Biogen Inc Valuation – March 2019 #BIIB

Company Profile (excerpt from Reuters): Biogen Inc., incorporated on April 1, 1997, is a biopharmaceutical company. The Company focuses on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. The Company markets products, including TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). The Company also has a collaboration agreement with Genentech, Inc. (Genentech), a member of the Roche Group, with respect to RITUXAN for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other anti-CD20 therapies.


Downloadable PDF version of this valuation:

ModernGraham Valuation of BIIB – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $46,257,034,108 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 314.38% Pass
6. Moderate PEmg Ratio PEmg < 20 11.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.61 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.37 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $20.61
MG Growth Estimate 12.91%
MG Value $707.38
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $298.87
MG Value based on 0% Growth $175.20
Market Implied Growth Rate 1.45%
Current Price $235.16
% of Intrinsic Value 33.24%

Biogen Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $11.08 in 2015 to an estimated $20.61 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.45% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Biogen Inc revealed the company was trading above its Graham Number of $202.57. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.41, which was below the industry average of 47.6, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.06.

Biogen Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.06
Graham Number $202.57
PEmg 11.41
Current Ratio 2.32
PB Ratio 3.61
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,640,900,000
Total Current Liabilities $3,295,200,000
Long-Term Debt $5,936,500,000
Total Assets $25,288,900,000
Intangible Assets $8,826,400,000
Total Liabilities $12,257,300,000
Shares Outstanding (Diluted Average) 200,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $27.58
Dec2018 $21.58
Dec2017 $11.92
Dec2016 $16.93
Dec2015 $15.34
Dec2014 $12.37
Dec2013 $7.81
Dec2012 $5.76
Dec2011 $5.04
Dec2010 $3.94
Dec2009 $3.35
Dec2008 $2.65
Dec2007 $1.99
Dec2006 $0.63
Dec2005 $0.47
Dec2004 $0.07
Dec2003 -$4.92
Dec2002 $0.85
Dec2001 $1.78
Dec2000 $0.72
Dec1999 $0.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $20.61
Dec2018 $16.63
Dec2017 $13.73
Dec2016 $13.63
Dec2015 $11.08
Dec2014 $8.29
Dec2013 $5.90
Dec2012 $4.68
Dec2011 $3.89
Dec2010 $3.04
Dec2009 $2.34
Dec2008 $1.61
Dec2007 $0.61
Dec2006 -$0.25
Dec2005 -$0.58
Dec2004 -$0.83
Dec2003 -$0.93

Recommended Reading:

Other ModernGraham posts about the company

Biogen Inc Valuation – June 2018 $BIIB
Biogen Inc Valuation – July 2017 $BIIB
Biogen Inc Valuation – February 2016 Update $BIIB
13 Best Stocks For Value Investors This Week – 10/17/15
Biogen Inc. Valuation – October 2015 Update $BIIB

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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