Cellectar Biosciences' (NASDAQ:CLRB) Cash Burn Situation
Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
So, the natural question for Cellectar Biosciences ( NASDAQ:CLRB ) shareholders is whether they should be concerned by its rate of cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Let's start with an examination of the business' cash, relative to its cash burn.
See our latest analysis for Cellectar Biosciences
Does Cellectar Biosciences Have A Long Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. When Cellectar Biosciences last reported its balance sheet in September 2023, it had zero debt and cash worth US$19m. In the last year, its cash burn was US$31m. So it had a cash runway of approximately 7 months from September 2023. It's worth mentioning that Cellectar Biosciences recently raised cash via a private placement- $24.5m in the first tranche and $78.4m in the second and final tranche raising a total of $102.m in the transaction.
How Is Cellectar Biosciences' Cash Burn Changing Over Time?
Cellectar Biosciences didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. With the cash burn rate up 37% in the last year, it seems that the company is ratcheting up investment in the business over time. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years .
Can Cellectar Biosciences Raise More Cash Easily?
Given its cash burn trajectory, Cellectar Biosciences shareholders should already be thinking about how easy it might be for it to raise further cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
How Risky Is Cellectar Biosciences' Cash Burn Situation?
While Cellectar Biosciences' cash burn raises concerns, the recent private placement is an encouraging development. This move not only addresses potential funding challenges but also reflects a proactive approach to strengthen the company's financial standing. It's a positive signal that should be taken into account alongside other considerations. Taking a deeper dive, we've spotted 5 warning signs for Cellectar Biosciences you should be aware of, and 1 of them is potentially serious.
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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.
