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Ascletis Pharma Inc.'s (HKG:1672) Path To Profitability

Simply Wall St

Ascletis Pharma Inc.'s (HKG:1672): Ascletis Pharma Inc., a biotechnology company, engages in the research and development, manufacturing, marketing, and sale of pharmaceutical products in the People’s Republic of China and internationally. The company’s loss has recently broadened since it announced a -CN¥7.3m loss in the full financial year, compared to the latest trailing-twelve-month loss of -CN¥88.6m, moving it further away from breakeven. As path to profitability is the topic on 1672’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for 1672’s growth and when analysts expect the company to become profitable.

See our latest analysis for Ascletis Pharma

Consensus from the 2 Biotechs analysts is 1672 is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of CN¥24m in 2020. So, 1672 is predicted to breakeven approximately a couple of months from now! In order to meet this breakeven date, I calculated the rate at which 1672 must grow year-on-year. It turns out an average annual growth rate of 106% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

SEHK:1672 Past and Future Earnings, December 3rd 2019

Underlying developments driving 1672’s growth isn’t the focus of this broad overview, however, keep in mind that by and large a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing I’d like to point out is that 1672 has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which typically has high debt relative to its equity. 1672 currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on 1672, so if you are interested in understanding the company at a deeper level, take a look at 1672’s company page on Simply Wall St. I’ve also put together a list of key factors you should look at:

  1. Valuation: What is 1672 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 1672 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 Ascletis Pharma’s board and the CEO’s back ground.
  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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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