Thursday, June 08, 2017

Galapogos GLPG huge increase in book value despite cash burn: rough math

2018: Price went up to EUR 104,5 and now back to EUR 86, book value has gone down from 22 EUR per share to around EUR 20, losing money. Medically successful? Outside my circle of competence = ''too difficult pile."

Book value per share of Galapagos has increased from €9,34 at the beginning of 2017 to roughly €22 today, a 235% increase.  How did that happen?

Note: I have no clue of the intrinsic value (discounted future cash flow) of Galapagos. The following doesn't take warrants, etc into account and might be completely wrong. I am not an expert, this is outside my circle of competence.

Here is my back of the envelope math. (m = million, equity = book value)

January 1st 2016:

Company Equity (Book Value): € 365m / 39m shares = €9,36 Book Value per Share

The company has had a "cash burn" of about €150m since then.

Expected Result: Equity €365m - cash burn €150 = €215 Equity expected today.


But in the past year the company has sold 11,7m ? shares to investors at around €75 ? per share. This increased the equity of the company by 11,7 x €75 = € 878 extra "paid in capital" 

Total Equity today: €215m expected + €878m = €1 093

Shares outstanding today: 39m + 11,7m sold = 50,7m shares outstanding today

Book Value (equity) per Share today: €1 093m equity / 50,7 shares = €22 book value per share June 2017

, questions or E-mails welcome:

No comments: