Intrinsic value of Geron Corporation - GERN

Previous Close

$1.48

  Intrinsic Value

$0.24

stock screener

  Rating & Target

str. sell

-84%

Previous close

$1.48

 
Intrinsic value

$0.24

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of GERN 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 0.3

 

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, %
  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
  2
  2
  4
  5
  8
  10
  14
  18
  24
  30
  37
  45
  55
  65
  76
  89
  102
  117
  132
  149
  166
  184
  203
  224
  245
  266
  289
  313
  338
  363
Variable operating expenses, $m
  46
  72
  107
  156
  219
  302
  405
  532
  684
  864
  1,073
  1,312
  1,582
  1,882
  2,213
  2,574
  2,965
  3,385
  3,834
  4,310
  4,814
  5,344
  5,901
  6,484
  7,092
  7,727
  8,388
  9,076
  9,791
  10,534
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
  46
  72
  107
  156
  219
  302
  405
  532
  684
  864
  1,073
  1,312
  1,582
  1,882
  2,213
  2,574
  2,965
  3,385
  3,834
  4,310
  4,814
  5,344
  5,901
  6,484
  7,092
  7,727
  8,388
  9,076
  9,791
  10,534
Operating income, $m
  -45
  -69
  -104
  -150
  -212
  -291
  -391
  -513
  -661
  -834
  -1,036
  -1,267
  -1,527
  -1,817
  -2,136
  -2,485
  -2,863
  -3,268
  -3,702
  -4,162
  -4,648
  -5,160
  -5,698
  -6,260
  -6,848
  -7,461
  -8,099
  -8,763
  -9,453
  -10,171
EBITDA, $m
  -45
  -69
  -103
  -150
  -212
  -291
  -391
  -513
  -660
  -834
  -1,036
  -1,266
  -1,526
  -1,816
  -2,135
  -2,484
  -2,861
  -3,266
  -3,699
  -4,159
  -4,645
  -5,157
  -5,694
  -6,257
  -6,844
  -7,456
  -8,094
  -8,758
  -9,448
  -10,165
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  4
  5
  7
  9
  12
  15
  18
  22
  26
  31
  36
  41
  47
  54
  60
  68
  75
  83
  91
  100
  109
  118
  128
  138
Earnings before tax, $m
  -45
  -69
  -104
  -151
  -214
  -294
  -395
  -519
  -668
  -844
  -1,048
  -1,282
  -1,545
  -1,839
  -2,163
  -2,516
  -2,899
  -3,310
  -3,749
  -4,215
  -4,708
  -5,228
  -5,773
  -6,343
  -6,939
  -7,560
  -8,207
  -8,881
  -9,581
  -10,308
Tax expense, $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
Net income, $m
  -45
  -69
  -104
  -151
  -214
  -294
  -395
  -519
  -668
  -844
  -1,048
  -1,282
  -1,545
  -1,839
  -2,163
  -2,516
  -2,899
  -3,310
  -3,749
  -4,215
  -4,708
  -5,228
  -5,773
  -6,343
  -6,939
  -7,560
  -8,207
  -8,881
  -9,581
  -10,308

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
  47
  73
  109
  158
  223
  306
  411
  539
  694
  877
  1,088
  1,331
  1,604
  1,908
  2,244
  2,610
  3,007
  3,433
  3,888
  4,371
  4,882
  5,420
  5,985
  6,576
  7,193
  7,837
  8,507
  9,204
  9,930
  10,683
Adjusted assets (=assets-cash), $m
  47
  73
  109
  158
  223
  306
  411
  539
  694
  877
  1,088
  1,331
  1,604
  1,908
  2,244
  2,610
  3,007
  3,433
  3,888
  4,371
  4,882
  5,420
  5,985
  6,576
  7,193
  7,837
  8,507
  9,204
  9,930
  10,683
Revenue / Adjusted assets
  0.043
  0.027
  0.037
  0.032
  0.036
  0.033
  0.034
  0.033
  0.035
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
  0.034
Average production assets, $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  22
  23
  25
  27
  29
Working capital, $m
  -8
  -12
  -19
  -27
  -38
  -53
  -71
  -93
  -119
  -151
  -187
  -229
  -275
  -328
  -385
  -448
  -516
  -590
  -668
  -751
  -838
  -931
  -1,028
  -1,129
  -1,235
  -1,346
  -1,461
  -1,581
  -1,705
  -1,835
Total debt, $m
  5
  11
  21
  33
  50
  71
  98
  132
  171
  219
  273
  336
  406
  485
  571
  666
  768
  878
  996
  1,120
  1,252
  1,391
  1,537
  1,689
  1,848
  2,014
  2,187
  2,367
  2,554
  2,749
Total liabilities, $m
  12
  19
  28
  41
  57
  79
  106
  139
  179
  226
  281
  343
  414
  492
  579
  673
  776
  886
  1,003
  1,128
  1,260
  1,398
  1,544
  1,697
  1,856
  2,022
  2,195
  2,375
  2,562
  2,756
Total equity, $m
  35
  54
  81
  117
  165
  227
  305
  400
  515
  650
  808
  987
  1,190
  1,416
  1,665
  1,937
  2,231
  2,547
  2,885
  3,244
  3,623
  4,022
  4,441
  4,879
  5,337
  5,815
  6,312
  6,830
  7,368
  7,927
Total liabilities and equity, $m
  47
  73
  109
  158
  222
  306
  411
  539
  694
  876
  1,089
  1,330
  1,604
  1,908
  2,244
  2,610
  3,007
  3,433
  3,888
  4,372
  4,883
  5,420
  5,985
  6,576
  7,193
  7,837
  8,507
  9,205
  9,930
  10,683
Debt-to-equity ratio
  0.130
  0.210
  0.250
  0.280
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
Adjusted equity ratio
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -45
  -69
  -104
  -151
  -214
  -294
  -395
  -519
  -668
  -844
  -1,048
  -1,282
  -1,545
  -1,839
  -2,163
  -2,516
  -2,899
  -3,310
  -3,749
  -4,215
  -4,708
  -5,228
  -5,773
  -6,343
  -6,939
  -7,560
  -8,207
  -8,881
  -9,581
  -10,308
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
Funds from operations, $m
  -45
  -69
  -104
  -151
  -214
  -294
  -395
  -518
  -667
  -843
  -1,047
  -1,281
  -1,544
  -1,838
  -2,161
  -2,514
  -2,897
  -3,308
  -3,747
  -4,213
  -4,706
  -5,225
  -5,769
  -6,339
  -6,935
  -7,556
  -8,203
  -8,876
  -9,575
  -10,303
Change in working capital, $m
  -3
  -4
  -6
  -8
  -11
  -14
  -18
  -22
  -27
  -31
  -36
  -42
  -47
  -52
  -58
  -63
  -68
  -73
  -78
  -83
  -88
  -92
  -97
  -101
  -106
  -111
  -115
  -120
  -125
  -129
Cash from operations, $m
  -42
  -65
  -98
  -143
  -202
  -280
  -377
  -496
  -641
  -812
  -1,011
  -1,239
  -1,497
  -1,785
  -2,104
  -2,452
  -2,829
  -3,235
  -3,669
  -4,130
  -4,618
  -5,132
  -5,672
  -6,238
  -6,829
  -7,446
  -8,088
  -8,756
  -9,451
  -10,173
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
Free cash flow, $m
  -42
  -65
  -98
  -143
  -203
  -280
  -377
  -497
  -642
  -813
  -1,012
  -1,241
  -1,499
  -1,787
  -2,106
  -2,454
  -2,831
  -3,238
  -3,672
  -4,133
  -4,622
  -5,136
  -5,677
  -6,243
  -6,834
  -7,451
  -8,094
  -8,763
  -9,458
  -10,181
Issuance/(repayment) of debt, $m
  5
  7
  9
  13
  17
  22
  27
  33
  40
  47
  55
  63
  71
  79
  87
  95
  102
  110
  117
  125
  132
  139
  146
  152
  159
  166
  173
  180
  187
  194
Issuance/(repurchase) of shares, $m
  58
  88
  131
  188
  262
  356
  473
  614
  783
  979
  1,205
  1,461
  1,748
  2,065
  2,411
  2,788
  3,193
  3,626
  4,087
  4,574
  5,088
  5,627
  6,192
  6,782
  7,397
  8,038
  8,705
  9,398
  10,119
  10,868
Cash from financing (excl. dividends), $m  
  63
  95
  140
  201
  279
  378
  500
  647
  823
  1,026
  1,260
  1,524
  1,819
  2,144
  2,498
  2,883
  3,295
  3,736
  4,204
  4,699
  5,220
  5,766
  6,338
  6,934
  7,556
  8,204
  8,878
  9,578
  10,306
  11,062
Total cash flow (excl. dividends), $m
  21
  30
  42
  57
  76
  98
  122
  150
  181
  214
  248
  283
  320
  356
  392
  428
  464
  498
  532
  565
  597
  629
  660
  691
  722
  753
  784
  816
  848
  881
Retained Cash Flow (-), $m
  -58
  -88
  -131
  -188
  -262
  -356
  -473
  -614
  -783
  -979
  -1,205
  -1,461
  -1,748
  -2,065
  -2,411
  -2,788
  -3,193
  -3,626
  -4,087
  -4,574
  -5,088
  -5,627
  -6,192
  -6,782
  -7,397
  -8,038
  -8,705
  -9,398
  -10,119
  -10,868
Prev. year cash balance distribution, $m
  156
  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
  119
  -58
  -89
  -130
  -186
  -258
  -350
  -464
  -602
  -766
  -957
  -1,178
  -1,428
  -1,709
  -2,019
  -2,359
  -2,729
  -3,128
  -3,554
  -4,009
  -4,490
  -4,998
  -5,531
  -6,090
  -6,675
  -7,285
  -7,921
  -8,583
  -9,271
  -9,986
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
  114
  -54
  -77
  -107
  -144
  -187
  -237
  -290
  -346
  -401
  -455
  -503
  -543
  -574
  -593
  -600
  -594
  -576
  -547
  -509
  -464
  -415
  -363
  -310
  -260
  -213
  -170
  -133
  -101
  -75
Current shareholders' claim on cash, %
  36.8
  14.0
  5.4
  2.2
  0.9
  0.4
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Geron Corporation (Geron) is a biopharmaceutical company, which supports the clinical stage development of a telomerase inhibitor, Imetelstat, in hematologic myeloid malignancies by Janssen Biotech, Inc. (Janssen). The Company is engaged in the development of therapeutic products for oncology. Using its nucleic acid chemistry, Geron designed Imetelstat to be an oligonucleotide that binds with high affinity to the ribonucleic acid (RNA) template of telomerase, thereby directly inhibiting telomerase activity. Janssen is engaged in the development of Imetelstat with two clinical trials, such as a Phase II trial in myelofibrosis (MF), referred to as IMbark, and a Phase II/III trial in myelodysplastic syndromes (MDS) referred to as IMerge. Imetelstat is a lipid conjugated 13-mer oligonucleotide that is designed to be complementary to and bind with high affinity to the RNA template of telomerase, thereby directly inhibiting telomerase activity.

FINANCIAL RATIOS  of  Geron Corporation (GERN)

Valuation Ratios
P/E Ratio -7.9
Price to Sales 39.3
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow -13.1
Price to Free Cash Flow -13.1
Growth Rates
Sales Growth Rate -83.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -21.5%
Ret/ On Assets - 3 Yr. Avg. -17.2%
Return On Total Capital -22.7%
Ret/ On T. Cap. - 3 Yr. Avg. -20.1%
Return On Equity -22.7%
Return On Equity - 3 Yr. Avg. -20.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -500%
EBITDA Margin - 3 Yr. Avg. -1366.7%
Operating Margin -516.7%
Oper. Margin - 3 Yr. Avg. -1373.1%
Pre-Tax Margin -500%
Pre-Tax Margin - 3 Yr. Avg. -1366.7%
Net Profit Margin -500%
Net Profit Margin - 3 Yr. Avg. -1366.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GERN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GERN stock intrinsic value calculation we used $1 million for the last fiscal year's total revenue generated by Geron Corporation. The default revenue input number comes from 0001 income statement of Geron Corporation. 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 GERN 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 GERN is calculated based on our internal credit rating of Geron Corporation, 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 Geron Corporation.
    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 GERN stock the variable cost ratio is equal to 2900%.

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 GERN 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 Geron Corporation.

Corporate tax rate of 27% is the nominal tax rate for Geron Corporation. 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 GERN 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 GERN are equal to 8.1%.

Life of production assets of 1.4 years is the average useful life of capital assets used in Geron Corporation 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 GERN is equal to -505.1%. 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 - $177.733 million for Geron Corporation - 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 186.395 million for Geron Corporation 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 Geron Corporation at the current share price and the inputted number of shares is $0.3 billion.

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