Market Value Added (MVA)
Market value added (MVA) is the difference between a firm fair value and its invested capital. MVA is a measure of the value a company has created in excess of the resources already committed to the enterprise.
MVA
Biogen Inc., MVA 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 Fair value of debt. See details »
2 Invested capital. See details »
A significant and consistent erosion of Market Value Added (MVA) is evident between December 31, 2017, and December 31, 2021. While the organization maintained a positive MVA throughout the period, the magnitude of value creation recognized by the market declined sharply, falling from approximately 62.5 billion USD to 23.5 billion USD.
- Market Value Trajectory
- A sustained downward trend in the fair market value of the company is observed. The market capitalization decreased from 74.99 billion USD in 2017 to 37.36 billion USD by the end of 2021, representing a total reduction of approximately 50%. The most pronounced acceleration in this decline occurred between 2019 and 2021.
- Invested Capital Stability
- In contrast to the market value, invested capital remained relatively stable over the five-year period. Values fluctuated within a narrow range, peaking at 14.14 billion USD in 2019 and ending at 13.82 billion USD in 2021. The lack of significant volatility in invested capital indicates that the decline in MVA was not driven by changes in the capital base, but rather by external market perceptions.
- Market Value Added (MVA) Analysis
- The MVA experienced a continuous year-over-year contraction. The decline from 62.52 billion USD in 2017 to 23.54 billion USD in 2021 reflects a substantial loss in the premium that investors were willing to pay over the book value of the invested capital. This suggests a diminishing market expectation regarding the company's ability to generate future excess returns relative to its cost of capital.
The divergence between stable invested capital and rapidly declining market value indicates that the reduction in MVA is attributable solely to the contraction in market capitalization. This pattern typically reflects a shift in investor sentiment or a perceived increase in the risk profile of the organization's future earnings potential.
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MVA Spread Ratio
Biogen Inc., MVA 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) | ||||||
| Market value added (MVA)1 | 23,538,398) | 32,438,581) | 48,286,947) | 54,613,835) | 62,517,289) | |
| Invested capital2 | 13,824,500) | 12,625,400) | 14,142,400) | 13,170,435) | 12,476,129) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 170.27% | 256.93% | 341.43% | 414.67% | 501.10% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 253.64% | — | — | — | — | |
| Amgen Inc. | 303.88% | — | — | — | — | |
| Bristol-Myers Squibb Co. | 138.81% | — | — | — | — | |
| Danaher Corp. | 187.44% | — | — | — | — | |
| Eli Lilly & Co. | 834.21% | — | — | — | — | |
| Gilead Sciences Inc. | 119.58% | — | — | — | — | |
| Johnson & Johnson | 366.82% | — | — | — | — | |
| Merck & Co. Inc. | 223.02% | — | — | — | — | |
| Pfizer Inc. | 210.66% | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 461.61% | — | — | — | — | |
| Thermo Fisher Scientific Inc. | 212.01% | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | 564.91% | — | — | — | — | |
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 MVA. See details »
2 Invested capital. See details »
3 2021 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 23,538,398 ÷ 13,824,500 = 170.27%
4 Click competitor name to see calculations.
A consistent downward trajectory is observed in both the Market Value Added (MVA) and the MVA spread ratio from 2017 to 2021. This trend indicates a significant reduction in the market's valuation of the company's ability to generate value over and above its invested capital.
- Market Value Added (MVA)
- MVA experienced a continuous decline throughout the reporting period, falling from 62,517,289 thousand US$ in 2017 to 23,538,398 thousand US$ by 2021. The most pronounced contraction occurred between 2019 and 2021, signaling a substantial decrease in the premium the market assigns to the organization's assets.
- Invested Capital
- Invested capital remained relatively stable, fluctuating within a narrow range between 12,476,129 thousand US$ and 14,142,400 thousand US$. The capital base showed a slight peak in 2019 followed by a correction in 2020 and a modest increase in 2021, indicating that the decline in MVA was not a result of divestment or a reduction in the capital base.
- MVA Spread Ratio
- The MVA spread ratio exhibited a steep and steady contraction, decreasing from 501.10% in 2017 to 170.27% in 2021. This persistent year-over-year decline suggests a narrowing gap between the actual return on invested capital and the cost of that capital as perceived by the market.
The divergence between a relatively stable level of invested capital and a rapidly declining MVA underscores a diminishing market confidence in the efficiency of value creation. The resulting erosion of the MVA spread ratio reflects a significant deterioration in the company's ability to create shareholder wealth relative to the capital employed over the five-year period.
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MVA Margin
Biogen Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 23,538,398) | 32,438,581) | 48,286,947) | 54,613,835) | 62,517,289) | |
| Revenue | 10,981,700) | 13,444,600) | 14,377,900) | 13,452,900) | 12,273,900) | |
| Performance Ratio | ||||||
| MVA margin2 | 214.34% | 241.28% | 335.84% | 405.96% | 509.35% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| AbbVie Inc. | 432.93% | — | — | — | — | |
| Amgen Inc. | 503.37% | — | — | — | — | |
| Bristol-Myers Squibb Co. | 240.26% | — | — | — | — | |
| Danaher Corp. | 468.46% | — | — | — | — | |
| Eli Lilly & Co. | 769.37% | — | — | — | — | |
| Gilead Sciences Inc. | 211.56% | — | — | — | — | |
| Johnson & Johnson | 383.60% | — | — | — | — | |
| Merck & Co. Inc. | 323.90% | — | — | — | — | |
| Pfizer Inc. | 224.83% | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 312.14% | — | — | — | — | |
| Thermo Fisher Scientific Inc. | 431.35% | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | 700.10% | — | — | — | — | |
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 MVA. See details »
2 2021 Calculation
MVA margin = 100 × MVA ÷ Revenue
= 100 × 23,538,398 ÷ 10,981,700 = 214.34%
3 Click competitor name to see calculations.
A consistent contraction in market valuation is evident between 2017 and 2021, characterized by a steady decline in both absolute Market Value Added (MVA) and the MVA margin.
- Market Value Added (MVA)
- A sustained downward trajectory is observed, with MVA decreasing from 62,517,289 thousand US$ in 2017 to 23,538,398 thousand US$ in 2021. This represents a substantial erosion of the market premium assigned to the company over the five-year period.
- Revenue Performance
- Revenue exhibited a fluctuating trend, initially increasing from 12,273,900 thousand US$ in 2017 to a peak of 14,377,900 thousand US$ in 2019. This growth was followed by a contraction, with revenue declining to 10,981,700 thousand US$ by December 31, 2021.
- MVA Margin
- The MVA margin experienced a continuous and significant decline, falling from 509.35% in 2017 to 214.34% in 2021. The persistent reduction in this ratio indicates that the market value added per unit of revenue decreased systematically throughout the period.
The analysis reveals a divergence between revenue and market valuation from 2017 to 2019; while revenues were increasing, the MVA and MVA margin were already in decline. The subsequent decline in revenue starting in 2020 coincided with a further reduction in MVA, suggesting that the market's valuation of the company's capital efficiency weakened significantly over the analyzed timeframe.
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