With the business potentially at an important milestone, we thought we'd take a closer look at Zai Lab Limited's (NASDAQ:ZLAB) future prospects. Zai Lab Limited, a biopharmaceutical company, discovers, licenses, develops, and commercializes therapeutics to treat oncology, autoimmune, and infectious diseases in China. On 31 December 2020, the US$15b market-cap company posted a loss of US$269m for its most recent financial year. Many investors are wondering about the rate at which Zai Lab will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Zai Lab

Zai Lab is bordering on breakeven, according to the 12 American Biotechs analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$47m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 42% year-on-year, on average, which is extremely buoyant. 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 Zai Lab given that this is a high-level summary, but, take into account that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. 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 Zai Lab has no debt on its balance sheet, which is rare for a loss-making biotech, which typically has high 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 too many aspects of Zai Lab to cover in one brief article, but the key fundamentals for the company can all be found in one place – Zai Lab's company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. Valuation: What is Zai Lab 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 Zai Lab 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 Zai Lab’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.

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. 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.

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