We feel now is a pretty good time to analyse Neuren Pharmaceuticals Limited's (ASX:NEU) business as it appears the company may be on the cusp of a considerable accomplishment. Neuren Pharmaceuticals Limited, a biopharmaceutical company, develops drugs for the treatment of neurological disorders. The AU$1.1b market-cap company’s loss lessened since it announced a AU$7.8m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$6.9m, as it approaches breakeven. The most pressing concern for investors is Neuren Pharmaceuticals' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for Neuren Pharmaceuticals
Neuren Pharmaceuticals is bordering on breakeven, according to the 3 Australian Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of AU$69m in 2023. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 53%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Neuren Pharmaceuticals given that this is a high-level summary, but, bear in mind that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing we’d like to point out is that Neuren Pharmaceuticals has no debt on its balance sheet, which is rare for a loss-making pharma, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Neuren Pharmaceuticals, so if you are interested in understanding the company at a deeper level, take a look at Neuren Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of essential aspects you should further research:
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Valuation: What is Neuren Pharmaceuticals 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 Neuren Pharmaceuticals is currently mispriced by the market.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Neuren Pharmaceuticals’s board and the CEO’s background.
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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.