Intrinsic value of AbbVie - ABBV

Previous Close

$98.81

  Intrinsic Value

$93.18

stock screener

  Rating & Target

hold

-6%

Previous close

$98.81

 
Intrinsic value

$93.18

 
Up/down potential

-6%

 
Rating

hold

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 2017), $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 157.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
Revenue, $m
  31,066
  34,045
  37,154
  40,393
  43,764
  47,270
  50,915
  54,702
  58,639
  62,729
  66,981
  71,402
  76,001
  80,786
  85,768
  90,957
  96,364
  102,002
  107,883
  114,020
  120,428
  127,122
  134,116
  141,428
  149,075
  157,074
  165,446
  174,209
  183,384
  192,994
Variable operating expenses, $m
  19,258
  20,689
  22,182
  23,738
  25,358
  27,042
  28,793
  30,613
  32,503
  34,468
  32,177
  34,300
  36,510
  38,808
  41,202
  43,694
  46,292
  49,000
  51,825
  54,774
  57,852
  61,067
  64,427
  67,940
  71,613
  75,456
  79,478
  83,687
  88,095
  92,711
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
  19,258
  20,689
  22,182
  23,738
  25,358
  27,042
  28,793
  30,613
  32,503
  34,468
  32,177
  34,300
  36,510
  38,808
  41,202
  43,694
  46,292
  49,000
  51,825
  54,774
  57,852
  61,067
  64,427
  67,940
  71,613
  75,456
  79,478
  83,687
  88,095
  92,711
Operating income, $m
  11,808
  13,356
  14,971
  16,654
  18,406
  20,228
  22,122
  24,090
  26,135
  28,261
  34,804
  37,102
  39,491
  41,978
  44,566
  47,262
  50,072
  53,002
  56,058
  59,247
  62,576
  66,054
  69,689
  73,488
  77,462
  81,618
  85,968
  90,521
  95,289
  100,282
EBITDA, $m
  21,265
  23,304
  25,432
  27,649
  29,957
  32,357
  34,852
  37,445
  40,139
  42,939
  45,849
  48,876
  52,024
  55,299
  58,709
  62,261
  65,963
  69,822
  73,847
  78,049
  82,435
  87,017
  91,804
  96,810
  102,044
  107,520
  113,250
  119,248
  125,529
  132,107
Interest expense (income), $m
  986
  2,018
  2,255
  2,618
  2,996
  3,391
  3,801
  4,228
  4,672
  5,134
  5,613
  6,111
  6,629
  7,168
  7,728
  8,311
  8,918
  9,550
  10,208
  10,895
  11,611
  12,359
  13,139
  13,955
  14,807
  15,697
  16,629
  17,603
  18,623
  19,690
  20,808
Earnings before tax, $m
  9,790
  11,101
  12,354
  13,658
  15,015
  16,427
  17,893
  19,418
  21,001
  22,647
  28,693
  30,472
  32,323
  34,250
  36,255
  38,345
  40,523
  42,793
  45,163
  47,635
  50,217
  52,915
  55,734
  58,682
  61,764
  64,990
  68,365
  71,899
  75,599
  79,475
Tax expense, $m
  2,643
  2,997
  3,336
  3,688
  4,054
  4,435
  4,831
  5,243
  5,670
  6,115
  7,747
  8,228
  8,727
  9,247
  9,789
  10,353
  10,941
  11,554
  12,194
  12,862
  13,559
  14,287
  15,048
  15,844
  16,676
  17,547
  18,459
  19,413
  20,412
  21,458
Net income, $m
  7,147
  8,104
  9,018
  9,970
  10,961
  11,991
  13,062
  14,175
  15,331
  16,533
  20,946
  22,245
  23,596
  25,002
  26,466
  27,992
  29,582
  31,239
  32,969
  34,774
  36,659
  38,628
  40,686
  42,838
  45,088
  47,442
  49,906
  52,486
  55,187
  58,017

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
  77,859
  85,326
  93,117
  101,235
  109,684
  118,471
  127,606
  137,099
  146,964
  157,216
  167,872
  178,952
  190,478
  202,471
  214,957
  227,962
  241,514
  255,644
  270,383
  285,765
  301,825
  318,600
  336,131
  354,457
  373,621
  393,670
  414,651
  436,613
  459,609
  483,694
Adjusted assets (=assets-cash), $m
  77,859
  85,326
  93,117
  101,235
  109,684
  118,471
  127,606
  137,099
  146,964
  157,216
  167,872
  178,952
  190,478
  202,471
  214,957
  227,962
  241,514
  255,644
  270,383
  285,765
  301,825
  318,600
  336,131
  354,457
  373,621
  393,670
  414,651
  436,613
  459,609
  483,694
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
  51,228
  56,140
  61,266
  66,608
  72,167
  77,948
  83,958
  90,204
  96,695
  103,440
  110,452
  117,742
  125,325
  133,216
  141,431
  149,988
  158,904
  168,201
  177,899
  188,019
  198,586
  209,624
  221,157
  233,215
  245,825
  259,016
  272,820
  287,270
  302,400
  318,247
Working capital, $m
  -9,506
  -10,418
  -11,369
  -12,360
  -13,392
  -14,465
  -15,580
  -16,739
  -17,943
  -19,195
  -20,496
  -21,849
  -23,256
  -24,720
  -26,245
  -27,833
  -29,487
  -31,213
  -33,012
  -34,890
  -36,851
  -38,899
  -41,040
  -43,277
  -45,617
  -48,065
  -50,626
  -53,308
  -56,116
  -59,056
Total debt, $m
  41,752
  48,472
  55,484
  62,790
  70,395
  78,303
  86,524
  95,068
  103,946
  113,173
  122,764
  132,736
  143,109
  153,903
  165,140
  176,844
  189,042
  201,758
  215,024
  228,867
  243,321
  258,419
  274,197
  290,690
  307,938
  325,982
  344,865
  364,631
  385,327
  407,003
Total liabilities, $m
  70,073
  76,793
  83,805
  91,111
  98,716
  106,624
  114,845
  123,389
  132,267
  141,494
  151,085
  161,057
  171,430
  182,224
  193,461
  205,165
  217,363
  230,079
  243,345
  257,188
  271,642
  286,740
  302,518
  319,011
  336,259
  354,303
  373,186
  392,952
  413,648
  435,324
Total equity, $m
  7,786
  8,533
  9,312
  10,123
  10,968
  11,847
  12,761
  13,710
  14,696
  15,722
  16,787
  17,895
  19,048
  20,247
  21,496
  22,796
  24,151
  25,564
  27,038
  28,576
  30,182
  31,860
  33,613
  35,446
  37,362
  39,367
  41,465
  43,661
  45,961
  48,369
Total liabilities and equity, $m
  77,859
  85,326
  93,117
  101,234
  109,684
  118,471
  127,606
  137,099
  146,963
  157,216
  167,872
  178,952
  190,478
  202,471
  214,957
  227,961
  241,514
  255,643
  270,383
  285,764
  301,824
  318,600
  336,131
  354,457
  373,621
  393,670
  414,651
  436,613
  459,609
  483,693
Debt-to-equity ratio
  5.360
  5.680
  5.960
  6.200
  6.420
  6.610
  6.780
  6.930
  7.070
  7.200
  7.310
  7.420
  7.510
  7.600
  7.680
  7.760
  7.830
  7.890
  7.950
  8.010
  8.060
  8.110
  8.160
  8.200
  8.240
  8.280
  8.320
  8.350
  8.380
  8.410
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
  7,147
  8,104
  9,018
  9,970
  10,961
  11,991
  13,062
  14,175
  15,331
  16,533
  20,946
  22,245
  23,596
  25,002
  26,466
  27,992
  29,582
  31,239
  32,969
  34,774
  36,659
  38,628
  40,686
  42,838
  45,088
  47,442
  49,906
  52,486
  55,187
  58,017
Depreciation, amort., depletion, $m
  9,457
  9,948
  10,461
  10,995
  11,551
  12,129
  12,730
  13,355
  14,004
  14,678
  11,045
  11,774
  12,532
  13,322
  14,143
  14,999
  15,890
  16,820
  17,790
  18,802
  19,859
  20,962
  22,116
  23,322
  24,582
  25,902
  27,282
  28,727
  30,240
  31,825
Funds from operations, $m
  16,604
  18,052
  19,479
  20,966
  22,512
  24,121
  25,792
  27,530
  29,335
  31,211
  31,991
  34,019
  36,128
  38,324
  40,610
  42,991
  45,472
  48,059
  50,759
  53,576
  56,517
  59,590
  62,802
  66,159
  69,670
  73,344
  77,188
  81,213
  85,427
  89,841
Change in working capital, $m
  -872
  -912
  -951
  -991
  -1,032
  -1,073
  -1,115
  -1,159
  -1,204
  -1,252
  -1,301
  -1,353
  -1,407
  -1,464
  -1,524
  -1,588
  -1,655
  -1,725
  -1,800
  -1,878
  -1,961
  -2,048
  -2,140
  -2,237
  -2,340
  -2,448
  -2,562
  -2,681
  -2,808
  -2,941
Cash from operations, $m
  17,476
  18,964
  20,430
  21,957
  23,544
  25,193
  26,908
  28,689
  30,539
  32,463
  33,292
  35,372
  37,536
  39,788
  42,134
  44,578
  47,127
  49,785
  52,558
  55,454
  58,478
  61,638
  64,942
  68,397
  72,010
  75,792
  79,750
  83,895
  88,235
  92,782
Maintenance CAPEX, $m
  -4,653
  -5,123
  -5,614
  -6,127
  -6,661
  -7,217
  -7,795
  -8,396
  -9,020
  -9,669
  -10,344
  -11,045
  -11,774
  -12,532
  -13,322
  -14,143
  -14,999
  -15,890
  -16,820
  -17,790
  -18,802
  -19,859
  -20,962
  -22,116
  -23,322
  -24,582
  -25,902
  -27,282
  -28,727
  -30,240
New CAPEX, $m
  -4,696
  -4,913
  -5,126
  -5,341
  -5,559
  -5,782
  -6,010
  -6,246
  -6,491
  -6,745
  -7,011
  -7,290
  -7,583
  -7,891
  -8,215
  -8,557
  -8,917
  -9,297
  -9,698
  -10,121
  -10,567
  -11,037
  -11,534
  -12,058
  -12,609
  -13,191
  -13,804
  -14,450
  -15,130
  -15,846
Cash from investing activities, $m
  -9,349
  -10,036
  -10,740
  -11,468
  -12,220
  -12,999
  -13,805
  -14,642
  -15,511
  -16,414
  -17,355
  -18,335
  -19,357
  -20,423
  -21,537
  -22,700
  -23,916
  -25,187
  -26,518
  -27,911
  -29,369
  -30,896
  -32,496
  -34,174
  -35,931
  -37,773
  -39,706
  -41,732
  -43,857
  -46,086
Free cash flow, $m
  8,127
  8,929
  9,690
  10,489
  11,324
  12,195
  13,103
  14,047
  15,028
  16,048
  15,937
  17,036
  18,178
  19,365
  20,597
  21,879
  23,211
  24,597
  26,040
  27,543
  29,109
  30,742
  32,446
  34,223
  36,079
  38,018
  40,044
  42,162
  44,378
  46,695
Issuance/(repayment) of debt, $m
  4,384
  6,720
  7,012
  7,306
  7,604
  7,909
  8,221
  8,544
  8,878
  9,227
  9,591
  9,972
  10,373
  10,794
  11,237
  11,704
  12,197
  12,717
  13,265
  13,844
  14,454
  15,098
  15,777
  16,493
  17,248
  18,044
  18,883
  19,766
  20,696
  21,676
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  
  4,384
  6,720
  7,012
  7,306
  7,604
  7,909
  8,221
  8,544
  8,878
  9,227
  9,591
  9,972
  10,373
  10,794
  11,237
  11,704
  12,197
  12,717
  13,265
  13,844
  14,454
  15,098
  15,777
  16,493
  17,248
  18,044
  18,883
  19,766
  20,696
  21,676
Total cash flow (excl. dividends), $m
  12,511
  15,649
  16,702
  17,795
  18,928
  20,104
  21,324
  22,591
  23,907
  25,275
  25,528
  27,009
  28,551
  30,159
  31,835
  33,583
  35,408
  37,314
  39,306
  41,387
  43,564
  45,840
  48,223
  50,717
  53,328
  56,062
  58,927
  61,928
  65,074
  68,371
Retained Cash Flow (-), $m
  -2,689
  -747
  -779
  -812
  -845
  -879
  -913
  -949
  -986
  -1,025
  -1,066
  -1,108
  -1,153
  -1,199
  -1,249
  -1,300
  -1,355
  -1,413
  -1,474
  -1,538
  -1,606
  -1,678
  -1,753
  -1,833
  -1,916
  -2,005
  -2,098
  -2,196
  -2,300
  -2,408
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
  367
  404
  443
  483
  525
  569
  615
  662
  711
  762
  815
  871
  928
  988
  1,050
  1,115
  1,182
  1,253
  1,326
  1,402
  1,482
  1,566
  1,653
  1,744
  1,839
  1,938
  2,042
  2,151
  2,265
  2,384
Cash available for distribution, $m
  9,823
  14,902
  15,923
  16,983
  18,083
  19,225
  20,410
  21,641
  22,920
  24,250
  24,462
  25,901
  27,399
  28,959
  30,586
  32,283
  34,053
  35,901
  37,832
  39,849
  41,958
  44,163
  46,470
  48,884
  51,411
  54,057
  56,829
  59,732
  62,775
  65,963
Discount rate, %
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
  9,146
  12,831
  12,585
  12,225
  11,756
  11,187
  10,529
  9,798
  9,009
  8,180
  6,995
  6,198
  5,411
  4,651
  3,934
  3,271
  2,671
  2,140
  1,681
  1,293
  972
  715
  513
  358
  244
  161
  104
  65
  39
  23
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 26.4
Price to Sales 6.1
Price to Book 33.9
Price to Tangible Book
Price to Cash Flow 22.3
Price to Free Cash Flow 24
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 2017 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 10.1% 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 7.4%, 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 1.3%.

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 164.9%.

Life of production assets of 10 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 -30.6%. 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 1596 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 $157.7 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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