Market Sentiment Around Loss-Making Flexion Therapeutics Inc (NASDAQ:FLXN)

Flexion Therapeutics Inc’s (NASDAQ:FLXN): Flexion Therapeutics, Inc., a biopharmaceutical company, focuses on the development and commercialization of anti-inflammatory and analgesic therapies for the treatment of patients with musculoskeletal conditions. With the latest financial year loss of -US$137.48m and a trailing-twelve month of -US$170.16m, the US$868.25m market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which FLXN will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for FLXN’s growth and when analysts expect the company to become profitable.

See our latest analysis for Flexion Therapeutics

Expectation from Biotechs analysts is FLXN is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$49.33m in 2021. So, FLXN is predicted to breakeven approximately a few months from now. What rate will FLXN have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 66.05%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGM:FLXN Past Future Earnings August 14th 18
NasdaqGM:FLXN Past Future Earnings August 14th 18

I’m not going to go through company-specific developments for FLXN given that this is a high-level summary, however, keep in mind that generally 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.

One thing I would like to bring into light with FLXN is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in FLXN’s case is 85.80%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on FLXN, so if you are interested in understanding the company at a deeper level, take a look at FLXN’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further examine:

  1. Valuation: What is FLXN 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 FLXN 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 Flexion Therapeutics’s board and the CEO’s back ground.
  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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.