Intrinsic value of Lexicon Pharmaceuticals - LXRX

Previous Close

$8.47

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$8.47

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of LXRX 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 0.9

 

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, %
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
  5.43
Revenue, $m
  103
  117
  131
  146
  162
  179
  197
  215
  235
  254
  275
  297
  319
  343
  367
  392
  418
  446
  474
  504
  534
  566
  600
  635
  671
  709
  749
  790
  833
  878
Variable operating expenses, $m
  56
  62
  69
  75
  83
  90
  98
  106
  115
  124
  124
  133
  143
  154
  165
  176
  188
  200
  213
  226
  240
  254
  269
  285
  301
  319
  336
  355
  374
  395
Fixed operating expenses, $m
  182
  186
  190
  194
  198
  203
  207
  212
  217
  221
  226
  231
  236
  241
  247
  252
  258
  263
  269
  275
  281
  287
  294
  300
  307
  313
  320
  327
  335
  342
Total operating expenses, $m
  238
  248
  259
  269
  281
  293
  305
  318
  332
  345
  350
  364
  379
  395
  412
  428
  446
  463
  482
  501
  521
  541
  563
  585
  608
  632
  656
  682
  709
  737
Operating income, $m
  -135
  -131
  -127
  -123
  -119
  -114
  -108
  -103
  -97
  -91
  -75
  -68
  -60
  -53
  -45
  -36
  -27
  -18
  -8
  2
  13
  25
  37
  49
  63
  77
  92
  108
  124
  142
EBITDA, $m
  -123
  -119
  -115
  -110
  -105
  -100
  -94
  -88
  -82
  -75
  -68
  -60
  -52
  -44
  -35
  -26
  -17
  -7
  4
  15
  27
  39
  52
  65
  80
  95
  111
  127
  145
  164
Interest expense (income), $m
  6
  13
  6
  8
  10
  12
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  40
  43
  47
  50
  54
  57
  61
  65
  70
  74
  79
  83
  89
  94
  99
Earnings before tax, $m
  -148
  -138
  -136
  -133
  -131
  -128
  -125
  -121
  -118
  -114
  -100
  -96
  -91
  -87
  -81
  -76
  -70
  -64
  -58
  -51
  -44
  -37
  -29
  -20
  -11
  -2
  8
  19
  31
  43
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
  2
  5
  8
  12
Net income, $m
  -148
  -138
  -136
  -133
  -131
  -128
  -125
  -121
  -118
  -114
  -100
  -96
  -91
  -87
  -81
  -76
  -70
  -64
  -58
  -51
  -44
  -37
  -29
  -20
  -11
  -2
  6
  14
  22
  31

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
  270
  305
  343
  383
  425
  469
  515
  564
  614
  666
  721
  777
  836
  897
  961
  1,027
  1,095
  1,167
  1,241
  1,318
  1,399
  1,483
  1,570
  1,662
  1,757
  1,856
  1,960
  2,068
  2,181
  2,300
Adjusted assets (=assets-cash), $m
  270
  305
  343
  383
  425
  469
  515
  564
  614
  666
  721
  777
  836
  897
  961
  1,027
  1,095
  1,167
  1,241
  1,318
  1,399
  1,483
  1,570
  1,662
  1,757
  1,856
  1,960
  2,068
  2,181
  2,300
Revenue / Adjusted assets
  0.381
  0.384
  0.382
  0.381
  0.381
  0.382
  0.383
  0.381
  0.383
  0.381
  0.381
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
Average production assets, $m
  77
  87
  98
  109
  121
  134
  147
  161
  175
  190
  205
  222
  238
  256
  274
  293
  312
  333
  354
  376
  399
  423
  447
  473
  501
  529
  558
  589
  622
  655
Working capital, $m
  -113
  -128
  -144
  -161
  -178
  -197
  -216
  -236
  -257
  -279
  -302
  -326
  -351
  -376
  -403
  -431
  -459
  -489
  -521
  -553
  -587
  -622
  -659
  -697
  -737
  -778
  -822
  -867
  -915
  -965
Total debt, $m
  118
  150
  184
  220
  258
  298
  339
  383
  428
  475
  524
  575
  628
  683
  740
  799
  861
  926
  992
  1,062
  1,134
  1,210
  1,289
  1,371
  1,456
  1,546
  1,639
  1,737
  1,838
  1,945
Total liabilities, $m
  243
  275
  309
  345
  383
  422
  464
  507
  552
  600
  649
  700
  753
  808
  865
  924
  986
  1,050
  1,117
  1,187
  1,259
  1,335
  1,413
  1,495
  1,581
  1,670
  1,764
  1,861
  1,963
  2,070
Total equity, $m
  27
  31
  34
  38
  43
  47
  52
  56
  61
  67
  72
  78
  84
  90
  96
  103
  110
  117
  124
  132
  140
  148
  157
  166
  176
  186
  196
  207
  218
  230
Total liabilities and equity, $m
  270
  306
  343
  383
  426
  469
  516
  563
  613
  667
  721
  778
  837
  898
  961
  1,027
  1,096
  1,167
  1,241
  1,319
  1,399
  1,483
  1,570
  1,661
  1,757
  1,856
  1,960
  2,068
  2,181
  2,300
Debt-to-equity ratio
  4.380
  4.920
  5.370
  5.750
  6.070
  6.340
  6.580
  6.790
  6.970
  7.130
  7.270
  7.400
  7.510
  7.610
  7.700
  7.790
  7.860
  7.930
  8.000
  8.050
  8.110
  8.160
  8.210
  8.250
  8.290
  8.330
  8.360
  8.400
  8.430
  8.460
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
  -148
  -138
  -136
  -133
  -131
  -128
  -125
  -121
  -118
  -114
  -100
  -96
  -91
  -87
  -81
  -76
  -70
  -64
  -58
  -51
  -44
  -37
  -29
  -20
  -11
  -2
  6
  14
  22
  31
Depreciation, amort., depletion, $m
  12
  13
  13
  13
  14
  14
  15
  15
  15
  16
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  -136
  -125
  -123
  -120
  -117
  -114
  -110
  -106
  -102
  -98
  -93
  -88
  -83
  -78
  -72
  -66
  -60
  -53
  -46
  -39
  -31
  -22
  -14
  -4
  6
  16
  25
  34
  43
  53
Change in working capital, $m
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -48
  -50
Cash from operations, $m
  -122
  -110
  -107
  -103
  -99
  -95
  -91
  -86
  -81
  -76
  -70
  -65
  -59
  -52
  -46
  -39
  -31
  -23
  -15
  -6
  3
  13
  23
  34
  45
  58
  68
  79
  91
  103
Maintenance CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
Cash from investing activities, $m
  -12
  -13
  -14
  -14
  -16
  -17
  -17
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
Free cash flow, $m
  -134
  -123
  -120
  -118
  -115
  -112
  -108
  -105
  -101
  -97
  -92
  -88
  -83
  -78
  -72
  -67
  -60
  -54
  -47
  -40
  -33
  -25
  -16
  -7
  3
  13
  21
  30
  39
  48
Issuance/(repayment) of debt, $m
  -128
  32
  34
  36
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  72
  75
  79
  82
  86
  89
  93
  98
  102
  107
Issuance/(repurchase) of shares, $m
  310
  141
  139
  137
  135
  132
  129
  126
  123
  119
  106
  102
  97
  93
  88
  83
  77
  72
  65
  59
  52
  45
  37
  29
  21
  12
  4
  0
  0
  0
Cash from financing (excl. dividends), $m  
  182
  173
  173
  173
  173
  172
  171
  169
  168
  166
  155
  153
  150
  148
  145
  142
  139
  136
  132
  129
  124
  120
  116
  111
  107
  101
  97
  98
  102
  107
Total cash flow (excl. dividends), $m
  48
  50
  53
  55
  58
  60
  62
  65
  67
  70
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  109
  114
  119
  127
  141
  155
Retained Cash Flow (-), $m
  -310
  -141
  -139
  -137
  -135
  -132
  -129
  -126
  -123
  -119
  -106
  -102
  -97
  -93
  -88
  -83
  -77
  -72
  -65
  -59
  -52
  -45
  -37
  -29
  -21
  -12
  -10
  -11
  -11
  -12
Prev. year cash balance distribution, $m
  187
  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
  -75
  -91
  -86
  -82
  -77
  -72
  -67
  -61
  -56
  -50
  -43
  -37
  -30
  -23
  -15
  -7
  1
  10
  20
  29
  40
  51
  63
  75
  88
  102
  108
  116
  129
  143
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
  -72
  -83
  -75
  -67
  -60
  -52
  -45
  -38
  -32
  -26
  -21
  -16
  -11
  -8
  -4
  -2
  0
  2
  3
  4
  4
  4
  4
  4
  3
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  50.0
  32.8
  22.5
  16.1
  11.9
  9.1
  7.1
  5.7
  4.7
  3.9
  3.4
  3.0
  2.6
  2.4
  2.2
  2.0
  1.9
  1.7
  1.7
  1.6
  1.5
  1.5
  1.4
  1.4
  1.4
  1.4
  1.4
  1.4
  1.4
  1.4

Lexicon Pharmaceuticals, Inc. is a biopharmaceutical company. The Company focuses on the development and commercialization of breakthrough treatments for human disease. Its drug programs include XERMELO (telotristat ethyl), sotagliflozin, LX2761 and LX9211. It also has a number of additional compounds into various stages of clinical and preclinical development. XERMELO is an orally-delivered small molecule compound approved by the Food and Drug Administration (FDA) for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog (SSA) therapy in adults inadequately controlled by SSA therapy. It is developing sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for type 1 and type 2 diabetes mellitus. LX2761 is an orally-delivered small molecule compound that it is developing for the treatment of diabetes. LX9211 is an orally-delivered small molecule compound that the Company is developing for the treatment of neuropathic pain.

FINANCIAL RATIOS  of  Lexicon Pharmaceuticals (LXRX)

Valuation Ratios
P/E Ratio -6.3
Price to Sales 10.6
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow -5
Price to Free Cash Flow -5
Growth Rates
Sales Growth Rate -36.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 22
Current Ratio 0
LT Debt to Equity 54.1%
Total Debt to Equity 64.3%
Interest Coverage -23
Management Effectiveness
Return On Assets -23.9%
Ret/ On Assets - 3 Yr. Avg. -16.7%
Return On Total Capital -43.6%
Ret/ On T. Cap. - 3 Yr. Avg. -26.4%
Return On Equity -63.7%
Return On Equity - 3 Yr. Avg. -36.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -160.2%
EBITDA Margin - 3 Yr. Avg. -192%
Operating Margin -165.1%
Oper. Margin - 3 Yr. Avg. -199.7%
Pre-Tax Margin -169.9%
Pre-Tax Margin - 3 Yr. Avg. -202.8%
Net Profit Margin -169.9%
Net Profit Margin - 3 Yr. Avg. -202.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

LXRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LXRX stock intrinsic value calculation we used $90.335 million for the last fiscal year's total revenue generated by Lexicon Pharmaceuticals. The default revenue input number comes from 0001 income statement of Lexicon Pharmaceuticals. 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 LXRX stock valuation model: a) initial revenue growth rate of 14.1% 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 4.3%, whose default value for LXRX is calculated based on our internal credit rating of Lexicon Pharmaceuticals, 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 Lexicon Pharmaceuticals.
    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 LXRX stock the variable cost ratio is equal to 55.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $178 million in the base year in the intrinsic value calculation for LXRX 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 Lexicon Pharmaceuticals.

Corporate tax rate of 27% is the nominal tax rate for Lexicon Pharmaceuticals. 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 LXRX 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 LXRX are equal to 74.6%.

Life of production assets of 34 years is the average useful life of capital assets used in Lexicon Pharmaceuticals 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 LXRX is equal to -109.8%. 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 - $52.102 million for Lexicon Pharmaceuticals - 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 105.832 million for Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ 3 Top Small-Cap Stocks to Buy Right Now   [Nov-05-18 08:53AM  Motley Fool]
▶ Lexicon: 3Q Earnings Snapshot   [Nov-01-18 09:01AM  Associated Press]
▶ 3 Biotech Stocks That Soared This Week: Are They Buys?   [Jun-02-18 07:17AM  Motley Fool]
▶ 3 Top Biotech Stocks to Buy Right Now   [Apr-21-18 07:16AM  Motley Fool]
▶ Woodlands pharma co. total revenue 'wont grow a lot' year over year   [Apr-02-18 01:16PM  American City Business Journals]
▶ Lexicon reports 4Q loss   [Feb-22-18 10:11AM  Associated Press]
▶ Lexicon reports 3Q loss   [Nov-08-17 07:49AM  Associated Press]

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