Flexion Therapeutics, Inc.'s (NASDAQ:FLXN): Flexion Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of anti-inflammatory and analgesic therapies for the treatment of patients with musculoskeletal conditions. The US$705m market-cap posted a loss in its most recent financial year of -US$169.7m and a latest trailing-twelve-month loss of -US$156.8m shrinking the gap between loss and breakeven. The most pressing concern for investors is FLXN’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for FLXN.
According to the 9 industry analysts covering FLXN, the consensus is breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of US$36m in 2022. Therefore, FLXN is expected to breakeven roughly 2 years from today. What rate will FLXN 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 57%, which signals high confidence from analysts. If this rate turns out to be too aggressive, FLXN may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for FLXN given that this is a high-level summary, however, take into account 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing I would like to bring into light with FLXN is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, and FLXN has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.
There are too many aspects of FLXN to cover in one brief article, but the key fundamentals for the company can all be found in one place – FLXN’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:
- Valuation: What is FLXN 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 FLXN 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 Flexion Therapeutics’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.
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