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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

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	1,501,467)	4,370,868)	6,023,385)	4,663,032)	2,890,089)
Cost of capital²	7.72%	7.88%	8.36%	8.46%	8.43%
Invested capital³	13,824,500)	12,625,400)	14,142,400)	13,170,435)	12,476,129)

Economic profit⁴	434,737)	3,375,406)	4,840,681)	3,549,053)	1,838,101)

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
= 1,501,467 – 7.72% × 13,824,500 = 434,737

The financial data reveals notable changes and trends in key performance indicators over the five-year period ending December 31, 2021.

Net Operating Profit After Taxes (NOPAT): The NOPAT experienced an overall upward trend from 2017 to 2019, rising from approximately $2.89 billion to $6.02 billion. However, this was followed by a significant decline in 2020 to approximately $4.37 billion, and a further sharp drop in 2021 to about $1.5 billion. This indicates a peak in profitability in 2019 before a substantial reduction in the following two years.
Cost of Capital: The cost of capital showed a gradual decrease over the period, moving from 8.43% in 2017 down to 7.72% in 2021. This decline suggests a reducing hurdle rate for investments, possibly reflecting lower market interest rates or changes in the company’s risk profile.
Invested Capital: Invested capital steadily increased from approximately $12.48 billion in 2017 to $14.14 billion in 2019. There was then a decline in 2020 to about $12.63 billion, followed by a rebound in 2021 to approximately $13.82 billion. This fluctuation suggests some restructuring or changes in investment levels during the period, especially around 2020.
Economic Profit: Economic profit, which measures value creation beyond the cost of capital, showed consistent strong growth from 2017 through 2019, increasing from about $1.84 billion to $4.84 billion. A decline occurred in 2020, dropping to $3.38 billion, with a dramatic decrease in 2021 to about $435 million. This pattern closely mirrors that of NOPAT, indicating reduced value generation by the company in the most recent year analyzed.

In summary, the earlier years display growth in profitability and value creation, supported by rising operating profits and invested capital. However, the years 2020 and 2021 reveal a marked downturn in profitability and economic profit, despite a moderate recovery in invested capital. Coupled with the falling cost of capital, the declining economic profit particularly in 2021 could be a signal of operational or market challenges impacting financial performance.

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Biogen Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income attributable to Biogen Inc.	1,556,100)	4,000,600)	5,888,500)	4,430,700)	2,539,100)
Deferred income tax expense (benefit)¹	(426,800)	149,000)	67,100)	108,300)	91,700)
Increase (decrease) in reserves for allowances²	(3,600)	1,100)	5,800)	(11,300)	(5,200)
Increase (decrease) in restructuring reserve³	—)	—)	—)	(500)	(4,600)
Increase (decrease) in equity equivalents⁴	(430,400)	150,100)	72,900)	96,500)	81,900)
Interest expense	253,600)	222,500)	187,400)	200,600)	250,800)
Interest expense, operating lease liability⁵	12,166)	14,071)	15,562)	20,529)	20,744)
Adjusted interest expense	265,766)	236,571)	202,962)	221,129)	271,544)
Tax benefit of interest expense⁶	(55,811)	(49,680)	(42,622)	(46,437)	(95,040)
Adjusted interest expense, after taxes⁷	209,955)	186,891)	160,340)	174,692)	176,504)
(Gain) loss on marketable securities	3,800)	8,300)	(4,500)	8,500)	19,400)
Interest income	(11,000)	(42,000)	(120,000)	(112,500)	(78,500)
Investment income, before taxes	(7,200)	(33,700)	(124,500)	(104,000)	(59,100)
Tax expense (benefit) of investment income⁸	1,512)	7,077)	26,145)	21,840)	20,685)
Investment income, after taxes⁹	(5,688)	(26,623)	(98,355)	(82,160)	(38,415)
Net income (loss) attributable to noncontrolling interest	171,500)	59,900)	—)	43,300)	131,000)
Net operating profit after taxes (NOPAT)	1,501,467)	4,370,868)	6,023,385)	4,663,032)	2,890,089)

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
= 419,500 × 2.90% = 12,166

⁶ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 265,766 × 21.00% = 55,811

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
= 7,200 × 21.00% = 1,512

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.

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Biogen Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income tax expense	52,500)	992,300)	1,158,000)	1,425,600)	2,458,700)
Less: Deferred income tax expense (benefit)	(426,800)	149,000)	67,100)	108,300)	91,700)
Add: Tax savings from interest expense	55,811)	49,680)	42,622)	46,437)	95,040)
Less: Tax imposed on investment income	1,512)	7,077)	26,145)	21,840)	20,685)
Cash operating taxes	533,599)	885,903)	1,107,377)	1,341,897)	2,441,355)

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.

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Biogen Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Current portion of notes payable	999,100)	—)	1,495,800)	—)	3,200)
Notes payable, excluding current portion	6,274,000)	7,426,200)	4,459,000)	5,936,500)	5,935,000)
Operating lease liability¹	419,500)	485,200)	486,300)	508,135)	508,429)
Total reported debt & leases	7,692,600)	7,911,400)	6,441,100)	6,444,635)	6,446,629)
Total Biogen Inc. shareholders’ equity	10,896,200)	10,700,300)	13,343,200)	13,039,600)	12,612,800)
Net deferred tax (assets) liabilities²	(720,600)	(336,600)	(421,300)	(517,700)	(473,200)
Reserves for allowances³	38,000)	41,600)	40,500)	34,700)	46,000)
Restructuring reserve⁴	—)	—)	—)	—)	500)
Equity equivalents⁵	(682,600)	(295,000)	(380,800)	(483,000)	(426,700)
Accumulated other comprehensive (income) loss, net of tax⁶	106,700)	299,000)	135,200)	240,400)	318,400)
Noncontrolling interests	63,500)	(14,200)	(4,100)	(8,000)	(14,700)
Adjusted total Biogen Inc. shareholders’ equity	10,383,800)	10,690,100)	13,093,500)	12,789,000)	12,489,800)
Construction in progress⁷	(770,300)	(1,950,800)	(2,084,400)	(1,758,500)	(1,276,000)
Marketable securities⁸	(3,481,600)	(4,025,300)	(3,307,800)	(4,304,700)	(5,184,300)
Invested capital	13,824,500)	12,625,400)	14,142,400)	13,170,435)	12,476,129)

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.

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Biogen Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,356,798)	32,356,798)	÷	40,780,998)	=	0.79	0.79	×	8.98%	=	7.13%
Notes payable, including current portion³	8,004,700)	8,004,700)	÷	40,780,998)	=	0.20	0.20	×	3.64% × (1 – 21.00%)	=	0.56%
Operating lease liability⁴	419,500)	419,500)	÷	40,780,998)	=	0.01	0.01	×	2.90% × (1 – 21.00%)	=	0.02%
Total:	40,780,998)					1.00					7.72%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,102,381)	40,102,381)	÷	49,103,481)	=	0.82	0.82	×	8.98%	=	7.34%
Notes payable, including current portion³	8,515,900)	8,515,900)	÷	49,103,481)	=	0.17	0.17	×	3.83% × (1 – 21.00%)	=	0.52%
Operating lease liability⁴	485,200)	485,200)	÷	49,103,481)	=	0.01	0.01	×	2.90% × (1 – 21.00%)	=	0.02%
Total:	49,103,481)					1.00					7.88%

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 »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	58,701,347)	58,701,347)	÷	65,741,247)	=	0.89	0.89	×	8.98%	=	8.02%
Notes payable, including current portion³	6,553,600)	6,553,600)	÷	65,741,247)	=	0.10	0.10	×	4.09% × (1 – 21.00%)	=	0.32%
Operating lease liability⁴	486,300)	486,300)	÷	65,741,247)	=	0.01	0.01	×	3.20% × (1 – 21.00%)	=	0.02%
Total:	65,741,247)					1.00					8.36%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	65,551,235)	65,551,235)	÷	72,096,970)	=	0.91	0.91	×	8.98%	=	8.17%
Notes payable, including current portion³	6,037,600)	6,037,600)	÷	72,096,970)	=	0.08	0.08	×	4.04% × (1 – 21.00%)	=	0.27%
Operating lease liability⁴	508,135)	508,135)	÷	72,096,970)	=	0.01	0.01	×	4.04% × (1 – 21.00%)	=	0.02%
Total:	72,096,970)					1.00					8.46%

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 »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	73,200,689)	73,200,689)	÷	80,192,419)	=	0.91	0.91	×	8.98%	=	8.20%
Notes payable, including current portion³	6,483,300)	6,483,300)	÷	80,192,419)	=	0.08	0.08	×	4.08% × (1 – 35.00%)	=	0.21%
Operating lease liability⁴	508,429)	508,429)	÷	80,192,419)	=	0.01	0.01	×	4.08% × (1 – 35.00%)	=	0.02%
Total:	80,192,419)					1.00					8.43%

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 »

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	434,737)	3,375,406)	4,840,681)	3,549,053)	1,838,101)
Invested capital²	13,824,500)	12,625,400)	14,142,400)	13,170,435)	12,476,129)
Performance Ratio
Economic spread ratio³	3.14%	26.74%	34.23%	26.95%	14.73%
Benchmarks
Economic Spread Ratio, Competitors⁴
AbbVie Inc.	4.19%	-3.58%	—	—	—
Amgen Inc.	7.28%	11.60%	—	—	—
Bristol-Myers Squibb Co.	0.71%	-14.80%	—	—	—
Danaher Corp.	-2.90%	-4.28%	—	—	—
Eli Lilly & Co.	11.00%	17.68%	—	—	—
Gilead Sciences Inc.	8.99%	-4.07%	—	—	—
Johnson & Johnson	9.92%	4.73%	—	—	—
Merck & Co. Inc.	11.36%	4.20%	—	—	—
Pfizer Inc.	11.01%	-3.65%	—	—	—
Regeneron Pharmaceuticals Inc.	66.99%	38.49%	—	—	—
Thermo Fisher Scientific Inc.	-1.46%	-0.51%	—	—	—
Vertex Pharmaceuticals Inc.	15.19%	28.47%	—	—	—

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 × 434,737 ÷ 13,824,500 = 3.14%

⁴ Click competitor name to see calculations.

The financial data over the analyzed periods presents several meaningful trends in the company's economic profitability and invested capital management.

Economic Profit: The economic profit demonstrates a rising trend from 2017 through 2019, peaking in 2019 at 4,840,681 thousand US dollars. However, a notable decline occurs in 2020, followed by a sharp drop in 2021 to 434,737 thousand US dollars. This suggests a significant reduction in value creation relative to prior years, indicating possible operational challenges or external pressures impacting profitability in the most recent period.
Invested Capital: Invested capital shows a generally increasing trend from 2017 to 2019, moving from 12,476,129 to 14,142,400 thousand US dollars. In 2020, there is a decrease to 12,625,400 thousand US dollars, followed by an increase again in 2021 to 13,824,500 thousand US dollars. This fluctuation signals some variability in capital deployment which may be tied to strategic investments, divestitures, or shifts in asset management.
Economic Spread Ratio: The economic spread ratio accounts for the return spread relative to the cost of capital and exhibits a similar pattern to economic profit. It rises sharply from 14.73% in 2017 to a peak of 34.23% in 2019, then declines to 26.74% in 2020, followed by a steep contraction to 3.14% in 2021. This marked reduction indicates that the company’s ability to generate returns above its cost of capital substantially diminished in the latest year, reflecting in the near erosion of value creation margin.

Overall, the analyzed data reflects strong performance and value generation up to 2019, with both economic profit and economic spread ratio attaining their highest levels during that year. Nevertheless, the subsequent years show a downturn in economic profitability and returns spread despite relatively stable invested capital levels. This trend could indicate operational difficulties, market challenges, or shifts in economic conditions that affected the company's ability to sustain prior levels of economic profit and capital efficiency.

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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	434,737)	3,375,406)	4,840,681)	3,549,053)	1,838,101)
Revenue	10,981,700)	13,444,600)	14,377,900)	13,452,900)	12,273,900)
Performance Ratio
Economic profit margin²	3.96%	25.11%	33.67%	26.38%	14.98%
Benchmarks
Economic Profit Margin, Competitors³
AbbVie Inc.	7.15%	-8.11%	—	—	—
Amgen Inc.	12.06%	18.56%	—	—	—
Bristol-Myers Squibb Co.	1.23%	-31.38%	—	—	—
Danaher Corp.	-7.24%	-12.54%	—	—	—
Eli Lilly & Co.	10.15%	17.69%	—	—	—
Gilead Sciences Inc.	15.91%	-8.40%	—	—	—
Johnson & Johnson	10.38%	5.63%	—	—	—
Merck & Co. Inc.	16.50%	5.01%	—	—	—
Pfizer Inc.	11.75%	-8.88%	—	—	—
Regeneron Pharmaceuticals Inc.	45.30%	37.50%	—	—	—
Thermo Fisher Scientific Inc.	-2.97%	-0.96%	—	—	—
Vertex Pharmaceuticals Inc.	18.83%	37.36%	—	—	—

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 × 434,737 ÷ 10,981,700 = 3.96%

³ Click competitor name to see calculations.

Revenue Trends: The revenue exhibited a general upward trend from the end of 2017 through 2019, increasing from approximately 12.27 billion USD to around 14.38 billion USD. However, thereafter a decline occurred in the following two years, with revenue falling to about 13.44 billion USD by the end of 2020 and further down to approximately 10.98 billion USD by the end of 2021. This suggests a peak in revenue in 2019 followed by a downturn over the subsequent two-year period.
Economic Profit Analysis: The economic profit showed substantial growth from 2017 to 2019. It increased from approximately 1.84 billion USD to a high of about 4.84 billion USD by the end of 2019, indicating strong profitability during this period. However, a notable decline occurred in 2020 and 2021, with economic profit decreasing to approximately 3.38 billion USD in 2020 and sharply down to approximately 0.43 billion USD by the end of 2021. This decline reflects reduced profitability despite the earlier growth.
Economic Profit Margin Insights: The economic profit margin followed a pattern similar to that of economic profit, rising significantly from approximately 14.98% at the end of 2017 to a peak of about 33.67% in 2019. This represents an improvement in the profitability relative to revenue. However, the margin declined thereafter, dropping to 25.11% in 2020 and decreasing sharply to just under 4% by the end of 2021. This sharp reduction indicates that the company’s profit generation efficiency relative to revenue worsened substantially in the latest observed period.
Overall Observations: The data reflects a period of growth in both revenue and profitability through 2019, followed by a significant downturn starting in 2020. The economic profit margin’s drop to single digits by 2021 highlights a pronounced challenge in maintaining profitability relative to revenue. This may point to increased costs, declining revenue quality, or other operational factors adversely affecting economic returns despite earlier gains.

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Biogen Inc. (NASDAQ:BIIB)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin