Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Biogen Inc. pages available for free this week:
- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Return on Equity (ROE) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
Biogen Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals several notable trends in the company's performance and capital structure over the five-year period under review.
- Net Operating Profit After Taxes (NOPAT)
- This metric exhibited a strong upward trend from 2017 through 2019, increasing from approximately 2.89 billion USD to over 6.02 billion USD. However, in 2020, NOPAT declined to about 4.37 billion USD and experienced a significant drop in 2021 to roughly 1.50 billion USD. This pattern suggests that the company faced operational challenges or market conditions adversely impacting profitability in the most recent years.
- Cost of Capital
- The cost of capital showed a slight decrease over the period, moving from 8.41% in 2017 to 7.70% in 2021. The gradual reduction could imply a marginally lower risk perception or improvements in the company’s capital structure and financing costs, potentially due to market factors or changes in debt and equity composition.
- Invested Capital
- Invested capital increased steadily from about 12.48 billion USD in 2017 to over 14.14 billion USD in 2019, followed by a decline to approximately 12.63 billion USD in 2020. It then rose again to around 13.82 billion USD in 2021. This fluctuation might reflect changes in asset investment levels, possibly driven by strategic acquisitions, divestitures, or capital expenditure adjustments.
- Economic Profit
- The economic profit mirrored the trends observed in NOPAT, increasing significantly from 1.84 billion USD in 2017 to 4.84 billion USD in 2019. It then declined to about 3.38 billion USD in 2020 and experienced a more pronounced decrease to 437 million USD in 2021. The economic profit remains positive throughout, indicating value creation, but the steep reduction in later years points to diminishing returns relative to invested capital and cost of capital.
In summary, while the company demonstrated robust growth in operating profits and economic profit through 2019, the declining trajectory in 2020 and 2021 highlights emerging concerns regarding profitability and capital efficiency. The slight downward trend in the cost of capital suggests relatively stable financing conditions amid these changes. The fluctuations in invested capital imply strategic financial and investment decisions impacting the company's asset base over time.
Net Operating Profit after Taxes (NOPAT)
Biogen Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in reserves for allowances.
3 Addition of increase (decrease) in restructuring reserve.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Biogen Inc..
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Biogen Inc..
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net Income Attributable to Biogen Inc.
- The net income exhibited a rising trend from 2017 to 2019, increasing from approximately 2.54 billion to nearly 5.89 billion US dollars. However, a decline was observed starting in 2020, with net income falling to about 4.00 billion and further decreasing sharply to approximately 1.56 billion US dollars in 2021. This indicates a significant reduction in profitability during the latter years of the period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT followed a similar trajectory to net income, showing an increase from about 2.89 billion US dollars in 2017 to a peak of approximately 6.02 billion US dollars in 2019. Subsequently, a decline occurred with NOPAT decreasing to roughly 4.37 billion in 2020 and then sharply dropping to around 1.50 billion US dollars in 2021. This pattern signifies a reduction in operating efficiency and effectiveness in generating profit after taxes over the last two years.
- Overall Observations
- Both net income and NOPAT demonstrated growth during the initial three years, suggesting improved financial performance and operational results. The peak in 2019 represents the highest point in profitability within the analyzed period. The subsequent decline in 2020 and more pronounced drop in 2021 highlight challenges or adverse developments affecting profitability and operational outcomes. The data suggests the company experienced a notable downturn in earning capacity and operating profit in the final years.
Cash Operating Taxes
Biogen Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Income Tax Expense
- The income tax expense demonstrates a consistent downward trend from 2017 to 2021. Starting at 2,458,700 thousand US dollars in 2017, the expense decreased significantly each year to reach 52,500 thousand US dollars in 2021. The reduction is particularly notable in 2021, where the expense dropped sharply compared to previous years.
- Cash Operating Taxes
- Cash operating taxes also show a general decline over the analyzed period. Beginning at 2,441,355 thousand US dollars in 2017, these taxes declined steadily year over year, falling to 533,599 thousand US dollars in 2021. The reduction is gradual until 2020, followed by a less steep but still notable decrease in 2021.
- Comparative Analysis
- Both income tax expense and cash operating taxes have followed a downward trajectory, reflecting a possible strategic or operational improvement affecting taxable income or tax planning. The income tax expense decreased more sharply between 2020 and 2021 compared to prior years, whereas cash operating taxes reduced more steadily across the entire timeframe.
Invested Capital
Biogen Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of restructuring reserve.
5 Addition of equity equivalents to total Biogen Inc. shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases remained relatively stable from 2017 to 2019, with a slight decrease each year from approximately 6.45 billion US dollars to around 6.44 billion US dollars. However, there was a significant increase in 2020, rising to approximately 7.91 billion US dollars. In 2021, the debt slightly decreased to about 7.69 billion US dollars, indicating a reduction after the peak the previous year.
- Total Biogen Inc. Shareholders’ Equity
- Shareholders' equity showed a consistent upward trend from 2017 to 2019, growing from approximately 12.61 billion US dollars to 13.34 billion US dollars. In 2020, there was a notable decline to about 10.70 billion US dollars. This followed by a modest recovery in 2021, with equity increasing to approximately 10.90 billion US dollars, yet still below the peak levels observed in 2019.
- Invested Capital
- Invested capital experienced steady growth from 2017 through 2019, rising from approximately 12.48 billion US dollars to 14.14 billion US dollars. In 2020, invested capital dropped to about 12.63 billion US dollars but rebounded in 2021 to 13.82 billion US dollars. This pattern suggests some disruptions or adjustments during 2020, followed by partial recovery the following year.
Cost of Capital
Biogen Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Notes payable, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Notes payable, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Notes payable, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Notes payable, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable, including current portion3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Notes payable, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Biogen Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of the financial metrics over the five-year period reveals distinct trends in economic profit, invested capital, and the economic spread ratio.
- Economic Profit
- The economic profit showed a robust growth from 2017 to 2019, rising from approximately 1.84 billion to 4.84 billion US dollars. However, in 2020, a notable decline is observed with economic profit decreasing to 3.38 billion US dollars. This downward trend is more pronounced in 2021, where economic profit sharply falls to around 437 million US dollars, indicating significant challenges or increased costs impacting profitability.
- Invested Capital
- The invested capital steadily increased over the period, rising from about 12.48 billion US dollars in 2017 to 14.42 billion US dollars in 2019. In 2020, there is a reduction to approximately 12.63 billion US dollars, followed by an increase again in 2021 to roughly 13.82 billion US dollars. This fluctuation suggests changes in capital deployment strategies or divestitures during the period.
- Economic Spread Ratio
- The economic spread ratio, an indicator of the profitability relative to invested capital, exhibited a strong upward trend from 14.75% in 2017 to a peak of 34.25% in 2019. Subsequently, it declined to 26.75% in 2020 and sharply dropped to 3.16% in 2021. The steep decline in 2021 reflects deteriorating returns on invested capital, aligning with the significant reduction in economic profit.
Overall, the data demonstrates substantial growth in economic profit and returns on capital up to 2019, followed by a period of decreasing profitability and economic efficiency through 2021. While invested capital shows a generally increasing trend with some volatility, the capacity to generate economic profit from that capital has weakened considerably in the most recent year observed.
Economic Profit Margin
Biogen Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period from 2017 to 2021.
- Revenue
- Revenue exhibited an upward trend from 2017 to 2019, increasing from approximately 12.27 billion US dollars to nearly 14.38 billion US dollars. This growth was followed by a decline in 2020 and a more pronounced decrease in 2021, falling to around 10.98 billion US dollars. This indicating a contraction in sales or reduced business activity towards the end of the period.
- Economic Profit
- Economic profit showed strong growth from 2017 to 2019, rising from about 1.84 billion to 4.84 billion US dollars. However, this was followed by a significant decline, dropping to approximately 3.38 billion in 2020 and plummeting further to a notably low 437 million US dollars in 2021. The sharp decrease in economic profit in 2021 reflects reduced profitability and could indicate increased costs, decreased operational efficiency, or adverse market conditions.
- Economic Profit Margin
- The economic profit margin followed a similar pattern to economic profit, improving from 15% in 2017 to a peak of 33.69% in 2019. After reaching this peak, the margin contracted substantially to 25.12% in 2020 and then sharply further to just under 4% in 2021. The precipitous drop in margin in the final year signals a severe erosion of profitability relative to revenue, suggesting that the company struggled to maintain cost discipline or pricing power during that period.
Overall, the data indicates strong financial performance and profitability growth up to 2019, followed by a marked downturn in both revenue and profitability starting in 2020 and significantly worsening in 2021. The decline in economic profit margin towards the end of the period highlights challenges in converting revenue into economic profit, which may warrant further investigation into underlying operational or market factors.