Here's Why We're A Bit Worried About Fate Therapeutics' (NASDAQ:FATE) Cash Burn Situation

We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether Fate Therapeutics (NASDAQ:FATE) shareholders should 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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How Long Is Fate Therapeutics' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at September 2025, Fate Therapeutics had cash of US$215m and no debt. In the last year, its cash burn was US$115m. Therefore, from September 2025 it had roughly 22 months of cash runway. 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.

View our latest analysis for Fate Therapeutics

How Well Is Fate Therapeutics Growing?

Fate Therapeutics reduced its cash burn by 13% during the last year, which points to some degree of discipline. But the revenue dip of 47% in the same period was a bit concerning. Taken together, we think these growth metrics are a little worrying. 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 Fate Therapeutics To Raise More Cash For Growth?

While Fate Therapeutics seems to be in a fairly good position, 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. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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).

Fate Therapeutics' cash burn of US$115m is about the same as its market capitalisation of US$119m. Given just how high that expenditure is, relative to the company's market value, we think there's an elevated risk of funding distress, and we would be very nervous about holding the stock.

So, Should We Worry About Fate Therapeutics' Cash Burn?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Fate Therapeutics' cash runway was relatively promising. After looking at that range of measures, we think shareholders should be extremely attentive to how the company is using its cash, as the cash burn makes us uncomfortable. Taking a deeper dive, we've spotted 3 warning signs for Fate Therapeutics you should be aware of, and 1 of them is potentially serious.

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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.