We Think Bridge Biotherapeutics (KOSDAQ:288330) Needs To Drive Business Growth Carefully

There's no doubt that money can be made by owning shares of unprofitable businesses. 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.

Given this risk, we thought we'd take a look at whether Bridge Biotherapeutics (KOSDAQ:288330) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Bridge Biotherapeutics

Does Bridge Biotherapeutics Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at September 2024, Bridge Biotherapeutics had cash of ₩26b and no debt. In the last year, its cash burn was ₩24b. Therefore, from September 2024 it had roughly 13 months of cash runway. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. Depicted below, you can see how its cash holdings have changed over time.

How Is Bridge Biotherapeutics' Cash Burn Changing Over Time?

In our view, Bridge Biotherapeutics doesn't yet produce significant amounts of operating revenue, since it reported just ₩1.1m in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. Even though it doesn't get us excited, the 28% reduction in cash burn year on year does suggest the company can continue operating for quite some time. Admittedly, we're a bit cautious of Bridge Biotherapeutics due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Easily Can Bridge Biotherapeutics Raise Cash?

While Bridge Biotherapeutics is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future 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.

Since it has a market capitalisation of ₩177b, Bridge Biotherapeutics' ₩24b in cash burn equates to about 13% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

Is Bridge Biotherapeutics' Cash Burn A Worry?

The good news is that in our view Bridge Biotherapeutics' cash burn situation gives shareholders real reason for optimism. One the one hand we have its solid cash burn relative to its market cap, while on the other it can also boast very strong cash burn reduction. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 5 warning signs for Bridge Biotherapeutics that investors should know when investing in the stock.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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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.