Lexicon Pharmaceuticals, Inc.’s (NASDAQ:LXRX) Path To Profitability

Lexicon Pharmaceuticals, Inc.’s (NASDAQ:LXRX): Lexicon Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the development and commercialization of pharmaceutical products. With the latest financial year loss of -US$120.5m and a trailing-twelve month of -US$89.0m, the US$150m market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is LXRX’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for LXRX.

See our latest analysis for Lexicon Pharmaceuticals

Consensus from the 4 Biotechs analysts is LXRX is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$149m in 2021. LXRX is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, I calculated the rate at which LXRX must grow year-on-year. It turns out an average annual growth rate of 34% is expected, which is rather optimistic! If this rate turns out to be too aggressive, LXRX may become profitable much later than analysts predict.

NasdaqGS:LXRX Past and Future Earnings, August 22nd 2019
NasdaqGS:LXRX Past and Future Earnings, August 22nd 2019

Underlying developments driving LXRX’s growth isn’t the focus of this broad overview, however, keep in mind that generally 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 issue worth mentioning. LXRX currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are key fundamentals of LXRX 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 LXRX, take a look at LXRX’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further examine:

  1. Historical Track Record: What has LXRX’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Lexicon Pharmaceuticals’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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.