Loss-Making Mesoblast Limited (ASX:MSB) Expected To Breakeven

Mesoblast Limited’s (ASX:MSB): Mesoblast Limited, a biopharmaceutical company, develops and commercializes allogeneic cellular medicines. With the latest financial year loss of -US$35.3m and a trailing-twelve month of -US$86.1m, the AU$624m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is MSB’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for MSB’s growth and when analysts expect the company to become profitable.

See our latest analysis for Mesoblast

MSB is bordering on breakeven, according to the 8 Biotechs analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$100m in 2022. Therefore, MSB is expected to breakeven roughly 3 years from now. In order to meet this breakeven date, I calculated the rate at which MSB must grow year-on-year. It turns out an average annual growth rate of 64% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, MSB may become profitable much later than analysts predict.

ASX:MSB Past and Future Earnings, February 27th 2019

Given this is a high-level overview, I won’t go into details of MSB’s upcoming projects, but, keep in mind that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing I’d like to point out is that MSB has managed its capital prudently, with debt making up 12% of equity. This means that MSB has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of MSB which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at MSB, take a look at MSB’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further examine:

1. Historical Track Record: What has MSB’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 Mesoblast’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.