When Will Karuna Therapeutics, Inc. (NASDAQ:KRTX) Turn A Profit?

With the business potentially at an important milestone, we thought we'd take a closer look at Karuna Therapeutics, Inc.'s (NASDAQ:KRTX) future prospects. Karuna Therapeutics, Inc., a clinical-stage biopharmaceutical company, creates and delivers transformative medicines for people living with psychiatric and neurological conditions. The US$12b market-cap company announced a latest loss of US$434m on 31 December 2023 for its most recent financial year result. As path to profitability is the topic on Karuna Therapeutics' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Karuna Therapeutics

According to the 16 industry analysts covering Karuna Therapeutics, the consensus is that breakeven is near. They expect the company to post a final loss in 2025, before turning a profit of US$71m in 2026. Therefore, the company is expected to breakeven roughly 2 years from now. 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 61% 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 Karuna Therapeutics given that this is a high-level summary, though, take into account that typically 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.

Before we wrap up, there’s one aspect worth mentioning. Karuna Therapeutics currently has no debt on its balance sheet, which is rare for a loss-making biotech, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Karuna Therapeutics which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Karuna Therapeutics, take a look at Karuna Therapeutics' company page on Simply Wall St. We've also put together a list of essential factors you should further research:

1. Valuation: What is Karuna Therapeutics 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 Karuna Therapeutics 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 Karuna Therapeutics’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.