Reata Pharmaceuticals, Inc.’s (NASDAQ:RETA): Reata Pharmaceuticals, Inc., a clinical stage biopharmaceutical company, develops novel therapeutics for patients with serious or life-threatening diseases by targeting molecular pathways that regulate cellular metabolism and inflammation. The company’s loss has recently broadened since it announced a -US$80.5m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$120.0m, moving it further away from breakeven. As path to profitability is the topic on RETA’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for RETA’s growth and when analysts expect the company to become profitable.
See our latest analysis for Reata Pharmaceuticals
According to the 6 industry analysts covering RETA, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$95m in 2022. RETA is therefore projected to breakeven around 3 years from now. What rate will RETA have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 75%, which is rather optimistic! If this rate turns out to be too aggressive, RETA may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of RETA’s upcoming projects, though, bear in mind that typically a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business 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 would like to bring into light with RETA is it 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 too many aspects of RETA to cover in one brief article, but the key fundamentals for the company can all be found in one place – RETA’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should look at:
- Historical Track Record: What has RETA’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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Reata 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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