I think this is very similar to the way that Elan keeps R&D expenses off its bottom line, creating or collaborating with an intermediary willing to do so in exchange for a share of future profits. In this case, Cephalon can use the funds to add to its sales force, in anticipation that in 2002, trial data and publication will provide Provigil with momentum into psychiatrists prescribing for depression and GPs prescribing for shift work/circadian rhythm disorders, and Gabitril momentum into neurologists treating neuropathic pain and psychiatrists treating anxiety. These are diffuse prescriber bases, and they will need a bigger sales force to access it. $50 million pays for 150 or so sales reps for 2 years, which (without checking my notes) I believe almost doubles the sales force. And after two years, Provigil has its full label and maybe a Big Pharma partner/acquirer. I'm not happy with the stealth expenditure strategy used by Elan (and now Cephalon) either, but the tyranny of the earnings forecast is absurd in its own way as well. Miss it by a penny, no matter how valid the reason/investment, and punishment is certain. Having just reached profitability. Baldino wants to maintain it while also maximizing his marketing clout. This is one way to do it.
Harry Tracy
NeuroInvestment
www.neuroinvestment.com |
