Short-sighted

17 April 2015 By Neil Unmack, Robert Cyran Follow @unmack1

A Citigroup analyst has questioned Actelion’s exclusion of stock options from its chosen earnings measure. The Swiss biotech firm may be an outlier in Europe, but custom-made earnings are common in U.S. tech and biotech companies where valuation is more art than science.

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Actelion’s core earnings is a “flawed” metric to measure profitability, Citigroup argued in a research report published April 17.

The core number, which is separate from Actelion’s reported earnings, does not include stock-based compensation, which last year totaled 53 million Swiss francs ($55 million), equivalent to 9 percent of operating income. Actelion is the only pharmaceutical company followed by Citigroup analysts in Europe to exclude stock compensation from core earnings, the bank said.

Actelion shares fell 3 percent on April 17 as of 17:00 GMT to 116.2 Swiss francs a share.

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