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Reata Pharmaceuticals, Inc.'s (NASDAQ:RETA): Reata Pharmaceuticals, Inc., a clinical stage biopharmaceutical company, develops novel therapeutics for patients with serious or life-threatening diseases by targeting molecular pathways that regulate cellular metabolism and inflammation. On 31 December 2018, the US$2.4b market-cap posted a loss of -US$80.5m for its most recent financial year. The most pressing concern for investors is RETA’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for RETA.
RETA is bordering on breakeven, according to the 6 Pharmaceuticals analysts. They expect the company to post a final loss in 2020, before turning a profit of US$12m in 2021. RETA is therefore projected to breakeven around 2 years from today. How fast will RETA have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 47% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving RETA’s growth isn’t the focus of this broad overview, however, keep in mind that by and large pharmaceuticals, depending on the stage of product development, have irregular periods of cash flow. 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 RETA is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and RETA 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 RETA to cover in one brief article, but the key fundamentals for the company can all be found in one place – RETA’s company page on Simply Wall St. I’ve also put together a list of important factors you should look at:
- Historical Track Record: What has RETA'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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Reata Pharmaceuticals’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.
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 firstname.lastname@example.org. 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.