Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So, the natural question for Connect Biopharma Holdings (NASDAQ:CNTB) shareholders is whether they should be concerned by its rate of 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. Let's start with an examination of the business' cash, relative to its cash burn.

Does Connect Biopharma Holdings Have A Long Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Connect Biopharma Holdings last reported its March 2026 balance sheet in May 2026, it had zero debt and cash worth US$46m. In the last year, its cash burn was US$58m. That means it had a cash runway of around 10 months as of March 2026. 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.

How Is Connect Biopharma Holdings' Cash Burn Changing Over Time?

In our view, Connect Biopharma Holdings doesn't yet produce significant amounts of operating revenue, since it reported just US$233k in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. During the last twelve months, its cash burn actually ramped up 70%. While this spending increase is no doubt intended to drive growth, if the trend continues the company's cash runway will shrink very quickly. 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.

How Hard Would It Be For Connect Biopharma Holdings To Raise More Cash For Growth?

Since its cash burn is moving in the wrong direction, Connect Biopharma Holdings shareholders may wish to think ahead to when the company may need to raise more cash. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Connect Biopharma Holdings has a market capitalisation of US$135m and burnt through US$58m last year, which is 43% of the company's market value. From this perspective, it seems that the company spent a huge amount relative to its market value, and we'd be very wary of a painful capital raising.

So, Should We Worry About Connect Biopharma Holdings' Cash Burn?

Connect Biopharma Holdings is not in a great position when it comes to its cash burn situation. Although we can understand if some shareholders find its cash runway acceptable, we can't ignore the fact that we consider its cash burn relative to its market cap to be downright troublesome. After looking at that range of measures, we think shareholders should be extremely attentive to how the company is using its cash, as the cash burn makes us uncomfortable. On another note, Connect Biopharma Holdings has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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.

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.