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, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should Kronos Bio (NASDAQ:KRON) 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for Kronos Bio

How Long Is Kronos Bio's 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. When Kronos Bio last reported its balance sheet in September 2023, it had zero debt and cash worth US$187m. Importantly, its cash burn was US$77m over the trailing twelve months. Therefore, from September 2023 it had 2.4 years of cash runway. Notably, analysts forecast that Kronos Bio will break even (at a free cash flow level) in about 5 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. You can see how its cash balance has changed over time in the image below.

How Is Kronos Bio's Cash Burn Changing Over Time?

In our view, Kronos Bio doesn't yet produce significant amounts of operating revenue, since it reported just US$4.0m in the last twelve months. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. Even though it doesn't get us excited, the 40% reduction in cash burn year on year does suggest the company can continue operating for quite some time. 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.

Can Kronos Bio Raise More Cash Easily?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Kronos Bio to raise more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.