We feel now is a pretty good time to analyse Karuna Therapeutics, Inc.'s (NASDAQ:KRTX) business as it appears the company may be on the cusp of a considerable accomplishment. Karuna Therapeutics, Inc., a clinical-stage biopharmaceutical company, creates and delivers transformative medicines for people living with psychiatric and neurological conditions. On 31 December 2023, the US$12b market-cap company posted a loss of US$434m for its most recent financial year. As path to profitability is the topic on Karuna Therapeutics' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Karuna Therapeutics is bordering on breakeven, according to the 16 American Biotechs analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$71m in 2026. 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 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 61% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Karuna Therapeutics given that this is a high-level summary, though, keep in mind that by and large biotechs, depending on the stage of product development, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we'd like to point out is that Karuna Therapeutics 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 Karuna Therapeutics 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 Karuna Therapeutics, take a look at Karuna Therapeutics' company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

1. Valuation: What is Karuna Therapeutics 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 Karuna Therapeutics 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 Karuna Therapeutics'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.