Biogen Inc.BIIBNASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $432.00 per share(market-calibrated)
+128.3%
Upside to Fair Value
Current
$189.25
Pure Model
$492.24
Fair Value
$432.00
Bull Case
$557.02
Bear Case
$448.14
Market Reality Check
Model Terminal Growth
3.00%
Market-Implied Growth
0.50%
Calibrated Growth
2.13%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $492.24.
What's Driving This Ratingfor BIIB
✓
CapEx already efficient
CapEx at 2.70% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
✓
Premium margins already priced in
EBIT margin of 25.23% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
→
Moderate revenue growth
Analyst consensus projects -3.90% revenue growth, fading to 3.00% by Year 10. Revenue reaches $10.7B (vs $9.8B today).
🎯
Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 82.75% indicates efficient cash generation. FCF reaches $2.8B by Year 10 (25.86% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.14
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)5.15%
Cost of Debt
Pre-tax Cost of Debt3.58%
Tax Rate7.71%
After-tax Cost of Debt3.30%
Equity Weight (E/V)79.98%
Debt Weight (D/V)20.02%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (79.98% × 5.15%) + (20.02% × 3.30%)
= 5.50%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $9.4B | $9.5B | $9.6B | $9.9B | $10.7B |
| EBIT | $2.4B | $2.4B | $2.4B | $2.5B | $2.7B |
| Tax | $184M | $184M | $187M | $192M | $208M |
| NOPAT | $2.2B | $2.2B | $2.2B | $2.3B | $2.5B |
| + Depreciation | $568M | $570M | $578M | $595M | $643M |
| - Capex | $254M | $255M | $259M | $267M | $288M |
| - Δ NWC | -$98M | $30M | $21M | $43M | $80M |
| Free Cash Flow | $2.6B | $2.5B | $2.5B | $2.6B | $2.8B |
| Discount Factor | 0.948 | 0.852 | 0.765 | 0.687 | 0.585 |
| Present Value | $2.5B | $2.1B | $1.9B | $1.8B | $1.6B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$2.8B
Terminal Growth Rate3.00%
WACC5.50%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$113.7B
PV of Terminal Value$66.6B
Exit Multiple Method
Year 10 EBITDA$3.3B
Exit Multiple (EV/EBITDA)24.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$80.0B
PV of Terminal Value$46.9B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$19.4B
PV of Terminal Value$66.6B
Enterprise Value$86.0B
(-) Net Debt$3.9B
Equity Value$82.1B
Shares Outstanding147M
Price per Share$559.40
Exit Multiple Method
PV of Projected FCFs$19.4B
PV of Terminal Value$46.9B
Enterprise Value$66.3B
(-) Net Debt$3.9B
Equity Value$62.4B
Shares Outstanding147M
Price per Share$425.09
Pure Model Fair Value
$492.24
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 2.00% | 2.50% | 3.00% | 3.50% | 4.00% |
|---|---|---|---|---|---|
| 3.50% | $624.24 | $598.42 | $573.80 | $550.34 | $527.96 |
| 4.50% | $535.12 | $598.42 | $573.80 | $550.34 | $527.96 |
| 5.50% | $425.85 | $453.51 | $492.24 | $550.34 | $527.96 |
| 6.50% | $358.37 | $373.20 | $392.25 | $417.67 | $453.24 |
| 7.50% | $310.69 | $319.61 | $330.51 | $344.14 | $361.66 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$448.14
136.8% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.5%
- • Beta: 0.18
Base Case
$492.24
160.1% vs current
- • Analyst consensus
- • Terminal growth: 3.0%
- • Beta: 0.14
Bull Case
$557.02
194.3% vs current
- • +25% vs analyst consensus
- • Terminal growth: 3.5%
- • Beta: 0.30
Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-3.90%
Year 3 Revenue Growth1.23%
Year 5 Revenue Growth0.87%
Year 7 Revenue Growth1.72%
Year 10 Revenue Growth3.00%
Terminal Growth Rate3.00%
Margin & Efficiency
Current EBIT Margin25.23%
Tax Rate7.71%
Historical Capex / Rev2.70%
NWC / Revenue25.67%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.