For example, Zynerba Pharmaceuticals Inc. (Nasdaq: ZYNE), which is attempting to treat rare neuropsychiatric conditions, is forecast to go without revenue until 2024. In its second quarter financial results press release, the company had $85.8 million in cash and stated, "Management believes that the Company's cash and cash equivalents as of June 30, 2021 are sufficient to fund operations and capital requirements well into the first half of 2024." In other words, if everything goes well and Zynerba's drug is approved, the company may have enough cash to launch the drug without having to raise money. Many biotechs aren't that lucky. Every quarter, various biotech management teams let investors know they have a year or two worth of cash. And that can be a problem for investors. When a biotech company needs to raise cash, it usually does so by selling more stock. That dilutes shareholders and often brings down the stock price. Here's what I mean... If a biotech is trading at $10, has 10 million shares outstanding and sells another 2 million shares to raise cash, existing shareholders just got diluted by 20%. Whatever profits the company was expected to earn down the road were just watered down by 20% on a per share basis. That will affect the valuation and usually makes the stock fall in the short term. Biotech stocks, particularly ones in early development, have tremendous potential for price appreciation because a successful drug launch can be life-changing for patients and investors. Understanding when a company needs cash can ensure you don't get into the stock just before a big downdraft in the share price. Good investing, Marc | 
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