DURECT Corporation (NASDAQ:DRRX) Is Expected To Breakeven In The Near Future

We feel now is a pretty good time to analyse DURECT Corporation's (NASDAQ:DRRX) business as it appears the company may be on the cusp of a considerable accomplishment. DURECT Corporation, a biopharmaceutical company, develops medicines based on its epigenetic regulator program. The US$25m market-cap company posted a loss in its most recent financial year of US$28m and a latest trailing-twelve-month loss of US$17m shrinking the gap between loss and breakeven. The most pressing concern for investors is DURECT'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 DURECT

Consensus from 2 of the American Pharmaceuticals analysts is that DURECT is on the verge of breakeven. They expect the company to post a final loss in 2026, before turning a profit of US$22m in 2027. 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 60%, 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 DURECT's upcoming projects, though, take into account that generally a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we would like to bring into light with DURECT is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is 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:

This article is not intended to be a comprehensive analysis on DURECT, so if you are interested in understanding the company at a deeper level, take a look at DURECT's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

1. Historical Track Record: What has DURECT's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on DURECT'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.