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’s 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 and space needed to develop its business without running out of cash.
Despite having positive free cash flow last year, Zymeworks saw a significant 82% drop in operating revenue. This decline raises concerns about the company’s future growth trajectory and its ability to raise more cash if needed. Issuing new shares or taking on debt are common ways for companies to raise funds, but Zymeworks shareholders should be wary of potential dilution if the company decides to issue more shares.
While Zymeworks’ cash burn situation may raise some red flags, the company’s cash runway and relatively comfortable metrics provide some reassurance. However, investors should be aware of the risks involved with cash-burning companies and consider all factors before committing capital to Zymeworks stock. For more insights and analysis on Zymeworks and other investment opportunities, investors are encouraged to conduct thorough research and seek professional advice.