Test Results Drive Guilford Price Down
Thursday, July 26, 2001
By Justin Gillis and Terence Chea,
Washington Post Staff Writers
Shares of Guilford Pharmaceuticals Inc. of Baltimore plunged after the company disclosed disappointing results in human tests of a drug to treat Parkinson's disease.
Even before the announcement, Guilford shares had been falling on speculation the drug did not work. The shares, which traded at $34 at the end of June, fell as low as $13.71 after the company made its statement in mid-afternoon, then recovered to close at $16.15, down 27 percent from Wednesday's close and off 53 percent for the month.
The drug, known as NIL-A, was being tested by Guilford's partner, Amgen Inc. of Thousand Oaks, Calif., which is the world's largest biotechnology company. NIL-A is only a small part of Guilford's portfolio of potential drugs, but investors attached greater significance to the compound because it was one of the first of a class of highly promising neurological drugs to reach advanced human testing.
These compounds, the neuroimmunophilin ligands, seem to be able to prompt damaged nerves to repair themselves without hurting normal nerve cells. The drugs have shown promise in animals for treating difficult diseases like Parkinson's and Alzheimer's, nerve injury, brain trauma and other conditions. If the drugs were proven to work in people, the potential markets would be huge, since there is only poor treatment at best available for most neurological diseases.
In its statement, Guilford said Amgen's tests suggested NIL-A, at least in the doses and timing by which it was administered, "does not produce a substantial reversal of the motor symptoms of Parkinson's disease."
Amgen, in a late-afternoon conference call with analysts devoted mostly to its quarterly financial results, said it was still studying NIL-A data and had made no firm decisions about the future of the drug.
Stacey Jurchison, a spokeswoman for Guilford, said the drug showed some indications of activity in the human tests and the company would work with Amgen to figure out how to proceed. She noted that Guilford has numerous other drugs in testing. "In the broad scheme of things, NIL-A is a piece of the puzzle of Guilford, but one of many pieces," she said.
Financial analysts suggested that the market was overreacting to the bad news. They noted that Guilford's neuroimmunophilin drugs must be tested at varying doses in numerous diseases before any definitive judgment can be made about their potential. And they pointed out that the startup company, though losing money, is sitting on some $191 million in cash, enough to sustain it through a failure or two. Guilford has one product, to treat brain cancer, on the market and it is testing others.
"I think people panic when they see a product with unsuccessful trial results without thinking about the rest of the pipeline," said Matthew Geller, analyst at CIBC World Markets. "I think even without this compound, the stock was underpriced. And now it's extremely underpriced."
Indeed, the analysts saw the plunge as a prime time to jump into Guilford shares. In a report released this morning, when the market was still trading on speculation, UBS Warburg analyst Andrew Gitkin declared that "for those that can handle the risk, we believe this is a good buying opportunity" for Guilford shares. |
