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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

Celgene Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net operating profit after taxes (NOPAT)¹	4,676)	1,913)	1,954)	1,787)	1,826)
Cost of capital²	13.81%	14.38%	15.09%	14.85%	16.15%
Invested capital³	27,773)	18,857)	18,672)	18,136)	9,844)

Economic profit⁴	842)	(799)	(863)	(907)	236)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,676 – 13.81% × 27,773 = 842

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Celgene Corp. economic profit increased from 2016 to 2017 and from 2017 to 2018.

Celgene Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net income	4,046)	2,940)	1,999)	1,602)	2,000)
Deferred income tax expense (benefit)¹	32)	(1,330)	(344)	(33)	(272)
Increase (decrease) in allowance for doubtful accounts²	—)	1)	(3)	(3)	(7)
Increase (decrease) in deferred revenue³	37)	26)	(8)	34)	5)
Increase (decrease) in equity equivalents⁴	69)	(1,303)	(355)	(2)	(275)
Interest expense	741)	522)	500)	311)	176)
Interest expense, operating lease liability⁵	14)	8)	7)	8)	7)
Adjusted interest expense	755)	530)	507)	318)	183)
Tax benefit of interest expense⁶	(159)	(186)	(177)	(111)	(64)
Adjusted interest expense, after taxes⁷	597)	345)	330)	207)	119)
(Gain) loss on marketable securities	(45)	(105)	(30)	(31)	(28)
Investment income, before taxes	(45)	(105)	(30)	(31)	(28)
Tax expense (benefit) of investment income⁸	9)	37)	11)	11)	10)
Investment income, after taxes⁹	(36)	(68)	(20)	(20)	(18)
Net operating profit after taxes (NOPAT)	4,676)	1,913)	1,954)	1,787)	1,826)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 375 × 3.82% = 14

⁶ 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 755 × 21.00% = 159

⁷ Addition of after taxes interest expense to net income.

⁸ 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 45 × 21.00% = 9

⁹ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Celgene Corp. NOPAT decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Celgene Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Provision for taxes on income	786)	1,374)	373)	422)	328)
Less: Deferred income tax expense (benefit)	32)	(1,330)	(344)	(33)	(272)
Add: Tax savings from interest expense	159)	186)	177)	111)	64)
Less: Tax imposed on investment income	9)	37)	11)	11)	10)
Cash operating taxes	903)	2,853)	884)	555)	654)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Celgene Corp. cash operating taxes increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.

Celgene Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Short-term borrowings and current portion of long-term debt	501)	—)	501)	—)	606)
Long-term debt, net of discount, excluding current portion	19,769)	15,838)	13,789)	14,250)	6,266)
Operating lease liability¹	375)	209)	191)	206)	197)
Total reported debt & leases	20,645)	16,047)	14,480)	14,456)	7,068)
Stockholders’ equity	6,161)	6,921)	6,599)	5,919)	6,525)
Net deferred tax (assets) liabilities²	2,729)	1,304)	(138)	312)	619)
Allowance for doubtful accounts³	16)	16)	15)	18)	21)
Deferred revenue⁴	146)	109)	83)	91)	56)
Equity equivalents⁵	2,891)	1,429)	(40)	421)	695)
Accumulated other comprehensive (income) loss, net of tax⁶	50)	(287)	(419)	(768)	(915)
Adjusted stockholders’ equity	9,102)	8,063)	6,141)	5,572)	6,305)
Construction in progress⁷	(166)	(224)	(149)	(221)	(105)
Debt securities available-for-sale and equity investments with readily determinable fair values⁸	(1,808)	(5,029)	(1,800)	(1,672)	(3,425)
Invested capital	27,773)	18,857)	18,672)	18,136)	9,844)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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 deferred revenue.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of debt securities available-for-sale and equity investments with readily determinable fair values.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Celgene Corp. invested capital increased from 2016 to 2017 and from 2017 to 2018.

Celgene Corp., cost of capital calculations

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	62,991)	62,991)	÷	82,667)	=	0.76	0.76	×	17.17%	=	13.09%
Debt³	19,300)	19,300)	÷	82,667)	=	0.23	0.23	×	3.82% × (1 – 21.00%)	=	0.70%
Operating lease liability⁴	375)	375)	÷	82,667)	=	0.00	0.00	×	3.82% × (1 – 21.00%)	=	0.01%
Total:	82,667)					1.00					13.81%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	71,577)	71,577)	÷	88,387)	=	0.81	0.81	×	17.17%	=	13.91%
Debt³	16,600)	16,600)	÷	88,387)	=	0.19	0.19	×	3.82% × (1 – 35.00%)	=	0.47%
Operating lease liability⁴	209)	209)	÷	88,387)	=	0.00	0.00	×	3.82% × (1 – 35.00%)	=	0.01%
Total:	88,387)					1.00					14.38%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	89,941)	89,941)	÷	104,703)	=	0.86	0.86	×	17.17%	=	14.75%
Debt³	14,572)	14,572)	÷	104,703)	=	0.14	0.14	×	3.68% × (1 – 35.00%)	=	0.33%
Operating lease liability⁴	191)	191)	÷	104,703)	=	0.00	0.00	×	3.68% × (1 – 35.00%)	=	0.00%
Total:	104,703)					1.00					15.09%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	77,846)	77,846)	÷	92,351)	=	0.84	0.84	×	17.17%	=	14.48%
Debt³	14,299)	14,299)	÷	92,351)	=	0.15	0.15	×	3.68% × (1 – 35.00%)	=	0.37%
Operating lease liability⁴	206)	206)	÷	92,351)	=	0.00	0.00	×	3.68% × (1 – 35.00%)	=	0.01%
Total:	92,351)					1.00					14.85%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	98,817)	98,817)	÷	106,101)	=	0.93	0.93	×	17.17%	=	16.00%
Debt³	7,088)	7,088)	÷	106,101)	=	0.07	0.07	×	3.51% × (1 – 35.00%)	=	0.15%
Operating lease liability⁴	197)	197)	÷	106,101)	=	0.00	0.00	×	3.51% × (1 – 35.00%)	=	0.00%
Total:	106,101)					1.00					16.15%

Based on: 10-K (reporting date: 2014-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Celgene Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	842)	(799)	(863)	(907)	236)
Invested capital²	27,773)	18,857)	18,672)	18,136)	9,844)
Performance Ratio
Economic spread ratio³	3.03%	-4.23%	-4.62%	-5.00%	2.40%
Benchmarks
Economic Spread Ratio, Competitors⁴
AbbVie Inc.	—	—	—	—	—
Amgen Inc.	—	—	—	—	—
Bristol-Myers Squibb Co.	—	—	—	—	—
Eli Lilly & Co.	—	—	—	—	—
Gilead Sciences Inc.	—	—	—	—	—
Johnson & Johnson	—	—	—	—	—
Merck & Co. Inc.	—	—	—	—	—
Pfizer Inc.	—	—	—	—	—
Regeneron Pharmaceuticals Inc.	—	—	—	—	—
Thermo Fisher Scientific Inc.	—	—	—	—	—
Zoetis Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 842 ÷ 27,773 = 3.03%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Celgene Corp. economic spread ratio improved from 2016 to 2017 and from 2017 to 2018.

Celgene Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	842)	(799)	(863)	(907)	236)

Net product sales	15,265)	12,973)	11,185)	9,161)	7,564)
Add: Increase (decrease) in deferred revenue	37)	26)	(8)	34)	5)
Adjusted net product sales	15,302)	12,999)	11,177)	9,195)	7,569)
Performance Ratio
Economic profit margin²	5.50%	-6.14%	-7.72%	-9.86%	3.12%
Benchmarks
Economic Profit Margin, Competitors³
AbbVie Inc.	—	—	—	—	—
Amgen Inc.	—	—	—	—	—
Bristol-Myers Squibb Co.	—	—	—	—	—
Eli Lilly & Co.	—	—	—	—	—
Gilead Sciences Inc.	—	—	—	—	—
Johnson & Johnson	—	—	—	—	—
Merck & Co. Inc.	—	—	—	—	—
Pfizer Inc.	—	—	—	—	—
Regeneron Pharmaceuticals Inc.	—	—	—	—	—
Thermo Fisher Scientific Inc.	—	—	—	—	—
Zoetis Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net product sales
= 100 × 842 ÷ 15,302 = 5.50%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Celgene Corp. economic profit margin improved from 2016 to 2017 and from 2017 to 2018.

Celgene Corp. (NASDAQ:CELG)

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