Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI): Is Breakeven Near?




  • In Business
  • 2022-05-14 13:18:18Z
  • By Simply Wall St.
 

We feel now is a pretty good time to analyse Spectrum Pharmaceuticals, Inc.'s (NASDAQ:SPPI) business as it appears the company may be on the cusp of a considerable accomplishment. Spectrum Pharmaceuticals, Inc., a biopharmaceutical company, develops and commercializes oncology and hematology drug products. The US$135m market-cap company's loss lessened since it announced a US$158m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$138m, as it approaches breakeven. The most pressing concern for investors is Spectrum Pharmaceuticals' path to profitability - when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Spectrum Pharmaceuticals

According to the 5 industry analysts covering Spectrum Pharmaceuticals, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$43m in 2024. So, the company is predicted to breakeven approximately 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 68%, 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 Spectrum Pharmaceuticals' upcoming projects, though, keep in mind that by and large 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.

Before we wrap up, there's one aspect worth mentioning. Spectrum Pharmaceuticals currently has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Spectrum Pharmaceuticals which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Spectrum Pharmaceuticals, take a look at Spectrum Pharmaceuticals' company page on Simply Wall St. We've also put together a list of key aspects you should further research:

  1. Valuation: What is Spectrum 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 Spectrum Pharmaceuticals 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 Spectrum Pharmaceuticals's board and the CEO's background.

  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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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