Can Amylyx Pharmaceuticals (NASDAQ:AMLX) Afford To Invest In Growth?

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. By way of example, Amylyx Pharmaceuticals (NASDAQ:AMLX) has seen its share price rise 163% 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 Amylyx Pharmaceuticals' cash burn is. 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.

Our free stock report includes 6 warning signs investors should be aware of before investing in Amylyx Pharmaceuticals. Read for free now.

How Long Is Amylyx Pharmaceuticals' 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. In March 2025, Amylyx Pharmaceuticals had US$204m in cash, and was debt-free. Looking at the last year, the company burnt through US$243m. So it had a cash runway of approximately 10 months from March 2025. 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. Importantly, if we extrapolate recent cash burn trends, the cash runway would be noticeably longer. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Amylyx Pharmaceuticals

How Easily Can Amylyx Pharmaceuticals Raise Cash?

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.

Since it has a market capitalisation of US$408m, Amylyx Pharmaceuticals' US$243m in cash burn equates to about 60% of its market value. From this perspective, it seems that the company spent a huge amount relative to its market value, and we'd be very wary of a painful capital raising.

How Risky Is Amylyx Pharmaceuticals' Cash Burn Situation?

Because Amylyx Pharmaceuticals is an early stage company, we don't have a great deal of data on which to form an opinion of its cash burn. Having said that, we can say that its cash burn relative to its market cap was a real negative. From what we can see the company is not in a strong position and there is a clear risk that the cash burn will cause problems for it. On another note, we conducted an in-depth investigation of the company, and identified 6 warning signs for Amylyx Pharmaceuticals (2 are significant!) that you should be aware of before investing here.

Of course Amylyx Pharmaceuticals may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.