In This Article:
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 Artiva Biotherapeutics (NASDAQ:ARTV) 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. Let's start with an examination of the business' cash, relative to its cash burn.
View our latest analysis for Artiva Biotherapeutics
Does Artiva Biotherapeutics Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2024, Artiva Biotherapeutics had US$62m in cash, and was debt-free. In the last year, its cash burn was US$50m. That means it had a cash runway of around 15 months as of March 2024. 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. You can see how its cash balance has changed over time in the image below.
How Well Is Artiva Biotherapeutics Growing?
We reckon the fact that Artiva Biotherapeutics managed to shrink its cash burn by 21% over the last year is rather encouraging. But this achievement is overshadowed by the brilliant operating revenue growth of 616%. It seems to be growing nicely. In reality, this article only makes a short study of the company's growth data. You can take a look at how Artiva Biotherapeutics is growing revenue over time by checking this visualization of past revenue growth.
How Hard Would It Be For Artiva Biotherapeutics To Raise More Cash For Growth?
Artiva Biotherapeutics seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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).