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When Will Heron Therapeutics, Inc. (NASDAQ:HRTX) Turn A Profit?

Heron Therapeutics, Inc.'s (NASDAQ:HRTX): Heron Therapeutics, Inc., a biotechnology company, engages in developing treatments to address unmet medical needs. With the latest financial year loss of -US$178.8m and a trailing-twelve month of -US$196.4m, the US$2.3b market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which HRTX will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for HRTX, its year of breakeven and its implied growth rate.

See our latest analysis for Heron Therapeutics

Consensus from the 10 Biotechs analysts is HRTX is on the verge of breakeven. They expect the company to post a final loss in 2021, before turning a profit of US$69m in 2022. Therefore, HRTX is expected to breakeven roughly 3 years from today. What rate will HRTX 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 70%, which signals high confidence from analysts. If this rate turns out to be too aggressive, HRTX may become profitable much later than analysts predict.

NasdaqCM:HRTX Past and Future Earnings, December 21st 2019
NasdaqCM:HRTX Past and Future Earnings, December 21st 2019

I’m not going to go through company-specific developments for HRTX given that this is a high-level summary, however, 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I’d like to point out is that HRTX has managed its capital prudently, with debt making up 1.9% of equity. This means that HRTX has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of HRTX which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at HRTX, take a look at HRTX’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:

  1. Valuation: What is HRTX 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 HRTX 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 Heron Therapeutics’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.