The short answer: a biotech company’s cash runway is the number of months it can keep operating before it runs out of money, calculated by dividing its cash and equivalents by its quarterly cash burn. You can compute it yourself from any public company’s 10-Q filing. A runway under twelve months is one of the clearest signals in the industry that a company is about to make large, fast decisions.
And here is the part most people get wrong: a company running low on cash is not a company that stops spending. It is a company about to spend, urgently, in a compressed window.
How to calculate cash runway
The calculation is simple and more honest than anything the company will tell you on an earnings call:
- Find the cash. From the most recent 10-Q or 10-K balance sheet: cash, cash equivalents, and short term marketable securities. Use the balance sheet line, not the number management quoted.
- Find the burn. From the cash flow statement: net cash used in operating activities over the trailing four quarters. Where a company is building manufacturing, add capital expenditure, because that spending is real.
- Divide. Cash divided by quarterly burn gives you quarters of runway. Multiply by three for months.
For example, a company with $120 million in cash burning $40 million a quarter has three quarters, or roughly nine months, of runway.
Why the “going concern” warning is too late
Auditors add a going concern paragraph to a company’s filings when there is substantial doubt about its ability to continue operating. It feels like the key signal. It is actually the last one.
By the time going concern language appears, the board has been discussing options for two quarters, and the major decisions have already been made. If you are learning about a company’s cash problem from the going concern disclosure, you are late. The signal you want is the runway calculation you ran yourself, three quarters earlier.
The warning signs that appear before the disclosure
- An expanded at the market facility. A newly filed or enlarged at-the-market equity program means the company is preparing to sell shares, the cheapest and most diluting form of financing.
- A board addition with financial or restructuring background. Boards add the skills they are about to need.
- A quiet executive departure. A Chief Financial Officer leaving a company with eleven months of cash is rarely a coincidence.
- Programs disappearing from the pipeline page. Companies quietly drop programs from their pipeline charts before announcing discontinuations.
Why low runway is a buying signal, not a dead lead
The standard reaction across the industry is to cross low runway companies off the prospect list. The reasoning sounds sensible: they have no money, so they cannot pay. It is wrong on two counts.
First, a company with eleven months of cash has more cash on hand right now than most of the companies you are chasing, and it is about to deploy it. When a company faces a runway problem, it does one of four things: raises on tough terms, cuts the pipeline to focus on one asset, sells itself, or restructures. Every one of those creates urgent, well funded, time bound work for somebody.
Second, everybody else made the same assumption and stopped calling. That means the demand is uncontested.
What each of the four doors creates
- They raise capital. They spend immediately against the milestone the money was raised for.
- They cut the pipeline. The surviving program is accelerated, not slowed, and its vendors get asked to do more.
- They sell themselves. Legal and diligence work at speed, then an acquirer inheriting programs and contracts.
- They restructure. Outsourced capacity in exactly the functions that were cut. A layoff is an outsourcing announcement that avoids the word.
Frequently asked questions
How do you calculate a company’s cash runway?
Divide cash, cash equivalents, and short term marketable securities by the company’s quarterly cash burn from operations. The result is the number of quarters the company can operate before needing more money.
What is a healthy cash runway for a biotech?
More than two years is generally considered comfortable for a clinical stage company. Under eighteen months, management begins planning the next raise. Under twelve months, the board is actively weighing strategic options.
What percentage of biotech companies are running low on cash?
Roughly a third of public biotechs had less than one year of cash runway at the end of 2025, according to EY, and fewer than half of emerging companies had more than two years.
Is a biotech with low cash a bad sales prospect?
No. A company running low on cash is about to make large, fast, well funded decisions, each of which creates urgent work. Because most sellers avoid these accounts, the demand is far less contested than at well funded companies.
Get the full report
We built a report that gives you the sector data, the four paths a company in this position takes, the public signals that appear before the going concern language, and a five step screen you can run yourself each quarter to find these companies before your competitors do.
Download The Cash Runway Report — free.
