Verona Pharma plc (NASDAQ:VRNA): When Will It Breakeven?

With the business potentially at an important milestone, we thought we'd take a closer look at Verona Pharma plc's (NASDAQ:VRNA) future prospects. Verona Pharma plc, a clinical stage biopharmaceutical company, focuses on development and commercialization of therapies for the treatment of respiratory diseases with unmet medical needs. The company’s loss has recently broadened since it announced a US$54m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$154m, moving it further away from breakeven. The most pressing concern for investors is Verona Pharma's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Verona Pharma

Verona Pharma is bordering on breakeven, according to the 8 American Pharmaceuticals analysts. They expect the company to post a final loss in 2025, before turning a profit of US$114m in 2026. The company is therefore projected to breakeven just over a year from now. 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 58%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Verona Pharma's upcoming projects, but, bear 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 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 issue worth mentioning. Verona Pharma currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Verona Pharma's case is 92%. 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 Verona Pharma 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 Verona Pharma, take a look at Verona Pharma's company page on Simply Wall St. We've also put together a list of relevant factors you should further research:

1. Valuation: What is Verona Pharma 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 Verona Pharma 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 Verona Pharma’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.