When Will Mesoblast Limited (ASX:MSB) Become Profitable?

Mesoblast Limited (ASX:MSB) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Mesoblast Limited engages in the development of regenerative medicine products in Australia, the United States, Singapore, and Switzerland. The AU$1.0b market-cap company’s loss lessened since it announced a US$82m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$73m, as it approaches breakeven. Many investors are wondering about the rate at which Mesoblast will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Mesoblast

Mesoblast is bordering on breakeven, according to the 4 Australian Biotechs analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$23m in 2026. The company is therefore projected to breakeven around 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 49%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Mesoblast given that this is a high-level summary, though, bear in mind that by and large 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 we’d like to point out is that The company has managed its capital prudently, with debt making up 23% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Mesoblast 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 Mesoblast, take a look at Mesoblast's company page on Simply Wall St. We've also put together a list of important aspects you should further examine:

1. Valuation: What is Mesoblast 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 Mesoblast is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Mesoblast’s 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.