Guilford Pharmaceuticals Inc. laid off 38 employees yesterday, bringing the total number of personnel cuts since December to more than 60 - about 20 percent of the work force the Baltimore biotechnology company had last fall.
The move will cost the company about $1.3 million in severance and outplacement costs, but it is expected to ultimately save $6 million per year. The company also announced a realignment yesterday that includes using fewer marketing staff members to cover larger territories and consolidating certain departments.
Guilford in December hired a new chief executive - Dean Mitchell, a former division president at Bristol-Myers Squibb Co. - to turn itself around. According to one analyst, Guilford at the time was burning cash at a rate of about $80 million per year. The company had about $40 million in cash and cash equivalents on hand as of March 31.
"That's a pretty hefty burn rate for a company their size," said Brian D. Rye, an analyst with Janney Montgomery Scott LLC in Philadelphia. "I suspect that's part of the reason for the management change."
In April, Mitchell announced a retooling of the 13-year-old business with the goal of turning a profit - or at least breaking even - by 2008. The new strategy included unloading heart-attack treatment Aggrastat, which has been draining resources, and putting more emphasis on its Gliadel wafer, a brain cancer therapy, and the sedative Aquavan, currently in clinical trials.
"What he didn't do at the time in early April was announce the structure to fit the strategy," said Thomas Seoh, who resigned from Guilford in March after 10 years at the company, most recently as its senior vice president for corporate and commercial development. "One would have expected some shoe to fall."
Mitchell said in April that he expected to cut a "minimal number" of positions. Later that month, he laid off Guilford's general counsel/senior vice president in charge of intellectual property and regulatory affairs. Twenty-four other positions have been eliminated "through attrition," said company spokeswoman Stacey Jurchison.
Shift in focus
Most of Guilford's management has turned over in the last year as the board of directors has sought a shift in focus, which, Rye said, was necessary.
"It's almost a poverty of riches over there," he said. "They have a whole lot of different, very promising things in clinical trials. ... But they need to pick and choose [which to move forward]. That's what Dean Mitchell has been brought on to do, and I think that's what he's doing. It's a prudent strategy."
Stock closes down
Guilford stock closed down 4 cents at $2.51 yesterday on the Nasdaq stock market.
Seoh, who has gone into business for himself as a consultant, said he would tell those who lost their jobs yesterday the same thing he told himself when he left: "There's some very useful skills in the things that we've been doing. I feel sorry for the people, but I'm confident they're going to move on."