We're Not Very Worried About Vicore Pharma Holding's (STO:VICO) Cash Burn Rate

Just because a business does not make any money, does not mean that the stock will go down. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for Vicore Pharma Holding (STO:VICO) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

View our latest analysis for Vicore Pharma Holding

How Long Is Vicore Pharma Holding's Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Vicore Pharma Holding last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth kr466m. Looking at the last year, the company burnt through kr129m. That means it had a cash runway of about 3.6 years as of June 2024. There's no doubt that this is a reassuringly long runway. You can see how its cash balance has changed over time in the image below.

How Is Vicore Pharma Holding's Cash Burn Changing Over Time?

Whilst it's great to see that Vicore Pharma Holding has already begun generating revenue from operations, last year it only produced kr104m, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. Notably, its cash burn was actually down by 59% in the last year, which is a real positive in terms of resilience, but uninspiring when it comes to investment for growth. 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 Vicore Pharma Holding Raise More Cash Easily?

While we're comforted by the recent reduction evident from our analysis of Vicore Pharma Holding's cash burn, it is still worth considering how easily the company could raise more funds, if it wanted to accelerate spending to drive growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Vicore Pharma Holding has a market capitalisation of kr877m and burnt through kr129m last year, which is 15% 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.

Is Vicore Pharma Holding's Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Vicore Pharma Holding's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Its cash burn relative to its market cap wasn't quite as good, but was still rather encouraging! Looking at all the measures in this article, together, we're not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. Taking a deeper dive, we've spotted 4 warning signs for Vicore Pharma Holding you should be aware of, and 2 of them don't sit too well with us.

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.