We feel now is a pretty good time to analyse Aerie Pharmaceuticals, Inc.'s (NASDAQ:AERI) business as it appears the company may be on the cusp of a considerable accomplishment. Aerie Pharmaceuticals, Inc., an ophthalmic pharmaceutical company, focuses on the discovery, development, and commercialization of first-in-class therapies for the treatment of glaucoma, dry eye, retinal diseases, and other eye diseases. The company’s loss has recently broadened since it announced a US$199.6m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$201.8m, moving it further away from breakeven. As path to profitability is the topic on Aerie Pharmaceuticals' 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.
Aerie Pharmaceuticals is bordering on breakeven, according to the 11 American Pharmaceuticals analysts. They expect the company to post a final loss in 2022, before turning a profit of US$48m in 2023. The company is therefore projected to breakeven around 3 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. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Aerie Pharmaceuticals' growth isn’t the focus of this broad overview, though, keep in mind that typically 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.
One thing we would like to bring into light with Aerie Pharmaceuticals is its 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. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are key fundamentals of Aerie Pharmaceuticals 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 Aerie Pharmaceuticals, take a look at Aerie Pharmaceuticals' company page on Simply Wall St. We've also put together a list of essential aspects you should look at:
Valuation: What is Aerie Pharmaceuticals 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 Aerie Pharmaceuticals 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 Aerie Pharmaceuticals’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.
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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