We're Not Worried About Repare Therapeutics' (NASDAQ:RPTX) Cash Burn

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.

Given this risk, we thought we'd take a look at whether Repare Therapeutics (NASDAQ:RPTX) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

Check out our latest analysis for Repare Therapeutics

Does Repare Therapeutics Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at June 2021, Repare Therapeutics had cash of US$301m and no debt. In the last year, its cash burn was US$69m. So it had a cash runway of about 4.4 years from June 2021. There's no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have changed over time.

How Easily Can Repare Therapeutics Raise Cash?

Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.

Repare Therapeutics has a market capitalisation of US$743m and burnt through US$69m last year, which is 9.3% of the company's market value. 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 Repare Therapeutics' Cash Burn?

Because Repare Therapeutics is an early stage company, we don't have a great deal of data on which to form an opinion of its cash burn. However, it is fair to say that its cash runway gave us comfort. Overall, we think its cash burn seems perfectly reasonable, and we are not concerned by it. Separately, we looked at different risks affecting the company and spotted 5 warning signs for Repare Therapeutics (of which 2 are concerning!) you should know about.

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.

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.

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