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Aurinia Pharmaceuticals Inc.'s (TSE:AUP) Shift From Loss To Profit

Simply Wall St

Aurinia Pharmaceuticals Inc.'s (TSE:AUP): Aurinia Pharmaceuticals Inc., a clinical stage biopharmaceutical company, engages in the research, development, and commercialization of therapeutic drugs for the treatment of various diseases in the United States and China. The CA$1.0b market-cap posted a loss in its most recent financial year of -US$64.1m and a latest trailing-twelve-month loss of -US$62.0m shrinking the gap between loss and breakeven. As path to profitability is the topic on AUP’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for AUP’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Aurinia Pharmaceuticals

Consensus from the 5 Biotechs analysts is AUP is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$87m in 2022. Therefore, AUP is expected to breakeven roughly 3 years from today. What rate will AUP have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 66%, which is rather optimistic! If this rate turns out to be too aggressive, AUP may become profitable much later than analysts predict.

TSX:AUP Past and Future Earnings, December 2nd 2019
TSX:AUP Past and Future Earnings, December 2nd 2019

Underlying developments driving AUP’s growth isn’t the focus of this broad overview, though, take into account that typically biotechs, depending on the stage of product development, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. AUP currently has no debt on its balance sheet, which is rare for a loss-making biotech, which usually has a high level of debt relative to its equity. AUP 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 AUP, so if you are interested in understanding the company at a deeper level, take a look at AUP’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should further examine:

  1. Valuation: What is AUP 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 AUP 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 Aurinia Pharmaceuticals’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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.