Arovella Therapeutics Limited (ASX:ALA) About To Shift From Loss To Profit

We feel now is a pretty good time to analyse Arovella Therapeutics Limited's (ASX:ALA) business as it appears the company may be on the cusp of a considerable accomplishment. Arovella Therapeutics Limited, a biotechnology company, focuses on the development of therapies for the treatment of cancer and conditions that affect the central nervous system in Australia and internationally. The AU$89m market-cap company announced a latest loss of AU$10m on 30 June 2023 for its most recent financial year result. The most pressing concern for investors is Arovella Therapeutics' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Arovella Therapeutics

According to some industry analysts covering Arovella Therapeutics, breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$9.2m in 2024. The company is therefore projected to breakeven around a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 65% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Arovella Therapeutics' upcoming projects, though, keep in mind that generally pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. Arovella Therapeutics currently 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:

There are key fundamentals of Arovella Therapeutics which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Arovella Therapeutics, take a look at Arovella Therapeutics' company page on Simply Wall St. We've also compiled a list of key aspects you should look at:

1. Historical Track Record: What has Arovella Therapeutics' 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 Arovella Therapeutics' board and the CEO’s background.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.