Intrinsic value of Sorrento Therapeutics - SRNE

Previous Close

$2.80

  Intrinsic Value

$1.10

stock screener

  Rating & Target

str. sell

-61%

Previous close

$2.80

 
Intrinsic value

$1.10

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of SRNE 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 0.2

 

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, %
  60.00
  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
  8
  13
  20
  30
  43
  61
  83
  112
  147
  189
  238
  296
  362
  436
  519
  610
  710
  818
  934
  1,058
  1,189
  1,328
  1,474
  1,628
  1,789
  1,957
  2,132
  2,314
  2,504
  2,701
  2,906
Variable operating expenses, $m
 
  108
  164
  244
  352
  495
  678
  909
  1,192
  1,533
  1,935
  2,398
  2,932
  3,534
  4,205
  4,944
  5,751
  6,625
  7,564
  8,566
  9,631
  10,757
  11,942
  13,186
  14,488
  15,848
  17,266
  18,743
  20,279
  21,877
  23,538
Fixed operating expenses, $m
 
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  65
  67
  69
  70
  72
  74
  76
  78
Total operating expenses, $m
  105
  146
  203
  284
  393
  537
  721
  953
  1,237
  1,579
  1,982
  2,447
  2,982
  3,585
  4,257
  4,998
  5,806
  6,681
  7,622
  8,625
  9,692
  10,819
  12,006
  13,251
  14,555
  15,917
  17,336
  18,815
  20,353
  21,953
  23,616
Operating income, $m
  -97
  -133
  -183
  -254
  -350
  -476
  -638
  -841
  -1,091
  -1,391
  -1,744
  -2,151
  -2,620
  -3,149
  -3,738
  -4,387
  -5,096
  -5,863
  -6,688
  -7,568
  -8,503
  -9,491
  -10,531
  -11,623
  -12,766
  -13,960
  -15,205
  -16,501
  -17,850
  -19,252
  -20,709
EBITDA, $m
  -94
  -126
  -175
  -244
  -336
  -459
  -616
  -814
  -1,056
  -1,346
  -1,690
  -2,088
  -2,543
  -3,056
  -3,628
  -4,258
  -4,946
  -5,690
  -6,490
  -7,344
  -8,251
  -9,210
  -10,219
  -11,278
  -12,387
  -13,545
  -14,753
  -16,011
  -17,319
  -18,680
  -20,094
Interest expense (income), $m
  1
  2
  7
  16
  28
  46
  69
  98
  135
  180
  235
  299
  374
  459
  556
  663
  781
  910
  1,050
  1,200
  1,361
  1,531
  1,711
  1,901
  2,100
  2,308
  2,526
  2,753
  2,989
  3,235
  3,490
Earnings before tax, $m
  -65
  -135
  -190
  -270
  -378
  -522
  -707
  -939
  -1,226
  -1,571
  -1,979
  -2,450
  -2,994
  -3,608
  -4,293
  -5,050
  -5,877
  -6,774
  -7,738
  -8,768
  -9,863
  -11,022
  -12,242
  -13,524
  -14,866
  -16,268
  -17,730
  -19,254
  -20,838
  -22,487
  -24,200
Tax expense, $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
Net income, $m
  -61
  -135
  -190
  -270
  -378
  -522
  -707
  -939
  -1,226
  -1,571
  -1,979
  -2,450
  -2,994
  -3,608
  -4,293
  -5,050
  -5,877
  -6,774
  -7,738
  -8,768
  -9,863
  -11,022
  -12,242
  -13,524
  -14,866
  -16,268
  -17,730
  -19,254
  -20,838
  -22,487
  -24,200

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  84
  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
  402
  512
  791
  1,183
  1,716
  2,422
  3,329
  4,469
  5,868
  7,551
  9,537
  11,843
  14,479
  17,452
  20,764
  24,415
  28,401
  32,715
  37,352
  42,303
  47,561
  53,119
  58,972
  65,115
  71,545
  78,261
  85,264
  92,557
  100,145
  108,035
  116,235
Adjusted assets (=assets-cash), $m
  318
  512
  791
  1,183
  1,716
  2,422
  3,329
  4,469
  5,868
  7,551
  9,537
  11,843
  14,479
  17,452
  20,764
  24,415
  28,401
  32,715
  37,352
  42,303
  47,561
  53,119
  58,972
  65,115
  71,545
  78,261
  85,264
  92,557
  100,145
  108,035
  116,235
Revenue / Adjusted assets
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
  0.025
Average production assets, $m
  41
  66
  101
  152
  220
  310
  427
  573
  752
  967
  1,222
  1,517
  1,855
  2,236
  2,660
  3,128
  3,639
  4,192
  4,786
  5,420
  6,094
  6,806
  7,556
  8,343
  9,167
  10,027
  10,924
  11,859
  12,831
  13,842
  14,893
Working capital, $m
  14
  -112
  -173
  -259
  -375
  -530
  -728
  -978
  -1,284
  -1,652
  -2,086
  -2,591
  -3,167
  -3,818
  -4,542
  -5,341
  -6,213
  -7,156
  -8,171
  -9,254
  -10,404
  -11,620
  -12,900
  -14,244
  -15,650
  -17,119
  -18,651
  -20,247
  -21,907
  -23,633
  -25,426
Total debt, $m
  47
  186
  437
  790
  1,270
  1,905
  2,721
  3,747
  5,006
  6,521
  8,308
  10,383
  12,756
  15,432
  18,413
  21,699
  25,286
  29,169
  33,342
  37,798
  42,530
  47,532
  52,800
  58,328
  64,115
  70,159
  76,462
  83,026
  89,855
  96,956
  104,336
Total liabilities, $m
  322
  461
  712
  1,065
  1,545
  2,180
  2,996
  4,022
  5,281
  6,796
  8,583
  10,658
  13,031
  15,707
  18,688
  21,974
  25,561
  29,444
  33,617
  38,073
  42,805
  47,807
  53,075
  58,603
  64,390
  70,434
  76,737
  83,301
  90,130
  97,231
  104,611
Total equity, $m
  80
  51
  79
  118
  172
  242
  333
  447
  587
  755
  954
  1,184
  1,448
  1,745
  2,076
  2,442
  2,840
  3,272
  3,735
  4,230
  4,756
  5,312
  5,897
  6,511
  7,154
  7,826
  8,526
  9,256
  10,014
  10,803
  11,623
Total liabilities and equity, $m
  402
  512
  791
  1,183
  1,717
  2,422
  3,329
  4,469
  5,868
  7,551
  9,537
  11,842
  14,479
  17,452
  20,764
  24,416
  28,401
  32,716
  37,352
  42,303
  47,561
  53,119
  58,972
  65,114
  71,544
  78,260
  85,263
  92,557
  100,144
  108,034
  116,234
Debt-to-equity ratio
  0.588
  3.630
  5.520
  6.680
  7.400
  7.860
  8.170
  8.380
  8.530
  8.640
  8.710
  8.770
  8.810
  8.840
  8.870
  8.890
  8.900
  8.920
  8.930
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
Adjusted equity ratio
  -0.013
  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
  -61
  -135
  -190
  -270
  -378
  -522
  -707
  -939
  -1,226
  -1,571
  -1,979
  -2,450
  -2,994
  -3,608
  -4,293
  -5,050
  -5,877
  -6,774
  -7,738
  -8,768
  -9,863
  -11,022
  -12,242
  -13,524
  -14,866
  -16,268
  -17,730
  -19,254
  -20,838
  -22,487
  -24,200
Depreciation, amort., depletion, $m
  3
  7
  8
  10
  13
  17
  22
  28
  35
  44
  55
  63
  77
  92
  110
  129
  150
  173
  198
  224
  252
  281
  312
  345
  379
  414
  451
  490
  530
  572
  615
Funds from operations, $m
  -45
  -128
  -182
  -259
  -365
  -505
  -685
  -912
  -1,190
  -1,527
  -1,924
  -2,387
  -2,917
  -3,516
  -4,184
  -4,921
  -5,727
  -6,600
  -7,540
  -8,544
  -9,612
  -10,741
  -11,930
  -13,179
  -14,487
  -15,854
  -17,279
  -18,763
  -20,308
  -21,915
  -23,584
Change in working capital, $m
  26
  -42
  -61
  -86
  -117
  -154
  -199
  -249
  -306
  -368
  -435
  -504
  -577
  -650
  -725
  -799
  -872
  -944
  -1,014
  -1,083
  -1,150
  -1,216
  -1,280
  -1,344
  -1,407
  -1,469
  -1,532
  -1,595
  -1,660
  -1,726
  -1,794
Cash from operations, $m
  -71
  -86
  -121
  -174
  -248
  -350
  -486
  -662
  -884
  -1,159
  -1,490
  -1,883
  -2,340
  -2,865
  -3,459
  -4,122
  -4,855
  -5,657
  -6,526
  -7,461
  -8,461
  -9,525
  -10,650
  -11,835
  -13,081
  -14,385
  -15,747
  -17,168
  -18,648
  -20,189
  -21,790
Maintenance CAPEX, $m
  0
  -2
  -3
  -4
  -6
  -9
  -13
  -18
  -24
  -31
  -40
  -50
  -63
  -77
  -92
  -110
  -129
  -150
  -173
  -198
  -224
  -252
  -281
  -312
  -345
  -379
  -414
  -451
  -490
  -530
  -572
New CAPEX, $m
  -7
  -25
  -36
  -50
  -68
  -90
  -116
  -146
  -179
  -216
  -255
  -295
  -338
  -381
  -424
  -468
  -511
  -553
  -594
  -634
  -674
  -712
  -750
  -787
  -824
  -860
  -897
  -934
  -972
  -1,011
  -1,051
Cash from investing activities, $m
  -17
  -27
  -39
  -54
  -74
  -99
  -129
  -164
  -203
  -247
  -295
  -345
  -401
  -458
  -516
  -578
  -640
  -703
  -767
  -832
  -898
  -964
  -1,031
  -1,099
  -1,169
  -1,239
  -1,311
  -1,385
  -1,462
  -1,541
  -1,623
Free cash flow, $m
  -88
  -112
  -159
  -228
  -323
  -450
  -615
  -826
  -1,087
  -1,405
  -1,784
  -2,229
  -2,741
  -3,323
  -3,976
  -4,700
  -5,495
  -6,360
  -7,293
  -8,293
  -9,359
  -10,489
  -11,681
  -12,935
  -14,249
  -15,624
  -17,059
  -18,554
  -20,111
  -21,730
  -23,413
Issuance/(repayment) of debt, $m
  39
  139
  251
  353
  480
  635
  817
  1,026
  1,259
  1,514
  1,788
  2,075
  2,373
  2,676
  2,981
  3,286
  3,587
  3,883
  4,173
  4,456
  4,732
  5,002
  5,267
  5,528
  5,787
  6,044
  6,303
  6,564
  6,829
  7,101
  7,380
Issuance/(repurchase) of shares, $m
  93
  190
  218
  309
  431
  592
  797
  1,053
  1,366
  1,739
  2,178
  2,680
  3,257
  3,905
  4,625
  5,415
  6,276
  7,205
  8,201
  9,263
  10,389
  11,578
  12,828
  14,138
  15,509
  16,940
  18,431
  19,983
  21,597
  23,276
  25,020
Cash from financing (excl. dividends), $m  
  132
  329
  469
  662
  911
  1,227
  1,614
  2,079
  2,625
  3,253
  3,966
  4,755
  5,630
  6,581
  7,606
  8,701
  9,863
  11,088
  12,374
  13,719
  15,121
  16,580
  18,095
  19,666
  21,296
  22,984
  24,734
  26,547
  28,426
  30,377
  32,400
Total cash flow (excl. dividends), $m
  43
  217
  310
  434
  589
  777
  999
  1,253
  1,537
  1,848
  2,181
  2,527
  2,889
  3,258
  3,630
  4,001
  4,368
  4,728
  5,081
  5,426
  5,762
  6,091
  6,414
  6,732
  7,047
  7,360
  7,675
  7,993
  8,316
  8,647
  8,987
Retained Cash Flow (-), $m
  65
  -190
  -218
  -309
  -431
  -592
  -797
  -1,053
  -1,366
  -1,739
  -2,178
  -2,680
  -3,257
  -3,905
  -4,625
  -5,415
  -6,276
  -7,205
  -8,201
  -9,263
  -10,389
  -11,578
  -12,828
  -14,138
  -15,509
  -16,940
  -18,431
  -19,983
  -21,597
  -23,276
  -25,020
Prev. year cash balance distribution, $m
 
  84
  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
 
  111
  92
  125
  157
  185
  201
  200
  172
  109
  3
  -153
  -368
  -647
  -995
  -1,414
  -1,908
  -2,477
  -3,120
  -3,837
  -4,627
  -5,486
  -6,414
  -7,406
  -8,462
  -9,579
  -10,756
  -11,990
  -13,281
  -14,629
  -16,033
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
 
  106
  84
  109
  130
  143
  146
  135
  107
  63
  2
  -73
  -157
  -246
  -334
  -415
  -485
  -539
  -575
  -591
  -588
  -567
  -532
  -485
  -431
  -373
  -314
  -257
  -205
  -160
  -121
Current shareholders' claim on cash, %
  100
  50.0
  19.6
  8.1
  3.5
  1.5
  0.7
  0.3
  0.2
  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

Sorrento Therapeutics, Inc. is a biopharmaceutical company. The Company is engaged in the discovery, acquisition, development and commercialization of drug therapeutics. Its primary therapeutic focus is oncology, including the treatment of chronic cancer pain. It is also developing therapeutic products for other indications, including immunology and infectious diseases. Its products in the pipeline include Chimeric Antigen Receptor-T Cell (CAR-T) programs, resiniferatoxin (RTX), and biosimilar/biobetter antibodies clinical development programs. Its pipeline also includes preclinical fully human therapeutic monoclonal antibodies (mAbs), including biosimilars/biobetters, fully human anti-PD-L1 and anti-PD-1 checkpoint inhibitors derived from its G-MAB library platform, antibody drug conjugates (ADCs), bispecific antibodies (BsAbs), as well as CAR-T and Chimeric Antigen Receptor Natural Killer (NK) cells (CAR. NK) for adoptive cellular immunotherapy.

FINANCIAL RATIOS  of  Sorrento Therapeutics (SRNE)

Valuation Ratios
P/E Ratio -2.3
Price to Sales 17.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow -2
Price to Free Cash Flow -1.8
Growth Rates
Sales Growth Rate 60%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 75%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 58.8%
Total Debt to Equity 58.8%
Interest Coverage -64
Management Effectiveness
Return On Assets -16.1%
Ret/ On Assets - 3 Yr. Avg. -20.1%
Return On Total Capital -43.4%
Ret/ On T. Cap. - 3 Yr. Avg. -37.7%
Return On Equity -54.2%
Return On Equity - 3 Yr. Avg. -43.4%
Asset Turnover 0
Profitability Ratios
Gross Margin 87.5%
Gross Margin - 3 Yr. Avg. 65.8%
EBITDA Margin -762.5%
EBITDA Margin - 3 Yr. Avg. -579.2%
Operating Margin -1212.5%
Oper. Margin - 3 Yr. Avg. -1189.2%
Pre-Tax Margin -812.5%
Pre-Tax Margin - 3 Yr. Avg. -664.2%
Net Profit Margin -762.5%
Net Profit Margin - 3 Yr. Avg. -852.5%
Effective Tax Rate 1.5%
Eff/ Tax Rate - 3 Yr. Avg. -84.3%
Payout Ratio 0%

SRNE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRNE stock intrinsic value calculation we used $8 million for the last fiscal year's total revenue generated by Sorrento Therapeutics. The default revenue input number comes from 2016 income statement of Sorrento Therapeutics. 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 SRNE 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 SRNE is calculated based on our internal credit rating of Sorrento Therapeutics, 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 Sorrento Therapeutics.
    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 SRNE stock the variable cost ratio is equal to 862.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $37 million in the base year in the intrinsic value calculation for SRNE 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 3.6% for Sorrento Therapeutics.

Corporate tax rate of 27% is the nominal tax rate for Sorrento Therapeutics. 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 SRNE 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 SRNE are equal to 512.5%.

Life of production assets of 24.2 years is the average useful life of capital assets used in Sorrento Therapeutics 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 SRNE is equal to -875%. 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 - $80 million for Sorrento Therapeutics - 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 78.521 million for Sorrento Therapeutics 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 Sorrento Therapeutics at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ 3 Biotech Stocks That Soared This Week: Are They Buys?   [Oct-14-17 10:34AM  Motley Fool]
▶ Sorrento Therapeutics Announces Dismissal Of Lawsuits   [Jun-14-17 02:29PM  PR Newswire]
▶ Sorrento Therapeutics Gears Up for Secondary Offering   [Apr-13-17 11:30AM  24/7 Wall St.]
▶ Sorrento and Wildcat Announce Resolution   [08:00AM  PR Newswire]
▶ Insider Buys Shares of Sorrento Therapeutics   [Feb-15-17 12:25PM  GuruFocus.com]
▶ Sorrento Therapeutics Closes Acquisition of Scilex   [Nov-08-16 04:20PM  PR Newswire]
▶ [$$] Sorrento Subsidiary Acquires Semnur for Up to $200M   [Aug-16-16 04:19PM  at The Wall Street Journal]
Financial statements of SRNE
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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