Avid Bioservices, Inc.'s (NASDAQ:CDMO): Avid Bioservices, Inc., a contract development and manufacturing organization, provides process development and Current Good Manufacturing Practices (CGMP) commercial manufacturing services focused on biopharmaceutical products derived from mammalian cell culture for biotechnology and pharmaceutical companies. With the latest financial year loss of -US$9.7m and a trailing-twelve month of -US$9.2m, the US$383m market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is CDMO’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for CDMO.
Consensus from the 5 Biotechs analysts is CDMO is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$2.6m in 2021. So, CDMO is predicted to breakeven approximately a couple of months from now! What rate will CDMO 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 92%, which signals high confidence from analysts. If this rate turns out to be too aggressive, CDMO may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for CDMO given that this is a high-level summary, but, keep in mind that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before I wrap up, there’s one aspect worth mentioning. CDMO currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that CDMO 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.
This article is not intended to be a comprehensive analysis on CDMO, so if you are interested in understanding the company at a deeper level, take a look at CDMO’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:
- Valuation: What is CDMO 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 CDMO 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 Avid Bioservices’s board and the CEO’s back ground.
- 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 email@example.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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