Kala Pharmaceuticals, Inc.’s (NASDAQ:KALA): Kala Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the development and commercialization of therapies using its proprietary nanoparticle-based Mucus Penetrating Particles (MPP) technology for the treatment of eye diseases. On 31 December 2018, the US$285m market-cap posted a loss of -US$66.7m for its most recent financial year. The most pressing concern for investors is KALA’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for KALA’s growth and when analysts expect the company to become profitable.
Consensus from the 4 Pharmaceuticals analysts is KALA is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$43m in 2021. KALA is therefore projected to breakeven around 2 years from now. What rate will KALA 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 56%, which signals high confidence from analysts. If this rate turns out to be too aggressive, KALA may become profitable much later than analysts predict.
Underlying developments driving KALA’s growth isn’t the focus of this broad overview, but, keep 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. 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 KALA is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in KALA’s case is 95%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
There are too many aspects of KALA to cover in one brief article, but the key fundamentals for the company can all be found in one place – KALA’s company page on Simply Wall St. I’ve also put together a list of key aspects you should look at:
- Valuation: What is KALA 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 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 back ground.
- 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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