Blockbuster Deal With Amgen
Causes Guilford Shares to Leap
Dow Jones Newswires
BALTIMORE -- Shares of Guilford Pharmaceuticals
Inc. surged Thursday after the company licensed to
Amgen Inc. the world-wide rights to a group of
compounds that hold promise in promoting nerve
regeneration and repair. The deal could be worth
$440.5 million to the smaller company.
The compounds, a class of neurotrophic agents known
as FKBP-neuroimmunophilin ligands, eventually could
be used to treat and repair nerves destroyed by
degenerative disorders of the nervous system such as
Alzheimer's disease and Parkinson's disease.
Analysts said it was the biggest licensing deal ever in the
biotechnology industry.
In early afternoon trading on the Nasdaq Stock Market,
Guilford's shares jumped $4.75, or 19%, to $30. More
than 2.27 million shares have changed hands, compared
with average daily volume of 125,300 shares.
Amgen's shares rose 50 cents to $52.875 on Nasdaq
volume of 3.58 million shares. Average daily volume is
4.3 million shares.
Unlike earlier forms of nerve-regenerating substances,
called neurotrophic factors, which must be injected
directly into the brain because of their large size,
Guilford's drug candidates are "small molecules" that can
be given orally and slip easily from the bloodstream into
the brain. And the much smaller Guilford compounds
seem to selectively target damaged nerve cells, while
leaving normal nerve cells alone, a characteristic
suggesting they might have fewer side effects than the
earlier generation of drugs.
"This is a blockbuster deal from the size and the
potential of the product," said Oppenheimer & Co.
analyst Matthew Geller, adding the deal will represent
the most exciting part of Amgen's research pipeline.
He described the Amgen-Guilford pact as "the biggest
licensing deal in biotech history by $100 million or
more."
Under the terms of the agreement, Amgen will pay the
Baltimore, Md., biotechnology company $35 million
upon the completion of the deal in the form of $15
million in cash, $15 million for the purchase of Guilford
equity and a $5 million purchase of 700,000 warrants
exercisable at 150% of the purchase price.
Amgen will also pay for all clinical development and
manufacturing, and will market the resulting drugs
worldwide. In addition, Amgen will pay Guilford $13.5
million over three years to support research in the
neuroimmunophilin program.
Under the most lucrative part of the deal, Amgen could
pay Guilford $392 million in so-called milestone
payments if the drugs are ultimately successful in treating
10 diseases. Milestone payments are paid after certain
achievements have been reached, such as a successful
round of testing or approval from the U.S. Food and
Drug Administration.
Diseases that could be treated with the drugs include
Parkinson's disease, Alzheimer's disease, stroke,
peripheral neuropathies, traumatic brain injuries,
traumatic spinal cord injuries, multiple sclerosis and
three non-neurological applications.
Taken together, the rights payments, the research
payments and the potential milestone payments indicate
the deal could be worth $440.5 million. Guilford had
revenues of just $28 million last year. It posted a loss of
$11 million for the first half of 1997.
"On the face of it, it looks like a spectacular deal from
Guilford's point of view," said Hambrecht & Quist Inc.
analyst Alex Zisson.
He said that Amgen represents what could be
considered an ideal partner in such a venture because
the Thousand Oaks, Calif., biotechnology company is
flush with cash, doesn't have much else in its product
pipeline and is experiencing slowing product sales.
As a result, Amgen has a big incentive to "spend quickly
and aggressively to move these products as quickly as
possible in as many indications as possible," Mr. Zisson
said.
However, considering Amgen's perspective, Rodman &
Renshaw Inc. analyst James Keeney was less
enthusiastic.
"It gives (Amgen) favorable publicity, but it really
doesn't solve their near-term problem, which is boosting
sales and earnings growth," he said. "Licensing deals for
far-out new-product possibilities just doesn't do it."
In addition, Guilford will get royalties on product sales
and has the option to conduct early -- and interim --
stage clinical development of one product in one
indication. It also may co-promote one product in the
U.S., with Amgen paying certain costs.
The warrants, if exercised, would add $25 million to
Amgen's equity investment in Guilford. The $15 million
already invested in Guilford represents a 3% stake, an
Amgen spokesman said.
Guilford's first product, a wafer-like device implanted in
the brain that dissolves to distribute chemotherapy to
fight cancer, was cleared for sale last year.
Last week, Amgen revealed in a filing with the U.S.
Securities and Exchange Commission that it was no
longer comfortable with Wall Street earnings
expectations because of an expected slowdown in sales
of its Epogen and Neupogen blood-cell boosting drugs
for the rest of the year. |
