Evaluating the Risks – Is Investing in Predictive Oncology Worth the Potential Rewards?

Investing in unprofitable companies can be an enticing prospect for many investors, particularly in industries such as biotech and mining exploration. These companies often offer the potential for significant future success, which can lead to substantial returns for shareholders. However, it is essential for investors to carefully evaluate the financial health of these companies, including factors such as cash burn and revenue growth.

One company that has been in the spotlight recently is Predictive Oncology (Nasdaq: POAI). Shareholders of the company may have concerns about its cash burn, which refers to the amount of cash the company is spending each year to fund its growth. As of March 2023, Predictive Oncology had approximately 17 months of cash runway based on its cash reserves and cash burn rate.

However, Predictive Oncology’s cash burn has been increasing, while its operating revenue has remained flat. This indicates a potentially troubling growth profile for the company. Investors may question whether the company can sustain its operations and continue to grow without generating significant revenue.

Furthermore, Predictive Oncology may face challenges in raising additional funds for growth. One concerning factor is the high cash burn relative to its market capitalization. This suggests a risk of extreme dilution for shareholders if the company decides to raise funds through the issuance of additional shares. Such dilution can significantly impact the value of existing shares and may not be well-received by investors.

It is worth noting that owning shares of unprofitable businesses can still be lucrative. A prime example of this is Salesforce.com (NYSE: CRM), a company that was unprofitable for many years before becoming a major success in the technology industry. However, it is crucial for investors to carefully assess the financial health and growth prospects of these companies before making any investment decisions.

Many loss-making companies ultimately burn through their cash and go bankrupt. This raises concerns for Predictive Oncology shareholders who may be worried about the company’s ability to sustain its operations and achieve profitability. The fact that Predictive Oncology’s cash burn has increased by 4.1% in the last year further adds to these concerns and highlights the need for a closer examination of the company’s growth profile.

While investing in unprofitable companies can offer significant potential for future success, it is important for investors to carefully evaluate the financial health and growth prospects of these companies. Predictive Oncology’s increasing cash burn and stagnant revenue growth raise concerns about its ability to sustain operations and achieve profitability. The company may also face challenges in raising additional funds for growth, which could result in significant dilution for shareholders. As with any investment, thorough research and analysis are essential to make informed decisions.

About Predictive Oncology

Predictive Oncology is on the cutting edge of the rapidly growing use of artificial intelligence and machine learning to expedite early drug discovery and enable drug development for the benefit of cancer patients worldwide. The Company’s scientifically validated AI platform, PEDAL, is able to predict with 92% accuracy if a tumor sample will respond to a certain drug compound, allowing for a more informed selection of drug/tumor type combinations for subsequent in-vitro testing. Together with the Company’s vast biobank of more than 150,000 assay-capable heterogenous human tumor samples, Predictive Oncology offers its academic and industry partners one of the industry’s broadest AI-based drug discovery solutions, further complimented by its wholly owned CLIA lab and GMP facilities. Predictive Oncology is headquartered in Eagan, MN.