Kala Pharmaceuticals, Inc. (NASDAQ:KALA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Kala Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of therapies using its proprietary nanoparticle-based Mucus Penetrating Particles (MPP) technology for the treatment of eye diseases. On 31 December 2020, the US$438m market-cap company posted a loss of US$104m for its most recent financial year. The most pressing concern for investors is Kala Pharmaceuticals' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 6 of the American Pharmaceuticals analysts is that Kala Pharmaceuticals is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$28m in 2023. So, the company is predicted to breakeven approximately 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 61%, 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 Kala Pharmaceuticals' upcoming projects, however, bear in mind 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing we would like to bring into light with Kala Pharmaceuticals is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Kala Pharmaceuticals' case is 72%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of Kala Pharmaceuticals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Kala Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further research:
- Valuation: What is Kala 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 Kala 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 Kala 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.
If you decide to trade Kala Pharmaceuticals, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.