With the business potentially at an important milestone, we thought we'd take a closer look at Shanghai Henlius Biotech, Inc.'s (HKG:2696) future prospects. Shanghai Henlius Biotech, Inc., a biopharmaceutical company, engages in the research and development of biologic medicines with a focus on oncology, autoimmune diseases, and ophthalmic diseases. The HK$9.0b market-cap company announced a latest loss of CN¥984m on 31 December 2021 for its most recent financial year result. The most pressing concern for investors is Shanghai Henlius Biotech's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts' expectations for the company.

Check out our latest analysis for Shanghai Henlius Biotech

Shanghai Henlius Biotech is bordering on breakeven, according to the 8 Hong Kong Biotechs analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of CN¥186m in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 84% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won't go into details of Shanghai Henlius Biotech's upcoming projects, however, keep in mind 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.

Before we wrap up, there's one issue worth mentioning. Shanghai Henlius Biotech currently has a debt-to-equity ratio of 101%. Typically, debt shouldn't exceed 40% of your equity, which in this case, the company has significantly overshot. 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 Shanghai Henlius Biotech, so if you are interested in understanding the company at a deeper level, take a look at Shanghai Henlius Biotech's company page on Simply Wall St. We've also put together a list of key factors you should further examine:

1. Valuation: What is Shanghai Henlius Biotech 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 Shanghai Henlius Biotech 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 Shanghai Henlius Biotech'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.

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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.