Intrinsic value of AbbVie - ABBV

Previous Close

$106.49

  Intrinsic Value

$30.60

stock screener

  Rating & Target

str. sell

-71%

Previous close

$106.49

 
Intrinsic value

$30.60

 
Up/down potential

-71%

 
Rating

str. sell

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

We calculate the intrinsic value of ABBV 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  12.16
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  25,638
  27,894
  30,243
  32,686
  35,226
  37,865
  40,608
  43,458
  46,421
  49,502
  52,706
  56,039
  59,509
  63,124
  66,889
  70,815
  74,910
  79,183
  83,644
  88,303
  93,172
  98,261
  103,583
  109,149
  114,974
  121,072
  127,455
  134,141
  141,145
  148,482
  156,172
Variable operating expenses, $m
 
  9,209
  9,854
  10,526
  11,224
  11,950
  12,704
  13,487
  14,301
  15,148
  16,029
  15,404
  16,357
  17,351
  18,386
  19,465
  20,591
  21,765
  22,991
  24,272
  25,610
  27,009
  28,472
  30,002
  31,603
  33,279
  35,034
  36,871
  38,796
  40,813
  42,927
Fixed operating expenses, $m
 
  8,043
  8,244
  8,450
  8,662
  8,878
  9,100
  9,328
  9,561
  9,800
  10,045
  10,296
  10,553
  10,817
  11,088
  11,365
  11,649
  11,940
  12,239
  12,545
  12,858
  13,180
  13,509
  13,847
  14,193
  14,548
  14,912
  15,284
  15,666
  16,058
  16,460
Total operating expenses, $m
  16,254
  17,252
  18,098
  18,976
  19,886
  20,828
  21,804
  22,815
  23,862
  24,948
  26,074
  25,700
  26,910
  28,168
  29,474
  30,830
  32,240
  33,705
  35,230
  36,817
  38,468
  40,189
  41,981
  43,849
  45,796
  47,827
  49,946
  52,155
  54,462
  56,871
  59,387
Operating income, $m
  9,384
  10,642
  12,144
  13,710
  15,340
  17,037
  18,804
  20,644
  22,559
  24,554
  26,632
  30,340
  32,599
  34,956
  37,416
  39,986
  42,671
  45,478
  48,414
  51,487
  54,703
  58,072
  61,602
  65,300
  69,178
  73,245
  77,510
  81,985
  86,682
  91,611
  96,786
EBITDA, $m
  10,573
  13,159
  14,743
  16,394
  18,113
  19,903
  21,766
  23,705
  25,724
  27,826
  30,016
  32,299
  34,680
  37,163
  39,755
  42,462
  45,290
  48,247
  51,339
  54,574
  57,961
  61,508
  65,223
  69,117
  73,198
  77,478
  81,967
  86,676
  91,617
  96,803
  102,246
Interest expense (income), $m
  986
  1,275
  1,182
  1,354
  1,533
  1,719
  1,912
  2,113
  2,322
  2,539
  2,765
  2,999
  3,243
  3,498
  3,762
  4,038
  4,326
  4,626
  4,939
  5,266
  5,607
  5,964
  6,336
  6,726
  7,134
  7,561
  8,007
  8,475
  8,965
  9,478
  10,015
Earnings before tax, $m
  7,884
  9,367
  10,962
  12,356
  13,807
  15,319
  16,892
  18,531
  20,237
  22,015
  23,867
  27,340
  29,355
  31,458
  33,653
  35,947
  38,345
  40,852
  43,475
  46,221
  49,096
  52,109
  55,265
  58,574
  62,044
  65,684
  69,503
  73,510
  77,717
  82,133
  86,770
Tax expense, $m
  1,931
  2,529
  2,960
  3,336
  3,728
  4,136
  4,561
  5,003
  5,464
  5,944
  6,444
  7,382
  7,926
  8,494
  9,086
  9,706
  10,353
  11,030
  11,738
  12,480
  13,256
  14,069
  14,922
  15,815
  16,752
  17,735
  18,766
  19,848
  20,984
  22,176
  23,428
Net income, $m
  5,953
  6,838
  8,003
  9,020
  10,079
  11,183
  12,331
  13,527
  14,773
  16,071
  17,423
  19,959
  21,429
  22,964
  24,567
  26,241
  27,992
  29,822
  31,737
  33,741
  35,840
  38,039
  40,344
  42,759
  45,292
  47,949
  50,737
  53,662
  56,733
  59,957
  63,342

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,423
  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
  66,099
  64,870
  70,332
  76,014
  81,920
  88,058
  94,437
  101,066
  107,956
  115,120
  122,571
  130,324
  138,394
  146,799
  155,557
  164,687
  174,210
  184,147
  194,521
  205,357
  216,679
  228,514
  240,890
  253,835
  267,382
  281,562
  296,408
  311,956
  328,243
  345,308
  363,192
Adjusted assets (=assets-cash), $m
  59,676
  64,870
  70,332
  76,014
  81,920
  88,058
  94,437
  101,066
  107,956
  115,120
  122,571
  130,324
  138,394
  146,799
  155,557
  164,687
  174,210
  184,147
  194,521
  205,357
  216,679
  228,514
  240,890
  253,835
  267,382
  281,562
  296,408
  311,956
  328,243
  345,308
  363,192
Revenue / Adjusted assets
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
Average production assets, $m
  26,888
  29,261
  31,725
  34,287
  36,952
  39,721
  42,598
  45,588
  48,696
  51,927
  55,288
  58,785
  62,425
  66,217
  70,167
  74,285
  78,581
  83,063
  87,743
  92,630
  97,737
  103,076
  108,658
  114,498
  120,608
  127,004
  133,701
  140,714
  148,061
  155,758
  163,825
Working capital, $m
  6,406
  418
  454
  490
  528
  568
  609
  652
  696
  743
  791
  841
  893
  947
  1,003
  1,062
  1,124
  1,188
  1,255
  1,325
  1,398
  1,474
  1,554
  1,637
  1,725
  1,816
  1,912
  2,012
  2,117
  2,227
  2,343
Total debt, $m
  36,842
  33,762
  38,678
  43,791
  49,107
  54,632
  60,373
  66,339
  72,540
  78,987
  85,693
  92,670
  99,933
  107,498
  115,380
  123,597
  132,168
  141,111
  150,448
  160,200
  170,390
  181,041
  192,180
  203,831
  216,023
  228,785
  242,146
  256,139
  270,798
  286,156
  302,251
Total liabilities, $m
  61,463
  58,383
  63,299
  68,412
  73,728
  79,253
  84,994
  90,960
  97,161
  103,608
  110,314
  117,291
  124,554
  132,119
  140,001
  148,218
  156,789
  165,732
  175,069
  184,821
  195,011
  205,662
  216,801
  228,452
  240,644
  253,406
  266,767
  280,760
  295,419
  310,777
  326,872
Total equity, $m
  4,636
  6,487
  7,033
  7,601
  8,192
  8,806
  9,444
  10,107
  10,796
  11,512
  12,257
  13,032
  13,839
  14,680
  15,556
  16,469
  17,421
  18,415
  19,452
  20,536
  21,668
  22,851
  24,089
  25,384
  26,738
  28,156
  29,641
  31,196
  32,824
  34,531
  36,319
Total liabilities and equity, $m
  66,099
  64,870
  70,332
  76,013
  81,920
  88,059
  94,438
  101,067
  107,957
  115,120
  122,571
  130,323
  138,393
  146,799
  155,557
  164,687
  174,210
  184,147
  194,521
  205,357
  216,679
  228,513
  240,890
  253,836
  267,382
  281,562
  296,408
  311,956
  328,243
  345,308
  363,191
Debt-to-equity ratio
  7.947
  5.200
  5.500
  5.760
  5.990
  6.200
  6.390
  6.560
  6.720
  6.860
  6.990
  7.110
  7.220
  7.320
  7.420
  7.500
  7.590
  7.660
  7.730
  7.800
  7.860
  7.920
  7.980
  8.030
  8.080
  8.130
  8.170
  8.210
  8.250
  8.290
  8.320
Adjusted equity ratio
  -0.024
  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
  5,953
  6,838
  8,003
  9,020
  10,079
  11,183
  12,331
  13,527
  14,773
  16,071
  17,423
  19,959
  21,429
  22,964
  24,567
  26,241
  27,992
  29,822
  31,737
  33,741
  35,840
  38,039
  40,344
  42,759
  45,292
  47,949
  50,737
  53,662
  56,733
  59,957
  63,342
Depreciation, amort., depletion, $m
  1,189
  2,517
  2,599
  2,685
  2,773
  2,866
  2,962
  3,061
  3,165
  3,273
  3,385
  1,960
  2,081
  2,207
  2,339
  2,476
  2,619
  2,769
  2,925
  3,088
  3,258
  3,436
  3,622
  3,817
  4,020
  4,233
  4,457
  4,690
  4,935
  5,192
  5,461
Funds from operations, $m
  5,352
  9,355
  10,602
  11,704
  12,853
  14,048
  15,293
  16,589
  17,938
  19,343
  20,808
  21,918
  23,510
  25,171
  26,906
  28,718
  30,611
  32,591
  34,662
  36,829
  39,098
  41,475
  43,965
  46,576
  49,312
  52,183
  55,194
  58,353
  61,669
  65,149
  68,803
Change in working capital, $m
  -1,689
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  91
  96
  100
  105
  110
  115
Cash from operations, $m
  7,041
  9,321
  10,566
  11,668
  12,814
  14,009
  15,252
  16,546
  17,893
  19,297
  20,760
  21,868
  23,458
  25,117
  26,849
  28,659
  30,550
  32,527
  34,595
  36,759
  39,025
  41,399
  43,886
  46,492
  49,225
  52,091
  55,098
  58,253
  61,563
  65,039
  68,688
Maintenance CAPEX, $m
  0
  -896
  -975
  -1,057
  -1,143
  -1,232
  -1,324
  -1,420
  -1,520
  -1,623
  -1,731
  -1,843
  -1,960
  -2,081
  -2,207
  -2,339
  -2,476
  -2,619
  -2,769
  -2,925
  -3,088
  -3,258
  -3,436
  -3,622
  -3,817
  -4,020
  -4,233
  -4,457
  -4,690
  -4,935
  -5,192
New CAPEX, $m
  -479
  -2,373
  -2,464
  -2,563
  -2,664
  -2,769
  -2,877
  -2,990
  -3,108
  -3,231
  -3,361
  -3,497
  -3,640
  -3,791
  -3,950
  -4,118
  -4,295
  -4,482
  -4,680
  -4,888
  -5,107
  -5,338
  -5,582
  -5,840
  -6,110
  -6,396
  -6,697
  -7,013
  -7,347
  -7,697
  -8,067
Cash from investing activities, $m
  -6,074
  -3,269
  -3,439
  -3,620
  -3,807
  -4,001
  -4,201
  -4,410
  -4,628
  -4,854
  -5,092
  -5,340
  -5,600
  -5,872
  -6,157
  -6,457
  -6,771
  -7,101
  -7,449
  -7,813
  -8,195
  -8,596
  -9,018
  -9,462
  -9,927
  -10,416
  -10,930
  -11,470
  -12,037
  -12,632
  -13,259
Free cash flow, $m
  967
  6,051
  7,127
  8,047
  9,007
  10,008
  11,050
  12,136
  13,266
  14,443
  15,668
  16,528
  17,858
  19,245
  20,692
  22,202
  23,778
  25,425
  27,146
  28,947
  30,831
  32,802
  34,867
  37,031
  39,298
  41,675
  44,168
  46,783
  49,526
  52,406
  55,429
Issuance/(repayment) of debt, $m
  5,588
  -2,678
  4,916
  5,113
  5,316
  5,525
  5,741
  5,966
  6,201
  6,447
  6,706
  6,977
  7,263
  7,564
  7,882
  8,217
  8,571
  8,943
  9,337
  9,752
  10,190
  10,651
  11,138
  11,651
  12,192
  12,762
  13,362
  13,993
  14,658
  15,358
  16,095
Issuance/(repurchase) of shares, $m
  -5,765
  1,034
  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  
  -211
  -1,644
  4,916
  5,113
  5,316
  5,525
  5,741
  5,966
  6,201
  6,447
  6,706
  6,977
  7,263
  7,564
  7,882
  8,217
  8,571
  8,943
  9,337
  9,752
  10,190
  10,651
  11,138
  11,651
  12,192
  12,762
  13,362
  13,993
  14,658
  15,358
  16,095
Total cash flow (excl. dividends), $m
  418
  4,408
  12,043
  13,161
  14,323
  15,533
  16,791
  18,102
  19,467
  20,890
  22,374
  23,505
  25,122
  26,810
  28,574
  30,419
  32,349
  34,368
  36,483
  38,699
  41,020
  43,454
  46,006
  48,682
  51,490
  54,437
  57,529
  60,776
  64,185
  67,765
  71,524
Retained Cash Flow (-), $m
  -691
  -7,872
  -546
  -568
  -591
  -614
  -638
  -663
  -689
  -716
  -745
  -775
  -807
  -840
  -876
  -913
  -952
  -994
  -1,037
  -1,084
  -1,132
  -1,183
  -1,238
  -1,295
  -1,355
  -1,418
  -1,485
  -1,555
  -1,629
  -1,706
  -1,788
Prev. year cash balance distribution, $m
 
  6,021
  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
 
  2,557
  11,497
  12,593
  13,732
  14,919
  16,153
  17,439
  18,778
  20,174
  21,629
  22,730
  24,315
  25,969
  27,698
  29,506
  31,396
  33,375
  35,446
  37,615
  39,888
  42,270
  44,768
  47,387
  50,135
  53,019
  56,045
  59,221
  62,556
  66,058
  69,736
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  2,339
  9,542
  9,396
  9,123
  8,733
  8,241
  7,664
  7,021
  6,332
  5,620
  4,817
  4,136
  3,487
  2,884
  2,338
  1,856
  1,442
  1,094
  811
  585
  412
  282
  187
  121
  75
  45
  26
  15
  8
  4
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

AbbVie Inc. (AbbVie) is a research-based biopharmaceutical company. The Company is engaged in the discovery, development, manufacture and sale of a range of pharmaceutical products. Its products are focused on treating conditions, such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis, and other serious health conditions. It offers products in various categories, including HUMIRA (adalimumab), Oncology products, Virology Products, Additional Virology products, Metabolics/Hormones products, Endocrinology products and other products, which include Duopa and Duodopa (carbidopa and levodopa), Anesthesia products and ZINBRYTA (daclizumab).

FINANCIAL RATIOS  of  AbbVie (ABBV)

Valuation Ratios
P/E Ratio 28.5
Price to Sales 6.6
Price to Book 36.6
Price to Tangible Book
Price to Cash Flow 24.1
Price to Free Cash Flow 25.8
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate -0.5%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 786%
Total Debt to Equity 794.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 15%
Return On Equity 138.7%
Return On Equity - 3 Yr. Avg. 125.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 77.3%
Gross Margin - 3 Yr. Avg. 78.5%
EBITDA Margin 39.2%
EBITDA Margin - 3 Yr. Avg. 30.7%
Operating Margin 36.6%
Oper. Margin - 3 Yr. Avg. 28.9%
Pre-Tax Margin 30.8%
Pre-Tax Margin - 3 Yr. Avg. 23.9%
Net Profit Margin 23.2%
Net Profit Margin - 3 Yr. Avg. 18.2%
Effective Tax Rate 24.5%
Eff/ Tax Rate - 3 Yr. Avg. 24.1%
Payout Ratio 62.4%

ABBV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABBV stock intrinsic value calculation we used $25638 million for the last fiscal year's total revenue generated by AbbVie. The default revenue input number comes from 2016 income statement of AbbVie. 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 ABBV stock valuation model: a) initial revenue growth rate of 8.8% 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 9.3%, whose default value for ABBV is calculated based on our internal credit rating of AbbVie, 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 AbbVie.
    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 ABBV stock the variable cost ratio is equal to 33.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7847 million in the base year in the intrinsic value calculation for ABBV 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 AbbVie.

Corporate tax rate of 27% is the nominal tax rate for AbbVie. 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 ABBV 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 ABBV are equal to 104.9%.

Life of production assets of 34.6 years is the average useful life of capital assets used in AbbVie 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 ABBV is equal to 1.5%. 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 - $4636 million for AbbVie - 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 1611.93 million for AbbVie 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 AbbVie at the current share price and the inputted number of shares is $171.7 billion.

Management's discussion and analysis

AbbVie is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories (Abbott). AbbVie's mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world's most complex and serious diseases. AbbVie's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C (HCV) and human immunodeficiency virus (HIV); neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other serious health conditions. AbbVie also has a pipeline of promising new medicines across such important medical specialties as immunology, virology, oncology and neurology, with additional targeted investment in cystic fibrosis and women's health.
AbbVie's products are generally sold worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies and independent retailers from AbbVie-owned distribution centers and public warehouses. In the United States, AbbVie distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to pharmacies and patients. Outside the United States, sales are made either directly to customers or through distributors, depending on the market served. Certain products are co-marketed or co-promoted with other companies. AbbVie has approximately 30,000 employees. AbbVie operates in one business segment—pharmaceutical products.

2016 Financial Results

AbbVie's strategy has focused on delivering strong financial results, advancing and investing in its pipeline and returning value to shareholders while ensuring a strong, sustainable growth business over the long term. In 2016, AbbVie's worldwide net revenues grew by 12% to $25.6 billion, driven primarily by the continued strength of HUMIRA, post-acquisition revenue growth related to IMBRUVICA and revenue growth in other key products including Creon and Duodopa. These increases were partially offset by a decline in net revenues of Kaletra and VIEKIRA.
The company's financial performance in 2016 included delivering diluted earnings per share of $3.63. 2016 results included the following after-tax costs: (i) $615 million related to the amortization of intangible assets; (ii) a $298 million currency devaluation loss related to Venezuela; (iii) $273 million related to the acquisition of Stemcentrx and Boehringer Ingelheim (BI) compounds; (iv) $228 million for changes in contingent consideration; (v) $200 million for acquired in-process research and development (IPR&D); (vi) $187 million associated with a tax law change for regulations issued in the fourth quarter of 2016 that revised the treatment of foreign currency translation gains and losses for certain operations; and (vii) milestone payments of $80 million. Additionally, 2016 financial results reflected added funding to support AbbVie’s emerging mid- and late-stage pipeline assets and continued investment in AbbVie’s growth brands.
In 2016, the company generated cash flows from operations of $7.0 billion, which AbbVie utilized to continue to enhance its pipeline through licensing and collaboration activities, pay cash dividends to stockholders of $3.7 billion and repurchase approximately 34 million shares for $2.1 billion in the open market (excluding the shares repurchased under an accelerated repurchase agreement). In October 2016, AbbVie's board of directors declared a quarterly cash dividend of $0.64 per share of common stock payable in February 2017. This reflects an increase of approximately 12% over the previous quarterly rate of $0.57 per share of common stock.
In April 2016, AbbVie acquired all rights to risankizumab (BI 655066), an anti-IL-23 monoclonal biologic antibody, from BI pursuant to a global collaboration agreement. In June 2016, AbbVie acquired Stemcentrx, a privately held biotechnology company. The transaction expands AbbVie’s oncology pipeline by adding the late-stage asset rovalpituzumab tesirine (Rova-T), four additional early-stage clinical compounds in solid tumor indications and a significant portfolio of pre-clinical assets. Rova-T is currently in registrational trials for small cell lung cancer and in early-stage clinical development for other solid tumors. In connection with the Stemcentrx acquisition, AbbVie’s board of directors authorized a $4.0 billion increase to 
AbbVie’s existing share repurchase program. Promptly following the closing of the Stemcentrx transaction, AbbVie entered into and executed a $3.8 billion accelerated share repurchase agreement (ASR) with a third party financial institution to reacquire nearly all of the newly-issued equity. In May 2016, AbbVie issued $7.8 billion aggregate principal amount of unsecured senior notes. Of the $7.7 billion net proceeds, $2.0 billion was used to repay the company’s outstanding term loan that was due to mature in November 2016, approximately $1.9 billion was used to finance the acquisition of Stemcentrx and approximately $3.8 billion was used to finance the ASR. In November 2016, the company issued €3.6 billion aggregate principal amount of unsecured senior Euro notes and repaid the company’s outstanding 1.75% senior notes that were due to mature in November 2017. See Note 5 to the Consolidated Financial Statements for additional information related to the acquisition of Stemcentrx and BI compounds, Note 9 for additional information related to the senior Euro notes and Note 12 for additional information related to the ASR.
2017 Strategic Objectives
AbbVie's mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company capable of achieving top-tier financial performance through outstanding execution and a consistent stream of innovative new medicines. AbbVie intends to continue to advance its mission in a number of ways, including: (i) growing revenues through continued strong performance from its existing portfolio of on-market products, including its flagship brands, HUMIRA and IMBRUVICA as well as growth from pipeline products; (ii) expanding operating margins; (iii) continued investment in its pipeline in support of opportunities in immunology, oncology, virology and neurology as well as continued investment in key on-market products; (iv) augmentation of its pipeline through concerted focus on strategic licensing, acquisition and partnering activity with a focus on identifying compelling programs that fit AbbVie's strategic criteria; and (v) returning cash to shareholders via dividends and share repurchases. In addition, AbbVie anticipates several regulatory submissions and key data readouts from key clinical trials in the next twelve months.
AbbVie expects to achieve its strategic objectives as follows:
   
HUMIRA sales growth by driving biologic penetration across disease categories, increasing market leadership and strong commercial execution.
   
IMBRUVICA revenue growth driven by increasing market share within its five currently approved indications.
   
The favorable impact of pipeline products approved in 2016 or currently under regulatory review where approval is expected in 2017. These products are described in greater detail in the section labeled "Research and Development" included as part of this Item 7.
AbbVie remains committed to driving continued expansion of operating margins and expects to achieve this objective through productivity initiatives in supply chain, ongoing efficiency programs to optimize manufacturing, commercial infrastructure, administrative costs and general corporate expenses and continued leverage from revenue growth. AbbVie also remains committed to returning cash to shareholders via dividends and share repurchases.

[Source: Form 10-K dated 2017-02-17]

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Financial statements of ABBV
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