Here's Why We're A Bit Worried About Sharp Therapeutics' (CVE:SHRX) Cash Burn Situation

We can readily understand why investors are attracted to unprofitable companies. 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 should Sharp Therapeutics (CVE:SHRX) shareholders be worried about its cash burn? 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.

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How Long Is Sharp Therapeutics' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2025, Sharp Therapeutics had US$3.1m in cash, and was debt-free. In the last year, its cash burn was US$5.1m. Therefore, from June 2025 it had roughly 7 months of cash runway. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. You can see how its cash balance has changed over time in the image below.

View our latest analysis for Sharp Therapeutics

How Is Sharp Therapeutics' Cash Burn Changing Over Time?

Sharp Therapeutics didn't record any revenue over the last year, indicating that it's an early stage company still developing its 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. In fact, it ramped its spending strongly over the last year, increasing cash burn by 131%. It's fair to say that sort of rate of increase cannot be maintained for very long, without putting pressure on the balance sheet. Sharp Therapeutics makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Hard Would It Be For Sharp Therapeutics To Raise More Cash For Growth?

Since its cash burn is moving in the wrong direction, Sharp Therapeutics shareholders may wish to think ahead to when the company may need to raise more cash. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

Sharp Therapeutics has a market capitalisation of US$22m and burnt through US$5.1m last year, which is 23% of the company's market value. That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution.

Is Sharp Therapeutics' Cash Burn A Worry?

We must admit that we don't think Sharp Therapeutics is in a very strong position, when it comes to its cash burn. While its cash burn relative to its market cap wasn't too bad, its increasing cash burn does leave us rather nervous. Considering all the measures mentioned in this report, we reckon that its cash burn is fairly risky, and if we held shares we'd be watching like a hawk for any deterioration. On another note, we conducted an in-depth investigation of the company, and identified 4 warning signs for Sharp Therapeutics (3 make us uncomfortable!) that you should be aware of before investing here.

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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.