Loss-Making Karuna Therapeutics, Inc. (NASDAQ:KRTX) Expected To Breakeven In The Medium-Term
With the business potentially at an important milestone, we thought we'd take a closer look at Karuna Therapeutics, Inc.'s (NASDAQ:KRTX) future prospects. Karuna Therapeutics, Inc., a clinical-stage biopharmaceutical company, creates and delivers transformative medicines for people living with psychiatric and neurological conditions. The US$12b market-cap company announced a latest loss of US$434m on 31 December 2023 for its most recent financial year result. As path to profitability is the topic on Karuna Therapeutics' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Check out our latest analysis for Karuna Therapeutics
According to the 16 industry analysts covering Karuna Therapeutics, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$71m in 2026. The company is therefore projected to breakeven around 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of Karuna Therapeutics' upcoming projects, but, take into account that generally 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 we’d like to point out is that Karuna Therapeutics 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. The company 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 Karuna Therapeutics, so if you are interested in understanding the company at a deeper level, take a look at Karuna Therapeutics' company page on Simply Wall St. We've also compiled a list of pertinent factors you should further research:
Valuation: What is Karuna Therapeutics 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 Karuna Therapeutics 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 Karuna Therapeutics’s board and the CEO’s background.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
