Market Sentiment Around Loss-Making Pharmaxis Ltd (ASX:PXS)

Pharmaxis Ltd (ASX:PXS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Pharmaxis Ltd, a clinical stage drug development company, engages in the research, development, and commercialization of healthcare products for the treatment of fibrotic and inflammatory diseases worldwide. On 30 June 2023, the AU$24m market-cap company posted a loss of AU$11m for its most recent financial year. Many investors are wondering about the rate at which Pharmaxis will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Pharmaxis

Consensus from 2 of the Australian Pharmaceuticals analysts is that Pharmaxis is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$17m in 2026. So, the company is predicted to breakeven approximately 3 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 52% year-on-year, on average, 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 Pharmaxis given that this is a high-level summary, however, keep 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one aspect worth mentioning. Pharmaxis currently has no debt on its balance sheet, which is rare for a loss-making pharma, which usually has a high level of 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:

This article is not intended to be a comprehensive analysis on Pharmaxis, so if you are interested in understanding the company at a deeper level, take a look at Pharmaxis' company page on Simply Wall St. We've also put together a list of essential factors you should further examine:

1. Valuation: What is Pharmaxis 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 Pharmaxis 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 Pharmaxis’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.