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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| ModernGraham tagged articles | Morningstar |
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| GuruFocus | SEC Filings |
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:
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Disclaimer:
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.
