Stock Analysis

Market Sentiment Around Loss-Making La Jolla Pharmaceutical Company (NASDAQ:LJPC)

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NasdaqCM:LJPC
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We feel now is a pretty good time to analyse La Jolla Pharmaceutical Company's (NASDAQ:LJPC) business as it appears the company may be on the cusp of a considerable accomplishment. La Jolla Pharmaceutical Company, a biopharmaceutical company, focuses on the discovery, development, and commercialization of therapeutics for life-threatening diseases. The US$195m market-cap company’s loss lessened since it announced a US$117m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$61m, as it approaches breakeven. As path to profitability is the topic on La Jolla Pharmaceutical's 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.

View our latest analysis for La Jolla Pharmaceutical

La Jolla Pharmaceutical is bordering on breakeven, according to the 3 American Biotechs analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$23m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. 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.

earnings-per-share-growth
NasdaqCM:LJPC Earnings Per Share Growth February 11th 2021

Underlying developments driving La Jolla Pharmaceutical's growth isn’t the focus of this broad overview, but, take into account 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.

Before we wrap up, there’s one issue worth mentioning. La Jolla Pharmaceutical currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are key fundamentals of La Jolla Pharmaceutical 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 La Jolla Pharmaceutical, take a look at La Jolla Pharmaceutical's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

  1. Valuation: What is La Jolla Pharmaceutical 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 La Jolla Pharmaceutical 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 La Jolla Pharmaceutical’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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What are the risks and opportunities for La Jolla Pharmaceutical?

La Jolla Pharmaceutical Company engages in the development and commercialization of therapies that improve outcomes in patients suffering from life-threatening diseases.

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Rewards

  • Trading at 78.6% below our estimate of its fair value

  • Earnings are forecast to grow 59.04% per year

  • Earnings have grown 40.6% per year over the past 5 years

Risks

  • Debt is not well covered by operating cash flow

  • Highly volatile share price over the past 3 months

  • Negative shareholders equity

  • Large one-off items impacting financial results

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La Jolla Pharmaceutical

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