Ardelyx, Inc.'s (NASDAQ:ARDX) Shift From Loss To Profit

With the business potentially at an important milestone, we thought we'd take a closer look at Ardelyx, Inc.'s (NASDAQ:ARDX) future prospects. Ardelyx, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines to treat gastrointestinal and cardiorenal therapeutic areas in the United States and internationally. With the latest financial year loss of US$66m and a trailing-twelve-month loss of US$66m, the US$1.8b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Ardelyx'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 Ardelyx

Consensus from 10 of the American Biotechs analysts is that Ardelyx is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$29m in 2025. The company is therefore projected to breakeven just over a year from today. 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 61% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Ardelyx's upcoming projects, but, keep in mind that typically 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.

Before we wrap up, there’s one issue worth mentioning. Ardelyx currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Ardelyx's case is 81%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Ardelyx 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 Ardelyx, take a look at Ardelyx's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

1. Valuation: What is Ardelyx 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 Ardelyx 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 Ardelyx’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.