Intrinsic value of Sorrento Therapeutics, Inc. - SRNE

Previous Close

$2.75

  Intrinsic Value

$0.19

stock screener

  Rating & Target

str. sell

-93%

Previous close

$2.75

 
Intrinsic value

$0.19

 
Up/down potential

-93%

 
Rating

str. sell

We calculate the intrinsic value of SRNE 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, %
  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
  155
  159
  163
  167
  172
  178
  184
  191
  198
  205
  213
  222
  231
  241
  251
  262
  274
  286
  299
  313
  328
  343
  359
  376
  394
  413
  433
  454
  475
  499
Variable operating expenses, $m
  399
  407
  418
  429
  442
  456
  471
  487
  505
  524
  533
  555
  578
  602
  628
  656
  685
  716
  748
  783
  819
  857
  898
  940
  985
  1,032
  1,082
  1,134
  1,189
  1,247
Fixed operating expenses, $m
  88
  90
  92
  94
  96
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
Total operating expenses, $m
  487
  497
  510
  523
  538
  554
  571
  589
  610
  631
  642
  667
  692
  719
  747
  778
  809
  843
  878
  916
  955
  996
  1,040
  1,085
  1,133
  1,183
  1,237
  1,292
  1,351
  1,412
Operating income, $m
  -331
  -339
  -347
  -356
  -365
  -376
  -387
  -399
  -412
  -426
  -429
  -445
  -461
  -478
  -496
  -515
  -536
  -557
  -579
  -603
  -627
  -653
  -681
  -709
  -739
  -771
  -804
  -839
  -875
  -913
EBITDA, $m
  -316
  -324
  -332
  -340
  -350
  -360
  -371
  -383
  -396
  -409
  -424
  -439
  -455
  -472
  -490
  -509
  -528
  -549
  -571
  -594
  -619
  -644
  -671
  -699
  -729
  -760
  -793
  -827
  -863
  -900
Interest expense (income), $m
  1
  1
  2
  3
  4
  5
  7
  9
  10
  12
  14
  16
  19
  21
  24
  27
  30
  33
  36
  40
  44
  48
  52
  56
  61
  66
  71
  77
  83
  89
  95
Earnings before tax, $m
  -332
  -341
  -350
  -360
  -371
  -383
  -396
  -409
  -424
  -440
  -446
  -463
  -482
  -502
  -523
  -545
  -569
  -593
  -619
  -646
  -675
  -705
  -737
  -770
  -805
  -842
  -881
  -921
  -964
  -1,008
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
  -332
  -341
  -350
  -360
  -371
  -383
  -396
  -409
  -424
  -440
  -446
  -463
  -482
  -502
  -523
  -545
  -569
  -593
  -619
  -646
  -675
  -705
  -737
  -770
  -805
  -842
  -881
  -921
  -964
  -1,008

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
  440
  451
  462
  475
  490
  505
  523
  541
  561
  583
  606
  630
  657
  684
  714
  745
  778
  813
  850
  890
  931
  974
  1,020
  1,068
  1,119
  1,173
  1,229
  1,288
  1,351
  1,416
Adjusted assets (=assets-cash), $m
  440
  451
  462
  475
  490
  505
  523
  541
  561
  583
  606
  630
  657
  684
  714
  745
  778
  813
  850
  890
  931
  974
  1,020
  1,068
  1,119
  1,173
  1,229
  1,288
  1,351
  1,416
Revenue / Adjusted assets
  0.352
  0.353
  0.353
  0.352
  0.351
  0.352
  0.352
  0.353
  0.353
  0.352
  0.351
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
Average production assets, $m
  71
  73
  75
  77
  79
  82
  85
  88
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  229
Working capital, $m
  -71
  -73
  -75
  -77
  -79
  -82
  -85
  -88
  -91
  -95
  -98
  -102
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -166
  -173
  -182
  -190
  -199
  -209
  -219
  -230
Total debt, $m
  10
  16
  22
  29
  37
  45
  54
  64
  75
  87
  99
  112
  126
  141
  157
  174
  192
  211
  231
  252
  274
  297
  322
  348
  375
  404
  434
  466
  500
  535
Total liabilities, $m
  237
  242
  249
  256
  263
  272
  281
  291
  302
  314
  326
  339
  353
  368
  384
  401
  419
  438
  458
  479
  501
  524
  549
  575
  602
  631
  661
  693
  727
  762
Total equity, $m
  203
  208
  214
  220
  226
  233
  241
  250
  259
  269
  280
  291
  303
  316
  330
  344
  360
  376
  393
  411
  430
  450
  471
  494
  517
  542
  568
  595
  624
  654
Total liabilities and equity, $m
  440
  450
  463
  476
  489
  505
  522
  541
  561
  583
  606
  630
  656
  684
  714
  745
  779
  814
  851
  890
  931
  974
  1,020
  1,069
  1,119
  1,173
  1,229
  1,288
  1,351
  1,416
Debt-to-equity ratio
  0.050
  0.070
  0.100
  0.130
  0.160
  0.190
  0.220
  0.260
  0.290
  0.320
  0.350
  0.390
  0.420
  0.450
  0.480
  0.510
  0.530
  0.560
  0.590
  0.610
  0.640
  0.660
  0.680
  0.700
  0.730
  0.750
  0.770
  0.780
  0.800
  0.820
Adjusted equity ratio
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -332
  -341
  -350
  -360
  -371
  -383
  -396
  -409
  -424
  -440
  -446
  -463
  -482
  -502
  -523
  -545
  -569
  -593
  -619
  -646
  -675
  -705
  -737
  -770
  -805
  -842
  -881
  -921
  -964
  -1,008
Depreciation, amort., depletion, $m
  15
  15
  15
  15
  15
  16
  16
  16
  16
  16
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
Funds from operations, $m
  -317
  -326
  -335
  -345
  -355
  -367
  -380
  -393
  -408
  -424
  -440
  -458
  -476
  -496
  -517
  -538
  -561
  -586
  -611
  -638
  -667
  -696
  -728
  -760
  -795
  -831
  -869
  -909
  -951
  -995
Change in working capital, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  -316
  -324
  -333
  -342
  -353
  -365
  -377
  -390
  -405
  -420
  -436
  -454
  -472
  -491
  -512
  -533
  -556
  -580
  -605
  -632
  -660
  -689
  -720
  -753
  -787
  -823
  -860
  -900
  -941
  -984
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from investing activities, $m
  -5
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Free cash flow, $m
  -321
  -330
  -339
  -349
  -360
  -372
  -385
  -398
  -413
  -429
  -445
  -463
  -482
  -502
  -523
  -545
  -568
  -593
  -619
  -646
  -675
  -705
  -737
  -770
  -805
  -842
  -880
  -921
  -963
  -1,008
Issuance/(repayment) of debt, $m
  5
  5
  6
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
Issuance/(repurchase) of shares, $m
  336
  345
  355
  366
  377
  390
  404
  418
  433
  450
  456
  475
  494
  515
  537
  560
  584
  609
  636
  665
  694
  725
  758
  793
  829
  867
  907
  949
  992
  1,039
Cash from financing (excl. dividends), $m  
  341
  350
  361
  373
  385
  399
  413
  428
  444
  462
  468
  488
  508
  530
  553
  577
  602
  628
  656
  686
  716
  748
  783
  819
  856
  896
  937
  981
  1,026
  1,074
Total cash flow (excl. dividends), $m
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  23
  25
  26
  28
  30
  32
  33
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
Retained Cash Flow (-), $m
  -336
  -345
  -355
  -366
  -377
  -390
  -404
  -418
  -433
  -450
  -456
  -475
  -494
  -515
  -537
  -560
  -584
  -609
  -636
  -665
  -694
  -725
  -758
  -793
  -829
  -867
  -907
  -949
  -992
  -1,039
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
  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
  -316
  -324
  -332
  -342
  -352
  -363
  -375
  -388
  -402
  -417
  -433
  -450
  -468
  -487
  -507
  -528
  -551
  -574
  -599
  -625
  -653
  -682
  -712
  -744
  -777
  -813
  -850
  -889
  -929
  -972
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
  -303
  -297
  -289
  -281
  -273
  -264
  -254
  -243
  -231
  -219
  -206
  -192
  -178
  -163
  -149
  -134
  -120
  -106
  -92
  -79
  -68
  -57
  -47
  -38
  -30
  -24
  -18
  -14
  -10
  -7
Current shareholders' claim on cash, %
  50.0
  24.9
  12.4
  6.1
  3.0
  1.5
  0.7
  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

Sorrento Therapeutics, Inc. is a biopharmaceutical company. The Company is engaged in the discovery, acquisition, development and commercialization of drug therapeutics. Its primary therapeutic focus is oncology, including the treatment of chronic cancer pain. It is also developing therapeutic products for other indications, including immunology and infectious diseases. Its products in the pipeline include Chimeric Antigen Receptor-T Cell (CAR-T) programs, resiniferatoxin (RTX), and biosimilar/biobetter antibodies clinical development programs. Its pipeline also includes preclinical fully human therapeutic monoclonal antibodies (mAbs), including biosimilars/biobetters, fully human anti-PD-L1 and anti-PD-1 checkpoint inhibitors derived from its G-MAB library platform, antibody drug conjugates (ADCs), bispecific antibodies (BsAbs), as well as CAR-T and Chimeric Antigen Receptor Natural Killer (NK) cells (CAR. NK) for adoptive cellular immunotherapy.

FINANCIAL RATIOS  of  Sorrento Therapeutics, Inc. (SRNE)

Valuation Ratios
P/E Ratio -2.3
Price to Sales 17.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow -2
Price to Free Cash Flow -1.8
Growth Rates
Sales Growth Rate 60%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 75%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 58.8%
Total Debt to Equity 58.8%
Interest Coverage -64
Management Effectiveness
Return On Assets -16.1%
Ret/ On Assets - 3 Yr. Avg. -20.1%
Return On Total Capital -43.4%
Ret/ On T. Cap. - 3 Yr. Avg. -37.7%
Return On Equity -54.2%
Return On Equity - 3 Yr. Avg. -43.4%
Asset Turnover 0
Profitability Ratios
Gross Margin 87.5%
Gross Margin - 3 Yr. Avg. 65.8%
EBITDA Margin -762.5%
EBITDA Margin - 3 Yr. Avg. -579.2%
Operating Margin -1212.5%
Oper. Margin - 3 Yr. Avg. -1189.2%
Pre-Tax Margin -812.5%
Pre-Tax Margin - 3 Yr. Avg. -664.2%
Net Profit Margin -762.5%
Net Profit Margin - 3 Yr. Avg. -852.5%
Effective Tax Rate 1.5%
Eff/ Tax Rate - 3 Yr. Avg. -84.3%
Payout Ratio 0%

SRNE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRNE stock intrinsic value calculation we used $152 million for the last fiscal year's total revenue generated by Sorrento Therapeutics, Inc.. The default revenue input number comes from 0001 income statement of Sorrento Therapeutics, 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 SRNE 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 4.3%, whose default value for SRNE is calculated based on our internal credit rating of Sorrento Therapeutics, 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 Sorrento Therapeutics, 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 SRNE stock the variable cost ratio is equal to 257.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for SRNE 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 19% for Sorrento Therapeutics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Sorrento Therapeutics, 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 SRNE 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 SRNE are equal to 46%.

Life of production assets of 17.5 years is the average useful life of capital assets used in Sorrento Therapeutics, 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 SRNE is equal to -46.1%. 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 - $199.568 million for Sorrento Therapeutics, 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 122.275 million for Sorrento Therapeutics, 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 Sorrento Therapeutics, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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