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With the business potentially at an important milestone, we thought we'd take a closer look at Anavex Life Sciences Corp.'s (NASDAQ:AVXL) future prospects. Anavex Life Sciences Corp., a clinical stage biopharmaceutical company, engages in the development of drug candidates for the treatment of central nervous system (CNS) diseases. On 30 September 2021, the US$1.5b market-cap company posted a loss of US$38m for its most recent financial year. As path to profitability is the topic on Anavex Life Sciences' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to the 2 industry analysts covering Anavex Life Sciences, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$6.8m in 2024. 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 55%, 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 Anavex Life Sciences' upcoming projects, however, take into account that by and large biotechs, 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.
Before we wrap up, there’s one aspect worth mentioning. Anavex Life Sciences currently has no debt on its balance sheet, which is rare for a loss-making biotech, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
There are too many aspects of Anavex Life Sciences to cover in one brief article, but the key fundamentals for the company can all be found in one place – Anavex Life Sciences' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:
Valuation: What is Anavex Life Sciences 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 Anavex Life Sciences 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 Anavex Life Sciences’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.
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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.