How Long Will Loss-Making Caladrius Biosciences Inc (CLBS) Survive?
Caladrius Biosciences Inc (NASDAQ:CLBS) announced a loss of -$21.82M in its most recent earnings update. Although some investors expected this, their belief in the path to profitability for CLBS may be wavering. Since CLBS is currently burning more cash than it is making, it’s likely the business will need funding for future growth, and additional cash raising may dilute the value of your shares. Below, I’ve analysed the most recent financial data to help answer this question. See our latest analysis for CLBS
What is cash burn?
CLBS currently has $59.37M in the bank, with negative cash flows from operations of -$24.67M. The biggest threat facing CLBS’s investor is the company going out of business when it runs out of money and cannot raise any more capital. Furthermore, it is not uncommon to find loss-makers in an industry such as biotech. The industry is highly competitive, with companies racing to invest in innovation at the risk of burning through its cash too fast.
When will CLBS need to raise more cash?
In the past year, opex (excluding one-offs) rose by 1.23%, which is fairly normal for a small-cap company. However, if CLBS continues to grow its opex at this rate, given how much money it currently has in the bank, it will need to raise capital again in 1.8 years. Furthermore, even if CLBS kept its opex level at the current $32M, it will still be coming to market in about 1.9 years.
Even though this is analysis is fairly basic, and CLBS still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the CLBS’s operation is, and when things may have to change.
What this means for you:
Are you a shareholder? You now have a better understanding of the risks you may face holding onto the stock, since we know the company could potentially run into some issues in the next couple of years. In addition to this analysis, I suggest you take a look at their expected revenue growth to determine the timing of future profitability as well.
Are you a potential investor? This analysis isn’t meant to deter you from buying CLBS, but rather, to help you understand the risks involved investing in loss-making companies. The outcome of my analysis suggests that if CLBS maintains the rate of opex growth, it will run out of cash in the upcoming years. An opportunity may exist for you to enter into the stock at an attractive price, should CLBS come to market to fund its operations.
Good management manages cash well – have a peek at CLBS’s CEO experience and the tenure of the board here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
