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Here's Why Camp4 Therapeutics (NASDAQ:CAMP) Must Use Its Cash Wisely

Simply Wall St · 07/02 15:49

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So should Camp4 Therapeutics (NASDAQ:CAMP) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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Does Camp4 Therapeutics 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 March 2025, Camp4 Therapeutics had cash of US$49m and such minimal debt that we can ignore it for the purposes of this analysis. In the last year, its cash burn was US$49m. That means it had a cash runway of around 12 months as of March 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

debt-equity-history-analysis
NasdaqGM:CAMP Debt to Equity History July 2nd 2025

See our latest analysis for Camp4 Therapeutics

How Is Camp4 Therapeutics' Cash Burn Changing Over Time?

Whilst it's great to see that Camp4 Therapeutics has already begun generating revenue from operations, last year it only produced US$1.5m, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. With the cash burn rate up 15% in the last year, it seems that the company is ratcheting up investment in the business over time. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. 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.

How Easily Can Camp4 Therapeutics Raise Cash?

Given its cash burn trajectory, Camp4 Therapeutics shareholders should already be thinking about how easy it might be for it to raise further cash in the future. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future 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 US$29m, Camp4 Therapeutics' US$49m in cash burn equates to about 169% of its market value. Given just how high that expenditure is, relative to the company's market value, we think there's an elevated risk of funding distress, and we would be very nervous about holding the stock.

Is Camp4 Therapeutics' Cash Burn A Worry?

We must admit that we don't think Camp4 Therapeutics is in a very strong position, when it comes to its cash burn. While its cash runway wasn't too bad, its cash burn relative to its market cap does leave us rather nervous. Considering all the measures mentioned in this report, we reckon that its cash burn is fairly risky, and if we held shares we'd be watching like a hawk for any deterioration. On another note, Camp4 Therapeutics has 6 warning signs (and 2 which are a bit unpleasant) we think you should know about.

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