When Can We Expect A Profit From Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL)?
Simply Wall St · 09/15 11:39

Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Madrigal Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company, focuses on the development of therapeutics for the treatment of non-alcoholic steatohepatitis (NASH) in the United States. The company’s loss has recently broadened since it announced a US$295m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$330m, moving it further away from breakeven. The most pressing concern for investors is Madrigal 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.

See our latest analysis for Madrigal Pharmaceuticals

Madrigal Pharmaceuticals is bordering on breakeven, according to the 11 American Biotechs analysts. They expect the company to post a final loss in 2024, before turning a profit of US$257m in 2025. The company is therefore projected to breakeven around 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 70% 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.

NasdaqGS:MDGL Earnings Per Share Growth September 15th 2023

Given this is a high-level overview, we won’t go into details of Madrigal Pharmaceuticals' upcoming projects, but, take into account that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we would like to bring into light with Madrigal Pharmaceuticals is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Madrigal Pharmaceuticals' case is 96%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Madrigal Pharmaceuticals, so if you are interested in understanding the company at a deeper level, take a look at Madrigal Pharmaceuticals' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:

  1. Valuation: What is Madrigal 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 Madrigal 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 Madrigal 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.