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.

Given this risk, we thought we'd take a look at whether Intra-Cellular Therapies (NASDAQ:ITCI) shareholders should 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

When Might Intra-Cellular Therapies Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In September 2024, Intra-Cellular Therapies had US$1.0b in cash, and was debt-free. Looking at the last year, the company burnt through US$63m. That means it had a cash runway of very many years as of September 2024. Importantly, though, analysts think that Intra-Cellular Therapies will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Intra-Cellular Therapies Growing?

Intra-Cellular Therapies managed to reduce its cash burn by 61% over the last twelve months, which suggests it's on the right flight path. Pleasingly, this was achieved with the help of a 46% boost to revenue. Considering these factors, we're fairly impressed by its growth trajectory. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can Intra-Cellular Therapies Raise More Cash Easily?

While Intra-Cellular Therapies seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future 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 US$9.1b, Intra-Cellular Therapies' US$63m in cash burn equates to about 0.7% of its market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

How Risky Is Intra-Cellular Therapies' Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Intra-Cellular Therapies is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. But it's fair to say that its cash burn reduction was also very reassuring. There's no doubt that shareholders can take a lot of heart from the fact that analysts are forecasting it will reach breakeven before too long. 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. An in-depth examination of risks revealed 1 warning sign for Intra-Cellular Therapies that readers should think about before committing capital to this stock.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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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.