ACADIA Pharmaceuticals Inc.’s (NASDAQ:ACAD): ACADIA Pharmaceuticals Inc., a biopharmaceutical company, focuses on the development and commercialization of small molecule drugs that address unmet medical needs in central nervous system disorders. With the latest financial year loss of -US$245.2m and a trailing-twelve month of -US$247.7m, the US$7.2b market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is ACAD’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for ACAD, its year of breakeven and its implied growth rate.
Consensus from the 15 Biotechs analysts is ACAD is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$53m in 2021. So, ACAD is predicted to breakeven approximately a couple of months from now! How fast will ACAD have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 58% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, ACAD may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for ACAD given that this is a high-level summary, but, 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.
One thing I’d like to point out is that ACAD has no debt on its balance sheet, which is rare for a loss-making biotech, which typically has high debt relative to its equity. ACAD currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
There are key fundamentals of ACAD which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at ACAD, take a look at ACAD’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should look at:
- Valuation: What is ACAD 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 ACAD is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ACADIA Pharmaceuticals’s board and the CEO’s back ground.
- 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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