20% of workers laid off by local drug developer

Difficulties with products and financing blamed

`Like losing part of your family'

Guilford's announcement leaves many in tears

July 31, 2002|By Julie Bell | Julie Bell,SUN STAFF

Guilford Pharmaceuticals Inc. eliminated the jobs of 60 employees, or about 20 percent of its work force, yesterday to save money in light of product setbacks and the difficulty in raising money with the stock market stumbling.

The layoffs by the Baltimore drug developer are the latest evidence that everything from drug failures to a prolonged bear market have taken a toll on the biotechnology industry. The sector was one of the economy's few bright spots during the recession that began last year.

Celera Genomics Group of Rockville, which sequenced the human genome before changing its focus to drug development, announced last month that it was cutting 132 jobs, 16 percent of its employees.

FOR THE RECORD - An article in Wednesday's Business section incorrectly characterized Guilford Pharmaceuticals Inc.'s plans for its line of drugs known as Naaladase inhibitors. The company is continuing to do laboratory and animal research on the drugs for nerve-degeneration disorders. Guilford is seeking to license Naaladase to another company for use against some diseases, but plans to keep rights to other uses. The Sun regrets the error.

"In this current financing environment, it's always wise for a biotech company to cut expenses," said Matthew M. Geller, a CIBC World Markets analyst, in commenting on Guilford's layoffs. "I think it's appropriate."

Guilford said it will take a third-quarter charge of up to $1.5 million to pay for severance and other costs related to the restructuring. The company expects the cutbacks to save $10 million to $12 million a year beginning next year.

The company's shares lost 17 cents to close at $5.33 yesterday on the Nasdaq stock market.

Guilford Chief Executive Officer Craig R. Smith announced the cuts to employees at an 11 a.m. meeting in a company lunchroom on its campus in the Holabird Industrial Park, prompting some workers to break down in tears. The company simultaneously issued a news release announcing the moves.

Supervisors then met individually with every company employee, giving packets of information to those whose jobs were being eliminated and words of encouragement to those who were staying.

Smith said the layoffs involved every department and included one or more vice presidents he declined to identify. Slightly more than half of those laid off were scientists working on drugs Guilford had recently quit developing to save money.

Employees are being offered severance pay and help finding new employment. Laid-off employees will be allowed back into Guilford buildings today to continue cleaning out work spaces.

Some appeared to have packed up and gone yesterday afternoon. "I don't want to talk about it," a despondent Guilford employee said as she drove out of the industrial park with a large box on the front seat of her car.

Smith was subdued about the layoffs but upbeat about the company's future in an interview in his second-floor office.

Dressed uncharacteristically in a suit and tie, Smith said, "It's like losing part of your family." He added, however, that "as painful as this is, it strengthens Guilford's prospects."

Smith went into last year with the expectation that it would be "transformational" for the company. Then Amgen Inc. dropped its financial support for a family of Guilford nerve-regeneration drugs, blaming the failure of one of the drugs to reverse motor symptoms of Parkinson's disease patients in a clinical trial.

The Food and Drug Administration added to Guilford's woes in the spring by declining to approve the expanded use of its Gliadel brain cancer treatment, the only product the company had on the market.

Guilford has responded by deciding to focus on two of the five new drugs it had in clinical trials six months ago.

It will continue developing Aquavan, a new formulation of the approved anesthetic propofol. Aquavan was designed to have fewer side effects than propofol.

The company also is developing the Parkinson's disease treatment rejected by Amgen. Guilford thinks the drug showed promise in the clinical trial, though it did not achieve the challenging goal of reversing symptoms.

The company has decided not to continue developing its Naaladase inhibitors for diabetic neuropathy and other nerve-degeneration disorders but hopes to sell the rights to another company.

It has been unable to close a deal. Smith said yesterday that a number of companies had expressed "scientific interest" in the inhibitors.

Signing a deal has been hampered because big pharmaceutical companies are distracted by drug setbacks of their own, accounting issues and mergers, among other things, Smith said.

His comments echoed those Mark D. Gessler, Gene Logic Inc.'s CEO, made Monday as he explained why his company's sales are expected to slow.

Guilford also is discontinuing development of Paclimer for ovarian cancer and Lidomer for post-surgical pain. Both involve the use of tiny polymer vesicles that carry drugs deep inside the body.

Smith said Guilford plans to package the rights to those polymer drugs and "spin off, sell off or license off that technology."

Some investors aren't satisfied.

"My knee-jerk reaction," said shareholder James Russell, "is they're cutting from the bottom and they should be starting from the top."

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