Guilford Pharmaceuticals Inc. said yesterday that it had completed a sale and leaseback of its corporate headquarters and a separate research facility, a move that gives the Baltimore biotechnology firm nearly $20 million as it works to develop new drugs.
Guilford sold both its corporate headquarters and its research facility totaling 170,000 square feet to BioMed Realty Trust Inc., a San Diego real estate investment trust specializing in biotechnology, pharmaceutical and life sciences properties. Both Guilford facilities are near Johns Hopkins University's Bayview Campus in East Baltimore.
The sales price was $25.4 million, although the net proceeds to Guilford were $19.4 million after some obligations were paid, BioMed Realty said. The deal is BioMed Realty's first foray into Maryland.
"Maryland is a key target market for us," said Alan D. Gold, chairman, president and chief executive officer of Bio- Med Realty.
In a statement, Guilford said the deal would provide working capital for its development pipeline and its efforts to win marketing approval for Aquavan, an anesthetic some analysts believe has the potential to become a multimillion-dollar product. Aquavan is now in late-stage human testing.
This month Guilford installed Dean J. Mitchell, a veteran pharmaceutical executive, as its new chief executive to expand the company's commercial products beyond the two it has on the market. Mitchell took over from Dr. Craig R. Smith, a physician who co-founded Guilford in 1993.
Gold said BioMed and Guilford had been in discussions for several months.
Mitchell and other top-level Guilford executives were traveling yesterday and unavailable for comment.
Under the deal, Guilford sold its headquarters and manufacturing facility on Tributary Street, as well as its Beckley Street research and development facility, which opened in 1999, and signed a long-term lease. Terms of the lease were not disclosed.
Under a sale and leaseback, a company sells property it owns and occupies to another firm in return for cash and an agreement to remain as tenant. The arrangement gives companies a way of extracting cash from real estate they occupy but believe they ultimately don't need to own.
Several such deals have been announced recently in the Baltimore area. In October, Mercantile Bankshares Corp. agreed to sell its Charles Center headquarters to a Virginia real estate investment firm for $51.2 million and to leaseback space for at least a decade.
However, such deals involving biotechnology firms are much less common because early-stage companies don't want to tie up precious capital in buildings.
Biotechnology companies generally opt to invest cash in potentially profitable drugs rather than put money in a building they could just as easily rent, said C. Robert Eaton, president of MdBio Inc., a nonprofit organization that promotes the evolution of the state's biotech sector. "You need that cash for your research-and-development programs," and not for real estate, Eaton said.
While Guilford is not an early stage company - it was founded in 1993 - the biotech has never turned an annual profit. It has only one of its own treatments on the market: its Gliadel wafer for combating brain cancer. Guilford purchased Aggrastat, a heart attack treatment, for $84 million from Merck & Co. Inc. in the fall of 2003, but in June the local company reduced its sales forecast for the drug.
Guilford announced this month that it had agreed to acquire business partner ProQuest Pharmaceuticals of Lawrence, Kan., for $7 million in stock. That deal gives Guilford full ownership of Aquavan.
Guilford shares declined 18 cents to close at $5.33 yesterday.