We're Interested To See How Alpha Cognition (NASDAQ:ACOG) Uses Its Cash Hoard To Grow

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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Alpha Cognition (NASDAQ:ACOG) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

Our free stock report includes 5 warning signs investors should be aware of before investing in Alpha Cognition. Read for free now.

How Long Is Alpha Cognition'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. As at March 2025, Alpha Cognition had cash of US$46m and no debt. Looking at the last year, the company burnt through US$7.4m. That means it had a cash runway of about 6.1 years as of March 2025. Importantly, though, analysts think that Alpha Cognition will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for Alpha Cognition

How Is Alpha Cognition's Cash Burn Changing Over Time?

In our view, Alpha Cognition doesn't yet produce significant amounts of operating revenue, since it reported just US$2.9m in the last twelve months. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. With cash burn dropping by 15% it seems management feel the company is spending enough to advance its business plans at an appropriate pace. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Hard Would It Be For Alpha Cognition To Raise More Cash For Growth?

While Alpha Cognition 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. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future 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.

Alpha Cognition's cash burn of US$7.4m is about 5.4% of its US$139m market capitalisation. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

So, Should We Worry About Alpha Cognition's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Alpha Cognition is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. On this analysis its cash burn reduction was its weakest feature, but we are not concerned about it. One real positive is that analysts are forecasting that the company will reach breakeven. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. On another note, Alpha Cognition has 5 warning signs (and 2 which can't be ignored) 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 companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.