Shanghai Henlius Biotech, Inc.'s (HKG:2696): Shanghai Henlius Biotech, Inc., a biopharmaceutical company, engages in the research and development of biologics with a focus on oncology and autoimmune diseases worldwide. The HK$23b market-cap company announced a latest loss of -CN¥875.5m on 31 December 2019 for its most recent financial year result. As path to profitability is the topic on 2696’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for 2696, its year of breakeven and its implied growth rate.

Check out our latest analysis for Shanghai Henlius Biotech

2696 is bordering on breakeven, according to the 5 Biotechs analysts. They expect the company to post a final loss in 2021, before turning a profit of CN¥632m in 2022. 2696 is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, I calculated the rate at which 2696 must grow year-on-year. It turns out an average annual growth rate of 96% is expected, which is rather optimistic! If this rate turns out to be too aggressive, 2696 may become profitable much later than analysts predict.

I’m not going to go through company-specific developments for 2696 given that this is a high-level summary, however, take into account that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. 2696 has managed its capital prudently, with debt making up 11% of equity. This means that 2696 has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on 2696, so if you are interested in understanding the company at a deeper level, take a look at 2696’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further examine:

1. Valuation: What is 2696 worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether 2696 is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Shanghai Henlius Biotech’s board and the CEO’s back ground.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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