Market Sentiment Around Loss-Making Heron Therapeutics, Inc. (NASDAQ:HRTX)

Heron Therapeutics, Inc. (NASDAQ:HRTX) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Heron Therapeutics, Inc., a commercial-stage biotechnology company, engages in developing and commercializing therapeutic that enhances medical care. The US$233m market-cap company’s loss lessened since it announced a US$14m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$14m, as it approaches breakeven. As path to profitability is the topic on Heron Therapeutics' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

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Consensus from 4 of the American Biotechs analysts is that Heron Therapeutics is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$3.7m in 2026. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 69% year-on-year, on average, which signals high confidence from analysts. 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 Heron Therapeutics given that this is a high-level summary, though, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Check out our latest analysis for Heron Therapeutics

Before we wrap up, there’s one issue worth mentioning. Heron Therapeutics currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Heron Therapeutics, so if you are interested in understanding the company at a deeper level, take a look at Heron Therapeutics' company page on Simply Wall St. We've also compiled a list of important factors you should look at:

1. Historical Track Record: What has Heron Therapeutics' 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 Heron Therapeutics' 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.