Three CEOs step down at local firms

GUILFORD: Company co-founder Smith will stay until executive with a deeper financial background is found

September 02, 2004|By William Patalon III | William Patalon III,SUN STAFF

Guilford Pharmaceuticals Inc. announced yesterday that its co-founder, Craig R. Smith, will retire early next year as the company's chairman, chief executive and president, to make way for a new chief executive with a deeper finance background for the Baltimore-based biotechnology company.

Smith said he intends to remain at Guilford's helm until the company's annual meeting next spring unless a successor is found sooner. Even after his retirement, Smith will remain a member of the board of directors and for at least one year will serve as a consultant to the company - to promote a smooth succession.

"I think that, with the company doing so well, this is the point in time where this is an extremely good thing to do," Smith, 58, said in an interview yesterday.

George L. Bunting Jr., a Guilford board director, said that under Smith the company has grown into a fully integrated pharmaceutical company."

Smith and fellow Johns Hopkins researcher Solomon H. Snyder founded Guilford in 1993. Although the company was long regarded for its array of intellectual property in biotechnology, it has struggled to develop into a commercial success.

While it has two drugs on the market and several more in clinical trials, the 11-year-old company largely resembles a development-stage biotech firm because it hasn't been able to commercialize many of its technologies.

Indeed, one of its two drugs on the market - Aggrastat, a heart-attack treatment - wasn't developed internally. It was purchased last fall from a large pharmaceutical firm, and has been a sales disappointment for Guilford, company officials and Wall Street analysts have said. The company's other commercial product is its Gliadel wafer therapy for combating brain cancer.

In the course of his "regular conversations" with board members, Smith said it ultimately became clear the company needed a succession plan. Any successor to Smith would have to be an executive who could transform Guilford into a profitable business while finding the money needed to develop a new generation of products.

The company recently announced a net loss of $21.3 million for this year's second quarter, which ended June 30, from a net loss of $5.4 million for the comparable period in 2003.

Guilford's shares closed yesterday at $5.01, down 30 cents. The shares are down more than 26 percent this year.

In large public companies, potential successors to the chief executive are often recruited and brought in at a rung or two below, such as at chief operating officer, to spend a year or two learning every facet of the business. But drawing top talent to a firm of Guilford's small size requires the company to offer the top spot, Smith said.

"We're not Constellation Energy," Smith said. "The kind of quality individual we're seeking is not going to want to be No. 2 for a couple of years, with the promise that they'll probably be No. 1. As a smaller company, we just don't have that luxury." Guilford has hired an executive recruiting firm and "the search has begun," Smith said, declining to disclose other details.

"I'm very proud of what we've accomplished here over the past 11 years," Smith said. "We've created the premier biotechnology/biopharmaceutical company in the Baltimore area."

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