Reata Pharmaceuticals, Inc. (NASDAQ:RETA) Is Expected To Breakeven In The Near Future
Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Reata Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company, identifies, develops, and commercializes novel therapeutics for patients with serious or life-threatening diseases. With the latest financial year loss of US$312m and a trailing-twelve-month loss of US$88m, the US$6.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Reata Pharmaceuticals will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
View our latest analysis for Reata Pharmaceuticals
Reata Pharmaceuticals is bordering on breakeven, according to the 9 American Pharmaceuticals analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$201m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Reata Pharmaceuticals' upcoming projects, but, keep in mind that typically a pharma company has lumpy cash flows which are contingent on the drug and stage of product development the business is in. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Reata Pharmaceuticals currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Reata Pharmaceuticals' case is 84%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Reata Pharmaceuticals, so if you are interested in understanding the company at a deeper level, take a look at Reata Pharmaceuticals' company page on Simply Wall St. We've also compiled a list of essential factors you should further research:
Valuation: What is Reata Pharmaceuticals 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 Reata Pharmaceuticals 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 Reata Pharmaceuticals’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.
