Intrinsic value of SciClone Pharmaceuticals - SCLN

Previous Close

$11.15

  Intrinsic Value

$16.46

stock screener

  Rating & Target

buy

+48%

  Value-price divergence*

+29%

Previous close

$11.15

 
Intrinsic value

$16.46

 
Up/down potential

+48%

 
Rating

buy

 
Value-price divergence*

+29%

*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 0.6

 

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
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  160
  185
  211
  239
  270
  302
  335
  370
  407
  446
  486
  528
  572
  617
  664
  713
  764
  817
  872
  929
  989
  1,051
  1,115
  1,183
  1,253
  1,326
  1,402
  1,481
  1,564
  1,651
  1,742
Variable operating expenses, $m
 
  137
  156
  177
  198
  222
  246
  271
  298
  326
  355
  383
  414
  447
  481
  517
  554
  592
  632
  674
  717
  762
  808
  857
  908
  961
  1,016
  1,074
  1,134
  1,197
  1,262
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
  137
  156
  177
  198
  222
  246
  271
  298
  326
  355
  383
  414
  447
  481
  517
  554
  592
  632
  674
  717
  762
  808
  857
  908
  961
  1,016
  1,074
  1,134
  1,197
  1,262
Operating income, $m
  33
  48
  55
  63
  71
  80
  89
  99
  109
  120
  131
  145
  157
  170
  183
  196
  210
  225
  240
  256
  272
  289
  307
  326
  345
  365
  386
  408
  431
  455
  480
EBITDA, $m
  34
  51
  58
  66
  74
  83
  92
  102
  112
  123
  134
  146
  158
  170
  183
  197
  211
  225
  241
  256
  273
  290
  308
  326
  346
  366
  387
  409
  432
  456
  481
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  34
  48
  55
  63
  71
  79
  88
  98
  108
  118
  129
  144
  155
  168
  180
  193
  207
  221
  236
  252
  268
  285
  302
  320
  339
  359
  379
  401
  423
  446
  471
Tax expense, $m
  3
  13
  15
  17
  19
  21
  24
  26
  29
  32
  35
  39
  42
  45
  49
  52
  56
  60
  64
  68
  72
  77
  82
  86
  92
  97
  102
  108
  114
  121
  127
Net income, $m
  31
  35
  40
  46
  52
  58
  64
  71
  79
  86
  94
  105
  113
  122
  132
  141
  151
  162
  173
  184
  195
  208
  220
  234
  247
  262
  277
  292
  309
  326
  344

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
  125
  143
  162
  182
  204
  226
  250
  275
  301
  328
  357
  386
  417
  449
  482
  516
  552
  589
  628
  668
  710
  753
  799
  846
  895
  947
  1,000
  1,056
  1,115
  1,176
Adjusted assets (=assets-cash), $m
  108
  125
  143
  162
  182
  204
  226
  250
  275
  301
  328
  357
  386
  417
  449
  482
  516
  552
  589
  628
  668
  710
  753
  799
  846
  895
  947
  1,000
  1,056
  1,115
  1,176
Revenue / Adjusted assets
  1.481
  1.480
  1.476
  1.475
  1.484
  1.480
  1.482
  1.480
  1.480
  1.482
  1.482
  1.479
  1.482
  1.480
  1.479
  1.479
  1.481
  1.480
  1.480
  1.479
  1.481
  1.480
  1.481
  1.481
  1.481
  1.482
  1.480
  1.481
  1.481
  1.481
  1.481
Average production assets, $m
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
Working capital, $m
  170
  42
  48
  54
  61
  68
  75
  83
  92
  100
  109
  119
  129
  139
  149
  161
  172
  184
  196
  209
  223
  236
  251
  266
  282
  298
  315
  333
  352
  372
  392
Total debt, $m
  0
  4
  9
  13
  19
  24
  30
  36
  42
  48
  55
  62
  70
  77
  85
  93
  102
  111
  120
  130
  140
  150
  161
  173
  184
  197
  210
  223
  237
  252
  267
Total liabilities, $m
  27
  31
  36
  40
  46
  51
  57
  63
  69
  75
  82
  89
  97
  104
  112
  120
  129
  138
  147
  157
  167
  177
  188
  200
  211
  224
  237
  250
  264
  279
  294
Total equity, $m
  215
  94
  107
  121
  137
  153
  170
  188
  206
  226
  246
  267
  290
  313
  336
  361
  387
  414
  442
  471
  501
  532
  565
  599
  634
  671
  710
  750
  792
  836
  882
Total liabilities and equity, $m
  242
  125
  143
  161
  183
  204
  227
  251
  275
  301
  328
  356
  387
  417
  448
  481
  516
  552
  589
  628
  668
  709
  753
  799
  845
  895
  947
  1,000
  1,056
  1,115
  1,176
Debt-to-equity ratio
  0.000
  0.040
  0.080
  0.110
  0.140
  0.160
  0.170
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.300
  0.300
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
  35
  40
  46
  52
  58
  64
  71
  79
  86
  94
  105
  113
  122
  132
  141
  151
  162
  173
  184
  195
  208
  220
  234
  247
  262
  277
  292
  309
  326
  344
Depreciation, amort., depletion, $m
  1
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Funds from operations, $m
  31
  38
  43
  49
  55
  61
  68
  75
  82
  90
  98
  105
  114
  123
  132
  142
  152
  162
  173
  184
  196
  208
  221
  234
  248
  263
  278
  293
  310
  327
  345
Change in working capital, $m
  -4
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  20
  20
Cash from operations, $m
  35
  33
  37
  43
  48
  54
  60
  67
  74
  81
  89
  96
  104
  112
  121
  131
  140
  150
  161
  171
  183
  194
  206
  219
  232
  246
  260
  275
  291
  307
  324
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $m
  -1
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -3
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Free cash flow, $m
  32
  32
  37
  42
  47
  53
  60
  66
  73
  80
  88
  95
  103
  111
  120
  129
  139
  149
  159
  170
  181
  193
  205
  217
  231
  244
  258
  273
  289
  305
  322
Issuance/(repayment) of debt, $m
  0
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
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
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Total cash flow (excl. dividends), $m
  33
  36
  41
  47
  53
  59
  65
  72
  79
  87
  94
  102
  110
  119
  128
  138
  148
  158
  169
  180
  191
  203
  216
  229
  242
  257
  271
  287
  303
  320
  337
Retained Cash Flow (-), $m
  -35
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
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
 
  158
  28
  32
  37
  43
  48
  54
  60
  67
  74
  81
  88
  96
  104
  113
  122
  131
  141
  151
  161
  172
  183
  195
  207
  220
  233
  246
  261
  276
  291
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
 
  151
  25
  28
  31
  33
  35
  37
  38
  39
  39
  38
  38
  37
  35
  33
  31
  29
  26
  23
  20
  18
  15
  13
  11
  9
  7
  5
  4
  3
  2
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
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SciClone Pharmaceuticals, Inc. is a pharmaceutical company. The Company's product portfolio of therapies includes oncology, infectious diseases and cardiovascular disorders. The Company's business is focused primarily in the People's Republic of China. The Company operates in two segments: China and the Rest of the World, including its operations in the United States and Hong Kong. The Company's lead product ZADAXIN (thymalfasin) is approved in over 30 countries, which is used for the treatment of hepatitis B virus (HBV), hepatitis C virus (HCV), and certain cancers according to the local regulatory approvals, and for use as an immune system enhancer. In addition to ZADAXIN, SciClone markets seven partnered and in-licensed products in China. The Company sells ZADAXIN in various international markets through its subsidiary, SciClone Pharmaceuticals International Ltd. (SPIL). Its development portfolio includes Angiomax, Loramyc, Neucardin, VIBATIV and Cleviprex.

FINANCIAL RATIOS  of  SciClone Pharmaceuticals (SCLN)

Valuation Ratios
P/E Ratio 18.4
Price to Sales 3.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow 16.8
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 15.4% 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 51.98 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 $0.6 billion.

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COMPANY NEWS

▶ [$$] Investor Group Buys SciClone Pharmaceuticals   [Oct-13-17 06:22PM  The Wall Street Journal]
▶ SciClone posts 2Q profit   [Aug-09-17 05:30PM  Associated Press]
▶ Company News for June 09, 2017   [Jun-09-17 10:23AM  Zacks]
▶ Is SciClone Pharma Getting Enough in the Buyout?   [Jun-08-17 08:40AM  24/7 Wall St.]
▶ SciClone posts 1Q profit   [05:28PM  Associated Press]
▶ SciClone posts 4Q profit   [06:17AM  Associated Press]
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Financial statements 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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