Even When Money is Easy, Rules of Biotech Finance Still Apply


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Last month Juno Therapeutics closed a $250 million IPO, bringing the total raised since it was founded in Seattle in 2013 to close to $600 million. The money is earmarked to support more than ten clinical trials over the next 12 months. Last year, 133 biotech companies around the world raised $11 billion in initial public offerings, eclipsing the previous record of 66 IPOs and $7.6 billion set the previous year.

If anything, the private markets have been even more generous. In Boston, Moderna Therapeutics earlier this week announced it had raised an additional $450 million from private investors—breaking records and bringing its cash hoard to $950 million since 2011 to fund a fusillade of trials for an RNA drug platform that remains shrouded in secrecy.

Industry managers have learned well the first law of biotech finance: When the money is there, take it. Now they must show that they have learned the corollary: Spend wisely, because you never know when the money will come again. That is not as easy as it might appear.

In creating the easy-money economy, the Fed also created $18 trillion in national debt. When that comes due and the Fed draws in the monetary reins, a biotech company with no recurring revenue and a long, expensive and uncertain path to approval (to say nothing of market risk) takes on a different look.

Maintaining discipline when your investors and the world expect you to revolutionize the treatment of disease will require a level of self-control that will test the most seasoned industry veterans, given that, as one CEO put it, “We are surrounded by insurmountable opportunity.”

One simple solution is for management to assume that the cash has to last ten years and apportion it accordingly. However, even biotech investors are impatient. Drip-feeding a company for a decade looks more like a long-term employment program than a value-maximizing plan “in our lifetime” for investors.

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Standish Fleming is a 29-year veteran of early stage, life sciences investing. He has helped raise and manage six venture funds totaling more than $500 million and served on the boards of 19 venture-backed companies, including Nereus Pharmaceuticals, Ambit Biosciences, Triangle Pharmaceuticals (acquired by Gilead Sciences) and Actigen/Corixa (now part of GSK). Follow @

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