Guilford drug company sells first shares of stock

June 18, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Guilford Pharmaceuticals Inc. of Baltimore said yesterday that it offered $15 million of stock in an initial public offering that was scaled back by a third because of a weak financing market for biotechnology firms.

The company, which was spun off from Scios Nova Inc. of Mountain View, Calif. last year, sold 1.875 million shares of stock at $8 each. In March, Guilford had said it planned to sell 2.8 million shares, hoping to raise $22.4 million.

"The market for biotechnology companies in general and the appetite for them has been down," Guilford chief executive Dr. Craig R. Smith said. "The biotechnology financial literature has been replete with the woes of biotech companies trying to raise money. . . . Our underwriters thought that we were much better off to bite off a size where we could sell the offering."

New York-based D. Blech & Co. Inc., which specializes in biotechnology offerings, was the underwriter.

Guilford is the brainchild of research by Dr. Solomon H. Snyder, a neuroscientist at the Johns Hopkins University School of Medicine. His research also led to the creation of Nova Pharmaceutical Corp. in 1982, and Nova was sold to Scios in 1992 without having brought any drugs to market.

Guilford also has no products on the market yet. The two closest are Gliadel, a product that surgeons implant in the brains of patients undergoing a second operation for brain cancer, and Dopascan, which is to be used in the diagnosis of Parkinson's disease.

The offering prospectus said the $13.8 million left from the offering after investment banking commissions will support Guilford's research until the third quarter of next year. The company has been unprofitable so far, and expects losses to widen while its products are still being researched.

Dr. Smith said Guilford hopes to submit an application to the U.S. Food and Drug Administration by mid-1995 for final approval of Gliadel, which has gone through three stages of clinical trials and has been shown to increase the short-term survival of brain cancer patients. Dopascan is in more preliminary Phase II clinical trials.

The company did not estimate the potential market for its products in the prospectus for the offering, Dr. Smith said. However, in February, Dr. Snyder estimated that Dopascan and Gliadel could generate more than $250 million a year in revenues if they win FDA approval.

Gliadel and NPC 17742, an anti-seizure and anti-stroke medication still in preclinical development, were the main products that were allocated to Guilford when Scios Nova created the company, Scios Nova spokeswoman Kira Bacon said.

Dr. Smith said that Dopascan and several drugs that are in a still earlier stage of research are the product of more recent research by Dr. Snyder and his research team at Hopkins.

Ms. Bacon said Scios Nova spun off Guilford because it wanted to focus on cardio-renal drugs that Scios was developing before the merger and anti-inflammation products that Nova had been developing. The company believed those areas held more promise of nearer-term profits than Nova's central nervous system drugs, she said.

But Dr. Smith denied that the move meant Scios Nova was walking away from the central nervous system drugs, noting that Scios Nova owned 62.2 percent of Guilford until yesterday's offering. The sale reduced Scios Nova's stake to 30.2 percent.

Scios Nova did not sell any shares. Instead, the sale of new shares reduced Scios Nova's percentage in the larger number of shares now outstanding.

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