We feel now is a pretty good time to analyse ACADIA Pharmaceuticals Inc.'s (NASDAQ:ACAD) business as it appears the company may be on the cusp of a considerable accomplishment. ACADIA Pharmaceuticals Inc., a biopharmaceutical company, focuses on the development and commercialization of small molecule drugs that address unmet medical needs in central nervous system disorders. The company’s loss has recently broadened since it announced a US$235m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$268m, moving it further away from breakeven. Many investors are wondering about the rate at which ACADIA Pharmaceuticals will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to the 17 industry analysts covering ACADIA Pharmaceuticals, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$178m in 2022. Therefore, the company is expected to breakeven roughly 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 79%, which is rather optimistic! 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 ACADIA Pharmaceuticals given that this is a high-level summary, though, take into account that generally biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing we’d like to point out is that ACADIA Pharmaceuticals has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which typically has high 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.
There are key fundamentals of ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals, take a look at ACADIA Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:
- Valuation: What is ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ACADIA Pharmaceuticals’s board and the CEO’s background.
- 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. 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.
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