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12:00 AM
Apr 14, 2003
 |  BioCentury  |  Strategy

Lessons from the '90s

Big Spenders

Lessons from the '90s

While companies endure this longest of biotech bear markets and watch their cash dwindle, it's important to remember that the money is there to be spent on turning science into products. While there's no guarantee that big spenders will use the money wisely, it can be said for certain that those who spend too little will get nowhere. Some of the bigger cash burners of the 1990s are now turning profits, or close to it, and their experiences provide some lessons for companies going through today's growing pains.

"You have to have cash on your balance sheet, but you also have to spend it to create value," said Frank Baldino, chairman and CEO of Cephalon Inc. (CEPH, West Chester, Penn.). "Keeping it on your balance sheet doesn't help anybody. If it did, then you shouldn't spend anything."

In addition to CEPH, Gilead Sciences Inc. (GILD, Foster City, Calif.) turned the corner last year.The companies share several traits. They have maintained a tight therapeutic focus; they have been very opportunistic about buying products and/or companies with products on or near the market; they do much of their own manufacturing; and do much of their own sales.

Each also has been opportunistic about laying off R&D expenses via outsourcing and through partners.


CEPH was one of the legendary spenders of the 1990s, spending sums that, might seem a tad high today, but at the time were breathtaking compared to what other young companies were doing. The company's secret was to mitigate its losses by bringing in partners and buying some product revenues.

Thus, even during the bear market that was ongoing in 1995, CEPH incurred total operating expenses of $89.8...

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