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 – 14.48% × -117,411 = -443,017
The analysis of economic profit from 2018 to 2022 reveals a sustained period of value destruction, characterized by consistent negative economic profit. While a temporary moderation in losses occurred in 2020, the subsequent two years show a sharp acceleration in economic losses, culminating in a significant deficit by the end of 2022.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT remained negative for the entire duration of the observed period. A notable recovery was observed in 2020, where losses narrowed to -31,573 thousand US dollars. However, this trend reversed sharply in 2021 and 2022, with losses expanding to -193,076 thousand and -460,021 thousand US dollars, respectively. The substantial increase in losses during the final two years indicates a significant deterioration in operating performance.
- Cost of Capital
- The cost of capital exhibited relative stability, fluctuating within a narrow range between 14.04% and 15.42%. This consistency suggests that the external financing environment and the perceived risk profile of the company remained steady, and therefore did not serve as the primary driver for the volatility observed in economic profit.
- Invested Capital
- Invested capital displayed significant volatility and was predominantly negative, with the exception of 2021. The presence of negative invested capital suggests a capital structure where current liabilities or other non-interest-bearing liabilities exceed the value of operating assets. This anomaly affected the economic profit calculation by reducing the capital charge, effectively offsetting a portion of the operating losses.
- Economic Profit
- Economic profit closely mirrored the trajectory of NOPAT, reflecting the company's inability to generate returns above its cost of capital. The economic profit reached its highest point (lowest loss) in 2020 at -19,223 thousand US dollars, but crashed to -443,017 thousand US dollars by 2022. The widening gap between NOPAT and economic profit in the final year indicates that the operating losses have far outpaced any mitigating effects from the capital structure.
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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.
The financial performance between 2018 and 2022 is characterized by a sustained and accelerating increase in losses. While both net loss and net operating profit after taxes (NOPAT) remain negative throughout the period, the scale of these losses intensified significantly in the latter years of the observed timeframe.
- Net Loss Trajectory
- A consistent downward trend is observed in net results, with losses increasing from 106.3 million US dollars in 2018 to 389.0 million US dollars by 2022. The rate of loss expansion accelerated sharply after 2020, with the net loss nearly doubling between 2021 and 2022.
- NOPAT Volatility and Decline
- The net operating profit after taxes exhibits greater volatility than the overall net loss. A notable temporary improvement occurred in 2020, where NOPAT narrowed to -31.6 million US dollars. However, this was followed by a severe downturn, reaching -193.1 million US dollars in 2021 and further deteriorating to -460.0 million US dollars in 2022.
- Operating Performance Divergence
- A shift in the relationship between NOPAT and net loss is evident. In 2020, the operating loss was substantially lower than the net loss. By 2022, this trend reversed, with the NOPAT loss exceeding the net loss by approximately 71.1 million US dollars, indicating that core operating losses have deteriorated more aggressively than the bottom-line net loss.
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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).
An analysis of cash operating taxes reveals a period of aggressive growth between 2018 and 2021, followed by a moderate contraction in 2022. The overall trajectory indicates a significant increase in tax outflows over the five-year period, peaking in the fourth year of the observation window.
- Growth Phase (2018–2021)
- Cash operating taxes grew exponentially from 102 thousand US dollars in 2018 to 5,911 thousand US dollars by 2021. This represents a substantial upward trend, with the most significant year-over-year increases occurring between 2019 and 2020, and 2020 and 2021.
- Peak and Retraction (2021–2022)
- The peak expenditure in cash operating taxes was reached on December 31, 2021, at 5,911 thousand US dollars. Subsequently, a decline was observed in 2022, where cash operating taxes fell to 4,236 thousand US dollars, representing a reduction of approximately 28% from the previous year's peak.
- Long-term Variance
- Despite the decrease in 2022, the cash operating taxes remained significantly higher than the baseline levels established in 2018 and 2019, suggesting a permanent shift in the tax obligation scale compared to the beginning of the analyzed period.
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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.
Analysis of the capital structure reveals significant volatility and a substantial increase in leverage over the five-year period ending December 31, 2022. The interplay between rising debt levels and fluctuating equity has resulted in an unstable invested capital base, which is a critical component for determining economic value added.
- Total Reported Debt and Leases
- A consistent and accelerating upward trend is observed in total debt. Obligations grew from $52.77 million in 2018 to $751.34 million by 2022. The growth was relatively steady until 2021, followed by a sharp escalation in 2022, where debt levels increased by approximately 177% in a single year, indicating a significant shift toward debt-based financing.
- Stockholders' Equity
- Equity balances demonstrate extreme instability, alternating between surplus and deficit positions. Following a deficit in 2019, equity recovered to a peak of $243.86 million in 2021. However, by the end of 2022, a deficit of $107.90 million was recorded. This oscillation suggests periodic capital raises followed by substantial operating losses that erode the equity base.
- Invested Capital
- Invested capital remained negative for four of the five analyzed years, suggesting that the company's non-operating assets or cash holdings frequently exceeded the combined total of debt and equity. A brief positive transition occurred in 2021, reaching $91.72 million, but this was reversed in 2022, falling to $117.41 million. The prevalence of negative invested capital indicates a structural imbalance that complicates traditional EVA calculations and suggests an unconventional capital employment strategy.
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Cost of Capital
Cytokinetics Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,102,408) | 4,102,408) | ÷ | 5,023,043) | = | 0.82 | 0.82 | × | 16.81% | = | 13.73% | ||
| Debt3 | 780,911) | 780,911) | ÷ | 5,023,043) | = | 0.16 | 0.16 | × | 4.61% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 139,724) | 139,724) | ÷ | 5,023,043) | = | 0.03 | 0.03 | × | 8.70% × (1 – 21.00%) | = | 0.19% | ||
| Total: | 5,023,043) | 1.00 | 14.48% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 16.81% | = | 13.26% | ||
| 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 | 15.07% | ||||||||||
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 | × | 16.81% | = | 11.08% | ||
| 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 | 14.04% | ||||||||||
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 | × | 16.81% | = | 13.42% | ||
| 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 | 15.18% | ||||||||||
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 | × | 16.81% | = | 14.49% | ||
| 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 | 15.42% | ||||||||||
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 | (443,017) | (206,896) | (19,223) | (103,303) | (93,836) | |
| Invested capital2 | (117,411) | 91,721) | (87,987) | (106,877) | (78,273) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | — | -225.57% | — | — | — | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 5.49% | 4.87% | — | — | — | |
| Amgen Inc. | 6.80% | 6.80% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.21% | 1.09% | — | — | — | |
| Danaher Corp. | -6.63% | -5.80% | — | — | — | |
| Eli Lilly & Co. | 8.52% | 10.19% | — | — | — | |
| Gilead Sciences Inc. | -0.27% | 6.76% | — | — | — | |
| Johnson & Johnson | 5.29% | 10.35% | — | — | — | |
| Merck & Co. Inc. | 11.24% | 11.41% | — | — | — | |
| Pfizer Inc. | 17.97% | 11.14% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 18.80% | 62.56% | — | — | — | |
| Thermo Fisher Scientific Inc. | -6.97% | -4.95% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 13.84% | 15.05% | — | — | — | |
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 × -443,017 ÷ -117,411 = —
4 Click competitor name to see calculations.
Financial performance indicates a consistent trend of economic loss over the five-year period, with a significant acceleration in the magnitude of these losses in the most recent fiscal years.
- Economic Profit Trends
- Economic profit remained negative from 2018 through 2022. Although there was a notable reduction in losses in 2020, reaching -US$ 19.2 million, the subsequent two years saw a rapid deterioration. The loss expanded significantly to -US$ 206.9 million in 2021 and reached -US$ 443.0 million by 2022, reflecting a substantial increase in the rate of value destruction.
- Invested Capital Volatility
- Invested capital exhibited extreme volatility and non-traditional values throughout the analyzed period. The figures remained negative from 2018 to 2020, shifted to a positive value of US$ 91.7 million in 2021, and reverted to a negative position of -US$ 117.4 million in 2022. This inconsistency suggests a highly unstable capital base or significant fluctuations in the relationship between current assets and total liabilities.
- Economic Spread Ratio Analysis
- For the year 2021, the economic spread ratio was recorded at -225.57%. This deeply negative percentage indicates that the return on invested capital was substantially lower than the company's cost of capital, confirming that the operational returns were insufficient to cover the cost of the capital employed during that period.
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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 | (443,017) | (206,896) | (19,223) | (103,303) | (93,836) | |
| 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 | -5,838.39% | -293.77% | -13.46% | -384.49% | -297.88% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 7.77% | 8.31% | — | — | — | |
| Amgen Inc. | 10.90% | 11.26% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.87% | 1.88% | — | — | — | |
| Danaher Corp. | -16.48% | -14.50% | — | — | — | |
| Eli Lilly & Co. | 7.25% | 9.40% | — | — | — | |
| Gilead Sciences Inc. | -0.46% | 11.95% | — | — | — | |
| Johnson & Johnson | 6.34% | 10.83% | — | — | — | |
| Merck & Co. Inc. | 14.02% | 16.57% | — | — | — | |
| Pfizer Inc. | 19.67% | 11.89% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 18.93% | 42.30% | — | — | — | |
| Thermo Fisher Scientific Inc. | -12.85% | -10.07% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 20.42% | 18.65% | — | — | — | |
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 × -443,017 ÷ 7,588 = -5,838.39%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by persistent negative economic profit and extreme volatility in revenue, resulting in a deteriorating economic profit margin. The company has consistently failed to generate returns exceeding its cost of capital, with the scale of economic value destruction accelerating significantly in the latter part of the period.
- Economic Profit Trend
- Economic profit remained negative throughout the five-year period. While a notable recovery occurred in 2020, where losses narrowed to -19.22 million USD, this trend reversed sharply. By 2022, economic losses expanded to -443.02 million USD, marking a substantial increase in the cost of capital exceeding the operating returns.
- Adjusted Revenue Volatility
- Revenues exhibited high instability, peaking in 2020 at 142.83 million USD before declining precipitously to 7.59 million USD by 2022. This sharp contraction in the top line occurred simultaneously with widening economic losses, compounding the financial instability.
- Economic Profit Margin Analysis
- The economic profit margin reflects the inverse relationship between revenue fluctuations and economic losses. The margin improved significantly in 2020 to -13.46% due to the surge in adjusted revenues. However, the combination of dwindling revenues and escalating economic losses led to a critical collapse of the margin in 2022, reaching -5,838.39%. This indicates a severe misalignment between the company's capital employed and its ability to generate revenue.
Overall, the trajectory indicates a worsening financial position. The drastic increase in negative economic profit, paired with the collapse of adjusted revenues, suggests that the business model faced significant challenges in achieving economic viability during the analyzed timeframe.
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