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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	8.66%	8.86%	9.43%	9.54%	9.52%
Invested capital³	13,824,500)	12,625,400)	14,142,400)	13,170,435)	12,476,129)

Economic profit⁴	304,075)	3,252,578)	4,690,254)	3,406,408)	1,702,440)

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 – 8.66% × 13,824,500 = 304,075

The financial performance from 2017 to 2021 is characterized by a period of significant value creation peaking in 2019, followed by a substantial contraction in economic profit. While the organization consistently generated positive economic value added throughout the period, the margin of profit above the cost of capital eroded sharply by the end of 2021.

Net Operating Profit After Taxes (NOPAT): A strong upward trend was observed between 2017 and 2019, with NOPAT increasing from 2.89 billion to a peak of 6.02 billion. This growth phase was followed by a severe decline, with NOPAT falling to 4.37 billion in 2020 and further dropping to 1.50 billion in 2021, indicating a significant reduction in operational efficiency and earnings power.
Cost of Capital: The cost of capital remained relatively stable over the five-year horizon, exhibiting a gradual decline from 9.52% in 2017 to 8.66% in 2021. This marginal compression in the required rate of return suggests a stable or slightly improving risk profile regarding the cost of funding.
Invested Capital: Invested capital showed fluctuations, increasing from 12.48 billion in 2017 to a peak of 14.14 billion in 2019. After a reduction to 12.63 billion in 2020, capital investments rose again to 13.82 billion by 2021. The increase in invested capital in 2021 coincided with a sharp drop in NOPAT, suggesting a period of diminished capital productivity.
Economic Profit: Economic profit followed a trajectory closely aligned with NOPAT, rising from 1.70 billion in 2017 to a peak of 4.69 billion in 2019. However, a steep decline occurred thereafter, resulting in an economic profit of 304 million in 2021. This represents a substantial loss of economic value creation capacity, as the gap between the operating return and the cost of capital narrowed significantly.

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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	×	10.18%	=	8.07%
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					8.66%

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	×	10.18%	=	8.31%
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					8.86%

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	×	10.18%	=	9.09%
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					9.43%

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	×	10.18%	=	9.25%
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					9.54%

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	×	10.18%	=	9.29%
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					9.52%

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	304,075)	3,252,578)	4,690,254)	3,406,408)	1,702,440)
Invested capital²	13,824,500)	12,625,400)	14,142,400)	13,170,435)	12,476,129)
Performance Ratio
Economic spread ratio³	2.20%	25.76%	33.16%	25.86%	13.65%
Benchmarks
Economic Spread Ratio, Competitors⁴
AbbVie Inc.	5.05%	—	—	—	—
Amgen Inc.	6.94%	—	—	—	—
Bristol-Myers Squibb Co.	1.30%	—	—	—	—
Danaher Corp.	-5.84%	—	—	—	—
Eli Lilly & Co.	10.41%	—	—	—	—
Gilead Sciences Inc.	6.93%	—	—	—	—
Johnson & Johnson	10.59%	—	—	—	—
Merck & Co. Inc.	11.65%	—	—	—	—
Pfizer Inc.	11.30%	—	—	—	—
Regeneron Pharmaceuticals Inc.	62.77%	—	—	—	—
Thermo Fisher Scientific Inc.	-4.98%	—	—	—	—
Vertex Pharmaceuticals Inc.	15.32%	—	—	—	—

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 × 304,075 ÷ 13,824,500 = 2.20%

⁴ Click competitor name to see calculations.

The analysis of economic value creation reveals a period of significant growth in value generation between 2017 and 2019, followed by a marked contraction that culminated in a sharp decline by the end of 2021.

Economic Profit Trajectory: Economic profit exhibited strong growth in the early part of the observed period, increasing from 1,702,440 thousand US$ in 2017 to a peak of 4,690,254 thousand US$ in 2019. However, a reversal occurred in 2020, with profit declining to 3,252,578 thousand US$, followed by a precipitous drop to 304,075 thousand US$ in 2021, representing a substantial erosion of economic value added.
Invested Capital Dynamics: Invested capital remained relatively stable with moderate fluctuations. It rose from 12,476,129 thousand US$ in 2017 to a peak of 14,142,400 thousand US$ in 2019. A temporary reduction to 12,625,400 thousand US$ was noted in 2020, before increasing again to 13,824,500 thousand US$ in 2021. The relative stability of the capital base suggests that the volatility in economic profit was not driven by drastic changes in the scale of investment.
Economic Spread Ratio Analysis: The economic spread ratio closely mirrored the trend of economic profit, peaking at 33.16% in 2019, which indicates a period of high efficiency in generating returns above the cost of capital. This efficiency diminished to 25.76% in 2020 and collapsed to 2.20% in 2021. The sharp decline in the spread ratio during the final year signifies that the returns on invested capital converged toward the cost of capital, nearly eliminating the company's ability to create economic value during that period.

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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	304,075)	3,252,578)	4,690,254)	3,406,408)	1,702,440)
Revenue	10,981,700)	13,444,600)	14,377,900)	13,452,900)	12,273,900)
Performance Ratio
Economic profit margin²	2.77%	24.19%	32.62%	25.32%	13.87%
Benchmarks
Economic Profit Margin, Competitors³
AbbVie Inc.	8.62%	—	—	—	—
Amgen Inc.	11.50%	—	—	—	—
Bristol-Myers Squibb Co.	2.25%	—	—	—	—
Danaher Corp.	-14.59%	—	—	—	—
Eli Lilly & Co.	9.60%	—	—	—	—
Gilead Sciences Inc.	12.27%	—	—	—	—
Johnson & Johnson	11.07%	—	—	—	—
Merck & Co. Inc.	16.93%	—	—	—	—
Pfizer Inc.	12.06%	—	—	—	—
Regeneron Pharmaceuticals Inc.	42.45%	—	—	—	—
Thermo Fisher Scientific Inc.	-10.13%	—	—	—	—
Vertex Pharmaceuticals Inc.	18.99%	—	—	—	—

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 × 304,075 ÷ 10,981,700 = 2.77%

³ Click competitor name to see calculations.

The financial trajectory from 2017 to 2021 is characterized by a period of significant value creation followed by a sharp contraction in economic performance. Performance peaked in 2019 across all measured metrics before experiencing a precipitous decline, particularly in the final year of the observed period.

Economic Profit Trend: Economic profit exhibited strong growth in the initial three years, rising from US$ 1.7 billion in 2017 to a peak of approximately US$ 4.69 billion in 2019. However, this trend reversed sharply thereafter, with a moderate decline in 2020 followed by a severe collapse to US$ 304 million by December 31, 2021.
Revenue Performance: Revenue followed a similar trajectory, increasing steadily from US$ 12.27 billion in 2017 to a high of US$ 14.38 billion in 2019. A subsequent downward trend is observed, with revenue falling to US$ 10.98 billion in 2021, representing a contraction in top-line growth that correlates with the decline in economic profit.
Economic Profit Margin Analysis: The economic profit margin demonstrates the most volatility, reflecting a substantial increase in value creation efficiency between 2017 and 2019, where the margin grew from 13.87% to 32.62%. This efficiency eroded rapidly in the following two years, culminating in a margin of 2.77% in 2021. The disproportionate drop in the margin relative to the revenue decline suggests a significant increase in the cost of capital or a substantial reduction in operating profitability during the final period.

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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