We're Not Worried About Kuros Biosciences' (VTX:KURN) Cash Burn

There's no doubt that money can be made by owning shares of unprofitable businesses. By way of example, Kuros Biosciences (VTX:KURN) has seen its share price rise 292% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

In light of its strong share price run, we think now is a good time to investigate how risky Kuros Biosciences' cash burn is. 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. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Kuros Biosciences

Does Kuros Biosciences Have A Long Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Kuros Biosciences last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth CHF14m. In the last year, its cash burn was CHF3.3m. That means it had a cash runway of about 4.4 years as of June 2024. There's no doubt that this is a reassuringly long runway. The image below shows how its cash balance has been changing over the last few years.

How Well Is Kuros Biosciences Growing?

Happily, Kuros Biosciences is travelling in the right direction when it comes to its cash burn, which is down 58% over the last year. And it is also great to see that the revenue is up a stonking 157% in the same time period. Overall, we'd say its growth is rather impressive. In reality, this article only makes a short study of the company's growth data. This graph of historic revenue growth shows how Kuros Biosciences is building its business over time.

How Hard Would It Be For Kuros Biosciences To Raise More Cash For Growth?

There's no doubt Kuros Biosciences seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Companies can raise capital through either debt or equity. 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.

Kuros Biosciences' cash burn of CHF3.3m is about 0.4% of its CHF770m market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

Is Kuros Biosciences' Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way Kuros Biosciences is burning through its cash. In particular, we think its revenue growth stands out as evidence that the company is well on top of its spending. But it's fair to say that its cash burn reduction was also very reassuring. Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. On another note, Kuros Biosciences has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)

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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.