Intrinsic value of AbbVie - ABBV

Previous Close

$87.97

  Intrinsic Value

$167.41

stock screener

  Rating & Target

str. buy

+90%

Previous close

$87.97

 
Intrinsic value

$167.41

 
Up/down potential

+90%

 
Rating

str. buy

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

Revenue (in 0001), $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 133.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.20
  17.78
  16.50
  15.35
  14.32
  13.38
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
Revenue, $m
  33,633
  39,614
  46,151
  53,235
  60,857
  69,003
  77,660
  86,818
  96,465
  106,595
  117,203
  128,286
  139,845
  151,885
  164,413
  177,441
  190,982
  205,054
  219,677
  234,874
  250,673
  267,101
  284,192
  301,978
  320,497
  339,789
  359,896
  380,863
  402,736
  425,567
Variable operating expenses, $m
  20,491
  23,364
  26,504
  29,908
  33,569
  37,482
  41,641
  46,040
  50,675
  55,541
  56,303
  61,627
  67,179
  72,963
  78,982
  85,240
  91,745
  98,505
  105,529
  112,830
  120,420
  128,312
  136,521
  145,066
  153,962
  163,230
  172,889
  182,961
  193,468
  204,436
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
  20,491
  23,364
  26,504
  29,908
  33,569
  37,482
  41,641
  46,040
  50,675
  55,541
  56,303
  61,627
  67,179
  72,963
  78,982
  85,240
  91,745
  98,505
  105,529
  112,830
  120,420
  128,312
  136,521
  145,066
  153,962
  163,230
  172,889
  182,961
  193,468
  204,436
Operating income, $m
  13,142
  16,249
  19,646
  23,328
  27,288
  31,520
  36,019
  40,777
  45,790
  51,054
  60,900
  66,659
  72,666
  78,922
  85,432
  92,201
  99,237
  106,549
  114,147
  122,044
  130,253
  138,790
  147,670
  156,912
  166,535
  176,560
  187,007
  197,902
  209,268
  221,131
EBITDA, $m
  18,454
  21,735
  25,322
  29,209
  33,391
  37,860
  42,611
  47,635
  52,929
  58,487
  64,307
  70,388
  76,730
  83,337
  90,211
  97,358
  104,788
  112,509
  120,533
  128,871
  137,540
  146,554
  155,931
  165,690
  175,851
  186,436
  197,468
  208,972
  220,974
  233,501
Interest expense (income), $m
  986
  2,018
  2,567
  3,296
  4,092
  4,955
  5,883
  6,876
  7,930
  9,045
  10,221
  11,454
  12,747
  14,096
  15,504
  16,971
  18,497
  20,084
  21,733
  23,447
  25,228
  27,079
  29,004
  31,005
  33,086
  35,253
  37,509
  39,859
  42,308
  44,861
  47,526
Earnings before tax, $m
  11,124
  13,682
  16,350
  19,236
  22,333
  25,637
  29,143
  32,847
  36,745
  40,834
  49,446
  53,913
  58,569
  63,417
  68,461
  73,704
  79,153
  84,816
  90,700
  96,816
  103,174
  109,786
  116,665
  123,826
  131,282
  139,051
  147,149
  155,594
  164,406
  173,605
Tax expense, $m
  3,004
  3,694
  4,415
  5,194
  6,030
  6,922
  7,869
  8,869
  9,921
  11,025
  13,350
  14,556
  15,814
  17,123
  18,484
  19,900
  21,371
  22,900
  24,489
  26,140
  27,857
  29,642
  31,500
  33,433
  35,446
  37,544
  39,730
  42,010
  44,390
  46,873
Net income, $m
  8,121
  9,988
  11,936
  14,042
  16,303
  18,715
  21,275
  23,979
  26,824
  29,809
  36,096
  39,356
  42,755
  46,295
  49,976
  53,804
  57,782
  61,916
  66,211
  70,676
  75,317
  80,144
  85,166
  90,393
  95,836
  101,507
  107,419
  113,584
  120,017
  126,732

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  84,294
  99,282
  115,665
  133,422
  152,524
  172,939
  194,637
  217,588
  241,768
  267,157
  293,742
  321,519
  350,489
  380,664
  412,063
  444,714
  478,651
  513,919
  550,568
  588,658
  628,253
  669,427
  712,260
  756,837
  803,251
  851,602
  901,995
  954,543
  1,009,364
  1,066,583
Adjusted assets (=assets-cash), $m
  84,294
  99,282
  115,665
  133,422
  152,524
  172,939
  194,637
  217,588
  241,768
  267,157
  293,742
  321,519
  350,489
  380,664
  412,063
  444,714
  478,651
  513,919
  550,568
  588,658
  628,253
  669,427
  712,260
  756,837
  803,251
  851,602
  901,995
  954,543
  1,009,364
  1,066,583
Revenue / Adjusted assets
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
Average production assets, $m
  29,328
  34,543
  40,243
  46,421
  53,067
  60,170
  67,720
  75,705
  84,118
  92,951
  102,201
  111,865
  121,945
  132,444
  143,368
  154,728
  166,536
  178,807
  191,558
  204,810
  218,587
  232,912
  247,815
  263,325
  279,474
  296,296
  313,829
  332,112
  351,186
  371,094
Working capital, $m
  1,446
  1,703
  1,984
  2,289
  2,617
  2,967
  3,339
  3,733
  4,148
  4,584
  5,040
  5,516
  6,013
  6,531
  7,070
  7,630
  8,212
  8,817
  9,446
  10,100
  10,779
  11,485
  12,220
  12,985
  13,781
  14,611
  15,476
  16,377
  17,318
  18,299
Total debt, $m
  47,544
  61,033
  75,778
  91,759
  108,950
  127,324
  146,852
  167,508
  189,270
  212,120
  236,047
  261,046
  287,119
  314,277
  342,536
  371,921
  402,465
  434,206
  467,190
  501,471
  537,107
  574,163
  612,713
  652,832
  694,605
  738,121
  783,475
  830,768
  880,107
  931,604
Total liabilities, $m
  75,865
  89,354
  104,099
  120,080
  137,271
  155,645
  175,173
  195,829
  217,591
  240,441
  264,368
  289,367
  315,440
  342,598
  370,857
  400,242
  430,786
  462,527
  495,511
  529,792
  565,428
  602,484
  641,034
  681,153
  722,926
  766,442
  811,796
  859,089
  908,428
  959,925
Total equity, $m
  8,429
  9,928
  11,567
  13,342
  15,252
  17,294
  19,464
  21,759
  24,177
  26,716
  29,374
  32,152
  35,049
  38,066
  41,206
  44,471
  47,865
  51,392
  55,057
  58,866
  62,825
  66,943
  71,226
  75,684
  80,325
  85,160
  90,200
  95,454
  100,936
  106,658
Total liabilities and equity, $m
  84,294
  99,282
  115,666
  133,422
  152,523
  172,939
  194,637
  217,588
  241,768
  267,157
  293,742
  321,519
  350,489
  380,664
  412,063
  444,713
  478,651
  513,919
  550,568
  588,658
  628,253
  669,427
  712,260
  756,837
  803,251
  851,602
  901,996
  954,543
  1,009,364
  1,066,583
Debt-to-equity ratio
  5.640
  6.150
  6.550
  6.880
  7.140
  7.360
  7.540
  7.700
  7.830
  7.940
  8.040
  8.120
  8.190
  8.260
  8.310
  8.360
  8.410
  8.450
  8.490
  8.520
  8.550
  8.580
  8.600
  8.630
  8.650
  8.670
  8.690
  8.700
  8.720
  8.730
Adjusted equity ratio
  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
  8,121
  9,988
  11,936
  14,042
  16,303
  18,715
  21,275
  23,979
  26,824
  29,809
  36,096
  39,356
  42,755
  46,295
  49,976
  53,804
  57,782
  61,916
  66,211
  70,676
  75,317
  80,144
  85,166
  90,393
  95,836
  101,507
  107,419
  113,584
  120,017
  126,732
Depreciation, amort., depletion, $m
  5,312
  5,486
  5,676
  5,882
  6,103
  6,340
  6,592
  6,858
  7,138
  7,433
  3,407
  3,729
  4,065
  4,415
  4,779
  5,158
  5,551
  5,960
  6,385
  6,827
  7,286
  7,764
  8,261
  8,777
  9,316
  9,877
  10,461
  11,070
  11,706
  12,370
Funds from operations, $m
  13,433
  15,474
  17,612
  19,924
  22,406
  25,055
  27,866
  30,836
  33,962
  37,241
  39,502
  43,085
  46,820
  50,709
  54,755
  58,961
  63,333
  67,876
  72,596
  77,503
  82,603
  87,908
  93,426
  99,170
  105,152
  111,384
  117,880
  124,654
  131,723
  139,102
Change in working capital, $m
  233
  257
  281
  305
  328
  350
  372
  394
  415
  436
  456
  477
  497
  518
  539
  560
  582
  605
  629
  654
  679
  706
  735
  765
  796
  830
  865
  902
  941
  982
Cash from operations, $m
  13,200
  15,217
  17,330
  19,619
  22,079
  24,705
  27,494
  30,443
  33,547
  36,806
  39,046
  42,609
  46,323
  50,192
  54,216
  58,401
  62,751
  67,271
  71,968
  76,849
  81,924
  87,201
  92,691
  98,405
  104,355
  110,554
  117,015
  123,753
  130,782
  138,120
Maintenance CAPEX, $m
  -821
  -978
  -1,151
  -1,341
  -1,547
  -1,769
  -2,006
  -2,257
  -2,523
  -2,804
  -3,098
  -3,407
  -3,729
  -4,065
  -4,415
  -4,779
  -5,158
  -5,551
  -5,960
  -6,385
  -6,827
  -7,286
  -7,764
  -8,261
  -8,777
  -9,316
  -9,877
  -10,461
  -11,070
  -11,706
New CAPEX, $m
  -4,711
  -5,215
  -5,700
  -6,178
  -6,646
  -7,103
  -7,549
  -7,985
  -8,413
  -8,834
  -9,250
  -9,664
  -10,080
  -10,499
  -10,925
  -11,360
  -11,808
  -12,271
  -12,751
  -13,252
  -13,776
  -14,326
  -14,903
  -15,510
  -16,149
  -16,823
  -17,533
  -18,283
  -19,074
  -19,908
Cash from investing activities, $m
  -5,532
  -6,193
  -6,851
  -7,519
  -8,193
  -8,872
  -9,555
  -10,242
  -10,936
  -11,638
  -12,348
  -13,071
  -13,809
  -14,564
  -15,340
  -16,139
  -16,966
  -17,822
  -18,711
  -19,637
  -20,603
  -21,612
  -22,667
  -23,771
  -24,926
  -26,139
  -27,410
  -28,744
  -30,144
  -31,614
Free cash flow, $m
  7,668
  9,024
  10,479
  12,100
  13,885
  15,833
  17,939
  20,200
  22,611
  25,168
  26,698
  29,538
  32,515
  35,628
  38,877
  42,262
  45,785
  49,449
  53,256
  57,212
  61,321
  65,589
  70,025
  74,635
  79,429
  84,416
  89,605
  95,009
  100,638
  106,505
Issuance/(repayment) of debt, $m
  10,176
  13,489
  14,745
  15,981
  17,191
  18,374
  19,528
  20,656
  21,762
  22,850
  23,927
  24,999
  26,073
  27,158
  28,259
  29,385
  30,544
  31,741
  32,984
  34,281
  35,636
  37,057
  38,549
  40,119
  41,773
  43,516
  45,354
  47,293
  49,339
  51,497
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  10,176
  13,489
  14,745
  15,981
  17,191
  18,374
  19,528
  20,656
  21,762
  22,850
  23,927
  24,999
  26,073
  27,158
  28,259
  29,385
  30,544
  31,741
  32,984
  34,281
  35,636
  37,057
  38,549
  40,119
  41,773
  43,516
  45,354
  47,293
  49,339
  51,497
Total cash flow (excl. dividends), $m
  17,844
  22,513
  25,224
  28,081
  31,077
  34,207
  37,467
  40,856
  44,373
  48,018
  50,625
  54,537
  58,588
  62,786
  67,136
  71,648
  76,329
  81,190
  86,240
  91,492
  96,956
  102,646
  108,574
  114,755
  121,202
  127,932
  134,959
  142,302
  149,977
  158,003
Retained Cash Flow (-), $m
  -3,332
  -1,499
  -1,638
  -1,776
  -1,910
  -2,042
  -2,170
  -2,295
  -2,418
  -2,539
  -2,659
  -2,778
  -2,897
  -3,018
  -3,140
  -3,265
  -3,394
  -3,527
  -3,665
  -3,809
  -3,960
  -4,117
  -4,283
  -4,458
  -4,641
  -4,835
  -5,039
  -5,255
  -5,482
  -5,722
Prev. year cash balance distribution, $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 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
  14,512
  21,014
  23,586
  26,305
  29,166
  32,165
  35,297
  38,561
  41,955
  45,479
  47,966
  51,759
  55,691
  59,768
  63,996
  68,383
  72,935
  77,663
  82,576
  87,683
  92,997
  98,529
  104,291
  110,297
  116,561
  123,096
  129,920
  137,047
  144,495
  152,281
Discount rate, %
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
  13,487
  18,023
  18,527
  18,774
  18,751
  18,457
  17,902
  17,106
  16,100
  14,920
  13,285
  11,943
  10,555
  9,166
  7,816
  6,541
  5,367
  4,314
  3,395
  2,612
  1,964
  1,441
  1,030
  717
  486
  319
  204
  126
  75
  43
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

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 23.5
Price to Sales 5.5
Price to Book 30.2
Price to Tangible Book
Price to Cash Flow 19.9
Price to Free Cash Flow 21.3
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 $28216 million for the last fiscal year's total revenue generated by AbbVie. The default revenue input number comes from 0001 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 19.2% 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 7.6%, 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 63.4%.

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 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 5.4% 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 87.2%.

Life of production assets of 31 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 4.3%. 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 - $5097 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 1514.27 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 $133.2 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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COMPANY NEWS

▶ AbbVie CFO Bill Chase to retire   [09:31AM  MarketWatch]
▶ AbbVie Falls 3%   [04:26PM  Investing.com]
▶ Waltham's Morphic Therapeutic inks $100M deal with AbbVie   [08:24AM  American City Business Journals]
▶ Amgen Launches Humira Biosimilar in Europe   [03:23PM  GuruFocus.com]
▶ [$$] By Adding Patents, Drugmaker Keeps Cheaper Humira Copies Out of U.S.   [Oct-16-18 10:36PM  The Wall Street Journal]
▶ AbbVie Rises 3%   [06:50PM  Investing.com]
▶ Company News For Oct 15, 2018   [09:48AM  Zacks]
▶ Can biotech thrive in a highrise? One developer discovers that it can   [04:35PM  American City Business Journals]
▶ 3 Top Biotech Stocks to Buy in October   [Oct-08-18 05:14PM  Motley Fool]
▶ Top 5 Biotech Stocks for 2018   [07:33PM  Investopedia]
▶ 5 Health Care Stocks Gurus Are Buying   [Oct-02-18 04:14PM  GuruFocus.com]
▶ 5 Reasons to Buy Gilead Stock Today   [11:45AM  InvestorPlace]

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