We're Keeping An Eye On CASI Pharmaceuticals' (NASDAQ:CASI) Cash Burn Rate

Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should CASI Pharmaceuticals (NASDAQ:CASI) 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for CASI Pharmaceuticals

Does CASI Pharmaceuticals Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When CASI Pharmaceuticals last reported its balance sheet in June 2023, it had zero debt and cash worth US$39m. Looking at the last year, the company burnt through US$27m. So it had a cash runway of approximately 17 months from June 2023. 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. The image below shows how its cash balance has been changing over the last few years.

How Well Is CASI Pharmaceuticals Growing?

We reckon the fact that CASI Pharmaceuticals managed to shrink its cash burn by 24% over the last year is rather encouraging. On top of that, operating revenue was up 25%, making for a heartening combination On balance, we'd say the company is improving over time. 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.

Can CASI Pharmaceuticals Raise More Cash Easily?

Even though it seems like CASI Pharmaceuticals is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. 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 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).

CASI Pharmaceuticals has a market capitalisation of US$29m and burnt through US$27m last year, which is 93% of the company's market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

How Risky Is CASI Pharmaceuticals' Cash Burn Situation?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought CASI Pharmaceuticals' revenue growth was relatively promising. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. Taking a deeper dive, we've spotted 4 warning signs for CASI Pharmaceuticals you should be aware of, and 1 of them can't be ignored.

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.