Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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
Cytokinetics Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -460,021 – 14.40% × -117,411 = -443,119
The financial analysis of the period between 2018 and 2022 reveals a consistent inability to generate positive economic profit, indicating that the company has failed to create value above its cost of capital. A significant deterioration in economic performance is evident, particularly in the final two years of the period, where the deficit expanded substantially.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT remained negative throughout the entire five-year duration, reflecting continuous operating losses. While there was a temporary narrowing of losses in 2020 to -31,573 thousand US$, this was followed by a severe downward trajectory. By 2022, NOPAT reached its lowest point at -460,021 thousand US$, representing a substantial increase in operating deficits compared to the 2018 baseline.
- Cost of Capital
- The cost of capital exhibited relative stability, fluctuating within a narrow range between 13.97% and 15.33%. The minimal variance in this metric suggests that the degradation in economic profit was not driven by changes in the required rate of return or market risk perceptions, but rather by internal operational performance.
- Invested Capital
- Invested capital showed high volatility and unusual fluctuations, remaining negative for most of the period. A notable shift occurred in 2021, where invested capital turned positive at 91,721 thousand US$, before reverting to a negative position of -117,411 thousand US$ in 2022. This inconsistency complicates the standard interpretation of capital efficiency but underscores a volatile capital structure.
- Economic Profit
- Economic profit followed a pattern closely aligned with NOPAT, remaining negative across all observed years. The period of relative stability between 2018 and 2020 was succeeded by a sharp decline. The economic profit deficit accelerated from -19,285 thousand US$ in 2020 to -443,119 thousand US$ by 2022, confirming a trend of accelerating value destruction.
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Net Operating Profit after Taxes (NOPAT)
Cytokinetics Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net loss.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 139,724 × 8.70% = 12,156
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 31,570 × 21.00% = 6,630
6 Addition of after taxes interest expense to net loss.
7 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 11,400 × 21.00% = 2,394
8 Elimination of after taxes investment income.
- Net Loss Trend
- The net loss demonstrates a consistent and significant increase over the five-year period. Beginning at approximately -106.3 million US dollars at the end of 2018, the net loss gradually worsened to -121.7 million in 2019 and further to -127.3 million in 2020. A sharper escalation is observed in 2021, with the net loss reaching approximately -215.3 million US dollars, followed by a substantial further decline to -389.0 million US dollars in 2022. This indicates increasing expenses, reduced revenues, or other factors contributing to growing financial challenges over time.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT follows a somewhat different trajectory from net loss but remains negative throughout the observed period. It starts at around -105.9 million US dollars in 2018 and deteriorates slightly to -119.5 million in 2019. In 2020, there is a notable improvement, with NOPAT improving substantially to approximately -31.6 million US dollars, indicating either a reduction in operating losses or improved operational efficiency during that year. However, this improvement is not sustained, as NOPAT declines sharply in 2021 to around -193.1 million, and further worsens to an estimated -460.0 million US dollars by the end of 2022. This sharp downturn in recent years suggests significant operational challenges impacting profitability after taxes.
- Overall Financial Performance Insights
- The increasing net losses alongside the fluctuating but largely negative NOPAT values suggest persistent financial difficulties with a notable deterioration in both net loss and operating profitability in the last two years of the data. The brief improvement in NOPAT in 2020 could reflect transient operational efficiencies or cost management, which were not maintained amid subsequent increases in losses. This pattern may warrant a deeper investigation into the underlying causes such as increased expenses, investments, or operational disruptions in the 2021 and 2022 periods.
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Cash Operating Taxes
Cytokinetics Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
The data presents a clear upward trend in cash operating taxes for the company over the observed period from December 31, 2018, to December 31, 2022. Starting at 102 thousand US dollars in 2018, the cash operating taxes increased significantly each year, peaking at 5,911 thousand US dollars by the end of 2021. However, in 2022, there was a noticeable decline to 4,236 thousand US dollars, indicating a reduction of approximately 28% from the previous year.
The absence of values for the income tax provision across all periods indicates either that such data was not reported or that there were no income tax provisions recognized during these years.
Overall, the cash operating taxes show a consistent upward trajectory with the exception of the last year, where a decline suggests possible changes in tax policy, operational conditions, or other factors impacting the tax liability related to cash operations. The lack of income tax provision data limits the ability to analyze comprehensive tax expense trends.
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Invested Capital
Cytokinetics Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity (deficit).
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of available-for-sale investments.
- Total reported debt & leases
- The total reported debt and leases show a consistent and significant upward trend over the five-year period. Beginning at $52.8 million in 2018, the figure rose sharply to $136.1 million in 2019 and remained relatively stable in 2020. From 2020 onwards, the debt level surged substantially, reaching $271.2 million in 2021 and further increasing to $751.3 million by the end of 2022. This dramatic rise in debt indicates a growing reliance on external financing or obligations over time.
- Stockholders’ equity (deficit)
- Stockholders’ equity exhibits considerable volatility throughout the period. Initially, it was positive at $25.9 million in 2018. However, it turned negative in 2019, reflecting a deficit of approximately $10.9 million. The position improved markedly in 2020 and 2021, reaching a peak value of $243.9 million in 2021, indicating a strong equity base during these years. Nevertheless, by the end of 2022, stockholders’ equity declined sharply into a deficit of $107.9 million, suggesting a deterioration in the company’s net asset position in the most recent year.
- Invested capital
- Invested capital remained negative for the majority of the analyzed period, starting at a deficit of $78.3 million in 2018 and worsening slightly to $106.9 million in 2019. There was a modest improvement in 2020, yet the figure remained negative. A notable positive shift occurred in 2021, with invested capital rising to a positive $91.7 million, implying effective investment and capital utilization during that year. This positive trend was reversed in 2022, with invested capital declining sharply back into negative territory at $117.4 million, reflecting a significant decrease in net capital invested in the company.
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Cost of Capital
Cytokinetics Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,102,408) | 4,102,408) | ÷ | 5,023,043) | = | 0.82 | 0.82 | × | 16.70% | = | 13.64% | ||
| Debt3 | 780,911) | 780,911) | ÷ | 5,023,043) | = | 0.16 | 0.16 | × | 4.61% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 139,724) | 139,724) | ÷ | 5,023,043) | = | 0.03 | 0.03 | × | 8.70% × (1 – 21.00%) | = | 0.19% | ||
| Total: | 5,023,043) | 1.00 | 14.40% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 2,971,658) | 2,971,658) | ÷ | 3,766,355) | = | 0.79 | 0.79 | × | 16.70% | = | 13.18% | ||
| Debt3 | 667,605) | 667,605) | ÷ | 3,766,355) | = | 0.18 | 0.18 | × | 11.01% × (1 – 21.00%) | = | 1.54% | ||
| Operating lease liability4 | 127,092) | 127,092) | ÷ | 3,766,355) | = | 0.03 | 0.03 | × | 10.00% × (1 – 21.00%) | = | 0.27% | ||
| Total: | 3,766,355) | 1.00 | 14.98% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,331,901) | 1,331,901) | ÷ | 2,020,026) | = | 0.66 | 0.66 | × | 16.70% | = | 11.01% | ||
| Debt3 | 684,900) | 684,900) | ÷ | 2,020,026) | = | 0.34 | 0.34 | × | 10.98% × (1 – 21.00%) | = | 2.94% | ||
| Operating lease liability4 | 3,225) | 3,225) | ÷ | 2,020,026) | = | 0.00 | 0.00 | × | 11.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 2,020,026) | 1.00 | 13.97% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 883,433) | 883,433) | ÷ | 1,105,896) | = | 0.80 | 0.80 | × | 16.70% | = | 13.34% | ||
| Debt3 | 215,652) | 215,652) | ÷ | 1,105,896) | = | 0.20 | 0.20 | × | 11.13% × (1 – 21.00%) | = | 1.71% | ||
| Operating lease liability4 | 6,811) | 6,811) | ÷ | 1,105,896) | = | 0.01 | 0.01 | × | 9.00% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 1,105,896) | 1.00 | 15.10% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 329,879) | 329,879) | ÷ | 382,647) | = | 0.86 | 0.86 | × | 16.70% | = | 14.40% | ||
| Debt3 | 42,413) | 42,413) | ÷ | 382,647) | = | 0.11 | 0.11 | × | 8.57% × (1 – 21.00%) | = | 0.75% | ||
| Operating lease liability4 | 10,355) | 10,355) | ÷ | 382,647) | = | 0.03 | 0.03 | × | 8.57% × (1 – 21.00%) | = | 0.18% | ||
| Total: | 382,647) | 1.00 | 15.33% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cytokinetics Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (443,119) | (206,819) | (19,285) | (103,394) | (93,907) | |
| Invested capital2 | (117,411) | 91,721) | (87,987) | (106,877) | (78,273) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | — | -225.49% | — | — | — | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 5.70% | 5.06% | — | — | — | |
| Amgen Inc. | 6.98% | 6.97% | — | — | — | |
| Bristol-Myers Squibb Co. | -0.98% | 1.29% | — | — | — | |
| Danaher Corp. | -6.54% | -5.71% | — | — | — | |
| Eli Lilly & Co. | 8.76% | 10.42% | — | — | — | |
| Gilead Sciences Inc. | -0.06% | 6.94% | — | — | — | |
| Johnson & Johnson | 5.53% | 10.59% | — | — | — | |
| Merck & Co. Inc. | 11.50% | 11.65% | — | — | — | |
| Pfizer Inc. | 18.17% | 11.33% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 19.04% | 62.79% | — | — | — | |
| Thermo Fisher Scientific Inc. | -6.88% | -4.86% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 14.11% | 15.32% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -443,119 ÷ -117,411 = —
4 Click competitor name to see calculations.
The analysis of economic value added reveals a consistent pattern of economic loss over the observed five-year period. Economic profit experienced significant volatility, with a notable reduction in losses in 2020 before transitioning into a period of rapid deterioration through 2022.
- Economic Profit Trends
- Economic profit remained negative throughout the entire period. Following a reduction of losses to -19,285 thousand US$ in 2020, a severe downward trajectory occurred. By December 31, 2022, economic profit reached its lowest point at -443,119 thousand US$, indicating a substantial acceleration in the erosion of economic value.
- Invested Capital Volatility
- Invested capital exhibited significant instability, alternating between negative and positive values. The capital position was negative from 2018 through 2020, shifted to a positive 91,721 thousand US$ in 2021, and reverted to a negative balance of -117,411 thousand US$ by the end of 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio was reported only for the period ending December 31, 2021, at -225.49%. This deeply negative figure demonstrates that the return on invested capital was significantly lower than the company's cost of capital, confirming a failure to generate an economic surplus during that fiscal year.
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Economic Profit Margin
Cytokinetics Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (443,119) | (206,819) | (19,285) | (103,394) | (93,907) | |
| Revenues | 94,588) | 70,428) | 55,828) | 26,868) | 31,501) | |
| Add: Increase (decrease) in deferred revenue | (87,000) | —) | 87,000) | —) | —) | |
| Adjusted revenues | 7,588) | 70,428) | 142,828) | 26,868) | 31,501) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -5,839.73% | -293.66% | -13.50% | -384.82% | -298.11% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 8.06% | 8.64% | — | — | — | |
| Amgen Inc. | 11.18% | 11.55% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.53% | 2.24% | — | — | — | |
| Danaher Corp. | -16.24% | -14.27% | — | — | — | |
| Eli Lilly & Co. | 7.46% | 9.61% | — | — | — | |
| Gilead Sciences Inc. | -0.10% | 12.28% | — | — | — | |
| Johnson & Johnson | 6.63% | 11.08% | — | — | — | |
| Merck & Co. Inc. | 14.34% | 16.91% | — | — | — | |
| Pfizer Inc. | 19.89% | 12.10% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 19.17% | 42.46% | — | — | — | |
| Thermo Fisher Scientific Inc. | -12.68% | -9.89% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 20.82% | 18.98% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -443,119 ÷ 7,588 = -5,839.73%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by consistent economic value destruction, with negative economic profit recorded in every period. While there was a temporary improvement in 2020, the overall trajectory indicates an accelerating disconnect between generated revenues and the cost of capital employed.
- Economic Profit Trends
- Economic losses remained relatively stable between 2018 and 2019, before narrowing significantly in 2020 to -19,285 thousand dollars. However, this improvement was short-lived, as losses expanded sharply in 2021 and reached a peak of -443,119 thousand dollars by December 31, 2022. This represents a substantial increase in the amount of value destroyed over the five-year window.
- Adjusted Revenue Volatility
- Revenue patterns exhibit extreme volatility. After a slight decline in 2019, adjusted revenues spiked to 142,828 thousand dollars in 2020. Following this peak, a severe downward trend occurred, with revenues falling to 70,428 thousand dollars in 2021 and collapsing to 7,588 thousand dollars by 2022. The near-total disappearance of revenue in the final year coincides with the deepest economic losses.
- Economic Profit Margin Analysis
- The economic profit margin reflects the instability of the underlying financials. The margin reached its most favorable point in 2020 at -13.50%, driven by the surge in adjusted revenues. Conversely, the 2022 margin of -5,839.73% indicates an extreme divergence, where the cost of capital overwhelmingly exceeds the operational returns, highlighting a critical deterioration in economic efficiency.
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