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, 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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given this risk, we thought we'd take a look at whether Anebulo Pharmaceuticals (NASDAQ:ANEB) 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'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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When Might Anebulo Pharmaceuticals Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at December 2024, Anebulo Pharmaceuticals had cash of US$15m and no debt. Looking at the last year, the company burnt through US$6.6m. So it had a cash runway of about 2.3 years from December 2024. Arguably, that's a prudent and sensible length of runway to have. You can see how its cash balance has changed over time in the image below.

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How Is Anebulo Pharmaceuticals' Cash Burn Changing Over Time?

Anebulo Pharmaceuticals didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 31% over the last year suggests some degree of prudence. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Hard Would It Be For Anebulo Pharmaceuticals To Raise More Cash For Growth?

While Anebulo Pharmaceuticals is showing a solid reduction in its cash burn, 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. Commonly, a business will sell new shares in itself to raise cash and drive 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).