Minnesota biotech buying Guilford Pharmaceuticals in $177.5 million deal
Thursday July 21, 1:01 pm ET
Guilford Pharmaceuticals Inc., one of Baltimore's largest biotechnology companies, said Thursday morning that it plans to sell to Minnesota-based MGI Pharma Inc. in a cash and stock deal worth about $177.5 million.
The transaction will bolster MGI's portfolio of cancer-treatment drugs focused on the acute-care market. Guilford's pipeline includes two cancer-related products: Gliadel is a small, dissolvable wafer that contains chemotherapy treatment for brain tumors; Aquavan, which remains in clinical trials, is a sedative that could be used in outpatient procedures.
The acquisition also marks a turning point for one of Greater Baltimore's cornerstone bio companies. Dean Mitchell, CEO of publicly held Guilford, said during a Thursday morning conference call with analysts that the company's board wanted Guilford to continue to go it alone in its quest to shepherd new drugs through the government's lengthy and expensive regulatory process.
But such a move would have required Guilford to raise more money, diluting shareholder value, Mitchell said. The union with MGI means Guilford can spread its risk across a broad product portfolio, while creating a newly "vibrant, rapidly growing biopharmaceutical company, which will continue to have a major presence in Baltimore."
"We were very cognizant of the fact that [remaining a standalone company] was going to require significant dilution to unlock the value of the portfolio," Mitchell said. "We felt this was a much better risk-return profile for our shareholders."
Reaction from analysts on the conference call seemed mixed. Several who follow Bloomington, Minn.-based MGI Pharma Inc. questioned the potential of Aquavan given Guilford's need to halt Phase III clinical trials of the drug in March because of high dosage levels. Others wondered how successful MGI would be finding a buyer for Aggrastat, a drug Guilford acquired in 2003 for $84 million but decided in April it would try to sell.
Mitchell, a 17-year Big Pharma veteran, was hired by Guilford late last year to move the company from a money-losing, research-focused one to a profitable company with drugs on the market. In a Baltimore Business Journal interview in February, he pronounced the company "too diverse" in its efforts and said a greater focus was needed to maximize the commercial value of its research efforts.
MGI Pharma CEO Lonnie Moulder said the deal will bring valuable "synergies" to both companies that will please shareholders. He predicted MGI's sales could exceed $1 billion in five years.
Shares of Guilford stock (Nasdaq: GLFD - News) closed at $2.41 per share July 20. MGI plans to pay $3.75 for each of Guilford's more than 46.5 million outstanding shares.
Guilford, which is not profitable, has shown signs of financial troubles lately. The public company said in May that it was laying off about 40 employees as part of a plan to save $6 million.
Guilford, which had revenues of $47.9 million in 2004, employs about 240 people.
Published July 21, 2005 by the Baltimore Business Journal |
