Guilford Pharmaceuticals Inc. said yesterday that it had agreed to acquire one of its business partners, ProQuest Pharmaceuticals of Lawrence, Kan., in a deal that gives the Baltimore biotechnology firm full ownership of a sedative the two firms had been developing jointly.
The acquisition, to be paid for with about $7 million - or about 1.5 million shares - of Guilford stock, is almost solely for the rights to Aquavan, since the privately held ProQuest is a tiny firm with little else that is ready for clinical testing. The transaction is scheduled to close this month.
"We believe that Aquavan has significant commercial potential," said Dean J. Mitchell, who began his new duties this week as Guilford's chief executive officer. "The acquisition of ProQuest therefore represents an important final step in securing Guilford's rights to this drug on a global basis."
The ProQuest deal is Guilford's latest attempt to increase the number of products it has on the market from two treatments, one for brain cancer and the other for heart attacks.
The company last summer licensed what once seemed to be its most promising developmental drug - said to reverse nerve damage - to a firm backed by New York venture capitalists. Now in its 11th year of existence, Guilford has yet to turn an annual profit.
By purchasing ProQuest now, Guilford wins full control of Aquavan and will not be forced to make progress payments during development, or pay royalties on sales if and when the Food and Drug Administration approves the drug, said analyst Brian D. Rye, who follows Guilford for Janney Montgomery Scott, a Philadelphia brokerage.
"We are very excited about the potential for Aquavan," said Rye, who has predicted the anesthesia/sedation drug could one day achieve annual sales of more than $200 million.
Currently in Phase III clinical testing, the last round before the company can seek FDA approval to market a drug, Aquavan is a sedative/hypnotic drug for less-invasive surgical procedures such as arthroscopic knee surgery or colonoscopy.
The market for such sedatives is an estimated $200 million to $250 million annually and is anticipated to climb with the graying of the U.S. population, the company and other experts say.
Aquavan clinical trials, which began this summer, are expected to run through to the end of 2005, Guilford said.
Although ProQuest developed the basic technology for the drug, the partnership with Guilford moved it from concept to late-stage development in less than four years - a brisk pace, said Osborne S. Wong, president of ProQuest.
The buyout agreement supersedes the licensing deal that Guilford signed with ProQuest in March 2000, an arrangement that had already provided the local firm with worldwide development and commercialization rights for Aquavan.
Guilford's shares yesterday closed up 2 cents each to $5.55. They are up since closing at $4.97 on Nov. 17, the day Mitchell's appointment as CEO was announced. But they are still down 18.1 percent this year.