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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 0-23736
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GUILFORD PHARMACEUTICALS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1841960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
(410) 631-6300
(Address and telephone number of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
TITLE OF CLASS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 16, 1999, the aggregate value of the approximately 19,415,293
shares of common stock of the Registrant issued and outstanding on such date,
excluding approximately 2,236,389 shares held by all affiliates of the
Registrant, was approximately $182,525,855. This figure is based on the closing
sales price of $10.625 per share of the Registrant's common stock as reported on
the Nasdaq(R) National Market on March 16, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:
Portions of the 1998 Annual Report to Stockholders are incorporated by
reference into Part II. Portions of the Notice of Annual Meeting and Proxy
Statement to be filed no later than 120 days following December 31, 1998 are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Guilford Pharmaceuticals Inc. (together with its subsidiaries, "Guilford"
or the "Company") is a biopharmaceutical company engaged in the development and
commercialization of novel products in two principal areas: (i) targeted and
controlled drug delivery systems using proprietary biodegradable polymers for
the treatment of cancer and other diseases; and (ii) therapeutic and diagnostic
products for neurological diseases and conditions.
DRUG DELIVERY BUSINESS
The Company's first product in its drug delivery business is GLIADEL(R)
wafer ("GLIADEL"), a novel treatment for glioblastoma multiforme, the most
common and rapidly fatal form of brain cancer. GLIADEL was cleared for marketing
by the U.S. Food and Drug Administration ("FDA") in September 1996 for use as an
adjunct to surgery to prolong survival in patients with recurrent glioblastoma
multiforme for whom surgical resection is indicated. GLIADEL was commercially
launched in the United States in February 1997 by the Company's worldwide
marketing partner (except for Scandinavia and Japan), Rhone-Poulenc Rorer
Pharmaceuticals, Inc. (together with its parent company, Rhone-Poulenc Rorer,
Inc., "RPR").
In 1998, RPR obtained regulatory approval (i.e., health authority approval)
for GLIADEL in France, Canada, Argentina, Brazil, South Korea, Israel, Singapore
and Uruguay. In certain of these countries, including Canada and France,
regulatory approval for GLIADEL is the first of several steps, including
regulatory review and approval of RPR's intended pricing, needed to market and
sell GLIADEL in those countries. RPR has informed the Company that it has
applied for regulatory clearance for GLIADEL in several other countries,
including Chile, Ecuador, Hong Kong, Indonesia, Malaysia, New Zealand, Peru, the
Philippines, South Africa, Taiwan, and Thailand, and is preparing to make
filings in other countries.
Regulatory approval for GLIADEL in France has provided the basis for a
European-wide filing for GLIADEL under a mutual recognition procedure. Under
this procedure, other European regulatory agencies are reviewing the GLIADEL
dossier. RPR has informed the Company that it has filed in Germany, the United
Kingdom, Italy, Spain, Austria, Luxembourg, Greece, Portugal, Ireland, and
Belgium under this mutual recognition procedure. RPR has also filed for
regulatory approval in Australia. Furthermore, the regulatory approval for
GLIADEL in Canada covers use in both initial and recurrent surgeries for
glioblastoma multiforme, the first such expanded approval for GLIADEL in any
country.
Pursuant to the terms of the Company's sales, marketing and distribution
rights agreement with RPR, the Company is eligible for certain non-recurring
milestone payments from RPR if and when
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RPR obtains all the required approvals in certain foreign countries needed to
sell GLIADEL for the recurrent indication in those countries, as follows:
MILESTONE FOR
COUNTRY RECURRENT INDICATION
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France...................................................... $2.5 million
Canada...................................................... $2.0 million
Germany..................................................... $2.0 million
Italy....................................................... $1.5 million
Spain....................................................... $1.0 million
United Kingdom.............................................. $1.0 million
Australia................................................... $1.0 million
Except with respect to Canada, a second milestone payment equal in amount
to that set forth above is payable for each of these countries if and when RPR
obtains all the required approvals needed to sell GLIADEL for the first surgery
indication in that particular country.
The Company and RPR are also working together to expand the label used with
GLIADEL in other countries, including the United States, to cover use of GLIADEL
for malignant glioma, a broader category of brain cancer which includes
glioblastoma multiforme, at the time of initial surgery. In this regard the
Company and RPR commenced patient enrollment in December 1997 in a multi-center,
placebo-controlled, Phase III clinical trial for GLIADEL at 42 clinical sites in
Europe, the United States and Israel in patients undergoing initial surgery for
malignant glioma. RPR has informed the Company that as of March 1, 1999, patient
enrollment in this study exceeded 70% of the anticipated total participation.
The Company's collaboration with RPR also contemplates further development
of a high-dose formulation of GLIADEL. In this regard the Company and RPR
commenced a Phase I dose-escalation clinical trial in October 1996 for a
high-dose formulation of GLIADEL using varying concentrations of BCNU, the
anti-cancer agent in GLIADEL. These levels have ranged from 6.5% up to 28% in
contrast to the 3.85% BCNU concentration contained in the currently marketed
formulation of GLIADEL.
Under its sales, marketing and distribution rights agreement with RPR, the
Company is eligible to receive up to an aggregate of $35 million in milestone
and equity payments from RPR in the event that RPR is able to achieve certain
specified international marketing clearances and to expand the label used to
market GLIADEL in the United States to first surgery patients.
The Company is also working to broaden its line of polymer-based oncology
products through the use of other chemotherapeutic agents, different polymer
systems and various formulations. The Company's first potential product
candidate in this program is a controlled release formulation of the
chemotherapeutic agent, paclitaxel (Taxol(R)), for peritoneal administration to
patients with ovarian cancer. In this formulation, the paclitaxel is delivered
via a proprietary biodegradable polyphosphoester ("PPE") polymer exclusively
developed in collaboration with scientists at The Johns Hopkins University
("Johns Hopkins"). While the Company is initially targeting this product
candidate for the treatment of ovarian cancer, other cancers that may be
suitable for this type of local targeted therapeutic approach include tumors of
the prostate, head and neck, breast, liver or lung.
NEUROLOGICAL PRODUCTS PROGRAM
In Guilford's neurological programs, the Company is developing neurotrophic
(i.e., nerve regenerative) and neuroprotectant small molecules as potential
treatments for a range of
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neurodegenerative diseases and conditions such as Parkinson's disease,
Alzheimer's disease, stroke, ALS, multiple sclerosis, spinal cord injury and
peripheral neuropathies. The Company is also continuing its efforts to seek a
way to continue to develop its DOPASCAN(R) Injection ("DOPASCAN") imaging agent
for the diagnosis and monitoring of Parkinson's disease. In addition, the
Company is researching small molecule therapeutics for cocaine and possibly
other addictive behaviors.
Neurotrophic Program
The Company's neurotrophic program originated from observations first made
in the laboratory of Dr. Solomon Snyder, Director of the Department of
Neuroscience at Johns Hopkins, that certain intracellular proteins, known as
"immunophilins", which are targets of immunosuppressant drugs such as FK 506,
are enriched 10-40 fold in certain areas of the central nervous system. The
Johns Hopkins scientists went on to discover that commonly used
immunosuppressive drugs can promote nerve growth. The Company has exclusively
licensed rights to U.S. patent applications relating to the neurotrophic effects
of certain immunosuppressant drugs and other immunophilin ligands from Johns
Hopkins. Guilford scientists, together with their academic collaborators,
further demonstrated that the pathway leading to nerve regeneration could be
separated from the immunosuppressant pathway. Guilford scientists have
synthesized a large number of proprietary small molecules, called
"neuroimmunophilin ligands", a number of which in vitro and in vivo data show
are neurotrophic without being immunosuppressive, orally-bioavailable and able
to cross the blood-brain barrier.
In August 1997, the Company entered into a collaboration with Amgen Inc. to
research, develop and commercialize a broad class of neuroimmunophilin ligands,
referred to as FKBP neuroimmunophilin ligands, as well as any other compounds
that may result from the collaboration, for all human therapeutic and diagnostic
applications. Amgen initially paid the Company a one time, non-refundable
signing fee of $15 million in 1997 and invested an additional $20 million in the
Company in exchange for 640,095 shares of the Company's common stock and
five-year warrants to purchase up to an additional 700,000 shares of the
Company's common stock at an exercise price of $35.15 per share.
As part of this collaboration, Amgen agreed to fund up to a total of $13.5
million to support research at the Company relating to the FKBP
neuroimmunophilin ligand technology. This research funding began on October 1,
1997 and is payable quarterly over three years. Amgen also has the option to
fund a fourth year of research, or under certain conditions, to terminate the
research program after two years.
If Amgen achieves certain specified development objectives in each of ten
different clinical indications, Amgen has agreed to pay to the Company up to a
total of $392 million in milestone payments. The Company will receive royalties
on any future sales of products resulting from the collaboration. Drug
development is a risky endeavor, however, and Amgen may not succeed in
developing any FKBP neuroimmunophilin compound into a safe and effective drug
that will be cleared by the FDA or foreign health regulatory authorities for
neurological or other uses. Consequently, Guilford may not earn any of the
milestone payments related to such development activities or any royalties.
During 1998, Guilford and Amgen worked to optimize their second-generation
lead FKBP neuroimmunohpilin compound, called "NIL-A", which the companies are
initially developing for the treatment of Parkinson's disease. In 1998, Amgen
completed a one-month Good Laboratory Practice (GLP) study of NIL-A, the
initiation of which triggered a one-time, non-refundable milestone payment to
Guilford of $1 million under the collaboration agreement.
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In September 1998, Amgen presented data at a conference sponsored by the
Cambridge Healthcare Institute on acute neuronal injury, which supports the
potential use of FKBP neuroimmunophilin ligands as disease-modifying agents of
Parkinson's disease. Amgen also reported enhanced oral bioavailability and
potency of NIL-A as compared to GPI-1046, Guilford's first generation, prototype
FKBP neuroimmunophilin ligand. In addition at the 28th Annual Society for
Neuroscience meeting held in October 1998, the Company presented data on
GPI-1046 suggesting that it can protect the optic nerve in an animal model of
optic nerve damage.
Neuroprotectant Program
In Guilford's neuroprotectant program, Guilford scientists are developing
novel compounds to protect brain cells from ischemia (that is, the lack of
oxygen delivery from reduced blood flow) and other disorders caused by massive
release of excitatory amino acid neurotransmitters such as glutamate. The
Company is exploring three distinct intervention points in a biochemical pathway
that can lead to neuronal damage: (i) pre-synaptic inhibition of glutamate
release by inhibiting the enzyme, N-acetylated alpha-linked acidic dipeptidase
("NAALADase"); (ii) post-synaptic inhibition of the enzyme, poly(ADP-ribose)
polymerase ("PARP"); and (iii) post-synaptic inhibition of nitric oxide via
inhibition of the enzyme, nitric oxide synthase ("NOS").
Guilford's researchers have shown that Guilford's NAALADase inhibitors can
protect against neurodegeneration in several in vitro and in vivo pre-clinical
models. Guilford scientists have shown that several of Guilford's prototype
NAALADase inhibitors can be neuroprotective in rat models of stroke involving
transient focal ischemia, when administered both before and after the ischemia.
Guilford's NAALADase inhibitors provided significant neuroprotective effects
when administered up to 6 hours following initiation of the transient ischemic
damage in this rat model of stroke. In addition to Guilford's work in models of
stroke, Guilford scientists are studying the use of these NAALADase inhibitors
in other potential therapeutic areas, including models of spinal cord injury,
Parkinson's disease, peripheral neuropathies, pain and prostate cancer.
Data gathered on the Company's prototype PARP inhibitor, have shown that
this compound can reduce the volume of brain damage in a pre-clinical model of
stroke. In addition to Guilford's work in models of stroke, Guilford scientists
are studying the use of PARP inhibitors in other potential therapeutic areas,
including models of myocardial ischemia, traumatic head and spinal cord
injuries, Alzheimer's disease, septic shock and arthritis.
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Readers should note that any statements made by the Company in this annual
report that are forward looking are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. In addition to
historical information, this annual report contains forward-looking statements
which reflect the Company's current expectations regarding future results of
operations, economic performance, and financial condition as well as other
matters that may affect the Company's business. In general, such forward-looking
statements are introduced by words such as "anticipates", "believes",
"estimates", "expects" and similar expressions. While these statements reflect
the Company's current plans and expectations and are based on information
currently available to the Company, Guilford may nevertheless not be able to
successfully implement these plans and the Company's expectations may not be
realized in whole or in part in the future. The forward-looking statements
contained in this annual report may cover, but are not necessarily limited to,
the following topics: (i) Company efforts in conjunction with RPR to obtain
international regulatory clearances to market and sell GLIADEL and to increase
end-user sales of the product; (ii) Company efforts in conjunction with RPR to
expand the labeled uses for GLIADEL; (iii) Company efforts to develop polymer
product line extensions and new polymer products; (iv) the conduct and
completion of research programs related to the Company's FKBP neuroimmunophilin
ligand, NAALADase inhibition and PARP inhibition and other technologies; (v)
clinical development activities, including commencing and conducting clinical
trials related to the Company's polymer-based drug delivery products and product
candidates (including GLIADEL), and pharmaceutical product candidates (including
NIL-A and any other lead compounds in the FKBP neuroimmunophilin ligand program,
and any lead compounds in the NAALADase and PARP programs, and DOPASCAN); (vi)
Company strategic plans; (vii) anticipated expenditures and the potential need
for additional funds; and (viii) implementation of solutions to the Year 2000
issue, all of which involve significant risks and uncertainties. The Company
wishes to caution readers that the Company's actual results may differ
significantly from the results discussed in the forward-looking statements, and
readers should not unduly rely on them. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in the
"Risk Factors" section of this annual report and elsewhere in this annual
report. In addition, any forward-looking statement the Company makes is intended
to speak only as of the date on which it is made, and the Company will not
update any forward-looking statement to reflect events or circumstances that
occur after the date on which such statement is made.
* * * * *
GLIADEL(R) and DOPASCAN(R) are registered trademarks of the Company.
Taxol(R) is a registered trademark of Bristol-Myers Squibb Company.
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PRODUCT AND DEVELOPMENT PROGRAMS
The following table summarizes the current status of the Company's product,
product candidates and research programs:
PROGRAM/ PRODUCT CANDIDATES DISEASE INDICATIONS/ CONDITIONS STATUS (1) CORPORATE PARTNER
DRUG DELIVERY BUSINESS
GLIADEL (3.85% BCNU) Recurrent glioblastoma Market RPR (2); Orion Corporation
multiforme Pharma (3)
Malignant glioma at time of Phase III RPR (2); Orion Corporation
initial surgery Pharma (3)
GLIADEL High-Dose (up to 28% Malignant glioma Phase I/II RPR (2); Orion Corporation
BCNU) Pharma (3)(4)
PACLIMER(TM) (paclitaxel in Ovarian, prostate, head & neck, Pre-clinical --
PPE microspheres) lung, and breast cancers
NEUROLOGICAL PRODUCTS
PROGRAM
NEUROTROPHIC DRUGS
Neuroimmunophilin ligands Parkinson's disease Pre-clinical Amgen
Other nerve growth and repair Pre-clinical Amgen
indications (Alzheimer's
disease, traumatic brain
injury, traumatic spinal cord
injury, multiple sclerosis,
neuropathy, stroke and others)
NEUROPROTECTIVE DRUGS
NAALADase inhibitors Stroke, head trauma, ALS, Pre-clinical --
Parkinson's disease, and
peripheral neuropathies
PARP inhibitors Stroke, cardiac ischemia, Research --
septic shock
NOS inhibitors Stroke, head trauma Research --
DIAGNOSTIC IMAGING AGENT
DOPASCAN Imaging agent to diagnose and Phase II Daiichi Radioisotope
monitor Parkinson's disease Laboratories, Ltd. (5)
ADDICTION THERAPEUTICS
Dopamine transporter ligand Cocaine addiction Research --
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(1) "Research" includes initial research related to specific molecular targets,
synthesis of new chemical entities, and assay development for the
identification of lead compounds. "Pre-clinical" includes testing of lead
compounds in vitro and in animal models, pharmacology and toxicology
testing, product formulation and process development prior to the
commencement of clinical trials.
(2) RPR is the Company's corporate partner for GLIADEL throughout the world,
excluding Scandinavia and Japan.
(3) Orion Corporation Pharma (formerly Orion Corporation Farmos) is the
Company's corporate partner for GLIADEL in Scandinavia.
(4) Orion Corporation Pharma has certain rights of first refusal for a high-dose
GLIADEL product in Scandinavia.
(5) Daiichi Radioisotope Laboratories, Ltd. is the Company's corporate partner
for DOPASCAN in Japan, Korea and Taiwan.
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The Company's effort to develop and commercialize GLIADEL and its product
candidates are subject to numerous risks and uncertainties. Certain of these
risks are set forth under the section herein captioned "Risk Factors" and
elsewhere in this annual report.
DRUG DELIVERY BUSINESS
The Company's drug delivery business involves the use of biodegradable
polymers for targeted and controlled drug delivery of chemotherapeutic drugs to
treat cancer. Delivering high drug concentrations locally for a sustained period
of time may increase the efficacy of chemotherapy in slowing tumor growth and/or
reducing tumor mass and may decrease the side effects associated with systemic
drug administration. Guilford has developed expertise in the discovery, clinical
development and manufacturing of polymer-based drug delivery products.
GLIADEL(R) Wafer
The Company's first product in its drug delivery business is GLIADEL, a
novel treatment for glioblastoma multiforme, the most common and rapidly fatal
form of primary brain cancer. GLIADEL is a proprietary biodegradable polymer
which contains the cancer chemotherapeutic drug BCNU (carmustine). Up to eight
GLIADEL wafers are implanted in the cavity created when a neurosurgeon removes a
brain tumor. The wafers gradually erode from the surface and deliver BCNU
directly to the tumor site in high concentrations for an extended period of time
without exposing the rest of the body to the toxic side effects of BCNU. GLIADEL
is used to complement surgery, radiation therapy and systemic intravenous
chemotherapy in patients with recurrent glioblastoma multiforme. The
availability of GLIADEL gives physicians an additional treatment option for this
rapidly fatal disease.
The Company entered into a series of agreements with RPR in June 1996.
These agreements currently grant RPR worldwide rights (excluding Scandinavia and
Japan) to market, sell and distribute GLIADEL. During 1996, RPR paid Guilford
$27.5 million in milestone payments, purchased $7.5 million of the Company's
common stock, and extended to the Company a line of credit for up to $7.5
million to support future expansion of the Company's GLIADEL and other polymer
manufacturing capacity. Under these agreements, RPR pays to Guilford a combined
transfer price and royalty of between 35% and 40% on RPR's net sales of GLIADEL
to end-users.
For 1998, the Company's revenues related to the sales and distribution of
GLIADEL were $6.5 million. Of this amount, $3.9 million was paid as a transfer
price on units sold to RPR and to Orion Corporation Pharma (the Company's
marketing partner in Scandinavia) and $2.6 million was paid as royalties on RPR
sales to hospitals and other end-users. In addition, under its agreements with
RPR, the Company is eligible for additional milestone payments totaling up to
$35 million (including $7.5 million in the form of an equity investment) if
Guilford and RPR achieve certain regulatory objectives. These objectives include
expanding the labeling in the United States to include the use of GLIADEL at the
time of initial surgery as well as obtaining specified international regulatory
approvals to market and sell GLIADEL. Guilford does not control the timing and
extent of any future regulatory approvals for GLIADEL, and thus the Company may
not receive any or all of these payments. Whether any or all of such regulatory
objectives will be attained remains uncertain. The Company pays a royalty to
Massachusetts Institute of Technology on sales of GLIADEL pursuant to the
license agreement under which the Company acquired the underlying technology for
this product.
On September 23, 1996 the FDA cleared the New Drug Application ("NDA") for
GLIADEL for use as an adjunct to surgery to prolong survival in patients with
recurrent glioblastoma multiforme for whom surgery is indicated. RPR
commercially launched GLIADEL in the United States in
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February 1997. In 1998, RPR obtained regulatory approval for GLIADEL in France,
Canada, Argentina, Brazil, South Korea, Israel, Singapore and Uruguay. In
certain of these countries, including Canada and France, regulatory approval for
GLIADEL is the first of several steps, including regulatory review and approval
of RPR's intended pricing, needed to market and sell GLIADEL in those countries.
RPR has informed the Company that it has applied for regulatory clearance for
GLIADEL in several other countries, including Chile, Ecuador, Hong Kong,
Indonesia, Malaysia, New Zealand, Peru, the Philippines, South Africa, Taiwan,
and Thailand, and is preparing to make filings in other countries.
Regulatory approval for GLIADEL in France has provided the basis for a
European-wide filing for GLIADEL under a mutual recognition procedure. Under
this procedure other European regulatory agencies are reviewing the GLIADEL
dossier. RPR has informed the Company that it has filed in Germany, the United
Kingdom, Italy, Spain, Austria, Luxembourg, Greece, Portugal, Ireland, and
Belgium under this mutual recognition procedure. RPR has also filed for
regulatory approval in Australia. Furthermore, the regulatory approval for
GLIADEL in Canada covers use in both initial and recurrent surgeries for
glioblastoma multiforme, the first such expanded approval for GLIADEL in any
country.
Pursuant to the terms of the Company's sales, marketing and distribution
rights agreement with RPR, the Company is eligible for certain non-recurring
milestone payments from RPR if and when RPR obtains all the required approvals
in certain foreign countries needed to sell GLIADEL for the recurrent indication
in those countries, as follows:
MILESTONE FOR
COUNTRY RECURRENT INDICATION
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France...................................................... $2.5 million
Canada...................................................... $2.0 million
Germany..................................................... $2.0 million
Italy....................................................... $1.5 million
Spain....................................................... $1.0 million
United Kingdom.............................................. $1.0 million
Australia................................................... $1.0 million
Except with respect to Canada, a second milestone payment equal in amount
to that set forth above is payable for each of these countries if and when RPR
obtains all the required approvals needed to sell GLIADEL for the first surgery
indication in that particular country.
The Company and RPR are also working together to expand the labeling for
GLIADEL in other countries, including the United States, to cover use of GLIADEL
for malignant glioma, a broader category of brain cancer which includes
glioblastoma multiforme, at the time of initial surgery. In this regard the
Company and RPR commenced patient enrollment in December 1997 in a multi-center,
Phase III clinical trial for GLIADEL at 42 clinical sites in Europe, the United
States and Israel in patients undergoing initial surgery for malignant glioma.
RPR has informed the Company that as of March 1, 1999, patient enrollment in
this study exceeded 70% of the anticipated total participation.
The Company's collaboration with RPR also contemplates further development
of a high-dose formulation of GLIADEL. In this regard the Company and RPR
commenced a Phase I dose-escalation clinical trial in October 1996 for a
high-dose formulation of GLIADEL using varying concentrations of BCNU, the
anti-cancer agent in GLIADEL. These levels have ranged from 6.5% up to 28% in
contrast to the 3.85% BCNU concentration contained in the currently marketed
formulation of GLIADEL.
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Under its sales, marketing and distribution rights agreement with RPR, the
Company is eligible to receive up to an aggregate of $35 million in milestone
and equity payments from RPR in the event that RPR is able to achieve certain
specified international marketing clearances and to expand the label used to
market GLIADEL in the United States to first surgery patients.
The Company entered into its agreement with Orion Corporation Pharma, a
major Scandinavian health care company, for the sales, marketing and
distribution of GLIADEL in Scandinavia in October 1995. Under this agreement,
Orion Corporation Pharma purchases GLIADEL from Guilford on an exclusive basis
for sale in Scandinavia. Orion Corporation Pharma commenced sales of GLIADEL in
Scandinavia in 1997 on a named hospital basis.
Future sales of GLIADEL are subject to certain risks and uncertainties. A
number of these risks are discussed in detail in the section of this Annual
Report entitled "Risks Factors" below. These risks include the following, among
others. RPR is not obligated to purchase any minimum amounts of GLIADEL from the
Company, and so the Company's revenues from GLIADEL are entirely dependent on
the level of RPR's sales to end-users. RPR may not be successful in its efforts
to market and sell GLIADEL. Neurosurgeons and their patients may not accept
GLIADEL for a number of reasons, including the fact that GLIADEL represents a
new and unfamiliar approach to the treatment of brain cancer and their
assessment that benefits of this therapy do not outweigh its costs. RPR may not
be successful in its attempts to obtain any additional regulatory and marketing
approvals to market GLIADEL, including approvals in France and/or Canada to sell
GLIADEL at acceptable prices. BCNU, the chemotherapeutic agent used in GLIADEL,
is currently only available from two suppliers, and thus this material may not
be available for GLIADEL manufacture. The Company's current manufacturing plant
for GLIADEL and a recently completed second facility are both located in the
same building at the Company's headquarters in Baltimore, Maryland, and thus are
subject to the risk that natural disasters or other factors may adversely affect
their operation and interrupt GLIADEL manufacture.
Other Polymer-Based Drug Delivery Products. The Company is working to
broaden its line of polymer-based products to include drug delivery products for
the treatment of tumors outside the central nervous system. Other cancers that
may be suitable for this type of targeted therapeutic approach include tumors of
the prostate, ovaries, head and neck, breast, esophagus, liver, pancreas, lung
and colon. The Company's first product candidate in this program is a controlled
release formulation of the chemotherapeutic agent, paclitaxel (Taxol(R)), for
peritoneal administration in patients with ovarian cancer. In this formulation
paclitaxel is delivered via a PPE polymer. In July 1996, the Company entered
into a license agreement with Johns Hopkins relating to two U.S. patents
covering PPE polymers and has licensed additional PPE patent applications from
Johns Hopkins.
NEUROLOGICAL PRODUCTS PROGRAM
Neurotrophic Drugs
Guilford, together with its corporate partner, Amgen, is developing small
molecule, orally-bioavailable compounds to promote nerve growth and repair
(neurotrophic agents) for the treatment of neurological disorders. The
degeneration or damage of nerve cells in the brain and peripheral neurons
resulting from certain diseases and conditions causes a loss of either central
nervous system function (e.g., Alzheimer's disease, Parkinson's disease,
multiple sclerosis, spinal cord injury and stroke) or peripheral nerve function
(e.g., diabetic neuropathy and other peripheral neuropathies). Under normal
circumstances, damaged nerves have limited ability to regrow or otherwise
recover, which poses a major obstacle for the treatment of these conditions.
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In 1990, scientists at Johns Hopkins led by Dr. Solomon H. Snyder
discovered that an intracellular binding protein for commonly used
immunosuppressive agents such as tacrolimus (FK 506), was concentrated 10 to 40
fold higher in certain areas of the brain than in the immune system. The Johns
Hopkins scientists went on to discover that commonly used immunosuppressive
drugs can promote nerve growth. Guilford has exclusively licensed from Johns
Hopkins U.S. patent applications relating to these discoveries. Guilford
scientists, together with their academic collaborators, further discovered that
the mechanism of nerve growth promotion is independent of the mechanism
responsible for immunosuppression, and this mechanism for the promotion of nerve
growth is mediated by binding to the major neuroimmunophilin in the brain.
Based on these discoveries, the Company has synthesized a large number of
proprietary small molecule neuroimmunophilin ligands in several distinct
chemical series that promote nerve growth and/or repair without being
immunosuppressive. The Company has filed a number of patent applications in the
United States and internationally relating to both novel compositions and
methods of treating neurological disorders utilizing these compounds. These
compounds induce nerve growth directly, as well as potentiate nerve growth in
the presence of nerve growth factors.
Company data indicate that a number of the Company's neuroimmunophilin
ligands can produce nerve regeneration following multiple routes of
administration, including in certain cases oral administration. Further, Company
scientists have shown that certain of these neuroimmunophilin ligands are able
to cross the blood-brain barrier, while many naturally-occurring nerve growth
factors, proteins and peptides are not orally-bioavailable and do not cross the
blood-brain barrier. Several of the Company's neuroimmunophilin ligand compounds
have shown neurotrophic effects in a range of different types of neurons such as
dopaminergic, cholinergic, serotonergic and sensory neurons, and therefore could
be useful in a range of disorders, potentially including certain neurological
disorders such as Parkinson's disease and Alzheimer's disease. In addition,
certain of the Company's neuroimmunophilin ligand compounds may have application
in certain non-neurological diseases and conditions.
In August 1997, the Company entered into a collaboration with Amgen to
research, develop and commercialize a broad class of neuroimmunophilin ligands,
referred to as FKBP neuroimmunophilin ligands, as well as any other compounds
that may result from the collaboration, for all human therapeutic and diagnostic
applications. Amgen initially paid the Company a one time, non-refundable
signing fee of $15 million in 1997 and invested an additional $20 million in the
Company in exchange for 640,095 shares of the Company's common stock and
five-year warrants to purchase up to an additional 700,000 shares of Company
common stock at an exercise price of $35.15 per share. In connection with the
sale of these securities, the Company granted Amgen certain demand and
"piggyback" registration rights under applicable securities laws.
As part of this collaboration, Amgen agreed to fund up to a total of $13.5
million to support research at the Company relating to the FKBP
neuroimmunophilin ligand technology. This research funding began on October 1,
1997 and is payable quarterly over three years. Amgen also has the option to
fund a fourth year of research, or under certain conditions, to terminate the
research program after two years.
If Amgen achieves certain specified development objectives in each of ten
different clinical indications, seven of which are neurological (i.e.,
Parkinson's disease, Alzheimer's disease, traumatic brain injury, traumatic
spinal cord injury, multiple sclerosis, neuropathy and stroke) and three of
which are non-neurological, Amgen has agreed to pay to the Company up to a total
of $392 million in milestone payments. Readers should be cautioned, however,
that it is unlikely that Amgen will be able to successfully develop FKBP
neuroimmunophilin ligand products for all ten of these indications.
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The Company will receive royalties on any future sales of products
resulting from the collaboration. Amgen has agreed to fund, develop and
commercialize the FKBP neuroimmunophilin ligand technology. Under limited
circumstances, Guilford has the option to conduct certain Phase I and Phase II
clinical trials on one product candidate and has the right to co-promote in the
United States one product resulting from the collaboration. Subject to its
obligation to fund two years of research at Guilford, Amgen has the right to
discontinue all of its development and commercialization activities under the
collaboration at any time.
During 1998, Guilford and Amgen worked to optimize their second-generation,
lead FKBP neuroimmunohpilin compound, called "NIL-A", which the companies are
initially developing for the treatment of Parkinson's disease. In 1998, Amgen
completed a one-month Good Laboratory Practice (GLP) study of NIL-A, the
initiation of which triggered a one-time, non-refundable milestone payment to
Guilford of $1 million.
In September 1998, Amgen presented data at a conference sponsored by the
Cambridge Healthcare Institute on acute neuronal injury which supports the
potential use of FKBP neuroimmunophilin ligands as disease modifying agents of
Parkinson's disease. Amgen also reported enhanced oral bioavailability and
potency of NIL-A as compared to GPI-1046, Guilford's first generation, prototype
FKBP neuroimmunophilin ligand. Amgen also noted that pharmacokinetic studies of
NIL-A in small animals and primates evidenced a longer half life and increased
absorption compared to GPI-1046. These new data provided additional support for
Amgen's selection of NIL-A as the lead FKBP neuroimmunophilin clinical compound.
In addition, at the 28th Annual Society for Neuroscience meeting held in
October 1998, the Company presented data on GPI-1046 suggesting that it can
protect the optic nerve in an animal model of optic nerve damage. In this study,
researchers completely severed the optic nerves of adult rats and gave the
animals either GPI-1046 or a placebo for 28 days. Three months after injury
researchers measured the extent of protection in the retina and severed optic
nerve. Results demonstrated that treatment with GPI-1046 provided significant
protection for a select population of ganglion cells in the retina. Researchers
also observed pronounced preservation of axons and myelin in the optic nerve. Of
particular interest was the significant decrease in axonal degeneration observed
in the segment between the eye and the site of injury on the nerve.
Under a license agreement pursuant to which the Company acquired rights to
certain patent applications relating to the FKBP neuroimmunophilin ligand
technology, the Company is obligated to pay to Johns Hopkins a portion of all
milestone payments paid by Amgen as well as a royalty on any and all net sales
of any FKBP neuroimmunophilin ligand product Amgen markets and sells in the
future.
As noted in the section herein captioned "Risk Factors" and elsewhere in
this annual report, readers should be cautioned that the preclinical results
discussed above and elsewhere in this annual report are based on a limited
number of animal studies and animal models of disease, and there is no guarantee
that the Company or Amgen will be able to successfully develop any FKBP
neuroimmunophilin compounds or other product candidates into safe and effective
drug(s) for neurological or other uses. Consequently, Guilford may never earn
any of the milestone payments related to Amgen's development activities or
revenues related to product sales.
In particular, the research, development and commercialization of
early-stage technology like the FKBP neuroimmunophilin ligand technology is
subject to significant risks and uncertainty. These risks involve those relating
to, among other things: (1) selection of an appropriate lead compound, (2)
successful completion of the pre-clinical and clinical development activities,
(3) regulatory clearances, (4) formulation of final product dosage forms, (5)
scale-up from bench quantities to
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commercial quantities, (5) manufacture of products, and (6) commercialization of
such products as well as (7) the successful prosecution and enforcement of
patent and other intellectual property rights and/or the defense of patent or
other intellectual property claims. For discussion of these and other risks, see
the section herein captioned "Risk Factors".
Furthermore, as used in this annual report, a "prototype" compound is one
which the Company uses to establish scientific proof-of-principle respecting the
relevant biomedical mechanism of action. In general, the Company does not intend
to develop such prototype compounds into products because of sub-optimal drug
metabolism or pharmacokinetic characteristics, the Company's proprietary
position with respect to such compound, or for other reasons. Upon in vitro and
in vivo proof of principal of intervention in a what is thought to be a
medically relevant biochemical mechanism of action, the Company seeks to develop
proprietary lead compounds through medicinal chemistry both around the prototype
compounds and other promising chemical structures generated by molecular
modeling, combinatorial or computational chemistry, and/or high throughput
screening.
Neuroprotective Drugs
Guilford is developing novel compounds to protect brain cells against
damage from ischemia (the lack of oxygen delivery from reduced blood flow) and
other insults and disorders which cause damage due to massive release of
excitatory amino acid neurotransmitters such as glutamate. The Company's
approach is to identify and clinically test compounds that have the ability to
intervene at three distinct steps in a biochemical pathway that can lead to
neuronal damage: (i) inhibition of glutamate release by inhibiting the enzyme,
NAALADase; (ii) inhibition of the enzyme, PARP; and (iii) inhibition of nitric
oxide production via inhibition of the enzyme, NOS.
It has been hypothesized that the release of the neurotransmitter glutamate
may be mediated in part by the enzyme NAALADase, which cleaves glutamate from
the abundant neuro-peptide, N-acetyl-aspartyl-glutamate (NAAG), and results in
stimulation of post-synaptic glutamate receptors (including n-methyl-D-aspartate
(NMDA) receptors). This release plays a critical role in many central neuronal
functions. However, in conditions such as ischemia and epilepsy, there is a
massive increase in synaptic glutamate concentrations, which results in
excessive activation of glutamate receptors. Dr. Solomon Snyder and his
colleagues at Johns Hopkins have shown that this activation, in turn, causes
excess production of the neurotransmitter nitric oxide, mediated by the enzyme
NOS, which results in damage to cellular DNA. DNA damage activates PARP, a
nuclear repair enzyme, which can deplete cellular energy stores and lead to cell
death.
NAALADase Inhibitors
Glutamate is a neurotransmitter which is required for normal brain
functioning. However, excess amounts of glutamate can be toxic and can kill
brain cells. Excess glutamate neurotransmission has been implicated in a number
of neurological disorders, such as stroke, pain, head trauma, ALS, Alzheimer's
disease, schizophrenia, Huntington's disease and Parkinson's disease.
Because of the large range of potential applications, blocking excess
glutamate has been an intense area of research in the pharmaceutical industry.
However, to date much of the research and development activity has focused on
blocking post-synaptic glutamate receptors, with compounds such as NMDA
antagonists, glycine antagonists, and other post-synaptic excitatory amino acid
(EAA) receptor blockers. Unfortunately, these agents have generally been
associated with severe toxicities, both in preclinical and clinical studies,
which have greatly limited their clinical potential.
Scientists at Guilford have been investigating a novel means of blocking
excess glutamate release. This mechanism is mediated by inhibition of the enzyme
NAALADase (N-Acetylated-
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Alpha-Linked-Acidic-Dipeptidase). Guilford has synthesized several series of
novel NAALADase inhibitors. By inhibiting NAALADase activity, these compounds
inhibit the pre-synaptic release of glutamate which occurs during certain types
of neurodegeneration.
In several in vitro and in vivo pre-clinical models, Guilford's researchers
have shown that Guilford's NAALADase inhibitors can protect against
neurodegeneration Guilford scientists have shown that several of Guilford's
prototype NAALADase inhibitors can be neuroprotective in models of stroke
involving transient focal ischemia, both when administered before and after the
ischemia. In addition to Guilford's work with the NAALADase inhibitors in models
of stroke, Company researchers are also studying other areas of potential use,
such as spinal cord injury, Parkinson's disease and pain.
Guilford scientists are currently expanding the work being done around
several novel classes of NAALADase inhibitors to optimize the in vivo potency,
efficacy, and bioavailability of these compounds for various uses. In the
Company's NAALADase program, Guilford scientists are exploring potential utility
and endeavoring to develop compounds for a wide range of neurological disorders
in which excess glutamate is believed to play a central role, including: stroke,
head trauma, Amyotrophic Lateral Sclerosis (ALS), Alzheimer's disease,
Parkinson's disease, schizophrenia, and chronic pain.
Importantly, Guilford scientists believe that Guilford's NAALADase
inhibitors do not interact with post-synaptic glutamate receptors. Consequently,
these compounds appear to be devoid of the behavioral toxicities associated with
post-synaptic glutamate antagonists. Neuropathology studies in rats dosed with a
NAALADase inhibitor have also shown no evidence of the neuronal degeneration
seen with post-synaptic glutamate inhibitors.
Guilford scientists have identified several chemical structural series of
novel NAALADase inhibitors which have nanomolar potency in inhibiting NAALADase
activity and protect against neurodegeneration both in in vitro and in vivo
models. The Company has identified a preliminary lead compound, and continues to
work to identify additional lead compounds, to take into human clinical trials.
Several of these compounds are currently being evaluated in rat models of
stroke, ALS, spinal cord injury and peripheral nerve injury.
PARP Inhibitors
As discussed above, during conditions of nerve degeneration, the cascade of
events that is believed to result in cell death is initiated by an increase in
synaptic glutamate levels, which results in an over-stimulation of post-synaptic
glutamate receptors. This stimulation results in a dramatic increase in
intracellular calcium, which leads to the formation of free radicals, such as
nitric oxide.
Nitric oxide is a neurotransmitter which is involved in normal brain
functioning. However, too much nitric oxide can be toxic and can cause DNA
damage. This damage in turn leads to over-activation of the enzyme,
poly(ADP-ribose) polymerase (PARP), which is involved in the repair of damaged
DNA. This repair process is very energy intensive, and excessive activation of
PARP rapidly leads to a drop in the cellular energy level, resulting in cell
death.
The inhibition of PARP may represent a common intervention point for
neurodegeneration resulting from several different pathways of damage, including
the generation of nitric oxide and other oxygen species, all of which trigger
PARP activation. Thus the inhibition of PARP offers a unique approach to the
development of neuroprotective agents for several different neurological
conditions, including stroke.
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In addition, there is accumulating evidence that in addition to stroke,
PARP activation may also mediate other types of ischemia and reperfusion injury,
for example, during myocardial ischemia. Guilford's PARP research and
development program is exploring the potential utility of PARP inhibitors for
treating a broad spectrum of diseases in which the over-stimulation of PARP has
been implicated. These include: stroke and other ischemic cerebrovascular
disorders, myocardial ischemia, traumatic head and spinal cord injuries,
neurodegenerative disorders such as Alzheimer's disease, Parkinson's, disease,
Huntington's disease, septic or hemorrhagic shock, arthritis, type I diabetes
and inflammatory bowel disease.
Recent studies by several academic laboratories in PARP "knock-out" mice,
that is, genetically altered mice lacking all PARP activity, have generally
corroborated Guilford's view that inhibiting PARP may be a viable target for
treating stroke and heart attacks. Experimental strokes induced in these animals
show them to have about 85-90% less brain damage than normal mice. The PARP
knock-out mice are about 40% more resistant to myocardial damage than normal
mice during experimental heart attack. Small molecule PARP inhibitors tested by
Guilford have achieved similar levels of protection.
NOS Inhibitors
In the nervous system, nitric oxide can be both a neurotransmitter and a
neurotoxin. Under pathologic conditions such as during stroke, calcium overload
causes prolonged activation of the enzyme, nitric oxide synthase ("NOS"). This
results in an excess amount of nitric oxide release, which causes neural damage.
Selective inhibition of a certain type of NOS known as neuronal NOS (or
nNOS) is crucial for maximizing neural protection and minimizing side effects.
Small molecules which disrupt certain nNOS associations with its regulatory
proteins may be effective nNOS inhibitors and yet may have a completely
different pharmacological profile and fewer side effects than NOS inhibitors
which indiscriminately affect all three forms of NOS at their catalytic sites.
Guilford has developed a high-throughput screening system for large-scale
screening of compounds for nNOS inhibition activity. Guilford is exploring the
potential utility of nNOS inhibitors for a range of neurological disorders in
which nitric oxide and other neurotoxins play a significant part in eliciting
neuronal death, including stroke and other ischemic cerebrovascular disorders,
traumatic head and spinal cord injuries, and neurodegenerative disorders such as
Alzheimer's disease, Parkinson's disease and Huntington's disease.
Imaging Agent Program -- DOPASCAN(R) Injection
The Company's product candidate for the diagnosis and monitoring of
Parkinson's disease, DOPASCAN, is administered intravenously in trace quantities
and allows physicians to obtain images and measure the degeneration of dopamine
neurons in the brain. Dopamine neurons are highly concentrated in a specialized
area of the brain that degenerates in Parkinson's disease. Parkinson's disease
is a common neurodegenerative disorder affecting more than 750,000 patients in
the United States. In Parkinson's disease, there is a decrease in the
dopaminergic nerve terminals and thus dopamine release.
In its early stages, Parkinson's disease can be very difficult to
distinguish clinically from other diseases with similar symptoms but which do
not respond well or at all to specific therapy for Parkinson's disease.
Unfortunately, there are no diagnostic tests currently available that can
reliably detect the neuronal degeneration in Parkinson's disease, and the
typical delay between the onset of symptoms and clinical diagnosis is more than
two years. The primary way to establish the diagnosis at
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present is through repeated physician visits and the use of therapeutic trials
of drugs such as L-Dopa, which carry with them the risk of unnecessary,
sometimes severe side effects.
Following intravenous injections with DOPASCAN, images of a subject's brain
are obtained with a SPECT camera and can identify the loss of dopamine neurons
in the brain. To date, over 2,000 patients have been imaged in the United States
and Europe using DOPASCAN. In a multi-center Phase IIb clinical trial conducted
by the Parkinson's Study Group in the United States and completed in 1997,
DOPASCAN accurately differentiated patients clinically diagnosed with a
Parkinsonian disorder (i.e., Parkinson's disease and progressive supranuclear
palsy) from subjects without a Parkinsonian disorder (e.g., essential tremor and
healthy controls) with a high sensitivity (98%) and specificity (97%). In
addition, no serious adverse events were attributed to DOPASCAN in this study.
In addition, in late 1997 the Company completed a multi-center Phase IIb trial
in Europe, closed its database for the trial in 1998, and is analyzing the data.
There can be no assurance, however, that similar results will be seen in
any other clinical trials for DOPASCAN that may be conducted in the future or
that DOPASCAN will be approved as a safe and effective FDA-cleared diagnostic.
The Company has entered into an agreement with Daiichi Radioisotope
Laboratories, Ltd., a leading Japanese radiopharmaceutical company, to develop
and commercialize DOPASCAN in Japan, Korea and Taiwan. Daiichi Radioisotope
Laboratories, Ltd. has informed the Company that it plans to commence Phase III
clinical trials in 1999. The Company intends to seek partners for the
manufacture and/or distribution of this product in other territories, including
the United States and Europe.
During 1998, the Company terminated its relationship with MDS Nordion Inc.
for the development and clinical supply of DOPASCAN. The Company took this step
for a number of reasons, including the Company's determination that Nordion
would not be able to supply DOPASCAN for commercial use at an acceptable price.
The Company is continuing its efforts to find a suitable manufacturer for
DOPASCAN. In addition, the Company is continuing to look for corporate partners
for the manufacture, sales, marketing and distribution of DOPASCAN. Only a
limited number of companies worldwide are capable of manufacturing a
radiopharmaceutical such as DOPASCAN, and the Company may not be able to enter
into an arrangement with a third-party manufacturer for the supply of DOPASCAN
for Phase III clinical trials or commercial supply on acceptable terms.
Inability to come to agreement with a suitable manufacturer for the clinical and
commercial supply of DOPASCAN on acceptable terms would prevent the Company from
developing this product candidate further.
Addiction Therapeutics
The Company is also developing therapeutics for cocaine addiction and other
addictive behaviors. Researchers have shown that cocaine binds to structures in
the brain known as dopamine transporters. The Company's cocaine addiction
therapeutics program focuses on the research and development of drugs which will
prevent cocaine from binding to dopamine transporters, thus potentially limiting
the effects of cocaine, and at the same time will minimally affect normal
dopamine transporter function.
Guilford scientists have identified and synthesized novel compounds with
specificity for the cocaine recognition site in the brain and the Company has
filed patent applications covering several classes of compounds. In addition to
cocaine addiction, other forms of addiction, including alcohol and heroin
addiction, may result from facilitation of dopaminergic neurotransmission in
certain areas of the brain. As a result, Guilford scientists are currently
investigating whether its prototype
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compound in the cocaine addiction area, GPI-2138, and related compounds may
block the addictive properties of alcohol and heroin in laboratory animals.
MANUFACTURING AND RAW MATERIALS
The Company currently manufactures GLIADEL using a proprietary process at
its 18,000 square foot manufacturing facility in Baltimore, Maryland, which
includes areas designated for packaging, quality control, laboratory, and
warehousing. The manufacturing facility has been in operation since April 1995,
was initially inspected by the FDA in October 1995, and was recently
re-inspected by the FDA in February 1999. The Company's current facilities are
designed to enable the Company to produce up to 8,000 GLIADEL treatments (each
consisting of eight GLIADEL wafers) annually.
In January 1998, the Company completed construction of an expansion of its
manufacturing facilities to allow for the additional synthesis of the
polyanhydride co-polymer used in the manufacture of GLIADEL. The Company also
will be able to use this facility to produce its newest proprietary
biodegradable polymers, the PPEs, in connection with the development of other
polymer-based products. In addition, the Company completed construction of a
second clean room facility in 1998, which the Company expects could increase its
GLIADEL manufacturing capacity to 20,000-30,000 treatments annually.
Furthermore, the Company expects that this second clean room facility will also
provide sufficient capacity to produce any clinical supply of PPE polymer-based
product candidates needed in the future, including its paclitaxel/PPE polymer
product candidate currently under development for ovarian cancer.
The Company believes that the various materials used in GLIADEL are readily
available and will continue to be available at reasonable prices. Nevertheless,
while the Company believes that it has an adequate supply of BCNU, the active
chemotherapeutic ingredient in GLIADEL, to meet current demand, any interruption
in the ability of the two current suppliers to deliver this ingredient could
prevent the Company from delivering the product on a timely basis. The Company
depends upon the availability of certain single-source raw materials in its
formulations, but is seeking alternate suppliers for most of these raw
materials. The Company cannot be sure that such sources can be secured
successfully on terms acceptable to the Company, or at all. Failure of any
supplier to provide sufficient quantities of raw material in accordance with the
FDA's current Good Manufacturing Practice regulations could cause delays in
clinical trials and commercialization of products, including GLIADEL.
GOVERNMENT REGULATION AND PRODUCT TESTING
All domestic prescription pharmaceutical manufacturers are subject to
extensive regulation by the federal government, principally the FDA and, to a
lesser extent, by state and local governments as well as foreign governments if
products are marketed abroad. Biologics and controlled drug products, such as
vaccines and narcotics, and radiolabeled drugs, are often regulated more
stringently than are other drugs. The Federal Food, Drug, and Cosmetic Act and
other federal statutes and regulations govern or influence the development,
testing, manufacture, labeling, storage, approval, advertising, promotion, sale
and distribution of prescription pharmaceutical products. Pharmaceutical
manufacturers are also subject to certain recordkeeping and reporting
requirements. Noncompliance with applicable requirements can result in warning
letters, fines, recall or seizure of products, total or partial suspension of
production and/or distribution, refusal of the government to enter into supply
contracts or to approve marketing applications and criminal prosecution.
Upon FDA approval, a drug may only be marketed in the United States for the
approved indications in the approved dosage forms and at the approved dosage
levels. The FDA also may require post-marketing testing and surveillance to
monitor the record of the approved product.
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Manufacturers of approved drug products are subject to ongoing compliance with
FDA regulations. For example, the FDA mandates that drugs be manufactured in
conformity with the FDA's applicable current Good Manufacturing Practice
("cGMP") regulations. In complying with the cGMP regulations, manufacturers must
continue to expend time, money and effort in production, recordkeeping and
quality control to ensure that the product meets applicable specifications and
other requirements. The FDA periodically inspects drug manufacturing facilities
to ensure compliance with its cGMP regulations. Failure to comply subjects the
manufacturer to possible FDA action, such as suspension of manufacturing,
seizure of the product or voluntary recall of a product. Adverse experiences
with the commercialized product must be reported to the FDA. The FDA also may
require the submission of any lot of the product for inspection and may restrict
the release of any lot that does not comply with FDA regulations, or may
otherwise order the suspension of manufacture, voluntary recall or seizure.
Product approvals may be withdrawn if compliance with regulatory requirements is
not maintained or if problems concerning safety or efficacy of the product occur
following approval.
Full Clinical Testing Requirements
The steps required before a newly marketed drug may be commercially
distributed in the United States include: (i) conducting appropriate preclinical
laboratory and animal tests; (ii) submitting to the FDA an application for an
Investigational New Drug ("IND"), which must become effective before clinical
trials may commence; (iii) conducting well-controlled human clinical trials that
establish the safety and efficacy of the drug product; (iv) filing with the FDA
a New Drug Application ("NDA") for non-biological drugs; and (v) obtaining FDA
approval of the NDA prior to any commercial sale or shipment of the
non-biological drug. In addition to obtaining FDA approval for each indication
to be treated with each product, each domestic drug manufacturing establishment
must register with the FDA, list its drug products with the FDA, comply with the
FDA's cGMP requirements and be subject to inspection by the FDA. Foreign
manufacturing establishments distributing drugs in the United States also must
comply with cGMP requirements, register and list their products, and are subject
to periodic inspection by FDA or by local authorities under agreement with FDA.
With respect to a drug product with an active ingredient not previously
approved by the FDA, the manufacturer must usually submit a full NDA, including
complete reports of preclinical, clinical and laboratory studies, to prove that
the product is safe and effective. A full NDA may also need to be submitted for
a drug product with a previously approved active ingredient if studies are
required to demonstrate safety and efficacy, such as when the drug will be used
to treat an indication for which the drug was not previously approved, or where
the method of drug delivery is changed. In addition, the manufacturer of an
approved drug may be required to submit for the FDA's review and approval a
supplemental NDA, including reports of appropriate clinical testing, prior to
marketing the drug with additional indications or making other significant
changes to the product or its manufacture. A manufacturer intending to conduct
clinical trials ordinarily will be required first to submit an IND to the FDA
containing information relating to previously conducted preclinical studies.
Pre-clinical testing includes formulation development, laboratory
evaluation of product chemistry and animal studies to assess the potential
safety and efficacy of the product formulation. Preclinical tests to support an
FDA application must be conducted in accordance with the FDA regulations
concerning Good Laboratory Practices (GLPs). The results of the preclinical
tests are submitted to the FDA as part of the IND and are reviewed by the FDA
prior to authorizing the sponsor to conduct clinical trials in human subjects.
Unless the FDA issues a clinical hold on an IND, the IND will become effective
30 days following its receipt by the FDA. There is no certainty that submission
of an IND will result in the commencement of clinical trials or that the
commencement of one phase
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of a clinical trial will result in commencement of other phases or that the
performance of any clinical trials will result in FDA approval.
Clinical trials for new drugs typically are conducted in three phases, are
subject to detailed protocols and must be conducted in accordance with the FDA's
regulations concerning good clinical practices (GCPs). Clinical trials involve
the administration of the investigational drug product to human subjects. Each
protocol indicating how the clinical trial will be conducted in the United
States must be submitted for review to the FDA as part of the IND. The FDA's
review of a study protocol does not necessarily mean that, if the study is
successful, it will constitute proof of efficacy or safety. Further, each
clinical study must be conducted under the auspices of an independent
institutional review board ("IRB") established pursuant to FDA regulations. The
IRB considers, among other factors, ethical concerns and informed consent
requirements. The FDA or the IRB may require changes in a protocol both prior to
and after the commencement of a trial. There is no assurance that the IRB or the
FDA will permit a study to go forward or, once started, to be completed.
Clinical trials may be placed on hold at any time for a variety of reasons,
particularly if safety concerns arise, or regulatory requirements are not met.
The three phases of clinical trials are generally conducted sequentially,
but they may overlap. In Phase I, the initial introduction of the drug into
humans, the drug is tested for safety, side effects, dosage tolerance,
metabolism and clinical pharmacology. Phase II involves controlled tests in a
larger but still limited patient population to determine the efficacy of the
drug for specific indications, to determine optimal dosage and to identify
possible side effects and safety risks. Phase II testing for an indication
typically takes at least from one and one-half to two and one-half years to
complete. If preliminary evidence suggesting effectiveness has been obtained
during Phase II evaluations, expanded Phase III trials are undertaken to gather
additional information about effectiveness and safety that is needed to evaluate
the overall benefit-risk relationship of the drug and to provide an adequate
basis for physician labeling. Phase III studies for a specific indication
generally take at least from two and one-half to five years to complete. There
can be no assurance that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's product candidates.
Reports of results of the preclinical studies and clinical trials for
non-biological drugs are submitted to the FDA in the form of an NDA for approval
of marketing and commercial shipment. User fee legislation now requires the
submission in fiscal year 1999 of $272,282 to cover the costs of FDA review of a
full NDA. Annual fees also exist for certain approved prescription drugs and the
establishments that make them. The NDA typically includes information pertaining
to the preparation of drug substances, analytical methods, drug product
formulation, details on the manufacture of finished product as well as proposed
product packaging and labeling. Submission of an NDA does not assure FDA
approval for marketing. In May 1998 the FDA published proposed regulations
describing criteria that the FDA will use to evaluate the safety and efficacy of
diagnostic radiopharmaceuticals like DOPASCAN. FDA is required to finalize these
regulations by May 1999. It is unclear how these provisions may affect the
potential for approval of DOPASCAN.
The median FDA approval time is currently about 12 months, although
clinical development, reviews, or approvals of treatments for cancer and other
serious or life-threatening diseases may be accelerated, expedited or
fast-tracked. In addition, approval times can vary widely among the various
reviewing branches of the FDA. The approval process may take substantially
longer if, among other things, the FDA has questions or concerns about the
safety and/or efficacy of a product. In general, the FDA requires at least two
properly conducted, adequate and well-controlled clinical studies demonstrating
safety and efficacy with sufficient levels of statistical assurance. In certain
cases the FDA may consider one clinical study sufficient. The FDA also may
request long-term toxicity studies or other studies relating to product safety
or efficacy. For example, the FDA may require additional
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clinical tests following NDA approval to confirm product safety and efficacy
(Phase IV clinical tests) or require other conditions for approval.
Notwithstanding the submission of such data, the FDA ultimately may decide that
the application does not satisfy its regulatory criteria for approval.
Confirmatory studies similar to Phase III clinical studies may be conducted
after, rather than before, FDA approval under certain circumstances. The FDA may
determine under its expedited, accelerated, or fast-track provisions that
previous limited studies establish an adequate basis for drug product approval,
provided that the sponsor agrees to conduct additional studies after approval to
verify safety and effectiveness. Treatment of patients not in clinical trials
with an experimental drug may also be allowed under a Treatment IND before
general marketing begins and pending FDA approval. Charging for an
investigational drug also may be allowed under a Treatment IND to recover
certain costs of development if various requirements are met. These
cost-recovery, treatment IND, and expedited, accelerated or fast-track approval
provisions are limited, for example, to drug products (i) intended to treat AIDS
or other serious or life-threatening diseases and that provide meaningful
therapeutic benefit to patients over existing treatments, (ii) that are for
diseases for which no satisfactory alternative therapy exists, or (iii) that
address an unmet medical need. No assurances exist that the Company's product
candidates will qualify for cost-recovery, expedited, accelerated, or fast-track
approvals or for treatment use under the FDA's regulations or the current
statutory provisions.
The full NDA process for newly marketed non-biological drugs, such as those
being developed by the Company, including FKBP neuroimmunophilin ligand products
and inhibitors of NAALADase and PARP, can take a number of years and involves
the expenditure of substantial resources. There can be no assurance that any
approval will be granted on a timely basis, or at all or that the Company will
have sufficient resources to carry such potential products through the
regulatory approval process.
Abbreviated Testing Requirements
The Drug Price Competition and Patent Term Restoration Act of 1984
("DPC-PTR Act") established abbreviated procedures for obtaining FDA approval
for many non-biological drugs which are off-patent and whose marketing
exclusivity has expired. Applicability of the DPC-PTR Act means that a full NDA
is not required for approval of a competitive product. Abbreviated requirements
are applicable to drugs which are, for example, either bioequivalent to
brand-name drugs, or otherwise similar to brand-name drugs, such that all the
safety and efficacy studies previously done on the innovator product need not be
repeated for approval. Changes in approved drug products, such as in the
delivery system, dosage form, or strength, can be the subject of abbreviated
application requirements. There can be no assurance that abbreviated
applications will be available or suitable for the Company's non-biological drug
products, including the Company's efforts to develop a controlled-release
formulation of the chemotherapeutic agent, paclitaxel (Taxol(R)) using the
Company's PPE polymers, or that FDA approval of such applications can be
obtained.
A five-year period of market exclusivity is provided for newly marketed
active ingredients of drug products not previously approved and a three-year
period for certain changes in approved drug products that require for approval
the submission of safety and efficacy information (other than bioequivalence
studies). A period of five years is available for new chemical entities not
previously approved by FDA. A period of three years is available for changes in
approved products, such as in delivery systems of previously approved products.
Both periods of marketing exclusivity mean that abbreviated applications, which
generally rely to some degree on approvals or on some data submitted by previous
applicants for comparable innovator drug products, cannot be marketed during the
period of exclusivity. The market exclusivity provisions of the DPC-PTR Act bar
only the marketing of
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competitive products that are the subject of abbreviated applications, not
products that are the subject of full NDAs. The DPC-PTR Act also may provide a
maximum time of five years to be restored to the life of any one patent for the
period it takes to obtain FDA approval of a drug product, including biological
drugs. No assurances exist that the exclusivity or patent restoration benefits
of the DPC-PTR Act will apply to any product candidates of the Company.
Other Regulation
Products marketed outside the United States which are manufactured in the
United States are subject to certain FDA regulations, as well as regulation by
the country in which the products are to be sold. The Company also would be
subject to foreign regulatory requirements governing clinical trials and
pharmaceutical sales, if products are marketed abroad. Whether or not FDA
approval has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must usually be obtained prior to the
commencement of marketing of the product in those countries. The approval
process varies from country to country and the time required may be longer or
shorter than that required for FDA approval.
In addition to the requirements for product approval, before a
pharmaceutical product may be marketed and sold in certain foreign countries the
proposed pricing for the product must be approved as well. Products may be
subject to price controls or limits on reimbursement. The requirements governing
product pricing and reimbursement vary widely from country to country and can be
implemented disparately at the national level. As to reimbursement, the European
Union generally provides options for its fifteen Member States to restrict the
range of medicinal products that are covered by their national health insurance
systems. Member States in the European Union can opt to have a "positive" or a
"negative" list. A positive list is a listing of all medicinal products covered
under the national health insurance system, whereas a negative list designates
which medicinal products are excluded from coverage. In the European Union, the
United Kingdom and Spain use a negative list approach, while France uses a
positive list approach. In Canada, each province decides on reimbursement
measures.
The European Union also generally provides options for its Member States to
control the prices of medicinal products for human use. A Member State may
approve a specific price for the medicinal product or it may instead adopt a
system of direct or indirect controls on the profitability of the company
placing the medicinal product on the market. For example, the regulation of
prices of pharmaceuticals in the United Kingdom (U.K.) is generally designed to
provide controls on the overall profits pharmaceutical companies may derive from
their sales to the U.K. National Health Service. The U.K. system is generally
based on profitability targets or limits for individual companies which are
normally assessed as a return on capital employed by the company in servicing
the National Health Service market, comparing capital employed and profits.
In comparison, Italy generally establishes prices for pharmaceuticals based
on a price monitoring system. The reference price is the European average price
calculated on the basis of the prices in four reference markets: France, Spain,
Germany and the United Kingdom. Italy typically levels the price of medicines
belonging to the same therapeutic class on the lowest price for a medicine
belonging to that category (i.e., same active principle, same pharmaceutical
form, same route of administration). Spain generally establishes the selling
price for new pharmaceuticals based on the prime cost, plus a profit margin
within a range established each year by the Spanish Commission for Economic
Affairs. Promotional and advertising costs are limited.
In Canada, prices for most new drugs are generally limited such that the
cost of therapy for the new drug is in the range of the cost of therapy for
existing drugs used to treat the same disease in Canada. Prices of breakthrough
drugs and those which bring a substantial improvement are generally
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limited to the median of the prices charged for those drugs in other
industrialized countries, such as France, Germany, Italy, Sweden, Switzerland,
the United Kingdom and the United States.
There can be no assurance that any country which has price controls or
reimbursement limitations for pharmaceuticals will allow favorable reimbursement
and pricing arrangements with respect to the Company or its corporate partners,
including RPR and its applications for GLIADEL in France, Canada and elsewhere
outside of the United States.
The Company also is governed by other federal, state and local laws of
general applicability. These laws include, but are not limited to, those
regulating working conditions enforced by the Occupational Safety and Health
Administration and regulating environmental hazards under such statutes as the
Toxic Substances Control Act, the Resource Conservation and Recovery Act and
other environmental laws enforced by the United States Environmental Protection
Agency ("USEPA"). The DEA regulates controlled substances, such as narcotics. A
precursor compound to DOPASCAN is a tropane-derivative similar to cocaine and
thus is subject to DEA regulations. Establishments handling controlled
substances must, for example, be licensed and inspected by the DEA, and may be
subject to export, import, security and production quota requirements.
Radiolabeled products, including drugs, are also subject to regulation by the
Department of Transportation and to state and federal licensing requirements.
Various states often have comparable health and environmental laws, such as
those governing the use and disposal of controlled and radiolabeled products.
While the Company is not actively involved in product areas involving
biotechnology and has no current plans to develop products utilizing modern
biotechnology, if the Company were to move in that direction, it would
potentially be subject to extensive regulation. The USEPA, the FDA and other
federal and state regulatory bodies have developed or are in the process of
developing specific requirements concerning products of biotechnology that may
affect research and development programs and product lines. The Company is
unable to predict whether any governmental agency will adopt requirements,
including regulations, which would have a material and adverse effect on any
future product applications involving biotechnology.
PATENTS AND PROPRIETARY TECHNOLOGY
Guilford believes that patent and trade secret protection is crucial to its
business and that its future will depend in part on its ability to obtain
patents, maintain trade secret protection and operate without infringing the
proprietary rights of others. As of December 31, 1998, the Company owned or had
licensed rights to more than 180 U.S. patents and patent applications and more
than 450 foreign patents and patent applications with claims relating to its
biodegradable polymer, imaging, neurotrophic, neuroprotective, addiction
therapeutics and other programs.
The role, validity and value of patents, licenses and proprietary
technology in the business of the Company are subject to various uncertainties
and contingencies. The Company's success will depend in part on its ability to
obtain, maintain and enforce patent protection for its products and processes or
license rights to patents, maintain trade secret protection and operate without
infringing upon the proprietary rights of others. The degree of patent
protection afforded to pharmaceutical and biotechnological inventions is
uncertain, and a number of Guilford's product candidates are subject to this
uncertainty.
The Company is aware of a company which has asserted publicly that it has
submitted patent applications (one of which is under Notice of Allowance)
claiming the use of certain of its immunosuppressive compounds and multidrug
resistance compounds for nerve growth applications. That company has also stated
that it has nine issued U.S. patents and three U.S. patent applications
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pending (one of which is under a Notice of Allowance) that it states claim
compounds that are useful in nerve growth applications. While the Company does
not believe that its neurotrophic compounds infringe on such company's patent,
no assurance can be given as to the ability of the Company's patents and patent
applications to adequately protect the Company's neurotrophic product candidates
or that the Company's neurotrophic product candidates will not infringe or be
dominated by patents that have issued or may issue in the future to third
parties.
There can be no assurance that any patent applications filed by, or
assigned or licensed to, the Company will be granted, that the Company will
develop additional products or processes that are patentable, or that any
patents issued to, or licensed by, the Company will provide the Company with any
competitive advantages or adequate protection for its products. In addition,
there can be no assurance that any existing or future patents or intellectual
property issued to, or licensed by, the Company will not subsequently be
challenged, invalidated or circumvented by others.
It is Guilford's policy to control the disclosure and use of Guilford's
know-how and trade secrets under confidentiality agreements with employees,
consultants and other parties. There can be no assurance, however, that its
confidentiality agreements will be honored, that others will not independently
develop equivalent or competing technology, that disputes will not arise
concerning the ownership of intellectual property or the applicability of
confidentiality obligations, or that disclosure of Guilford's trade secrets will
not occur. To the extent that consultants or other research collaborators use
intellectual property owned by others in their work with the Company, disputes
may also arise as to the rights to related or resulting intellectual property.
Guilford supports and collaborates in research conducted in universities
and in governmental research organizations. There can be no assurance that the
Company will have or be able to acquire exclusive rights to the inventions or
technical information derived from such collaborations or that disputes will not
arise as to rights in derivative or related research programs conducted by the
Company. In addition, in the event of a contractual breach by the Company,
certain of the Company's collaborative research contracts provide for transfer
of technology (including any patents or patent applications) to the relevant
governmental research organization. In addition, such a breach may cause the
Company to lose its rights to use technology (including any patents or patent
applications) licenced from the relevant university or governmental research
organization resulting from the Company sponsored research program.
If the Company is required to defend against charges of infringement of
patent or proprietary rights of third parties or to protect its own patent or
proprietary rights against third parties, the Company may incur substantial
costs and could lose rights to develop or market certain products or be required
to pay monetary damages or royalties to license proprietary rights from third
parties. In response to actual or threatened litigation, the Company may seek
licenses from third parties or attempt to redesign its products or processes to
avoid infringement; however, there can be no assurance that the Company will be
able to obtain licenses on acceptable terms or at all or redesign its products
or processes. In addition to being a party to patent infringement litigation,
the Company could be required to participate in patent interference proceedings
declared by the U.S. Patent and Trademark Office (or its foreign counterparts),
which would be expensive and time-consuming, even if the Company were to prevail
in such a proceeding. The Company may also be forced to initiate legal
proceedings to protect its patent position or other proprietary rights. These
proceedings typically are costly, protracted, and offer no assurance of success.
In order to protect its proprietary position with respect to its
neuroimmunophilin ligands, Guilford filed an opposition in 1998 in an effort to
prevent the final issuance of a European patent to a competing company. In the
opposition, Guilford submitted approximately 80 anticipatory references to the
European Patent Office. While Guilford does not believe the claims of this
European patent
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would be valid, any final issuance could result in future litigation if this
company were to allege that Guilford or Amgen infringed the claims of this
patent in Europe.
TECHNOLOGY LICENSING AGREEMENTS
In March 1994, the Company entered into an agreement (the "GLIADEL
Agreement") with Scios Inc. pursuant to which the Company licensed from Scios
exclusive worldwide rights to numerous U.S. patents and patent applications and
corresponding international patents and patent applications for polyanhydride
biodegradable polymer technology for use in the field of tumors of the central
nervous system and cerebral edema. GLIADEL is covered by two of the U.S. patents
under this license which expire in 2005 and certain related international
patents and patent applications. In April 1994, Scios assigned all of its rights
and obligations under the GLIADEL Agreement to the Massachusetts Institute of
Technology.
Under this agreement, Guilford is obligated to pay a royalty on all net
sales of products incorporating such technology as well as a percentage of all
royalties received by Guilford from sublicensees and certain advance and minimum
annual royalty payments. In 1998, Guilford paid $259,729 in royalty payments to
the Massachusetts Institute of Technology related to payments made to the
Company from RPR and Orion Corporation Pharma related to GLIADEL. Guilford has
exclusive worldwide rights to the technology for brain cancer therapeutics,
subject to certain conditions, including a requirement to perform appropriate
preclinical tests and file an IND with the FDA within 24 months of the
identification of a drug-polymer product having greater efficacy than GLIADEL.
In addition, Guilford is obligated to meet certain development milestones.
Although the Company believes that it can comply with such obligations, the
failure of the Company to perform these obligations could result in the Company
losing its right to new polymer-based product(s).
In June 1996, the Company entered into a license agreement with the
Massachusetts Institute of Technology and Johns Hopkins respecting a patent
application covering certain biodegradable polymers for use in connection with
the controlled local delivery of certain chemotherapeutic agents (including
paclitaxel (Taxol(R)) and camptothecin) for treating solid tumors. Under this
agreement, the Company is obligated to make certain annual and milestone
payments to the Massachusetts Institute of Technology and to pay royalties based
on any sales of products incorporating the technology licensed to Guilford.
Furthermore, under the terms of the agreement, the Company has committed to
spend minimum amounts to develop the technology and to meet certain development
milestones. Although the Company believes that it can comply with such
obligations, failure of the Company to perform these obligations could result in
the Company losing its rights to such technology.
In July 1996, the Company entered into a license agreement with Johns
Hopkins which currently covers several U.S. patents respecting certain PPE
polymers developed at Johns Hopkins and additional PPE patent applications. This
agreement, among other things, requires Guilford to pay certain processing,
maintenance and/or up-front fees, milestone payments and royalties, a portion of
proceeds from sublicenses, and fees and costs related to patent prosecution and
maintenance and to spend minimum amounts for, and meet deadlines regarding,
development of this technology. In the event of termination of these licenses,
the Company could lose its rights to use of the licensed technology.
Guilford and Johns Hopkins are parties to exclusive license agreements
covering the neurotrophic use of neuroimmunophilin ligands, which was jointly
discovered by scientists at, and is jointly owned by, Johns Hopkins and
Guilford, and inhibition of NOS and PARP for neuroprotective uses and
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certain other technologies. These agreements, among other things, require
Guilford to pay certain processing, maintenance, and/or up-front fees, milestone
payments and royalties, a portion of proceeds from sublicenses, and fees and
costs related to patent prosecution and maintenance and to spend minimum amounts
for, and meet deadlines regarding, development of the technologies. In the event
of termination of these licenses, the Company could lose its rights to use of
the licensed technology (or in the case of joint inventions, exclusive use of
such technology). In the case of Guilford's license with Johns Hopkins relating
to neuroimmunophilin ligands, Johns Hopkins is entitled to a portion of all
milestone payments paid to the Company, including payments under the Company's
collaboration with Amgen, and a royalty on net sales of neuroimmunophilin ligand
products, again including sale of products under the Company's collaboration
with Amgen.
The Company obtained exclusive worldwide rights to DOPASCAN pursuant to a
March 1994 license agreement (the "RTI Agreement") with Research Triangle
Institute ("RTI"), which grants Guilford rights to various U.S. and
international patents and patent applications relating to binding ligands for
certain receptors in the brain which are or may be useful as dopamine neuron
imaging agents. DOPASCAN and certain related precursors and analogues are
covered by U.S. patents which start expiring in 2009, as well as certain related
international patents and patent applications.
Under the RTI Agreement, the Company reimbursed RTI for certain past
patent-related expenses and agreed to make annual payments to RTI to support
mutually agreed-upon research to be conducted at RTI through March 1999. In
addition, the Company is obligated to pay RTI a royalty on gross revenues to
Guilford from products derived from the licensed technology and from sublicensee
proceeds and to make certain minimum royalty payments following the first
commercial sale of such products. Guilford must use commercially reasonable
efforts to develop products related to the licensed technology and to meet
certain performance milestones. Failure of the Company to perform its
obligations under the RTI Agreement in the future could result in termination of
the license.
United States Government Rights
Aspects of the technology licensed under the Company's license agreements
may be subject to certain government rights. These rights include a
non-exclusive, royalty-free worldwide license to practice or have practiced such
inventions for any governmental purpose. In addition, the U.S. government has
the right to grant licenses which may be exclusive under any of such inventions
to a third party if it determines that: (i) adequate steps have not been taken
to commercialize such inventions; (ii) such action is necessary to meet public
health or safety needs; or (iii) such action is necessary to meet requirements
for public use under federal regulations. The U.S. government also has the right
to take title to a subject invention if there is a failure to disclose the
invention and elect title within specified time limits. In addition, the U.S.
government may acquire title in any country in which a patent application is not
filed within specified time limits. Federal law requires any licensor of an
invention that was partially funded by the federal government to obtain a
covenant from any exclusive licensee to manufacture products using the invention
substantially in the United States. Further, the government rights include the
right to use and disclose without limitation technical data relating to licensed
technology that was developed in whole or in part at government expense.
Provisions recognizing these government rights are contained in the Company's
principal technology license agreements.
SALES, MARKETING AND DISTRIBUTION
In general, the Company's strategy is to establish strategic alliances with
larger pharmaceutical companies where possible to develop and promote products
that require extensive development, sales
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and marketing resources. Within the United States, the Company may seek to
retain co-promotion rights with respect to some or all compounds or indications
in any such strategic alliances, or the Company may elect to market and
distribute its products directly where the commercial prospects so warrant.
RPR Agreement
In June 1996, the Company entered into a marketing, sales and distribution
rights agreement and other related agreements with RPR. Under these agreements
RPR has worldwide (excluding Scandinavia and Japan) marketing, sales, promotion
and distribution rights for GLIADEL. Upon execution of these agreements, the
Company received $7.5 million for 281,531 shares of its common stock.
Furthermore, in addition to an aggregate of $27.5 million in rights payments
made by RPR upon execution of the agreements in June 1996 and FDA clearance of
the GLIADEL NDA in September 1996, the agreements with RPR provide for up to an
additional $35 million in payments ($7.5 million in the form of an equity
investment) in the event that certain regulatory and other milestones are
achieved, although there can be no assurance that any or all of such milestones
will be attained and certain of these payments are contingent on international
regulatory filings and clearances, the timing and extent of which are largely
within the control of RPR.
RPR may, under certain circumstances, fund up to approximately $17 million
for the development of higher dose forms of GLIADEL being developed by the
Company and for certain additional clinical studies related to GLIADEL. The
Company has the right under certain circumstances to borrow up to an aggregate
of $7.5 million to expand the Company's GLIADEL manufacturing and related
facilities.
In addition to the payments outlined above, the Company acts as the
exclusive manufacturer of GLIADEL and receives transfer price payments and
royalties based on any "net sales" (as defined in the agreements with RPR) of
GLIADEL. RPR's exclusive rights terminate in a particular country upon the later
of the expiration of the last to expire of certain patents applicable in that
country or the last commercial sale of GLIADEL in that country. RPR also has an
exclusive 90-day period following development by the Company of new polymer
technology for brain cancer to make an offer to license such technology.
Amgen Collaboration
In August 1997, the Company entered into a collaboration with Amgen to
research, develop and commercialize a broad class of neuroimmunophilin ligands,
referred to as FKBP neuroimmunophilin ligands, as well as any other compounds
that may result from the collaboration, for all human therapeutic and diagnostic
applications. Amgen initially paid the Company a one time, non-refundable
signing fee of $15 million in 1997 and also invested an additional $20 million
in the Company in exchange for 640,095 shares of the Company's common stock and
five-year warrants to purchase up to an additional 700,000 shares of Company
common stock at an exercise price of $35.15 per share. In connection with the
sale of these securities, the Company granted Amgen certain demand and
"piggyback" registration rights under applicable securities laws.
As part of this collaboration, Amgen agreed to fund up to a total of $13.5
million to support research at the Company relating to the FKBP
neuroimmunophilin ligand technology. This research funding began on October 1,
1997 and is payable quarterly over three years. Amgen also has the option to
fund a fourth year of research or, under certain conditions, to terminate the
research program after two years.
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If Amgen achieves certain specified development objectives in each of ten
different clinical indications, seven of which are neurological (i.e.,
Parkinson's disease, Alzheimer's disease, traumatic brain injury, traumatic
spinal cord injury, multiple sclerosis, neuropathy and stroke) and three of
which are non-neurological, Amgen has agreed to pay to the Company up to a total
of $392 million in milestone payments.
The Company will receive royalties on any future sales of products
resulting from the collaboration. Amgen has agreed to fund, develop and
commercialize the FKBP neuroimmunophilin ligand technology. Under limited
circumstances, Guilford has the option to conduct certain Phase I and Phase II
clinical trials on one product candidate and has the right to co-promote in the
United States one product resulting from the collaboration. Subject to its
obligation to fund two years of research at Guilford, Amgen has the right to
discontinue all its development and commercialization activities under the
collaboration at any time.
Other Agreements
In October 1995, the Company entered into an agreement appointing Orion
Corporation Pharma distributor for GLIADEL in Scandinavia, and in December 1995
the Company entered into an agreement with Daiichi Radioisotope Laboratories,
Ltd. for the marketing, sale and distribution of DOPASCAN in Japan, Korea and
Taiwan.
COMPETITION
The Company is involved in evolving technological fields in which
developments are expected to continue at a rapid pace. Guilford's success
depends upon its ability to compete effectively in the research, development and
commercialization of products and technologies in its areas of focus.
Competition from pharmaceutical, chemical and biotechnology companies,
universities and research institutes is intense and expected to increase. Many
of these competitors have substantially greater research and development
capabilities, experience and manufacturing, marketing, financial and managerial
resources than the Company and represent significant competition for the
Company. Acquisitions of competing companies by large pharmaceutical or other
companies could enhance the financial, marketing and other resources available
to these competitors. These competitors may develop products which are superior
to those under development by the Company.
The Company is aware of several competing approaches under development for
the treatment of malignant glioma including using radioactive seeds for
interstitial radiotherapy, increasing the permeability of the blood-brain
barrier to chemotherapeutic agents, sensitizing cancer cells to chemotherapeutic
agents using gene therapy and developing chemotherapeutics directed to specific
receptors in brain tumors.
A number of companies have shown interest in trying to develop neurotrophic
agents to promote nerve growth and repair in neurodegenerative disorders and
traumatic central nervous system injuries. However, much of this activity has
focused on naturally occurring growth factors. Such large molecules generally
cannot cross the blood-brain barrier and thus present problems in administration
and delivery. One company has announced that certain of its neuroimmunophilin
ligands showed positive results in stimulating nerve growth in an animal model
of nerve crush, and has disclosed that it has made patent filings covering
compounds and uses in connection with nerve growth promotion. This company has
also announced that it is planning to begin a phase II clinical trial for
peripheral neuropathy using a neuroimmunophilin compound it originally was
developing for multiple drug resistance in cancer patients. In addition, another
company announced that IGF-1 showed positive results in clinical trials of a
peripheral neurodegenerative disorder.
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There is intense competition to develop an effective and safe
neuroprotective drug or biological agent. Calcium channel antagonists, calpain
inhibitors, adenosine receptor antagonists, free radical scavengers, superoxide
dismutase inducers, proteoloytic enzyme inhibitors, phospholipase inhibitors and
a variety of other agents are under active development by others. Glutamate or
NMDA receptor antagonists are under development by several other companies.
The Company believes that two other companies are clinically evaluating
imaging agents for dopamine neurons. In addition, a variety of radiolabeled
compounds for use with Positron Emission Tomography ("PET") scanners have been
used to image dopamine neurons successfully in patients with Parkinson's
disease. PET scanning is currently only available in a limited number of
hospitals in the United States and Europe.
In the field of cocaine addiction, most of the investigated compounds to
date have been studied by academic and government groups. Further, much of this
work has been with known agents, such as carbamazepine, that are commercially
available for other indications. Guilford is aware of another company that is
investigating the use of butylcholinesterase as a treatment for acute cocaine
overdose. The Company is aware of one company that is investigating an
immunological approach in an attempt to develop a cocaine vaccine. The Company
is not aware of other commercial research programs targeting specific cocaine
antagonists, which do not interfere with normal dopamine neuron function.
Any product candidate that the Company develops and for which it gains
regulatory approval, including GLIADEL, must then compete for market acceptance
and market share. For certain of the Company's product candidates, an important
factor will be the timing of market introduction of competitive products.
Accordingly, the relative speed with which the Company and competing companies
can develop products, complete the clinical testing and approval processes, and
supply commercial quantities of the products to the market is expected to be an
important determinant of market success. Other competitive factors include the
capabilities of the Company's collaborators, product efficacy and safety, timing
and scope of regulatory approval, product availability, marketing and sales
capabilities, reimbursement coverage, the amount of clinical benefit of the
Company's product candidates relative to their cost, method of administration,
price and patent protection. There can be no assurance that the Company's
competitors will not develop more effective or more affordable products or
achieve earlier product development completion, patent protection, regulatory
approval or product commercialization than the Company. The achievement of any
of these goals by the Company's competitors could have a material adverse effect
on the Company's business, financial condition and results of operations.
PRODUCT LIABILITY AND INSURANCE
Product liability risk is inherent in the testing, manufacture, marketing
and sale of the Company's product candidates, and there can be no assurance that
the Company will be able to avoid significant product liability exposure. While
the Company currently maintains $15 million of product liability insurance
covering clinical trials and product sales, there can be no assurance that such
or any future insurance coverage obtained by the Company will be adequate or
that claims will be covered by the Company's insurance. The Company's insurance
policies provide coverage on a claims-made basis and are subject to annual
renewal. Product liability insurance varies in cost, can be difficult to obtain
and may not be available to the Company in the future on acceptable terms, or at
all.
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EMPLOYEES
At December 31, 1998, the Company employed 218 individuals. Of these 218
employees, 185 were employed in the areas of research and product development
and in manufacturing and quality control of GLIADEL. The remaining 33 employees
performed general and administrative functions, including executive, finance and
administration, legal and business development. None of the Company's employees
are currently represented by a labor union. To date, the Company has experienced
no work stoppages related to labor issues and believes its relations with its
employees are good.
All employees are required to enter into a confidentiality agreement with
the Company. Hiring and retaining qualified personnel are important factors for
the Company's future success. The Company is likely to continue to add personnel
particularly in the areas of research, clinical research and operations,
including manufacturing. Intense competition exists for these qualified
personnel from other biotechnology and biopharmaceutical companies as well as
academic, research and governmental organizations. There can be no assurance
that the Company will be able to continue to hire qualified personnel and, if
hired, that the Company will be able to retain these individuals.
ITEM 1A. EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES OF REGISTRANT
CRAIG R. SMITH, M.D., age 53, joined the Company as a Director at the
Company's inception in July 1993. Dr. Smith was elected President and Chief
Executive Officer in August 1993 and was elected Chairman of the Board in
January 1994. Prior to joining the Company, Dr. Smith was Senior Vice President
for Business and Market Development at Centocor, Inc., a biotechnology
corporation. Dr. Smith joined Centocor in 1988 as Vice President of Clinical
Research after serving on the Faculty of the Department of Medicine at Johns
Hopkins Medical School for 13 years. Dr. Smith received his M.D. from the State
University of New York at Buffalo in 1972 and received training in Internal
Medicine at Johns Hopkins Hospital from 1972 to 1975.
JOHN P. BRENNAN, age 56, joined the Company as Vice President, Operations
in January 1994 and became Senior Vice President, Operations in January 1997. In
February 1999, Mr. Brennan was promoted to Senior Vice President, Technical
Operations and General Manager, Drug Delivery Business. From 1980 to 1993, he
was Vice President, Technical Operations and Manufacturing for G.D. Searle and
Co., a pharmaceutical company, and was responsible for the operation of
manufacturing plants in North America, Latin America and Europe and the
worldwide pharmaceutical and process technology from 1980 to 1993. From 1977 to
1980, Mr. Brennan was General Manager of the E.R. Squibb & Sons, Inc.
manufacturing facility in Humacao, Puerto Rico. Mr. Brennan held various
technical positions at SmithKline Corporation from 1960 to 1977. Mr. Brennan has
over 38 years of experience in the pharmaceutical industry. Mr. Brennan received
his B.S. in Chemistry from the Philadelphia College of Pharmacy and Science in
1968 and attended the Wharton Graduate Management Program in 1976.
ANDREW R. JORDAN, age 51, joined the Company as Vice President, Secretary,
Treasurer and Chief Financial Officer in September 1993 and became Senior Vice
President, Treasurer and Chief Financial Officer in January 1997. Prior to
joining the Company, Mr. Jordan held various positions with KPMG LLP, a public
accounting firm, beginning in 1973, including partner since 1983. Mr. Jordan's
experience at KPMG LLP included advising early-stage and emerging technology
companies and initial and secondary public equity and debt offerings. He
received his B.A. from Rutgers College in 1969 and his MBA from Rutgers Graduate
School of Business in 1973 and is a Certified Public Accountant.
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PETER D. SUZDAK, PH.D., age 40, joined the Company in March 1995 as Vice
President, Research. In February 1999, Dr. Suzdak was promoted to Senior Vice
President, Research & Development. Prior to joining the Company, Dr. Suzdak was
Director of Neurobiology at Novo Nordisk A/S and was responsible for all
neurobiology research from 1993 to 1995, and Department Head for Receptor
Neurochemistry from 1988 to 1992 as well as a member of the drug discovery
management group from 1989 to 1995. Prior thereto, Dr. Suzdak was a Pharmacology
Research Associate in the Clinical Neuroscience Branch of the National Institute
of Mental Health in Bethesda, Maryland from 1985 to 1988. Dr. Suzdak received
his Ph.D. in Neuroscience from the University of Connecticut and a B.S. in
Pharmacy from St. Johns University.
NICHOLAS LANDEKIC, age 40, joined the Company in March 1995 as Vice
President, Business Development. From January 1992 to February 1995, Mr.
Landekic was Senior Director of Business Development at Cephalon, Inc. and was
responsible for licensing and other corporate collaborations. From 1989 to 1992,
he was a Senior Manager of Product Planning at Bristol-Myers Squibb Company and
was responsible for worldwide commercial development and strategic planning for
currently marketed and new central nervous system products. From 1985 to 1989,
Mr. Landekic held various positions at the McNeil Pharmaceutical division of the
Johnson and Johnson Company, and from 1982 to 1983 worked in research at the Mt.
Sinai Medical Center. Mr. Landekic received his M.B.A. in Finance/Marketing from
the State University of New York at Albany, an M.A. in Biology from Indiana
University and a B.S. in Biology from Marist College.
THOMAS C. SEOH, age 41, joined the Company in April 1995 as Vice President,
General Counsel and Secretary. From 1992 to 1995, Mr. Seoh was affiliated with
the ICN Pharmaceuticals, Inc. ("ICN") group, as Vice President and Associate
General Counsel of ICN from 1994 to 1995, Vice President, General Counsel and
Secretary of Viratek, Inc. from 1993 to 1994 and Deputy General Counsel of SPI
Pharmaceuticals, Inc. from 1992 to 1994, providing legal function support for
pharmaceutical operations, research and development and corporate development.
From 1990 to 1992, Mr. Seoh was General Counsel and Secretary of Consolidated
Press U.S., Inc., the North American holding corporation of the Sydney,
Australia-based Consolidated Press group. Prior thereto, Mr. Seoh was associated
with the New York and London law offices of Lord, Day & Lord, Barrett Smith. Mr.
Seoh received his J.D. and A.B. from Harvard University.
WILLIAM C. VINCEK, PH.D., age 51, joined the Company as Vice President,
Corporate Quality in August 1997. From November 1993 until Dr. Vincek joined the
Company, he was Group Director, CMC & Preclinical Regulatory Affairs and Global
Research and Development GMP Quality Assurance at Glaxo Wellcome, Inc. Prior
thereto from 1984 until October 1993, Dr. Vincek held various positions at
SmithKline Beecham Pharmaceuticals and related entities, most recently from July
1992 until October 1993 as Director, Pharmaceutical Analysis Department. Dr.
Vincek received his Ph.D. in Medicinal Chemistry from the University of Kansas,
where he also received an M.S. in Medicinal Chemistry. Dr. Vincek received a
B.S. in Chemistry from Colorado State University.
DAVID H. BERGSTROM, PH.D., age 44, joined the Company as Vice President,
Pharmaceutical & Chemical Development in July 1998. Prior to joining the
Company, Dr. Bergstrom was employed by Hoechst Marion Roussel, Inc. as the
Director of Pharmaceutical and Analytical Sciences from 1996 to 1998,
responsible for managing research and development efforts to facilitate optimal
lead candidate selection for commercial development. Dr. Bergstrom served as
Director of Pharmaceutical and Analytical Development for the predecessor
company, Hoechst-Roussel Pharmaceuticals Inc., from 1991 to 1996, and Group
Manager, Formulations, Pharmaceutical Research from 1990 to 1991. Prior thereto,
Dr. Bergstrom held various positions at Ciba-Geigy Corporation. Dr. Bergstrom
received his B.S. in Pharmacy from Ferris State College, an M.S. in
Pharmaceutical Chemistry from the University of Michigan, and a Ph.D. in
Pharmaceutics from the University of Utah.
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DANA C. HILT, M.D., age 46, joined the Company as Vice President, Clinical
Research in May 1998. As part of a Company reorganization in February 1999, Dr.
Hilt's title was changed to Vice President, Clinical Research and Drug
Metabolism. Prior to joining the Company, Dr. Hilt was employed by Amgen, most
recently as Director, Neuroscience from 1996 to 1998, earlier as Associate
Director, Neuroscience from 1993 to 1996. While at Amgen, Dr. Hilt's duties
included overseeing aspects of basic research, clinical trials, regulatory
strategy and manufacturing for certain of Amgen's neurological product programs.
Prior to joining Amgen, Dr. Hilt held a variety of positions at the University
of Maryland School of Medicine and the National Institutes of Health. Dr. Hilt
received his B.S. degree in Chemistry from the University of Maine, his M.D.
from Tufts University School of Medicine, and received training in Internal
Medicine at Harvard Medical School and Neurology at Johns Hopkins Hospital.
GREGORY M. HOCKEL, PH.D., age 48, joined the Company as Vice President,
Regulatory Affairs in April 1998. Prior to joining the Company, Dr. Hockel was
employed by British Biotech, Inc., as Vice President, Regulatory Affairs from
1994 until 1998, responsible for interactions with U.S. and Canadian regulatory
authorities, drug safety reporting, and Good Clinical Practice compliance in
North America. Dr. Hockel also served on British Biotech's board of directors
from 1995 to 1998. Prior to his employment with British Biotech, Dr. Hockel
worked in the regulatory affairs department of G. H. Besselaar Associates from
1989 to 1994, ultimately as the Executive Director, Regulatory Affairs in 1994.
Prior thereto, Dr. Hockel held various positions at Pfizer Central Research. Dr.
Hockel received his B.A. in Biology from the California State University at Long
Beach, his Ph.D. in Physiology from Indiana University School of Medicine, and
an M.B.A. from Rensselaer Polytechnic Institute.
NANCY J. LINCK, PH.D., J.D., age 57, joined the Company as Vice President,
Intellectual Property in November 1998.