We're Keeping An Eye On NurExone Biologic's (CVE:NRX) Cash Burn Rate

There's no doubt that money can be made by owning shares of unprofitable businesses. Indeed, NurExone Biologic (CVE:NRX) stock is up 117% in the last year, providing strong gains for shareholders. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

In light of its strong share price run, we think now is a good time to investigate how risky NurExone Biologic's cash burn is. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

See our latest analysis for NurExone Biologic

How Long Is NurExone Biologic's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2024, NurExone Biologic had US$3.3m in cash, and was debt-free. Looking at the last year, the company burnt through US$3.9m. Therefore, from March 2024 it had roughly 10 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below.

How Is NurExone Biologic's Cash Burn Changing Over Time?

Because NurExone Biologic isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. Over the last year its cash burn actually increased by 7.9%, which suggests that management are increasing investment in future growth, but not too quickly. 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. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can NurExone Biologic Raise More Cash Easily?

While its cash burn is only increasing slightly, NurExone Biologic shareholders should still consider the potential need for further cash, down the track. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

NurExone Biologic has a market capitalisation of US$24m and burnt through US$3.9m last year, which is 16% of the company's market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

So, Should We Worry About NurExone Biologic's Cash Burn?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought NurExone Biologic's cash burn relative to its market cap was relatively promising. Summing up, we think the NurExone Biologic's cash burn is a risk, based on the factors we mentioned in this article. On another note, NurExone Biologic has 6 warning signs (and 4 which are a bit concerning) we think you should know about.

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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.