Will Pharos iBio (KOSDAQ:388870) Spend Its Cash Wisely?

Simply Wall St · 04/14 22:10

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, the natural question for Pharos iBio (KOSDAQ:388870) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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How Long Is Pharos iBio's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Pharos iBio last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth ₩16b. Looking at the last year, the company burnt through ₩10b. That means it had a cash runway of around 18 months as of December 2024. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.

debt-equity-history-analysis
KOSDAQ:A388870 Debt to Equity History April 14th 2025

View our latest analysis for Pharos iBio

How Is Pharos iBio's Cash Burn Changing Over Time?

Pharos iBio didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. Over the last year its cash burn actually increased by 25%, which suggests that management are increasing investment in future growth, but not too quickly. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. Pharos iBio 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 Easily Can Pharos iBio Raise Cash?

Given its cash burn trajectory, Pharos iBio shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. 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. 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).

Since it has a market capitalisation of ₩90b, Pharos iBio's ₩10b in cash burn equates to about 11% of its market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

Is Pharos iBio's Cash Burn A Worry?

On this analysis of Pharos iBio's cash burn, we think its cash burn relative to its market cap was reassuring, while its increasing cash burn has us a bit worried. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about Pharos iBio's situation. On another note, Pharos iBio has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

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