We feel now is a pretty good time to analyse PTC Therapeutics, Inc.'s (NASDAQ:PTCT) business as it appears the company may be on the cusp of a considerable accomplishment. PTC Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of medicines for the treatment of rare disorders. The company’s loss has recently broadened since it announced a US$252m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$441m, moving it further away from breakeven. As path to profitability is the topic on 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.
Consensus from 11 of the American Biotechs analysts is that Therapeutics is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of US$135m 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 57%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Therapeutics' growth isn’t the focus of this broad overview, though, keep in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company 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 Therapeutics is its debt-to-equity ratio of 189%. Generally, the rule of thumb is 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.
This article is not intended to be a comprehensive analysis on Therapeutics, so if you are interested in understanding the company at a deeper level, take a look at Therapeutics' company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further research:
- Valuation: What is 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 Therapeutics 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 Therapeutics’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.
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What are the risks and opportunities for PTC Therapeutics?
Trading at 81.7% below our estimate of its fair value
Revenue is forecast to grow 10.7% per year
Negative shareholders equity
Shareholders have been diluted in the past year
Significant insider selling over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
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.
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