What is the optimal biotech burn rate?

Ethan Perlstein, founder of Perlstein Lab, asked a question on Twitter and got some great answers from David Grainger, partner at Index Ventures and Katrine Bosley, CEO of Editas Medicine. (You can read the whole thread by clicking through.)

I was late to the conversation, but my answer is…it depends. Here are a few questions to consider about “optimal” burn rates.

  • What kind of company are you building? The others made this point as well (single asset vs. platform) This issue is important because your potential exit will impact how much you should raise (and thus how much you can spend).
  • Do you need to do the benchwork yourself? This one is related to the question above, but there are situations where building out a key technical competency for a single asset makes sense (e.g. when the methods aren’t common/available at contract research organizations).
  • What milestones are you working towards? Your specific activities will drive your burn. Discovery to lead entails different costs than taking a candidate you in-license into IND-enabling studies. The goal is to  get to your milestones (on time) with the money you raised.
  • What is the competitive situation? (aka should you spend more cash to potentially save time?) A recent example is DNA editing technology CRISPR. Here is a recent overview of the intellectual property in this area from MIT Technology Review.

David Grainger, Index Ventures

Grainger has shared his thoughts on his blog, including this post The Zero Person Biotech Company that focuses on the virtual model.

Katrine Bosley, Editas Medicine 

This comment is great but short (darn 140 character limit!), so here is a longer post on capital efficiency from Booth at Atlas.

Additional Stories…From Entrepreneurs 

At Atlas Venture, the entrepreneurs in their portfolio companies contribute to a blog series called From the Trenches. Jonathan Montagu, the CBO at Nimbus, has written about their virtual experience. Kevin Pojasek, CEO at Quartet Medicine, provided an overview of the portfolio companies that includes some of their lean experience.

 

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