Guilford drug firm loses 55 cents a share


In January, when Guilford Pharmaceuticals Inc. became the sole distributor of its signature product - a dime-sized wafer that dispenses anti-cancer treatments - the Baltimore company needed to beef up its sales-and-marketing team to go after new customers.

The strategy is working, but it comes at a price. The company said yesterday that it more than doubled its spending on selling, general and administrative expenses in the first quarter.

That, coupled with an increase in research and development costs, helped push the drug developer to a loss of $14.6 million, or 55 cents per share, in the three months that ended March 31. That compares with an operating loss of $8.3 million in last year's first quarter, excluding an $8.6 million one-time accounting charge.

Still, the company was pleased with the quarter because sales of Gliadel are on the rise. Gliadel is a drug-dispensing wafer that is implanted in the cavity left behind after a brain tumor is surgically removed.

Four years ago, Guilford sold marketing rights for Gliadel to Aventis Pharma, but bought them back in October in a stock deal valued at nearly $8 million. Worldwide sales of Gliadel last year were $16.5 million.

In this year's first quarter, unit sales of Gliadel were 10 percent higher than they were under Aventis in last year's corresponding period. Guilford, which employs about 300 people overall, now has 42 people in its sales and marketing department.

"That's quite an accomplishment given it's the first quarter they actually owned the drug and marketed it solely themselves," said Stefan D. Loren, managing director of pharmaceuticals and life sciences at Legg Mason Wood Walker Inc. in Baltimore.

Revenue in the period - all from Gliadel sales - was $4.75 million. Although that was an increase of only 1 percent, revenue in last year's first quarter came largely from contracts with other pharmaceutical companies, such as Aventis.

Guilford also raised $42.6 million in January from the sale of 2.5 million shares, the proceeds of which are being used in marketing and developing new products.

Research and development costs rose 45 percent in the quarter to $14.2 million, largely because of efforts to accelerate development of two particular drugs.

One, Aquavan, is a general anesthetic. The other, now designated GPI-5693, is used to treat pain associated with diabetic neuropathy, which causes tingling and numbness in the hands and feet. The drug might even become effective in reversing the disease, the company said.

"Last year marked a dynamic turning point for Guilford," Craig R. Smith, president and chief executive, said in a conference call yesterday. "We successfully transformed Guilford into a fully integrated pharmaceutical company with the resources to discover, develop and now market and sell our own products."

The company also is partnering with Amgen Inc. to develop a product that promotes the regrowth and repair of damaged nerves, which could be especially beneficial in treating Parkinson's disease. It is now in the second of three testing phases.

"It'll take awhile before [the stock] really gets moving," said Loren, who rates Guilford a "strong buy."

Shares, which reached a high of $37.38 in March 2000, closed at $19.96 yesterday, down 29 cents.

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