 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 SciClone Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for SciClone 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 SCLN 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 SCLN are equal to 1.6%.

Life of production assets of 34.5 years is the average useful life of capital assets used in SciClone 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 SCLN is equal to 22.5%. 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 - $215 million for SciClone 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 52.037 million for SciClone 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 SciClone Pharmaceuticals at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ SciClone posts 1Q profit   [05:28PM  Associated Press]
▶ SciClone posts 4Q profit   [06:17AM  Associated Press]
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▶ SciClone Reports 2015 Financial Results   [04:05PM  PR Newswire]
▶ LifeSci Capital Initiates Coverage of SciClone   [Mar-08-16 02:45PM  Accesswire]
Stock chart of SCLN Financial statements of SCLN Annual reports of SCLN
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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