Gentlemen: I do not own any shares in Guilford, in fact never heard of the Company before today. Just thought you might be interested in Alan Abelson's, Up & Down Wall Street, article that appeared in Barrons today. Hope you are still holding, and the best of luck.
"We mention Mark not only because he's a fine fellow and all that,
as well as a crack investor, but also because in his latest letter
to his partners he offers an extensive analysis of a company called Guilford Pharmaceuticals
We found what he says about Guilford quite interesting, and we
thought you might, too.
Guilford, we should note right off the bat, was one of the underwritings
of the notorious D. Blech & Co. It was floated in the summer
of 1994 at $8 a share. Three months later, Blech went up in smoke
and Guilford fell to $3.
What first attracted Mark to the company at the time was insider
buying. Further, with Blech kaput, it had zero Wall Street following.
A spinoff from another biotech outfit, Scios-Nova, Guilford inherited
a product called Gliadel, for which most of the development necessary
for FDA approval had already been done. And Mark was impressed
by Guilford's founder, Dr. Solomon Snyder, a world-class neuroscientist.
Gliadel, Mark explains, is Guilford's ``low tech, but novel, approach
to treating brain cancer,'' a disease which is often fatal within
a year or two of diagnosis and current treatments for which, including
surgery and systemic chemotherapy with an unpleasant drug called
BCNU, are minimally effective.
Gliadel, in Mark's description, consists of eight dime-size biodegradable
wafers impregnated with BCNU which are deposited directly into
the brain cavity at the time of surgery and release the drug at
a constant rate over several weeks. Besides delivering a 1,000-fold
increase in drug concentration at the tumor site, the formulation
virtually eliminates the side effects that accompany systemic
BCNU therapy.
Since '94, Mark relates, Guilford has recruited 100 employees,
built a manufacturing facility, submitted a New Drug Application
for Gliadel, completed an encouraging second clinical trial of
the drug, won FDA approval for a Treatment IND program, raised
$65 million through two equity offerings and moved ahead on other
projects. Investors responded by lifting the stock to a recent
high of 37 1/2.
``On June 15, 1996,'' Mark reports, ``Guilford experienced two
landmark corporate events. First, Gliadel was reviewed by an external
FDA committee which voted for approval, virtually assuring the
product will be on the market by early 1997. Second, Guilford
established a lucrative marketing partnership for Gliadel and
derivative products with Rhone-Poulenc Rorer, a leading company
in cancer research. Rhone agreed to pay $15 million in up-front
cash, $60 million on regulatory approval, and almost 40% of Gliadel
sales, to Guilford.'' Few strategic alliances between pharmaceutical
and biotech companies, asserts Mark, have been so generous.
What followed was typical Wall Street. The stock slumped to 22
(it closed Friday at 23). In part, the downdraft in the market
as a whole carried it lower. But, in addition, investors were
spooked by the fact that the FDA committee recommended a narrower
product label for Gliadel than anticipated.
Mark shrugs off the label scare, noting that even if the FDA goes
along with the narrower designation suggested by the panel, the
effect will not appreciably limit Gliadel's sales, since the widespread
practice is to use drugs off-label. Some 80% of the sales of Taxol,
Bristol-Myers Squibb's $800 million a year anti-cancer drug, comes
from off-label use.
Gliadel, contends Mark, is ``one of the biotechnology industry's
lowest risk products: shown to be safe and effective; FDA approval
appears highly likely; the target market is unsatisfied and price
insensitive; and no competitive products loom on the horizon.''
Follow-on products from Gliadel have shown great promise, he continues.
And the company is developing small-molecule, orally-administered
drugs called ``neuroimmunophilins'' that might someday be useful
in treating Alzheimer's, Parkinson's and other diseases.
Guilford, Mark concludes, is ``arguably as undervalued today as
it was when we first purchased the shares.''" |
