We can readily understand why investors are attracted to unprofitable companies. Indeed, Summit Therapeutics (NASDAQ:SMMT) stock is up 347% in the last year, providing strong gains for shareholders. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

In light of its strong share price run, we think now is a good time to investigate how risky Summit Therapeutics' cash burn is. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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Does Summit 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. When Summit Therapeutics last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth US$412m. In the last year, its cash burn was US$157m. So it had a cash runway of about 2.6 years from December 2024. Importantly, analysts think that Summit Therapeutics will reach cashflow breakeven in 4 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. Depicted below, you can see how its cash holdings have changed over time.

See our latest analysis for Summit Therapeutics

How Is Summit Therapeutics' Cash Burn Changing Over Time?

Summit Therapeutics 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. The 72% reduction in its cash burn over the last twelve months may be good for protecting the balance sheet but it hardly points to imminent growth. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company .

Can Summit Therapeutics Raise More Cash Easily?

There's no doubt Summit Therapeutics' rapidly reducing cash burn brings comfort, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund further growth. Companies can raise capital through either debt or equity. 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).

Summit Therapeutics' cash burn of US$157m is about 1.1% of its US$14b market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Summit Therapeutics' Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Summit Therapeutics is burning through its cash. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. And even its cash runway was very encouraging. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Summit Therapeutics (of which 1 can't be ignored!) you should know about.

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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.