We can readily understand why investors are attracted to unprofitable companies. 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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So, the natural question for EyePoint Pharmaceuticals (NASDAQ:EYPT) shareholders is whether they should be concerned by its rate of 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. Let's start with an examination of the business' cash, relative to its cash burn.

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When Might EyePoint Pharmaceuticals Run Out Of Money?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at December 2024, EyePoint Pharmaceuticals had cash of US$371m and no debt. Looking at the last year, the company burnt through US$130m. That means it had a cash runway of about 2.8 years as of December 2024. Importantly, analysts think that EyePoint Pharmaceuticals will reach cashflow breakeven in 5 years. Essentially, that means the company will either reduce its cash burn, or else require more cash. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for EyePoint Pharmaceuticals

How Well Is EyePoint Pharmaceuticals Growing?

It was quite stunning to see that EyePoint Pharmaceuticals increased its cash burn by 8,002% over the last year. While that's concerning on it's own, the fact that operating revenue was actually down 6.0% over the same period makes us positively tremulous. Considering these two factors together makes us nervous about the direction the company seems to be heading. Clearly, however, the crucial factor is whether the company will grow its business going forward. 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 EyePoint Pharmaceuticals Raise Cash?

EyePoint Pharmaceuticals 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. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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 looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.