We Think BridgeBio Oncology Therapeutics (NASDAQ:BBOT) Can Afford To Drive Business Growth

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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.

So should BridgeBio Oncology Therapeutics (NASDAQ:BBOT) shareholders 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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When Might BridgeBio Oncology Therapeutics Run Out Of Money?

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. As at December 2024, BridgeBio Oncology Therapeutics had cash of US$156m and no debt. Looking at the last year, the company burnt through US$55m. That means it had a cash runway of about 2.8 years as of December 2024. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

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How Is BridgeBio Oncology Therapeutics' Cash Burn Changing Over Time?

BridgeBio Oncology Therapeutics didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. Over the last year its cash burn actually increased by 4.9%, which suggests that management are increasing investment in future growth, but not too quickly. However, the company's true cash runway will therefore be shorter than suggested above, if spending continues to increase. 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.

How Hard Would It Be For BridgeBio Oncology Therapeutics To Raise More Cash For Growth?

Since its cash burn is increasing (albeit only slightly), BridgeBio Oncology Therapeutics shareholders should still be mindful of the possibility it will require more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.

BridgeBio Oncology Therapeutics' cash burn of US$55m is about 6.0% of its US$921m 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.

Is BridgeBio Oncology Therapeutics' Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way BridgeBio Oncology Therapeutics 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. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Taking a deeper dive, we've spotted 5 warning signs for BridgeBio Oncology Therapeutics you should be aware of, and 3 of them are a bit concerning.

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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.