Guilford putting negatives behind it

Baltimore drug developer to concentrate on two promising products

May 15, 2002|By Julie Bell | Julie Bell,SUN STAFF

Craig R. Smith, Guilford Pharmaceuticals Inc.'s chairman and chief executive, pulled no punches yesterday as he reviewed the past 12 months, calling the year "easily the most challenging in the company's nine-year history."

Smith stood at a podium in the lunchroom of the Baltimore drug developer's gleaming research and development facility, flanked by fellow directors, and unflinchingly relaying a drumbeat of negatives to about 30 employees and investors at the company's annual shareholders meeting.

Amgen Inc., he noted, dumped its financial backing for Guilford's nerve-regeneration drugs after deeming the lead drug "a failure."

The Food and Drug Administration rejected Guilford's push to expand marketing of its only approved product, the Gliadel treatment for brain cancer. And its stock, which traded at about $20 a year ago, sank along with the Nasdaq.

"Now our stock is $7 a share," Smith said, "and we've never been a stronger or a better company."

Despite a difficult market for raising money, a pile of human tests to finance and a sales and marketing team that doesn't have enough to sell, Smith said, the company is optimistic.

The difficulties of the past year have prompted Guilford to refocus its efforts on two drugs it believes will give it the most bang for its buck. The drugs are the Aquavan anesthetic and its lead nerve-regeneration drug for Parkinson's disease, which Amgen deemed a failure.

Guilford, however, believes clinical trials showed the drug has promise though in an initial trial it did not totally reverse Parkinson's motor symptoms as Amgen had hoped.

Guilford also is cutting costs and looking for partners to buy the rights to drugs it no longer wants to submit to additional human testing, including drugs designed to inhibit an enzyme linked to chronic neurodegenerative disorders such as diabetic neuropathy.

In addition, Guilford is in the hunt to acquire the rights to one or two already marketed drugs, bringing in more revenue and giving the sales team something to sell in addition to Gliadel.

The smattering of shareholders at yesterday's meeting gave the plan mixed reviews.

"I'm concerned," said James D. Russell, a Baltimore-area shareholder who has 5,000 Guilford shares he bought at prices as high as $28 apiece.

"I look at the realities of what it's going to cost to get any of these products across the finish line," Russell told Smith in a question-and-answer period. "I'm wondering where I should find optimism from the standpoint of share price in any of this."

Terence Hallinan, a Westernville, N.Y., resident who holds 300 Guilford shares, told Smith, "My impression is that Guilford is going through a slimming down and a tightening of the pipeline, and I think it's a good thing."

The belt-tightening medicine is exactly what analysts such as Stefan D. Loren of Legg Mason Wood Walker have been encouraging Guilford to take. Loren previously had criticized Guilford for "having too many balls in the air."

After Guilford outlined its new cost-cutting and refocusing efforts in a first-quarter earnings conference call last week, Loren issued a report maintaining his "strong buy" recommendation on the stock. Legg Mason makes a market in Guilford shares.

Guilford Chief Financial Officer Andrew R. Jordan acknowledged yesterday that Wall Street is taking a wait-and-see attitude toward the company's efforts. And he acknowledged that pharmaceutical companies are fiercely competing for drugs already on the market, complicating Guilford's efforts.

Still, Smith said he is optimistic that the company can acquire the rights to one or two drugs on the market.

"I think there's plenty of reason for optimism in the company's prospects," Smith said. "I would be disappointed personally if I'm standing here a year from now and we have not succeeded in [signing] one or two more corporate partnerships."

Shares of Guilford fell 11 cents yesterday to close at $6.74 on the Nasdaq stock market.

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