Orexo AB (publ) (STO:ORX): When Will It Breakeven?

We feel now is a pretty good time to analyse Orexo AB (publ)'s (STO:ORX) business as it appears the company may be on the cusp of a considerable accomplishment. Orexo AB (publ), a specialty pharmaceutical company, develops and commercializes pharmaceuticals and digital therapies in the United States, European Union, and internationally. On 31 December 2023, the kr628m market-cap company posted a loss of kr128m for its most recent financial year. As path to profitability is the topic on Orexo's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Orexo

Expectations from some of the Swedish Pharmaceuticals analysts is that Orexo is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of kr45m in 2026. The company is therefore projected to breakeven around 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 76% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Orexo's growth isn’t the focus of this broad overview, however, keep in mind that by and large a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Orexo is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Orexo 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 Orexo, take a look at Orexo'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 Orexo 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 Orexo 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 Orexo’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.