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Alkermes plc's (NASDAQ:ALKS) Shift From Loss To Profit

Simply Wall St
·3 min read

Alkermes plc (NASDAQ:ALKS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Alkermes plc, a biopharmaceutical company, researches, develops, and commercializes pharmaceutical products to address unmet medical needs of patients in various therapeutic areas in the United States, Ireland, and internationally. The US$3.4b market-cap company’s loss lessened since it announced a US$197m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$74m, as it approaches breakeven. The most pressing concern for investors is Alkermes' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Alkermes

Consensus from 10 of the American Biotechs analysts is that Alkermes is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$37m in 2023. The company is therefore projected to breakeven around 3 years 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 70%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Alkermes given that this is a high-level summary, however, take into account 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.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 25% 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:

There are key fundamentals of Alkermes 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 Alkermes, take a look at Alkermes' company page on Simply Wall St. We've also compiled a list of important factors you should further examine:

  1. Valuation: What is Alkermes 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 Alkermes 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 Alkermes’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.

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.

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