Here's Why We're A Bit Worried About Sutro Biopharma's (NASDAQ:STRO) Cash Burn Situation

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. 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, the natural question for Sutro Biopharma (NASDAQ:STRO) shareholders is whether they should be concerned by its rate of 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). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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Does Sutro Biopharma Have A Long 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, Sutro Biopharma had US$249m in cash, and was debt-free. In the last year, its cash burn was US$199m. That means it had a cash runway of around 15 months as of March 2025. Notably, analysts forecast that Sutro Biopharma will break even (at a free cash flow level) in about 3 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. Depicted below, you can see how its cash holdings have changed over time.

See our latest analysis for Sutro Biopharma

How Well Is Sutro Biopharma Growing?

Sutro Biopharma actually ramped up its cash burn by a whopping 67% in the last year, which shows it is boosting investment in the business. And that is all the more of a concern in light of the fact that operating revenue was actually down by 57% in the last year, as the company no doubt scrambles to change its fortunes. Considering these two factors together makes us nervous about the direction the company seems to be heading. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Sutro Biopharma Raise More Cash Easily?

Sutro Biopharma revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. 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$62m, Sutro Biopharma's US$199m in cash burn equates to about 320% of its market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

Is Sutro Biopharma's Cash Burn A Worry?

On this analysis of Sutro Biopharma's cash burn, we think its cash runway was reassuring, while its cash burn relative to its market cap has us a bit worried. One real positive is that analysts are forecasting that the company will reach breakeven. After considering the data discussed in this article, we don't have a lot of confidence that its cash burn rate is prudent, as it seems like it might need more cash soon. Taking a deeper dive, we've spotted 4 warning signs for Sutro Biopharma you should be aware of, and 2 of them make us uncomfortable.

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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.