Intrinsic value of Ionis Pharmaceuticals, Inc. - IONS

Previous Close

$78.90

  Intrinsic Value

$11.04

stock screener

  Rating & Target

str. sell

-86%

Previous close

$78.90

 
Intrinsic value

$11.04

 
Up/down potential

-86%

 
Rating

str. sell

We calculate the intrinsic value of IONS 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 10.9

 

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, %
  14.50
  13.55
  12.70
  11.93
  11.23
  10.61
  10.05
  9.54
  9.09
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.96
  6.76
  6.58
  6.43
  6.28
  6.15
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
Revenue, $m
  687
  780
  879
  984
  1,094
  1,211
  1,332
  1,459
  1,592
  1,730
  1,874
  2,024
  2,179
  2,341
  2,509
  2,683
  2,865
  3,053
  3,249
  3,453
  3,666
  3,887
  4,118
  4,359
  4,610
  4,872
  5,145
  5,431
  5,729
  6,041
Variable operating expenses, $m
  644
  729
  820
  916
  1,018
  1,125
  1,236
  1,353
  1,475
  1,602
  1,720
  1,858
  2,000
  2,149
  2,303
  2,463
  2,630
  2,803
  2,983
  3,170
  3,365
  3,569
  3,780
  4,001
  4,232
  4,472
  4,723
  4,986
  5,260
  5,546
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
  644
  729
  820
  916
  1,018
  1,125
  1,236
  1,353
  1,475
  1,602
  1,720
  1,858
  2,000
  2,149
  2,303
  2,463
  2,630
  2,803
  2,983
  3,170
  3,365
  3,569
  3,780
  4,001
  4,232
  4,472
  4,723
  4,986
  5,260
  5,546
Operating income, $m
  43
  51
  59
  67
  77
  86
  96
  106
  117
  129
  154
  166
  179
  192
  206
  220
  235
  250
  266
  283
  301
  319
  338
  357
  378
  399
  422
  445
  470
  495
EBITDA, $m
  68
  77
  87
  97
  108
  119
  131
  144
  157
  170
  185
  199
  215
  231
  247
  264
  282
  301
  320
  340
  361
  383
  406
  429
  454
  480
  507
  535
  564
  595
Interest expense (income), $m
  7
  46
  -6
  2
  11
  21
  31
  41
  52
  64
  76
  88
  102
  115
  129
  144
  159
  175
  191
  208
  226
  244
  264
  284
  305
  326
  349
  373
  398
  423
  450
Earnings before tax, $m
  -3
  57
  56
  56
  56
  55
  55
  54
  53
  53
  65
  64
  64
  63
  62
  61
  60
  59
  58
  57
  56
  55
  54
  53
  52
  50
  49
  48
  46
  45
Tax expense, $m
  0
  15
  15
  15
  15
  15
  15
  15
  14
  14
  18
  17
  17
  17
  17
  16
  16
  16
  16
  15
  15
  15
  15
  14
  14
  14
  13
  13
  13
  12
Net income, $m
  -3
  41
  41
  41
  41
  40
  40
  39
  39
  38
  48
  47
  46
  46
  45
  45
  44
  43
  42
  42
  41
  40
  39
  39
  38
  37
  36
  35
  34
  33

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
  973
  1,105
  1,245
  1,394
  1,550
  1,715
  1,887
  2,067
  2,255
  2,451
  2,655
  2,866
  3,087
  3,315
  3,553
  3,800
  4,057
  4,325
  4,602
  4,892
  5,193
  5,506
  5,833
  6,174
  6,529
  6,900
  7,288
  7,692
  8,115
  8,557
Adjusted assets (=assets-cash), $m
  973
  1,105
  1,245
  1,394
  1,550
  1,715
  1,887
  2,067
  2,255
  2,451
  2,655
  2,866
  3,087
  3,315
  3,553
  3,800
  4,057
  4,325
  4,602
  4,892
  5,193
  5,506
  5,833
  6,174
  6,529
  6,900
  7,288
  7,692
  8,115
  8,557
Revenue / Adjusted assets
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
  0.706
Average production assets, $m
  159
  180
  203
  227
  253
  280
  308
  337
  368
  400
  433
  467
  503
  541
  579
  620
  662
  705
  751
  798
  847
  898
  951
  1,007
  1,065
  1,125
  1,189
  1,255
  1,323
  1,396
Working capital, $m
  -164
  -186
  -209
  -234
  -260
  -288
  -317
  -347
  -379
  -412
  -446
  -482
  -519
  -557
  -597
  -639
  -682
  -727
  -773
  -822
  -873
  -925
  -980
  -1,037
  -1,097
  -1,159
  -1,225
  -1,293
  -1,364
  -1,438
Total debt, $m
  -83
  35
  161
  295
  436
  584
  739
  901
  1,070
  1,246
  1,430
  1,621
  1,819
  2,025
  2,239
  2,461
  2,692
  2,933
  3,183
  3,443
  3,714
  3,996
  4,291
  4,597
  4,917
  5,251
  5,600
  5,964
  6,344
  6,742
Total liabilities, $m
  876
  994
  1,121
  1,254
  1,395
  1,543
  1,698
  1,860
  2,030
  2,206
  2,389
  2,580
  2,778
  2,984
  3,198
  3,420
  3,652
  3,892
  4,142
  4,402
  4,673
  4,956
  5,250
  5,557
  5,876
  6,210
  6,559
  6,923
  7,304
  7,702
Total equity, $m
  97
  110
  125
  139
  155
  171
  189
  207
  226
  245
  265
  287
  309
  332
  355
  380
  406
  432
  460
  489
  519
  551
  583
  617
  653
  690
  729
  769
  812
  856
Total liabilities and equity, $m
  973
  1,104
  1,246
  1,393
  1,550
  1,714
  1,887
  2,067
  2,256
  2,451
  2,654
  2,867
  3,087
  3,316
  3,553
  3,800
  4,058
  4,324
  4,602
  4,891
  5,192
  5,507
  5,833
  6,174
  6,529
  6,900
  7,288
  7,692
  8,116
  8,558
Debt-to-equity ratio
  -0.860
  0.320
  1.300
  2.120
  2.810
  3.410
  3.920
  4.360
  4.750
  5.090
  5.390
  5.650
  5.890
  6.110
  6.300
  6.480
  6.640
  6.780
  6.920
  7.040
  7.150
  7.260
  7.360
  7.450
  7.530
  7.610
  7.680
  7.750
  7.820
  7.880
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
  -3
  41
  41
  41
  41
  40
  40
  39
  39
  38
  48
  47
  46
  46
  45
  45
  44
  43
  42
  42
  41
  40
  39
  39
  38
  37
  36
  35
  34
  33
Depreciation, amort., depletion, $m
  25
  26
  28
  29
  31
  33
  35
  37
  39
  42
  31
  33
  36
  39
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
Funds from operations, $m
  22
  67
  69
  70
  72
  73
  75
  77
  78
  80
  79
  80
  82
  84
  87
  89
  91
  94
  96
  99
  101
  104
  107
  110
  114
  117
  121
  124
  128
  132
Change in working capital, $m
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
Cash from operations, $m
  42
  90
  92
  95
  98
  101
  104
  107
  110
  113
  113
  116
  119
  123
  127
  130
  134
  138
  143
  147
  152
  157
  162
  168
  173
  179
  186
  192
  199
  207
Maintenance CAPEX, $m
  -10
  -11
  -13
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -54
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -95
New CAPEX, $m
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
Cash from investing activities, $m
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -69
  -73
  -78
  -81
  -86
  -91
  -95
  -101
  -106
  -111
  -117
  -124
  -130
  -137
  -143
  -151
  -159
  -167
Free cash flow, $m
  12
  57
  57
  57
  56
  56
  56
  56
  55
  55
  51
  51
  50
  50
  49
  49
  48
  48
  47
  47
  46
  45
  45
  44
  44
  43
  42
  42
  41
  40
Issuance/(repayment) of debt, $m
  -730
  119
  126
  134
  141
  148
  155
  162
  169
  176
  183
  191
  198
  206
  214
  222
  231
  240
  250
  260
  271
  282
  294
  307
  320
  334
  349
  364
  381
  398
Issuance/(repurchase) of shares, $m
  856
  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
  3
  6
  8
  11
Cash from financing (excl. dividends), $m  
  126
  119
  126
  134
  141
  148
  155
  162
  169
  176
  183
  191
  198
  206
  214
  222
  231
  240
  250
  260
  271
  282
  294
  307
  320
  334
  352
  370
  389
  409
Total cash flow (excl. dividends), $m
  138
  175
  183
  190
  197
  204
  211
  218
  224
  231
  234
  241
  248
  256
  263
  271
  279
  288
  297
  307
  317
  328
  339
  351
  363
  377
  394
  411
  430
  449
Retained Cash Flow (-), $m
  -856
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
Prev. year cash balance distribution, $m
  1,804
  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
  1,086
  162
  169
  175
  182
  188
  194
  200
  206
  212
  214
  220
  226
  233
  239
  246
  254
  261
  269
  278
  287
  296
  306
  317
  328
  340
  355
  371
  388
  405
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
  1,041
  149
  147
  144
  141
  136
  131
  125
  118
  111
  102
  94
  86
  78
  70
  63
  55
  48
  41
  35
  30
  25
  20
  16
  13
  10
  8
  6
  4
  3
Current shareholders' claim on cash, %
  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
  49.9
  49.9
  49.8

Ionis Pharmaceuticals, Inc. is engaged in discovering and developing ribonucleic acid (RNA)-targeted therapeutics. The Company, using its drug discovery platform, has developed a pipeline of drugs for patients with unmet medical needs. The Company's segments include Ionis Core and Akcea Therapeutics. In the Ionis Core segment, the Company is engaged in exploiting a drug discovery platform to generate a pipeline of drugs for the Company and its partners. The Akcea Therapeutics segment includes the operations of the Company's subsidiary, Akcea Therapeutics, Inc. (Akcea Therapeutics). Akcea Therapeutics is focused on developing and commercializing volanesorsen and other clinical-stage drugs for serious cardiometabolic diseases caused by lipid disorders. The Company is developing volanesorsen to treat two severe and rare, genetically defined diseases, familial chylomicronemia (FCS) and familial partial lipodystrophy (FPL). The Company offers SPINRAZA, a Generation 2.0+ antisense drug.

FINANCIAL RATIOS  of  Ionis Pharmaceuticals, Inc. (IONS)

Valuation Ratios
P/E Ratio -110.3
Price to Sales 27.7
Price to Book 96
Price to Tangible Book
Price to Cash Flow -85.7
Price to Free Cash Flow -80.7
Growth Rates
Sales Growth Rate 22.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio 668
Current Ratio 0.1
LT Debt to Equity 588%
Total Debt to Equity 589%
Interest Coverage -11
Management Effectiveness
Return On Assets -8.6%
Ret/ On Assets - 3 Yr. Avg. -7%
Return On Total Capital -12.8%
Ret/ On T. Cap. - 3 Yr. Avg. -10.4%
Return On Equity -57.8%
Return On Equity - 3 Yr. Avg. -36.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 16.4%
Gross Margin - 3 Yr. Avg. 5.8%
EBITDA Margin -19.6%
EBITDA Margin - 3 Yr. Avg. -20.9%
Operating Margin -14.4%
Oper. Margin - 3 Yr. Avg. -22.3%
Pre-Tax Margin -24.2%
Pre-Tax Margin - 3 Yr. Avg. -26.8%
Net Profit Margin -25.1%
Net Profit Margin - 3 Yr. Avg. -24.8%
Effective Tax Rate -3.6%
Eff/ Tax Rate - 3 Yr. Avg. 8.1%
Payout Ratio 0%

IONS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IONS stock intrinsic value calculation we used $600 million for the last fiscal year's total revenue generated by Ionis Pharmaceuticals, Inc.. The default revenue input number comes from 0001 income statement of Ionis Pharmaceuticals, Inc.. 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 IONS stock valuation model: a) initial revenue growth rate of 14.5% 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 IONS is calculated based on our internal credit rating of Ionis Pharmaceuticals, Inc., 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 Ionis Pharmaceuticals, Inc..
    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 IONS stock the variable cost ratio is equal to 94%.

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 IONS 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 7.1% for Ionis Pharmaceuticals, Inc..

Corporate tax rate of 27% is the nominal tax rate for Ionis Pharmaceuticals, Inc.. 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 IONS 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 IONS are equal to 23.1%.

Life of production assets of 14 years is the average useful life of capital assets used in Ionis Pharmaceuticals, Inc. 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 IONS is equal to -23.8%. 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 - $1048.079 million for Ionis Pharmaceuticals, Inc. - 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 138.401 million for Ionis Pharmaceuticals, Inc. 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 Ionis Pharmaceuticals, Inc. at the current share price and the inputted number of shares is $10.9 billion.

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