Loss-Making Adocia SA (EPA:ADOC) Set To Breakeven

We feel now is a pretty good time to analyse Adocia SA's (EPA:ADOC) business as it appears the company may be on the cusp of a considerable accomplishment. Adocia SA, a clinical-stage biotechnology company, researches and develops formulations of pre-approved therapeutic proteins and peptides for the treatment of diabetes and other metabolic diseases. The €97m market-cap company posted a loss in its most recent financial year of €21m and a latest trailing-twelve-month loss of €21m shrinking the gap between loss and breakeven. As path to profitability is the topic on Adocia's investors mind, we've decided to gauge market sentiment. 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 Adocia

According to some industry analysts covering Adocia, breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of €15m in 2024. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 64% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Adocia given that this is a high-level summary, however, bear in mind that generally biotechs, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Adocia 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 key fundamentals of Adocia 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 Adocia, take a look at Adocia's company page on Simply Wall St. We've also put together a list of key aspects you should further research:

1. Valuation: What is Adocia 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 Adocia 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 Adocia’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.