Cash runway
Sector Deep DivesCash and equivalents divided by the burn rate: the months before a company must raise, partner an asset or stop.
Also written: runway, cash reach
Runway converts a balance sheet number into a deadline, and for a pre revenue business the deadline is the thing that matters. It is the most informative single figure on a clinical stage balance sheet, and it is not a multiple of anything.
The question that follows is always the same: does the runway reach the next value inflection point. A company funded through its readout can negotiate. A company that runs out three months before it can raise on any terms available, which is a materially worse position than the same company with the same science and more cash.
That is why the standard advice is to raise when you can rather than when you must, and why boards accept dilution long before the cash is gone. Raising eighteen months early costs a known discount. Raising three months late costs whatever the market decides to charge.
Read runway against the trial calendar rather than as a headline. Twelve months of runway with a readout in nine is comfortable. Twelve months with a readout in eighteen is a financing plan disguised as a balance sheet.
Worked example
A company holds 120 of cash and burns 10 a month, so twelve months of runway.
Its Phase III reads out in eighteen. The gap is six months, so the raise is not a possibility to be managed, it is a certainty already in the share price, and the only decision left is whether it happens from strength or from necessity.