We feel now is a pretty good time to analyse Alvotech's (NASDAQ:ALVO) business as it appears the company may be on the cusp of a considerable accomplishment. Alvotech, through its subsidiaries, develops and manufactures biosimilar medicines for patients worldwide. The company's loss has recently broadened since it announced a US$552m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$618m, moving it further away from breakeven. The most pressing concern for investors is Alvotech's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Alvotech is bordering on breakeven, according to the 4 American Biotechs analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$43m in 2025. The company is therefore projected to breakeven just over a year 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 101%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Alvotech's growth isn't the focus of this broad overview, though, keep in mind that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company 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. Alvotech currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.
Next Steps:
This article is not intended to be a comprehensive analysis on Alvotech, so if you are interested in understanding the company at a deeper level, take a look at Alvotech's company page on Simply Wall St. We've also put together a list of essential factors you should further research:
- Valuation: What is Alvotech 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 Alvotech 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 Alvotech'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.
