Stock Analysis

Novan, Inc. (NASDAQ:NOVN): When Will It Breakeven?

Source: Shutterstock

Novan, Inc. (NASDAQ:NOVN) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Novan, Inc., a medical dermatology company, focuses on researching, developing, and commercializing therapeutic products for skin diseases. With the latest financial year loss of US$30m and a trailing-twelve-month loss of US$37m, the US$29m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Novan's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Novan

Novan is bordering on breakeven, according to the 6 American Pharmaceuticals analysts. They expect the company to post a final loss in 2024, before turning a profit of US$12m in 2025. The company is therefore projected to breakeven around 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 60%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

NasdaqCM:NOVN Earnings Per Share Growth March 15th 2023

Given this is a high-level overview, we won’t go into details of Novan's upcoming projects, however, keep in mind that by and large 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.

Before we wrap up, there’s one issue worth mentioning. Novan currently has a debt-to-equity ratio of over 2x. Typically, 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 in investing in the loss-making company.

Next Steps:

There are key fundamentals of Novan 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 Novan, take a look at Novan's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

  1. Valuation: What is Novan 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 Novan 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 Novan’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.

What are the risks and opportunities for Novan?

Novan, Inc., a medical dermatology company, focuses on researching, developing, and commercializing therapeutic products for skin diseases.

View Full Analysis


  • Trading at 99.2% below our estimate of its fair value

  • Earnings are forecast to grow 60.12% per year


  • Has less than 1 year of cash runway

  • Does not have a meaningful market cap ($29M)

  • Shareholders have been diluted in the past year

  • Volatile share price over the past 3 months

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report