Celgene Corp. (CELG)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Celgene Corp., FCFF calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net income	2,940	1,999	1,602	2,000	1,450
Net noncash charges	135	1,432	932	692	772
Change in current assets and liabilities, excluding the effect of acquisitions	2,171	546	(50)	115	4
Net cash provided by operating activities	5,246	3,976	2,484	2,806	2,226
Interest paid, net of tax¹	368	444	193	169	79
Capital expenditures	(279)	(236)	(286)	(150)	(120)
Free cash flow to the firm (FCFF)	5,335	4,185	2,390	2,825	2,185

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the Celgene Corp.'s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	Celgene Corp.'s FCFF increased from 2015 to 2016 and from 2016 to 2017.

Celgene Corp., interest paid, net of tax calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Effective Income Tax Rate (EITR)

EITR¹	31.80%	15.70%	20.80%	14.10%	12.90%
Interest Paid, Net of Tax
Interest paid, before tax	539	527	243	196	91
Less: Interest paid, tax²	171	83	51	28	12
Interest paid, net of tax	368	444	193	169	79

2017 Calculations

² Interest paid, tax = Interest paid × EITR
= 539 × 31.80% = 171

Celgene Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	52,499
Free cash flow to the firm (FCFF)	5,335
Ratio
EV/FCFF	9.84
Benchmarks
EV/FCFF, Competitors
Abbott Laboratories	31.67
AbbVie Inc.	16.22
Allergan PLC	15.33
Amgen Inc.	10.88
Biogen Inc.	23.52
Bristol-Myers Squibb Co.	21.01
Eli Lilly & Co.	27.68
Gilead Sciences Inc.	8.37
Johnson & Johnson	22.85
Merck & Co. Inc.	44.32
Pfizer Inc.	16.19
Regeneron Pharmaceuticals Inc.	35.08
EV/FCFF, Sector
Pharmaceuticals & Biotechnology	18.76
EV/FCFF, Industry
Health Care	19.71

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Celgene Corp., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	75,373	96,260	85,544	98,142	65,942
Free cash flow to the firm (FCFF)²	5,335	4,185	2,390	2,825	2,185
Ratio
EV/FCFF³	14.13	23.00	35.79	34.75	30.18
Benchmarks
EV/FCFF, Competitors
Abbott Laboratories	26.99	36.35	30.00	27.54	25.21
AbbVie Inc.	21.20	17.64	14.93	32.10	14.33
Allergan PLC	15.54	69.00	36.43	39.81	40.63
Amgen Inc.	11.16	11.23	11.51	13.76	16.49
Biogen Inc.	26.28	14.61	20.11	34.00	32.88
Bristol-Myers Squibb Co.	24.77	51.76	87.88	35.51	28.83
Eli Lilly & Co.	19.87	23.22	43.88	24.69	12.89
Gilead Sciences Inc.	9.72	6.44	6.51	12.63	43.41
Johnson & Johnson	20.44	19.65	16.62	17.44	17.27
Merck & Co. Inc.	33.91	20.51	13.16	24.11	16.28
Pfizer Inc.	13.91	14.94	14.19	12.81	11.91
Regeneron Pharmaceuticals Inc.	32.57	38.99	57.44	97.24	73.58
EV/FCFF, Sector
Pharmaceuticals & Biotechnology	18.02	17.50	16.56	20.04	18.65
EV/FCFF, Industry
Health Care	18.52	18.16	16.97	19.42	17.84

2017 Calculations

³ EV/FCFF = EV ÷ FCFF
= 75,373 ÷ 5,335 = 14.13

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	Celgene Corp.'s EV/FCFF ratio declined from 2015 to 2016 and from 2016 to 2017.