Baltimore biotech Guilford Pharmaceuticals says it will bolster its sales staff, seek outside funding and might spin off one of its drug lines.

New strategies at Guilford

April 07, 2005|By Tricia Bishop | Tricia Bishop,SUN STAFF

Guilford Pharmaceuticals Inc. outlined yesterday a strategy overhaul meant to save itself from itself, but investors didn't appear to be immediately convinced.

The Baltimore biotechnology company has spent the past year overhauling its management and implementing creative cost-cutting measures. Yesterday's announcement revealed that Guilford is looking to unload one of its two marketed products.

The annoucement was met with skepticism on the Nasdaq stock market, where Guilford shares closed down 18 cents, or nearly 8 percent, at $2.16.

During a conference held in New York City yesterday and broadcast live on the Internet, the company's management said it would hire more sales staff; look for outside funding for early-stage drugs, perhaps by spinning off a separate company or seeking licensing deals; and look to expand uses for drugs under development or on the market.

The company also plans to aggressively market a brain cancer treatment that it thinks has more potential and to count one chicken before it is hatched by banking on Aquavan, a sedative in clinical trials, whose development also hit a speed bump late last month.

"Our objective is to turn around the financial performance of the company within three years," said Chief Financial Officer William F. Spengler, who predicts that Guilford - yet to show a profit - will break even by 2008.

The 12-year-old business has two products on the market, the brain cancer treatment and an injection meant to help heart attack patients. The two products' combined sales grew about 74 percent last year. Guilford, which plans to back off from the heart attack treatment, nevertheless reported an annual loss of about $88 million, and the company's stock has dropped nearly 70 percent since April last year.

Last month, Guilford lost ground on clinical trials of the one product for which it has high hopes.

Many biotechnology businesses struggle during their first decade, partly because of the huge amount of money and time - typically up to $1 billion and 15 years - it takes to bring a new drug to market and gain Food and Drug Administration approval. But some analysts and shareholders blame Guilford's troubles less on industry difficulties than lack of business know-how.

In December, Guilford replaced its science-trained founder, Craig R. Smith, a former professor at the Johns Hopkins School of Medicine, with Dean J. Mitchell, a former vice president of strategy at Bristol-Myers Squibb Co. who holds a master's degree in business.

The company's new approach has to be "market- driven," Mitchell said yesterday. Science is still important, he said, but it "has to be science that's developed from the marketplace backwards, not the other way around."

The revamped plan is the culmination of four months of review and strategy, helped by a Boston consulting business that spent six weeks evaluating Guilford. It replaces a business plan criticized for having a complex financial structure and too small a sales force.

Among the biggest shifts in business for Guilford is the new plan to stop putting resources into its Aggrastat Injection, a marketed heart attack treatment that had disappointing sales of $12.5 million last year, less than half of the expected $30 million.

There's too much competition in that area, said Mitchell, who plans to "disinvest" in the drug and look for an "exit strategy" or a partner willing to take on the burden.

Instead, Guilford will build the company around its Gliadel wafer, which treats brain cancer, and Aquavan, a light sedative in its third phase of clinical trials.

The trials were suspended last month so that Guilford could re-evaluate dosing levels. When that move was announced March 24, the company's stock fell 34 percent, to $2.34 from $3.53 a day earlier.

Aquavan is designed as an orally administered sedative meant for use in medical procedures such as colonoscopy. Trials have shown it to have quick onset and recovery times, leaving patients coherent and "street ready" when they wake up, unlike the two other generic sedatives on the market. It has potential to be a $300 million-per-year drug for Guilford, Mitchell said, if the company can get it approved.

During trials, the drug sedated patients more heavily than expected, which Guilford doesn't want because that might mean an anesthesiologist would have to administer it, making it less convenient for doctors.

Still, "the rumors of the death of Aquavan have been greatly exaggerated," said Mitchell, who was accompanied at the conference by a gastroenterologist from New York's Mount Sinai Hospital.

"The numbers may look good and they may look bad depending on your perspective," said Lawrence Cohen, an associate clinical professor at Sinai's division of gastroenterology. From his perspective, Aquavan looked pretty good, he said, with a 90 percent satisfaction rate from doctors and patients who tested the drug.

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