Using authority granted by last year's General Assembly, the state Department of Economic and Employment Development (DEED) yesterday handed over a $250,000 check to the founder of a Baltimore biotechnology firm, representing the state's first equity investment in a private firm.
The investment in Guilford Pharmaceuticals Inc., co-founded by Solomon H. Snyder, a Johns Hopkins School of Medicine neuroscientist, marks the first time the state has taken a direct ownership position in a private company.
DEED has a variety of loan and loan guarantee programs for private businesses, the state has funded the construction of several high-tech facilities for the use of private companies, and a state-sponsored fund has invested almost $20 million in venture capital companies that do business in the region. But the purchase of preferred stock in Guilford Pharmaceuticals is a first, according to DEED Secretary Mark L. Wasserman.
"We are embarking on activating a new approach to economic development by virtue of our ability to make direct equity investments in Maryland companies," Mr. Wasserman said yesterday. "That's not necessarily brand-new nationally, but it is cutting edge."
For its first equity investment, DEED chose Guilford because the company isn't quite as speculative as many start-up biotech firms, Mr. Wasserman said. Although several drugs are still being researched in the lab at Hopkins, Guilford's two most promising products have been under development for years, first by Nova Pharmaceutical Corp., a Baltimore firm Dr. Snyder helped create a decade ago, and then by Scios Nova Inc., the Mountain View, Calif., company that acquired Nova in 1992. Scios Nova has invested about $4 million in Guilford.
The new company's leading product is a drug delivery system called Gliadel, which is a treatment for almost invariably fatal malignant brain tumors, Dr. Snyder said. Gliadel has proved far more effective than existing treatments, with none of the agonizing side effects of conventional chemotherapy and radiation treatments, he said. Assuming Food and Drug Administration approval next year, the product should be ready for large-scale manufacturing in late 1995, he added.
The second product is a drug used to diagnose and monitor the progression of Parkinson's disease, which afflicts about 600,000 Americans. Guilford hopes to initiate large-scale testing of its Dopascan this summer, which should take about a year, and expects to ask for FDA approval by the end of next year as well, said Dr. Snyder, who remains on the faculty at Hopkins and serves as chairman of Guilford's scientific advisory board.
If approved, the two drugs could generate more than $250 million a year in revenues, Dr. Snyder estimated.
He said that without the show of support from the state of Maryland, the company likely would have ended up in the Philadelphia area, which was the home of Guilford's chairman and chief executive officer, Dr. Craig Smith, a former top executive at drugmaker Centocor Inc., in Malvern, Pa.
DEED's investment in Guilford stems from the legislature's approval of an Enterprise Investment Fund to make equity investments in Maryland companies.
DEED transferred $1.8 million into the fund from some of its other programs, and plans to ask the General Assembly for another $1 million this year.
Along with Guilford, one other company has been marked for an investment, said Mr. Wasserman, who declined to name the firm.
Another five or six prospective investments "are in the pipeline," he said.
Enterprise Fund investments will range from $150,000 to $250,000, and the state will limit itself to no more than a 25 percent stake in any company, Mr. Wasserman said. No investment will last more than 15 years, he said, and seven years is the ideal duration.
"I see us sitting on this huge reservoir of science and technology in this state, and for a few dollars we can reel in some of the winners," Mr. Wasserman said.
Investments will be focused in four industries Maryland has identified as having the best potential for growth: information technology; electronics and aerospace; environmental services and technology; and the life sciences.
DEED has appointed an advisory board to help the fund make investment decisions.
Board members include acting chairman John May, a general partner in Calvert Social Ventures, a Bethesda venture capital firm; Mark Schneebaum, chief financial officer of Genetic Therapy Inc., a biotech firm in Gaithersburg; Herb Rabin, who heads the engineering research center at the University of Maryland at College Park; and economic development consultant David Gillece.