Here's Why We're Watching Foghorn Therapeutics' (NASDAQ:FHTX) Cash Burn Situation

We can readily understand why investors are attracted to unprofitable companies. 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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether Foghorn Therapeutics (NASDAQ:FHTX) 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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Does Foghorn Therapeutics Have A Long Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. When Foghorn Therapeutics last reported its September 2025 balance sheet in November 2025, it had zero debt and cash worth US$180m. Looking at the last year, the company burnt through US$89m. So it had a cash runway of about 2.0 years from September 2025. Arguably, that's a prudent and sensible length of runway to have. You can see how its cash balance has changed over time in the image below.

View our latest analysis for Foghorn Therapeutics

How Well Is Foghorn Therapeutics Growing?

Foghorn Therapeutics reduced its cash burn by 14% during the last year, which points to some degree of discipline. But the revenue dip of 3.9% in the same period was a bit concerning. In light of the data above, we're fairly sanguine about the business 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.

How Hard Would It Be For Foghorn Therapeutics To Raise More Cash For Growth?

While Foghorn Therapeutics seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. 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).

Foghorn Therapeutics' cash burn of US$89m is about 31% of its US$283m market capitalisation. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

How Risky Is Foghorn Therapeutics' Cash Burn Situation?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Foghorn Therapeutics' cash runway was relatively promising. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. On another note, Foghorn Therapeutics has 2 warning signs (and 1 which makes us a bit uncomfortable) we think 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.