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There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
So should Protagonist Therapeutics (NASDAQ:PTGX) shareholders 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'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
See our latest analysis for Protagonist Therapeutics
How Long Is Protagonist Therapeutics' 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 2022, Protagonist Therapeutics had US$305m in cash, and was debt-free. Importantly, its cash burn was US$118m over the trailing twelve months. That means it had a cash runway of about 2.6 years as of March 2022. 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.
How Well Is Protagonist Therapeutics Growing?
Some investors might find it troubling that Protagonist Therapeutics is actually increasing its cash burn, which is up 37% in the last year. Having said that, it's revenue is up a very solid 50% in the last year, so there's plenty of reason to believe in the growth story. The company needs to keep up that growth, if it is to really please shareholders. 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.
Can Protagonist Therapeutics Raise More Cash Easily?
There's no doubt Protagonist Therapeutics seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future 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).