Verona Pharma plc's (NASDAQ:VRNA) Path To Profitability

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. With the latest financial year loss of US$54m and a trailing-twelve-month loss of US$63m, the US$1.2b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Verona Pharma will turn a profit, with the big question being “when will the company breakeven?” 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 Verona Pharma

Consensus from 6 of the American Pharmaceuticals analysts is that Verona Pharma is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$56m in 2026. 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 64%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Verona Pharma's upcoming projects, though, take into account that typically pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 22% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Verona Pharma, so if you are interested in understanding the company at a deeper level, take a look at Verona Pharma's company page on Simply Wall St. We've also compiled a list of key factors you should further research:

1. Historical Track Record: What has Verona Pharma's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com