Intrinsic value of Sorrento Therapeutics - SRNE

Previous Close

$1.65

  Intrinsic Value

$0.17

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

0%

Previous close

$1.65

 
Intrinsic value

$0.17

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

0%

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

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 0.1

 

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
  17
  30
  48
  72
  102
  141
  188
  245
  312
  390
  479
  579
  691
  814
  949
  1,094
  1,251
  1,418
  1,595
  1,783
  1,980
  2,188
  2,405
  2,631
  2,868
  3,114
  3,370
  3,636
Earnings before tax, $m
  -65
  -135
  -191
  -271
  -380
  -524
  -710
  -944
  -1,232
  -1,579
  -1,989
  -2,463
  -3,010
  -3,627
  -4,317
  -5,078
  -5,910
  -6,812
  -7,782
  -8,819
  -9,921
  -11,086
  -12,314
  -13,604
  -14,954
  -16,365
  -17,836
  -19,369
  -20,963
  -22,622
  -24,346
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
  -191
  -271
  -380
  -524
  -710
  -944
  -1,232
  -1,579
  -1,989
  -2,463
  -3,010
  -3,627
  -4,317
  -5,078
  -5,910
  -6,812
  -7,782
  -8,819
  -9,921
  -11,086
  -12,314
  -13,604
  -14,954
  -16,365
  -17,836
  -19,369
  -20,963
  -22,622
  -24,346

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
  533
  824
  1,232
  1,788
  2,523
  3,468
  4,655
  6,112
  7,865
  9,934
  12,336
  15,082
  18,179
  21,630
  25,432
  29,584
  34,078
  38,908
  44,066
  49,543
  55,333
  61,429
  67,828
  74,526
  81,521
  88,816
  96,413
  104,317
  112,536
  121,078
Adjusted assets (=assets-cash), $m
  318
  533
  824
  1,232
  1,788
  2,523
  3,468
  4,655
  6,112
  7,865
  9,934
  12,336
  15,082
  18,179
  21,630
  25,432
  29,584
  34,078
  38,908
  44,066
  49,543
  55,333
  61,429
  67,828
  74,526
  81,521
  88,816
  96,413
  104,317
  112,536
  121,078
Revenue / Adjusted assets
  0.025
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
  0.024
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
  -1
  -2
  -3
  -4
  -6
  -8
  -11
  -15
  -19
  -24
  -30
  -36
  -44
  -52
  -61
  -71
  -82
  -93
  -106
  -119
  -133
  -147
  -163
  -179
  -196
  -213
  -231
  -250
  -270
  -291
Total debt, $m
  47
  205
  467
  834
  1,334
  1,995
  2,846
  3,915
  5,226
  6,804
  8,666
  10,828
  13,299
  16,086
  19,192
  22,614
  26,351
  30,396
  34,742
  39,384
  44,313
  49,524
  55,011
  60,770
  66,798
  73,094
  79,660
  86,497
  93,611
  101,007
  108,695
Total liabilities, $m
  322
  480
  742
  1,109
  1,609
  2,270
  3,121
  4,190
  5,501
  7,079
  8,941
  11,103
  13,574
  16,361
  19,467
  22,889
  26,626
  30,671
  35,017
  39,659
  44,588
  49,799
  55,286
  61,045
  67,073
  73,369
  79,935
  86,772
  93,886
  101,282
  108,970
Total equity, $m
  80
  53
  82
  123
  179
  252
  347
  466
  611
  787
  993
  1,234
  1,508
  1,818
  2,163
  2,543
  2,958
  3,408
  3,891
  4,407
  4,954
  5,533
  6,143
  6,783
  7,453
  8,152
  8,882
  9,641
  10,432
  11,254
  12,108
Total liabilities and equity, $m
  402
  533
  824
  1,232
  1,788
  2,522
  3,468
  4,656
  6,112
  7,866
  9,934
  12,337
  15,082
  18,179
  21,630
  25,432
  29,584
  34,079
  38,908
  44,066
  49,542
  55,332
  61,429
  67,828
  74,526
  81,521
  88,817
  96,413
  104,318
  112,536
  121,078
Debt-to-equity ratio
  0.588
  3.840
  5.660
  6.770
  7.460
  7.910
  8.210
  8.410
  8.550
  8.650
  8.720
  8.780
  8.820
  8.850
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  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
  -191
  -271
  -380
  -524
  -710
  -944
  -1,232
  -1,579
  -1,989
  -2,463
  -3,010
  -3,627
  -4,317
  -5,078
  -5,910
  -6,812
  -7,782
  -8,819
  -9,921
  -11,086
  -12,314
  -13,604
  -14,954
  -16,365
  -17,836
  -19,369
  -20,963
  -22,622
  -24,346
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
  -260
  -366
  -507
  -688
  -916
  -1,196
  -1,535
  -1,935
  -2,400
  -2,933
  -3,535
  -4,207
  -4,949
  -5,760
  -6,639
  -7,584
  -8,595
  -9,669
  -10,805
  -12,002
  -13,259
  -14,575
  -15,950
  -17,385
  -18,879
  -20,433
  -22,050
  -23,730
Change in working capital, $m
  26
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
Cash from operations, $m
  -71
  -127
  -182
  -259
  -365
  -505
  -686
  -913
  -1,193
  -1,530
  -1,930
  -2,394
  -2,926
  -3,528
  -4,199
  -4,940
  -5,750
  -6,628
  -7,573
  -8,582
  -9,656
  -10,791
  -11,987
  -13,243
  -14,559
  -15,933
  -17,367
  -18,860
  -20,414
  -22,030
  -23,710
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
  -154
  -220
  -314
  -440
  -605
  -815
  -1,077
  -1,396
  -1,777
  -2,224
  -2,740
  -3,327
  -3,985
  -4,716
  -5,517
  -6,390
  -7,331
  -8,340
  -9,414
  -10,553
  -11,755
  -13,018
  -14,343
  -15,728
  -17,173
  -18,679
  -20,246
  -21,877
  -23,571
  -25,332
Issuance/(repayment) of debt, $m
  39
  158
  262
  367
  500
  661
  851
  1,068
  1,312
  1,577
  1,862
  2,162
  2,471
  2,787
  3,105
  3,423
  3,736
  4,045
  4,347
  4,642
  4,929
  5,211
  5,487
  5,759
  6,028
  6,296
  6,565
  6,837
  7,114
  7,397
  7,688
Issuance/(repurchase) of shares, $m
  93
  176
  220
  312
  435
  597
  804
  1,063
  1,377
  1,754
  2,196
  2,703
  3,284
  3,937
  4,662
  5,458
  6,325
  7,261
  8,265
  9,334
  10,468
  11,665
  12,924
  14,243
  15,624
  17,064
  18,565
  20,128
  21,754
  23,444
  25,200
Cash from financing (excl. dividends), $m  
  132
  334
  482
  679
  935
  1,258
  1,655
  2,131
  2,689
  3,331
  4,058
  4,865
  5,755
  6,724
  7,767
  8,881
  10,061
  11,306
  12,612
  13,976
  15,397
  16,876
  18,411
  20,002
  21,652
  23,360
  25,130
  26,965
  28,868
  30,841
  32,888
Total cash flow (excl. dividends), $m
  43
  181
  261
  365
  496
  654
  840
  1,054
  1,293
  1,554
  1,834
  2,124
  2,429
  2,739
  3,052
  3,364
  3,672
  3,975
  4,272
  4,562
  4,844
  5,121
  5,392
  5,659
  5,924
  6,188
  6,452
  6,719
  6,991
  7,269
  7,555
Retained Cash Flow (-), $m
  65
  -176
  -220
  -312
  -435
  -597
  -804
  -1,063
  -1,377
  -1,754
  -2,196
  -2,703
  -3,284
  -3,937
  -4,662
  -5,458
  -6,325
  -7,261
  -8,265
  -9,334
  -10,468
  -11,665
  -12,924
  -14,243
  -15,624
  -17,064
  -18,565
  -20,128
  -21,754
  -23,444
  -25,200
Prev. year cash balance distribution, $m
 
  68
  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
 
  73
  41
  54
  60
  57
  36
  -8
  -84
  -200
  -362
  -578
  -855
  -1,198
  -1,610
  -2,095
  -2,653
  -3,286
  -3,993
  -4,773
  -5,624
  -6,544
  -7,531
  -8,584
  -9,700
  -10,876
  -12,113
  -13,409
  -14,763
  -16,175
  -17,644
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
 
  70
  38
  47
  50
  44
  26
  -6
  -53
  -115
  -190
  -275
  -365
  -456
  -541
  -615
  -674
  -715
  -735
  -735
  -715
  -677
  -625
  -563
  -494
  -423
  -353
  -288
  -228
  -177
  -133
Current shareholders' claim on cash, %
  100
  7.3
  1.6
  0.4
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Sorrento Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery, acquisition, development, and commercialization of proprietary drug therapeutics for addressing unmet medical needs worldwide. The company’s primary therapeutic focus is oncology, including the treatment of chronic cancer pain, as well as developing therapeutic products for other indications, such as immunology and infectious diseases. It is developing resiniferatoxin, a non-opiate, ultra potent, and selective agonist of the TRPV-1 receptor for intractable pain in end-stage disease. The company’s preclinical human therapeutic monoclonal antibodies include human anti- PD-L1 and anti-PD-1 checkpoint inhibitors; antibody drug conjugates; and bispecific antibodies, as well as Chimeric Antigen Receptor-T Cell and Chimeric Antigen Receptor Natural Killer cells for adoptive cellular immunotherapies. Sorrento Therapeutics, Inc. was founded in 2006 and is based in San Diego, California.

FINANCIAL RATIOS  of  Sorrento Therapeutics (SRNE)

Valuation Ratios
P/E Ratio -1.4
Price to Sales 10.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow -1.2
Price to Free Cash Flow -1.1
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 -10%. 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 57.074 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 $0.1 billion.

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COMPANY NEWS

▶ 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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