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Market Sentiment Around Loss-Making Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

Simply Wall St

Lexicon Pharmaceuticals, Inc.'s (NASDAQ:LXRX): Lexicon Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the development and commercialization of pharmaceutical products. The US$147m market-cap company’s loss lessens since it announced a -US$120.5m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -US$89.0m, as it approaches breakeven. As path to profitability is the topic on LXRX’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for LXRX’s growth and when analysts expect the company to become profitable.

See our latest analysis for Lexicon Pharmaceuticals

LXRX is bordering on breakeven, according to the 4 Biotechs analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$149m in 2021. Therefore, LXRX is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which LXRX must grow year-on-year. It turns out an average annual growth rate of 34% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:LXRX Past and Future Earnings, September 9th 2019

Underlying developments driving LXRX’s growth isn’t the focus of this broad overview, though, keep in mind that by and large 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 issue worth mentioning. LXRX currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

This article is not intended to be a comprehensive analysis on LXRX, so if you are interested in understanding the company at a deeper level, take a look at LXRX’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should look at:

  1. Historical Track Record: What has LXRX's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Lexicon 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.

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.

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. Thank you for reading.