Initiator Pharma A/S (STO:INIT): Are Analysts Optimistic?

Initiator Pharma A/S (STO:INIT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Initiator Pharma A/S, a clinical stage life science company, develops drugs targeting unmet medical needs within the central and peripheral nervous system. The kr515m market-cap company’s loss lessened since it announced a kr.38m loss in the full financial year, compared to the latest trailing-twelve-month loss of kr.29m, as it approaches breakeven. The most pressing concern for investors is Initiator Pharma'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.

See our latest analysis for Initiator Pharma

Initiator Pharma is bordering on breakeven, according to some Swedish Biotechs analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of kr.68m in 2024. Therefore, the company is expected to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 161% year-on-year, on average, which is rather optimistic! 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 Initiator Pharma's upcoming projects, but, keep in mind that typically biotechs, 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 issue worth mentioning. Initiator Pharma currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Initiator Pharma's case is 90%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Initiator Pharma to cover in one brief article, but the key fundamentals for the company can all be found in one place – Initiator Pharma's company page on Simply Wall St. We've also put together a list of essential factors you should further examine:

1. Valuation: What is Initiator Pharma 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 Initiator Pharma 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 Initiator Pharma’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.