Intrinsic value of The Medicines Company - MDCO

Previous Close

$47.49

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$47.49

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of MDCO 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 3.5

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Variable operating expenses, $m
  80
  82
  83
  85
  87
  89
  91
  94
  97
  100
  83
  86
  90
  93
  97
  102
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
Fixed operating expenses, $m
  124
  126
  129
  132
  135
  138
  141
  144
  147
  150
  154
  157
  161
  164
  168
  171
  175
  179
  183
  187
  191
  195
  200
  204
  208
  213
  218
  223
  227
  232
Total operating expenses, $m
  204
  208
  212
  217
  222
  227
  232
  238
  244
  250
  237
  243
  251
  257
  265
  273
  281
  290
  299
  308
  318
  328
  339
  350
  361
  373
  386
  399
  411
  425
Operating income, $m
  -198
  -202
  -206
  -210
  -215
  -220
  -225
  -230
  -236
  -242
  -228
  -234
  -241
  -248
  -255
  -263
  -271
  -279
  -287
  -296
  -305
  -315
  -325
  -335
  -346
  -357
  -368
  -380
  -393
  -406
EBITDA, $m
  -174
  -178
  -182
  -186
  -191
  -195
  -200
  -206
  -211
  -217
  -223
  -229
  -235
  -242
  -249
  -256
  -264
  -272
  -280
  -288
  -297
  -306
  -316
  -326
  -336
  -346
  -358
  -369
  -381
  -394
Interest expense (income), $m
  12
  55
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  98
  102
  108
  113
  119
  125
Earnings before tax, $m
  -252
  -239
  -244
  -250
  -256
  -262
  -269
  -276
  -283
  -291
  -279
  -288
  -297
  -306
  -316
  -326
  -337
  -348
  -360
  -373
  -385
  -399
  -413
  -428
  -443
  -459
  -476
  -493
  -512
  -531
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
  -252
  -239
  -244
  -250
  -256
  -262
  -269
  -276
  -283
  -291
  -279
  -288
  -297
  -306
  -316
  -326
  -337
  -348
  -360
  -373
  -385
  -399
  -413
  -428
  -443
  -459
  -476
  -493
  -512
  -531

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
  680
  696
  714
  734
  756
  780
  807
  836
  867
  900
  935
  973
  1,014
  1,057
  1,102
  1,151
  1,202
  1,256
  1,313
  1,373
  1,437
  1,504
  1,575
  1,649
  1,728
  1,811
  1,898
  1,989
  2,086
  2,187
Adjusted assets (=assets-cash), $m
  680
  696
  714
  734
  756
  780
  807
  836
  867
  900
  935
  973
  1,014
  1,057
  1,102
  1,151
  1,202
  1,256
  1,313
  1,373
  1,437
  1,504
  1,575
  1,649
  1,728
  1,811
  1,898
  1,989
  2,086
  2,187
Revenue / Adjusted assets
  0.009
  0.009
  0.008
  0.010
  0.009
  0.009
  0.009
  0.010
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
  0.009
Average production assets, $m
  116
  118
  121
  125
  129
  133
  137
  142
  147
  153
  159
  165
  172
  180
  187
  196
  204
  214
  223
  233
  244
  256
  268
  280
  294
  308
  323
  338
  355
  372
Working capital, $m
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
Total debt, $m
  541
  555
  571
  589
  609
  631
  655
  681
  709
  739
  771
  805
  841
  880
  921
  964
  1,010
  1,059
  1,110
  1,165
  1,222
  1,282
  1,346
  1,413
  1,484
  1,558
  1,637
  1,719
  1,806
  1,897
Total liabilities, $m
  612
  626
  642
  660
  680
  702
  726
  752
  780
  810
  842
  876
  912
  951
  992
  1,036
  1,082
  1,130
  1,182
  1,236
  1,293
  1,354
  1,417
  1,484
  1,555
  1,630
  1,708
  1,790
  1,877
  1,968
Total equity, $m
  68
  70
  71
  73
  76
  78
  81
  84
  87
  90
  94
  97
  101
  106
  110
  115
  120
  126
  131
  137
  144
  150
  157
  165
  173
  181
  190
  199
  209
  219
Total liabilities and equity, $m
  680
  696
  713
  733
  756
  780
  807
  836
  867
  900
  936
  973
  1,013
  1,057
  1,102
  1,151
  1,202
  1,256
  1,313
  1,373
  1,437
  1,504
  1,574
  1,649
  1,728
  1,811
  1,898
  1,989
  2,086
  2,187
Debt-to-equity ratio
  7.950
  7.980
  8.000
  8.030
  8.060
  8.090
  8.120
  8.150
  8.180
  8.210
  8.240
  8.270
  8.300
  8.330
  8.350
  8.380
  8.410
  8.430
  8.460
  8.480
  8.500
  8.530
  8.550
  8.570
  8.590
  8.610
  8.620
  8.640
  8.660
  8.670
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
  -252
  -239
  -244
  -250
  -256
  -262
  -269
  -276
  -283
  -291
  -279
  -288
  -297
  -306
  -316
  -326
  -337
  -348
  -360
  -373
  -385
  -399
  -413
  -428
  -443
  -459
  -476
  -493
  -512
  -531
Depreciation, amort., depletion, $m
  24
  24
  24
  24
  24
  25
  25
  25
  25
  25
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Funds from operations, $m
  -228
  -215
  -220
  -225
  -231
  -237
  -244
  -251
  -258
  -266
  -274
  -282
  -291
  -300
  -310
  -320
  -330
  -341
  -353
  -365
  -377
  -390
  -404
  -418
  -433
  -449
  -465
  -482
  -500
  -518
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Cash from operations, $m
  -228
  -215
  -220
  -225
  -231
  -237
  -243
  -250
  -257
  -265
  -273
  -281
  -290
  -299
  -309
  -319
  -329
  -340
  -352
  -364
  -376
  -389
  -403
  -417
  -432
  -447
  -464
  -480
  -498
  -516
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Cash from investing activities, $m
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -27
  -27
  -29
Free cash flow, $m
  -234
  -221
  -227
  -233
  -239
  -245
  -252
  -260
  -267
  -276
  -284
  -293
  -303
  -312
  -323
  -333
  -345
  -356
  -369
  -381
  -395
  -409
  -423
  -439
  -455
  -471
  -489
  -507
  -526
  -546
Issuance/(repayment) of debt, $m
  -252
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  43
  46
  49
  51
  54
  57
  60
  64
  67
  71
  74
  78
  82
  87
  91
Issuance/(repurchase) of shares, $m
  532
  241
  246
  252
  258
  264
  271
  278
  286
  294
  282
  291
  301
  310
  320
  331
  342
  354
  366
  379
  392
  406
  420
  435
  451
  467
  485
  502
  521
  541
Cash from financing (excl. dividends), $m  
  280
  255
  262
  270
  278
  286
  295
  304
  314
  324
  314
  325
  337
  349
  361
  374
  388
  403
  417
  433
  449
  466
  484
  502
  522
  541
  563
  584
  608
  632
Total cash flow (excl. dividends), $m
  46
  33
  35
  37
  39
  41
  43
  45
  47
  48
  30
  32
  34
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
Retained Cash Flow (-), $m
  -532
  -241
  -246
  -252
  -258
  -264
  -271
  -278
  -286
  -294
  -282
  -291
  -301
  -310
  -320
  -331
  -342
  -354
  -366
  -379
  -392
  -406
  -420
  -435
  -451
  -467
  -485
  -502
  -521
  -541
Prev. year cash balance distribution, $m
  189
  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
  -297
  -207
  -211
  -215
  -219
  -223
  -228
  -234
  -240
  -246
  -252
  -259
  -266
  -274
  -282
  -290
  -299
  -308
  -317
  -327
  -338
  -348
  -360
  -372
  -384
  -397
  -410
  -424
  -439
  -454
Discount rate, %
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.31
  19.22
  20.18
  21.19
  22.25
  23.36
  24.53
  25.76
  27.05
  28.40
  29.82
  31.31
  32.87
  34.52
  36.24
  38.06
  39.96
  41.96
  44.05
  46.26
  48.57
PV of cash for distribution, $m
  -266
  -164
  -146
  -129
  -112
  -96
  -82
  -68
  -56
  -46
  -36
  -29
  -22
  -16
  -12
  -9
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  11.0
  2.4
  0.5
  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
  0.0
  0.0
  0.0

The Medicines Company is a global biopharmaceutical company. The Company is focused on advancing the treatment of acute and intensive care patients through the delivery of medicines to the hospital marketplace around the world. It markets Angiomax (bivalirudin), Ionsys (fentanyl iontophoretic transdermal system), Minocin (minocycline) for injection and Orbactiv (oritavancin). It also has a pipeline of products in development, including Carbavance, inclisiran and MDCO-700. Carbavance is used for the treatment of hospitalized patients with gram-negative bacterial infections. Inclisiran is used for the treatment of hypercholesterolemia. MDCO-700 includes sedative-hypnotic, which is used to induce and maintain sedation for procedural care and general anesthesia for surgical care. In addition to these products and products in development, it has a portfolio of generic drugs.

FINANCIAL RATIOS  of  The Medicines Company (MDCO)

Valuation Ratios
P/E Ratio -28.3
Price to Sales 20.1
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow -10.4
Price to Free Cash Flow -10.1
Growth Rates
Sales Growth Rate -45.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -89.6%
Cap. Spend. - 3 Yr. Gr. Rate -3%
Financial Strength
Quick Ratio 10
Current Ratio 0
LT Debt to Equity 95.3%
Total Debt to Equity 103.5%
Interest Coverage -9
Management Effectiveness
Return On Assets -6.1%
Ret/ On Assets - 3 Yr. Avg. -8.9%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -13.4%
Return On Equity -17%
Return On Equity - 3 Yr. Avg. -20.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 57.1%
Gross Margin - 3 Yr. Avg. 61%
EBITDA Margin -45.2%
EBITDA Margin - 3 Yr. Avg. -35.7%
Operating Margin -218.5%
Oper. Margin - 3 Yr. Avg. -102.1%
Pre-Tax Margin -70.8%
Pre-Tax Margin - 3 Yr. Avg. -50.9%
Net Profit Margin -70.8%
Net Profit Margin - 3 Yr. Avg. -63.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 0%

MDCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDCO stock intrinsic value calculation we used $6 million for the last fiscal year's total revenue generated by The Medicines Company. The default revenue input number comes from 0001 income statement of The Medicines Company. 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 MDCO stock valuation model: a) initial revenue growth rate of 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 11.8%, whose default value for MDCO is calculated based on our internal credit rating of The Medicines Company, 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 The Medicines Company.
    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 MDCO stock the variable cost ratio is equal to 1316.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $121 million in the base year in the intrinsic value calculation for MDCO 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 6.9% for The Medicines Company.

Corporate tax rate of 27% is the nominal tax rate for The Medicines Company. 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 MDCO 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 MDCO are equal to 1889.1%.

Life of production assets of 66.9 years is the average useful life of capital assets used in The Medicines Company 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 MDCO is equal to -187.6%. 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 - $-22.264 million for The Medicines Company - 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 73.719 million for The Medicines Company 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 The Medicines Company at the current share price and the inputted number of shares is $3.5 billion.

RELATED COMPANIES Price Int.Val. Rating
JNJ Johnson & John 128.21 107.87  sell
LLY Eli Lilly and 114.05 89.42  sell
EGRX Eagle Pharmace 54.99 95.50  str.buy
MRK Merck & Compan 86.57 44.01  sell
AZN Astrazeneca PL 44.74 24.54  sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.