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Biotech Stock Cash Warning List - 2021

Updated: Dec 3, 2021

Summary:

  • Smid-cap companies often burn large amounts of cash and need to raise cash periodically

  • Our BPIQ.com Cash Warning List includes companies in our BPIQ.com database with less than 2 quarters of cash

  • The December 2021 BPIQ.com Cash Warning List includes six companies

  • For a more detailed look at these companies, read our full article HERE, after signing up. Learn more here.


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An important fact for micro, small, and mid-cap ("smid-cap") biotech investors to consider, is the months of cash and short-term investments that a company has, because most of these companies burn lots of cash and need to raise periodically. They typically do this with a follow-on stock offering where they put more shares of stock into the public markets. This dilutes current investors and often lowers share price. See our education video for more information.



As a more general rule, when are smid-cap biopharma companies likely to raise money? As we discuss in our education video two years of cash is a good rule of thumb as a comfort zone for smid-cap biopharma companies. In other words, smid-cap biopharma companies general target 2 years of cash, and if they have less than this amount of cash or short-term equivalents they are much more likely to do a cash raise/dilution, than if they have more than this amount. Smid-cap companies with approved drugs with significant sales potential relative to a companies cash burn, might take out a loan rather than dilute investors with a cash raise, especially if they are not happy with their current valuation. Of course if smid-cap companies have less than 1 year of cash, and especially less than 1 quarter of cash, they are in a more urgent need to raise cash through a follow-on offering. This is why BPIQ.com has started to publish a Biotech Stock Cash Warning List, so that investors in these companies do not get caught off guard.


We have searched our BPIQ.com database of virtually all smid-cap biopharma companies for companies with less than two quarters of cash on hand for our December 2021 BPIQ.com Biotech Stock Cash Warning List. These companies are in an urgent need to raise cash as reported in their third quarter reports. See Table 1 for our current list, and the cash and burn rate of these companies according to our calculations. Since the burn rates are from the third quarter report, the calculated "months on hand" is the months from September 2021. We don't find any public release that this company has done a cash raise recently, and we are not aware of another on demand funding source available for this company, such as an ATM or loan facility. Thus, investors are cautioned that there is a high likelihood of a dilution event/follow-on offering or other cash-raising activity for these companies in the coming month(s).


Table 1 - Cash burn and cash/short term investments of our December 2021 BPIQ.com Biotech Stock Cash Warning List



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