Microsoft Excel LibreOffice Calc

Regeneron Pharmaceuticals Inc. (REGN)

Economic Value Added (EVA)

Advanced level

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

Regeneron Pharmaceuticals Inc., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
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 2,295,517  1,416,399  792,780  1,128,393  343,668 
Cost of capital2 13.25% 13.20% 13.25% 13.26% 13.27%
Invested capital3 6,178,047  4,815,536  3,528,047  3,006,006  1,763,096 
 
Economic profit4 1,476,848  780,774  325,247  729,742  109,740 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

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
= 2,295,517 – 13.25% × 6,178,047 = 1,476,848

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. Regeneron Pharmaceuticals Inc.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Regeneron Pharmaceuticals Inc., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income 2,444,400  1,198,511  895,522  636,056  348,074 
Deferred income tax expense (benefit)1 (140,000) 319,009  (360,078) (130,092) (51,294)
Increase (decrease) in deferred revenue2 (32,600) (113,099) 244,270  608,892  19,102 
Increase (decrease) in equity equivalents3 (172,600) 205,910  (115,808) 478,800  (32,192)
Interest expense 28,200  25,119  7,195  14,241  37,372 
Interest expense, operating lease liability4 1,821  1,609  3,107  6,585  6,576 
Adjusted interest expense 30,021  26,728  10,302  20,826  43,948 
Tax benefit of interest expense5 (6,304) (9,355) (3,606) (7,289) (15,382)
Adjusted interest expense, after taxes6 23,717  17,373  6,696  13,537  28,566 
(Gain) loss on marketable securities —  (8,300) 9,800  —  (1,200)
Investment income, before taxes —  (8,300) 9,800  —  (1,200)
Tax expense (benefit) of investment income7 —  2,905  (3,430) —  420 
Investment income, after taxes8 —  (5,395) 6,370  —  (780)
Net operating profit after taxes (NOPAT) 2,295,517  1,416,399  792,780  1,128,393  343,668 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

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 income.

4 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 20,147 × 9.04% = 1,821

5 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 30,021 × 21.00% = 6,304

6 Addition of after taxes interest expense to net income.

7 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

8 Elimination of after taxes investment income.

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. Regeneron Pharmaceuticals Inc.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

Regeneron Pharmaceuticals Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Income tax expense (benefit) 109,100  880,000  434,293  589,041  427,673 
Less: Deferred income tax expense (benefit) (140,000) 319,009  (360,078) (130,092) (51,294)
Add: Tax savings from interest expense 6,304  9,355  3,606  7,289  15,382 
Less: Tax imposed on investment income —  2,905  (3,430) —  420 
Cash operating taxes 255,404  567,441  801,407  726,422  493,929 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

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. Regeneron Pharmaceuticals Inc.’s cash operating taxes decreased from 2016 to 2017 and from 2017 to 2018.

Invested Capital

Regeneron Pharmaceuticals Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Capital and facility lease obligations, current portion —  —  129,557  1,789  1,353 
Convertible senior notes, current portion —  —  —  10,802  — 
Capital and facility lease obligations, excluding current portion 708,500  703,453  351,569  362,919  310,938 
Convertible senior notes, excluding current portion —  —  —  —  146,773 
Operating lease liability1 20,147  17,797  34,373  76,127  63,907 
Total reported debt & leases 728,647  721,250  515,499  451,637  522,971 
Stockholders’ equity 8,757,300  6,144,078  4,449,245  3,654,837  2,542,325 
Net deferred tax (assets) liabilities2 (670,100) (506,291) (825,303) (461,945) (316,104)
Deferred revenue3 916,700  949,337  1,062,436  818,166  250,301 
Equity equivalents4 246,600  443,046  237,133  356,221  (65,803)
Accumulated other comprehensive (income) loss, net of tax5 12,300  (640) 12,840  (8,572) (52,251)
Adjusted stockholders’ equity 9,016,200  6,586,484  4,699,218  4,002,486  2,424,271 
Construction-in-progress6 (469,600) (408,857) (318,929) (579,834) (472,231)
Marketable securities7 (3,097,200) (2,083,341) (1,367,741) (868,283) (711,915)
Invested capital 6,178,047  4,815,536  3,528,047  3,006,006  1,763,096 

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

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.

5 Removal of accumulated other comprehensive income.

6 Subtraction of construction-in-progress.

7 Subtraction of marketable securities.

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

Cost of Capital

Regeneron Pharmaceuticals Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 44,416,806  44,416,806  ÷ 45,145,453  = 0.98 0.98 × 13.35% = 13.14%
Debt3 708,500  708,500  ÷ 45,145,453  = 0.02 0.02 × 9.04% × (1 – 21.00%) = 0.11%
Operating lease liability4 20,147  20,147  ÷ 45,145,453  = 0.00 0.00 × 9.04% × (1 – 21.00%) = 0.00%
Total: 45,145,453  1.00 13.25%

Based on: 10-K (filing date: 2019-02-07).

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 34,745,141  34,745,141  ÷ 35,466,391  = 0.98 0.98 × 13.35% = 13.08%
Debt3 703,453  703,453  ÷ 35,466,391  = 0.02 0.02 × 9.04% × (1 – 35.00%) = 0.12%
Operating lease liability4 17,797  17,797  ÷ 35,466,391  = 0.00 0.00 × 9.04% × (1 – 35.00%) = 0.00%
Total: 35,466,391  1.00 13.20%

Based on: 10-K (filing date: 2018-02-08).

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 38,189,072  38,189,072  ÷ 38,704,571  = 0.99 0.99 × 13.35% = 13.17%
Debt3 481,126  481,126  ÷ 38,704,571  = 0.01 0.01 × 9.04% × (1 – 35.00%) = 0.07%
Operating lease liability4 34,373  34,373  ÷ 38,704,571  = 0.00 0.00 × 9.04% × (1 – 35.00%) = 0.01%
Total: 38,704,571  1.00 13.25%

Based on: 10-K (filing date: 2017-02-09).

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 38,482,398  38,482,398  ÷ 38,934,035  = 0.99 0.99 × 13.35% = 13.20%
Debt3 375,510  375,510  ÷ 38,934,035  = 0.01 0.01 × 8.65% × (1 – 35.00%) = 0.05%
Operating lease liability4 76,127  76,127  ÷ 38,934,035  = 0.00 0.00 × 8.65% × (1 – 35.00%) = 0.01%
Total: 38,934,035  1.00 13.26%

Based on: 10-K (filing date: 2016-02-11).

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 41,225,338  41,225,338  ÷ 41,748,310  = 0.99 0.99 × 13.35% = 13.18%
Debt3 459,064  459,064  ÷ 41,748,310  = 0.01 0.01 × 10.29% × (1 – 35.00%) = 0.07%
Operating lease liability4 63,907  63,907  ÷ 41,748,310  = 0.00 0.00 × 10.29% × (1 – 35.00%) = 0.01%
Total: 41,748,310  1.00 13.27%

Based on: 10-K (filing date: 2015-02-12).

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Regeneron Pharmaceuticals Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 1,476,848  780,774  325,247  729,742  109,740 
Invested capital2 6,178,047  4,815,536  3,528,047  3,006,006  1,763,096 
Performance Ratio
Economic spread ratio3 23.90% 16.21% 9.22% 24.28% 6.22%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,476,848 ÷ 6,178,047 = 23.90%

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. Regeneron Pharmaceuticals Inc.’s economic spread ratio improved from 2016 to 2017 and from 2017 to 2018.

Economic Profit Margin

Regeneron Pharmaceuticals Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 1,476,848  780,774  325,247  729,742  109,740 
Revenues 6,710,800  5,872,227  4,860,427  4,103,728  2,819,557 
Add: Increase (decrease) in deferred revenue (32,600) (113,099) 244,270  608,892  19,102 
Adjusted revenues 6,678,200  5,759,128  5,104,697  4,712,620  2,838,659 
Performance Ratio
Economic profit margin2 22.11% 13.56% 6.37% 15.48% 3.87%

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 1,476,848 ÷ 6,678,200 = 22.11%

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s 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. Regeneron Pharmaceuticals Inc.’s economic profit margin improved from 2016 to 2017 and from 2017 to 2018.