Here's Why We're Not At All Concerned With SpringWorks Therapeutics' (NASDAQ:SWTX) Cash Burn Situation

editorial-team@simplywallst.com (Simply Wall St)

Sun, Apr 13, 2025, 7:48 AM 3 min read

We can readily understand why investors are attracted to unprofitable companies. 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.

So should SpringWorks Therapeutics (NASDAQ:SWTX) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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Does SpringWorks Therapeutics Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at December 2024, SpringWorks Therapeutics had cash of US$308m and no debt. Importantly, its cash burn was US$196m over the trailing twelve months. So it had a cash runway of approximately 19 months from December 2024. Notably, however, analysts think that SpringWorks Therapeutics will break even (at a free cash flow level) before then. In that case, it may never reach the end of its cash runway. Depicted below, you can see how its cash holdings have changed over time.

debt-equity-history-analysis — NasdaqGS:SWTX Debt to Equity History April 13th 2025

See our latest analysis for SpringWorks Therapeutics

How Well Is SpringWorks Therapeutics Growing?

SpringWorks Therapeutics reduced its cash burn by 15% during the last year, which points to some degree of discipline. But that's nothing compared to its mouth-watering operating revenue growth of 3,058%. It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years .

How Easily Can SpringWorks Therapeutics Raise Cash?

SpringWorks Therapeutics 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. 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.

SpringWorks Therapeutics has a market capitalisation of US$2.7b and burnt through US$196m last year, which is 7.2% 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 SpringWorks Therapeutics' Cash Burn?

As you can probably tell by now, we're not too worried about SpringWorks Therapeutics' cash burn. In particular, we think its revenue growth stands out as evidence that the company is well on top of its spending. On this analysis its cash burn reduction was its weakest feature, but we are not concerned about it. There's no doubt that shareholders can take a lot of heart from the fact that analysts are forecasting it will reach breakeven before too long. Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 1 warning sign for SpringWorks Therapeutics that potential shareholders should take into account before putting money into a stock.

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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.