Faron Pharmaceuticals Oy (LON:FARN): Are Analysts Optimistic?

Faron Pharmaceuticals Oy (LON:FARN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Faron Pharmaceuticals Oy operates as a clinical stage drug discovery and development company. The UK£175m market-cap company posted a loss in its most recent financial year of €29m and a latest trailing-twelve-month loss of €29m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Faron Pharmaceuticals Oy's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Faron Pharmaceuticals Oy

Faron Pharmaceuticals Oy is bordering on breakeven, according to the 3 British Biotechs analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of €57m in 2025. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 70% 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.

Given this is a high-level overview, we won’t go into details of Faron Pharmaceuticals Oy's upcoming projects, however, keep 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 would like to bring into light with Faron Pharmaceuticals Oy 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. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

This article is not intended to be a comprehensive analysis on Faron Pharmaceuticals Oy, so if you are interested in understanding the company at a deeper level, take a look at Faron Pharmaceuticals Oy's company page on Simply Wall St. We've also compiled a list of important factors you should look at:

1. Valuation: What is Faron Pharmaceuticals Oy 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 Faron Pharmaceuticals Oy 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 Faron Pharmaceuticals Oy’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.