When Will Verona Pharma plc (NASDAQ:VRNA) Become Profitable?

Verona Pharma plc (NASDAQ:VRNA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. 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 US$2.8b market-cap company posted a loss in its most recent financial year of US$54m and a latest trailing-twelve-month loss of US$125m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Verona Pharma's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Verona Pharma

Consensus from 7 of the American Pharmaceuticals analysts is that Verona Pharma is on the verge of breakeven. They expect the company to post a final loss in 2025, before turning a profit of US$70m in 2026. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 66% year-on-year, on average, which signals high confidence from analysts. 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 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 71%. Note that a higher debt obligation 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 pertinent factors you should further examine:

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.