Zymeworks (NASDAQ:ZYME) shareholders may be wondering about the company’s cash burn rate and its impact on the stock’s performance. Cash burn refers to the amount of cash a company spends each year to fund its growth, and it is essential to assess whether a company is burning through its cash reserves too quickly.
As of December 2023, Zymeworks had cash reserves of US$374 million and no debt. However, the company burned through US$122 million in the last year, giving it a cash runway of approximately 3.1 years. This runway provides Zymeworks with the time needed to develop its business without running out of cash.
Despite having positive free cash flow last year, Zymeworks experienced an 82% decline in operating revenue, raising concerns among shareholders. The company’s ability to raise more cash easily is also a point of consideration, as issuing new shares or taking on debt are common methods for companies to fund their growth.
Zymeworks’ cash burn of US$122 million accounts for about 21% of its market capitalization of US$583 million. If the company were to sell enough shares to fund another year’s growth at the current share price, shareholders could face costly dilution.
While Zymeworks’ cash runway is reassuring, the decline in revenue is a cause for concern. Investors should carefully evaluate the risks associated with the company’s cash burn situation before making any investment decisions.
