We're Interested To See How Hemogenyx Pharmaceuticals (LON:HEMO) Uses Its Cash Hoard To Grow
There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
So should Hemogenyx Pharmaceuticals (LON:HEMO) shareholders be worried about its cash burn? For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
Does Hemogenyx Pharmaceuticals Have A Long 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. As at June 2026, Hemogenyx Pharmaceuticals had cash of UK£4.6m and no debt. Importantly, its cash burn was UK£1.6m over the trailing twelve months. That means it had a cash runway of about 2.9 years as of June 2026. 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.
See our latest analysis for Hemogenyx Pharmaceuticals
How Is Hemogenyx Pharmaceuticals' Cash Burn Changing Over Time?
Because Hemogenyx Pharmaceuticals isn't currently generating revenue, we consider it an early-stage business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. Notably, its cash burn was actually down by 70% in the last year, which is a real positive in terms of resilience, but uninspiring when it comes to investment for growth. Hemogenyx Pharmaceuticals makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.
How Hard Would It Be For Hemogenyx Pharmaceuticals To Raise More Cash For Growth?
While we're comforted by the recent reduction evident from our analysis of Hemogenyx Pharmaceuticals' cash burn, it is still worth considering how easily the company could raise more funds, if it wanted to accelerate spending to drive growth. 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. 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.
Since it has a market capitalisation of UK£37m, Hemogenyx Pharmaceuticals' UK£1.6m in cash burn equates to about 4.4% of its market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.
How Risky Is Hemogenyx Pharmaceuticals' Cash Burn Situation?
As you can probably tell by now, we're not too worried about Hemogenyx Pharmaceuticals' cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. But it's fair to say that its cash burn relative to its market cap was also very reassuring. Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. Separately, we looked at different risks affecting the company and spotted 5 warning signs for Hemogenyx Pharmaceuticals (of which 2 are a bit unpleasant!) you should know about.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.