<PAGE> 1
Filed by Guilford Pharmaceuticals Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Commission File No. 0-20096
Subject Company: Gliatech Inc.
[The following is the transcript of a conference call which took place May 30,
2000]
GUILFORD PHARMACEUTICALS
MODERATOR: DR. CRAIG SMITH
MAY 30, 2000
8:00 A.M. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to
the Guilford and Gliatech conference call. At this time, all
participants are in a listen-only mode. Later we will conduct
a question-and-answer session. At that time, if you have a
question, you will need to press the 1 followed by the 4 on
your push-button phone. As a reminder, this conference is
being recorded Tuesday, May 30, 2000. I would now like to turn
the conference over to Dr. Craig Smith, president and CEO,
Guilford Pharmaceuticals. Please go ahead, sir.
Dr. Craig Smith: Good morning. I'm Dr. Craig Smith, chairman, president, and
CEO of Guilford Pharmaceuticals. I'd like to thank you for
joining Dr. Tom Oesterling and me on this exciting day for
Guilford Pharmaceuticals and Gliatech. I'd now like to
introduce Dr. Oesterling, chairman and CEO of Gliatech.
Dr. Tom Oesterling: Good morning and thank you, Craig.
Dr. Smith: Before I begin my remarks, I must remind you that during this
call, I'll make forward-looking statements or projections
that carry risks that could cause the company's actual
performance to differ materially from these forward-looking
statements, and I refer you to our recent SEC filings for a
complete discussion of these risks.
As you know, this morning we announced the signing of a
definitive merger agreement that proposes to combine Guilford
and Gliatech to create a specialty pharmaceutical company that
will focus on selling and developing biopolymer products for
surgeons and developing new drugs for the treatment of
neurological and psychiatric disorders. Our new company, which
will retain the name Guilford Pharmaceuticals, combines our
respective strengths in biopolymer product development and the
discovery and development of new treatments for neurological
and psychiatric disorders, and will offer an exciting array of
marketed products and products in clinical development.
By combining our technology and resources, we intend to
position Guilford as a fully integrated company with a robust
product development pipeline that includes three marketed
products and nine products in clinical development. The
combined companies' commercial products will be GLIADEL wafer,
ADCON-L, and ADCON TN. Combined 1999 gross sales for these
products were $45.3 million. GLIADEL is currently marketed by
Aventis, and Guilford receives royalties on sales, while
ADCON-L and TN are marketed by Gliatech.
Upon successful completion of the merger, Guilford intends to
market and sell its biopolymer products to surgeons and will
seek to in-license or co-promote other surgical products to
expand its product line. The combined company will also have a
robust
<PAGE> 2
research and development pipeline that includes nine products
in clinical development. I refer you to this morning's press
release and the accompanying merger-at-a-glance fact sheet for
a more detailed description of each of these products.
As for the specifics of the merger, I will remain chairman,
president, and CEO of Guilford, and Tom Oesterling will join
the Guilford board of directors and management team and lead
strategic planning for the combined company. The combined
company will consolidate its corporate and research facilities
in Baltimore, while maintaining a manufacturing facility in
Solon, Ohio. The combined company will have cash, cash
equivalents, and investments of approximately $154 million.
Under terms of the agreement announced today, Gliatech
shareholders will receive 1.38 shares of Guilford common stock
for each share of Gliatech common stock. At the conclusion of
the merger, Guilford shareholders will own approximately 63
percent of the combined company and Gliatech shareholders will
own approximately 37 percent.
Structurally, Gliatech will become a wholly owned subsidiary
of Guilford. Based on the fixed exchange ratio, the combined
company will have approximately 36.5 million shares
outstanding.
I'd now like to ask Dr. Oesterling to make a few comments.
Dr. Oesterling: Thank you, Craig. I'd like to begin by thanking all of you
again for joining us today. Like Guilford, Gliatech was
founded with the purpose of developing innovative products
for major unmet human health care needs. Our biosurgical
and neurological programs are focused on the discovery,
evolvement, and commercialization of biopolymer and
neurological products to improve surgical outcomes and
treat neurological disorders.
Like Craig, I quickly realized the tremendous synergy between
our two companies, as well as a shared entrepreneurial
corporate culture. I strongly believe that together our two
companies can compete very effectively, based on our products,
technologies, and business strategy. We will increase our
critical mass by broadening our commercial platform,
development pipeline, and human and financial resources.
Moreover, we can establish a leadership position in two
important business niches -- biopolymers for the surgical
marketplace and novel therapies for neurological disorders. By
combining our respective marketed products and rich
development pipelines, we will create a specialty
pharmaceutical company with a strong commercial platform and a
broad development pipeline.
Craig will now make some closing remarks.
Dr. Smith: Thanks, Tom. Pending the successful completion of this
merger, over the next 12 months we anticipate that the
combined company will achieve a number of significant
clinical milestones, specifically in our biopolymer
program, we expect the new company to complete the ADCON-P
pivotal trial and complete the filing of a PMA for approval
from the FDA, complete a Phase III first-surgery clinical
trial of GLIADEL wafer, seek U.S. and European registration
for a first-surgery label expansion for GLIADEL wafer,
initiate a pivotal clinical study for ADCON-A, obtain
Japanese approval for ADCON-L, obtain results from a pilot
study of ADCON-I for breast implants, and file an IDE for a
pivotal study in the U.S., and obtain reimbursement
approvals for ADCON-L in the U.S. and from several major
managed care groups. We also expect to complete, later this
year, a Phase I clinical study of Paclimer Microspheres for
ovarian cancer.
In our neuroscience programs, we expect the combined company
to initiate a Phase II clinical trial for patients with
Parkinson's Disease in our neuroimmunophilin ligand program
with Amgen, complete enrollment in a Phase II clinical trial
for Perceptin in adult attention deficit hyperactivity
disorder patients, commence a first-time-in-human clinical
<PAGE> 3
study of our lead NAALADASE inhibitor compound in patients
with neuropathic pain due to diabetic peripheral neuropathy,
and, finally, to commence Phase I development of our novel
propofol pro-drug, GPI 15-7-15.
As you can see, we have many exciting opportunities ahead of
us. I know I speak for the management teams and boards of both
companies when I say that we all see this as a significant
opportunity to create a stronger, product-focused organization
with tremendous growth potential supported by a strong
financial position and a focused and dedicated management
team, we intend to successfully leverage our respective
strengths and position Guilford as a leader in the development
of biopolymer products for surgeons and novel therapies for
neurological and psychiatric disorders. We certainly recognize
that many challenges lie ahead, but we feel confident in our
ability to deliver results.
If there are any questions, Tom and I would be happy to
address them at this time.
Operator: Ladies and gentlemen, we will now begin the
question-and-answer session. If you have a question, you will
need to press the 1 followed by the 4 on your push-button
phone. You will hear a three-tone prompt acknowledging your
request. If your question has been answered, and you would
like to withdraw your polling request, you may do so by
pressing the 1 followed by the 3. If you are using a
speakerphone, please pick up your handset before entering your
request. One moment, please, for the first question. John
Sonnier with Prudential Security, please go ahead with your
question.
John Sonnier: Thanks. Hi, Craig, Tom. My question is about R&D. I mean,
the synergies are quite clear, but can you give us some
idea of the amount of consolidation that you would expect
when we put the two R&D organizations together?
Dr. Smith: Sure. This is Craig, John. Thanks for the question. Yes,
I think that what we will be doing during the integration
period is developing a portfolio management plan, but at
this time I think we feel that the combined company will be
able to aggressively pursue all of the products that I just
mentioned in clinical development, and we will be
prioritizing and developing resource plans and budgets for
the earlier stage research programs that, frankly, we
haven't even touched on this morning, and these include
some very exciting programs from both companies. Looking at
the combined pro forma P&L for the year, we think that it
is highly likely that this transaction will be accretive to
Guilford, and that we'll be able to deliver excellent
financial results.
J. Sonnier: Thank you.
Operator: Dennis Harp with DB Alex Brown, please go ahead with your
question.
Dennis Harp: Yes, I had some questions regarding the sales force for
the ADCON suite of products. How many people do you have in
the U.S.? How many outside of the U.S.? And what will you need
to do to augment that sales force as additional ADCON products
come online?
Dr. Oesterling: OK. Yeah, for ADCON in the United States, we sell
it through a group of independent sales agents, and there are,
roughly, 30 of these agencies, and the combined number of
sales reps in the field from these 30 agencies is about 200.
These are agencies that are specialized on selling Prilox to
surgeons, specifically to surgeons undertaking spine surgery,
and sell a number of products that are used in spine surgery,
so it's a natural fit to go into this kind of a sales force.
Outside of the U.S. we sell ADCON-L and TN to stocking
distributors. We have, roughly, divided the territories by
country. We have one distributor per country. We sell the
product to the distributor, and then he sells it to the
hospital, and each distributor has their own sales force
and handles all the sales and marketing expenses. That's
different from the U.S.,
<PAGE> 4
where in the U.S. we control the distribution of the product,
and the company sells the product to the hospital and collects
from the hospital, and then we pay the agents who are selling
the product a commission. Now, for future products coming down
the pike, some of these will fit into the existing structure
that we have, and others will probably need to develop
different kinds of distribution systems where we're looking at
different surgeons and different numbers of surgeons and
different numbers of hospitals that need to be reached through
a sales force. So depending on the product that's coming,
we'll have to determine the distribution system as that
product gets closer to the market.
D. Harp: And if I might ask a follow-up question -- what has been the
difficult with getting reimbursement for the ADCON products?
Why isn't it more widely reimbursed?
Dr. Oesterling: Well, actually, it's being reimbursed now on about 30 percent
of the patients or, roughly, 30 percent of the patients to
whom the product is administered, and for the other areas
of reimbursement, it depends on the type of system, and it
depends on the hospital and the way the reimbursement
system is administered within the hospital and through the
payor. We were a little slow in building our reimbursement
group to begin to make presentations to the payors. We're
doing that now, and we're increasing the rate of pickup of
reimbursement buy, you know, the large HMO's and so on. So
we think we're on a good path there.
Dr. Smith: This is Craig Smith. Just a comment, as well, Dennis. I
think that Tom and I also see that by putting the two
companies together, there may be other alternatives
available to us, and one of the things we're going to be
studying very carefully is the prospect that we would be
able to take on more responsibility for this ourselves by
setting up a commercial operations group within the
combined company and fielding potentially our own sales
force as new products are acquired or developed.
D. Harp: Great. Thank you.
Operator: Stefan Loren with Legg Mason, please go ahead with your
question.
Stefan Loren: Yes, my first question relates to the manufacturing,
actually, that you mentioned a little bit earlier. Is there
any possibilities of moving all of Guilford's manufacturing
polymer products in with those of the Gliatech division as
well as trying to achieve some manufacturing synergy?
Dr. Smith: Stefan, this is Craig. Given the nature of what Guilford is
producing, which basically are biopolymers loaded with
chemotherapeutic agents, and the nature of the ADCON
product line, which are for prevention of surgical
complications, we think it would be best, quite frankly, to
have two separate facilities manufacturing those products
so that there is, literally, no chance of any possibility
of contamination or any other untoward events. So at this
point, I think we would plan on manufacturing the
polymer-based chemotherapeutic agents here at Guilford, and
the ADCON line in Solon, Ohio, and in Europe at the
facility in the Netherlands for European distribution. We,
obviously, will be looking at other strategic alternatives
that may be available to us, but there-- I think the
important thing is that we will be able to leverage the
quality control, quality assurance, analytical and other
laboratories and facilities, and would expect that's where
most of the synergies will be achieved.
S. Loren: OK, now, sort of a second question on Perceptin -- now
that the combined entity is a much bigger company than
Gliatech, does this change any thoughts on outright licensing
of Perceptin? Timing for that? Do you think you gained any
leverage in your negotiation if you are currently in
negotiations over that?
Dr. Smith: Well, certainly, I think we have discussed the broader number
of strategic alternatives that are available by putting the
two companies together. Certainly, the combined company is
in a much stronger financial position, and both companies
have shown that they're very adept
<PAGE> 5
at negotiating both in-licensing and out-licensing
transactions, and we will certainly be, in the weeks and
months ahead, looking at our alternatives and probably at a
later date be able to be more explicit about the plans for
each of the programs.
S. Loren: Thank you.
Operator: Larry Neibor with Robert W. Baird, please go ahead with your
question.
Larry Neibor: Thank you, good morning. Could you give us some idea of the
proposed timing of the transaction?
Dr. Smith: Yes. As you saw from the press release this morning, both
boards of directors have approved the definitive merger
agreement. Now we must make submissions to the Securities
and Exchange Commission, Hart-Scott-Rodino filings, and put
this proposed merger to a vote of both the Guilford
shareholders and the Gliatech shareholders. The timing of
this would be dependent upon the pace of regulatory review,
and we would expect that at some point in the third
quarter, most likely we would be able to put this to a vote
of the respective shareholders. If both groups of
shareholders approve the transaction, the deal would be
closed, and we would expect that by the end of this year,
we should be able to effect the operational changes that I
alluded to earlier.
L. Neibor: OK, and I just want to be certain that this is a fixed
exchange ratio. There's no collar on the deal?
Dr. Smith: Yes, that's correct. It's a fixed exchange ratio, no collar.
L. Neibor: Then, finally, what is the status of the validation for the
Solon, Ohio--
Dr. Smith: I'm sorry, I missed that question.
L. Neibor: What is the status of the validation for the Solon, Ohio,
manufacturing facility?
Dr. Oesterling: I'll take that one, Craig. As you know, we have the facility
built out now. All the equipment is in place. We're in the
process of-- we're still continuing with making of validation
batches of material and making and validating the equipment
that we're using in the process, and we're expecting to be
filing an FDA submission shortly. We've already had reviews
by European regulatory authorities for our ISO certification
and for the CE Mark. So the process is underway for Europe
and will shortly be underway in the U.S.
L. Neibor: When do you anticipate shipping to the domestic market from
that facility?
Dr. Oesterling: Well, that's a hard one to predict because of
there's a time in there when we need approval by the FDA. The
FDA will need to come in and inspect the facility and then
write their report, and these can sometimes stretch out to
several months. Sometimes they're a few months, and sometimes
they're several months, and it's basically impossible to
predict that.
L. Neibor: OK, thank you.
Operator: Tracy Harry with Neuro Investments, please go ahead with your
question.
Harry Tracy: Craig and Tom both, now -- it's Harry Tracy. Good
morning, Craig, congratulations. I think you've bought a good
company, rather perhaps inexpensively, but, hopefully, the
synergies will work out. Most of my questions have been asked,
but I have a question about the Gliatech R&D staff, though. To
what degree any appraisals were made on terms of whether most
or all of them are willing to trade Lake Erie for Chesapeake
Bay?
<PAGE> 6
Dr. Smith: Well, obviously, Harry, that's something that is a
very, very important issue for both companies at this point.
Suffice it to say that from Guilford's perspective we've been
very impressed with the quality of the research and
development activities at Gliatech. It was a big part of the
reason that we wanted to enter into this transaction, and our
hope would be that as many folks as are reasonable and
possible would be willing to make that transition and we're
hoping to work with everyone at Gliatech to try to make that
happen.
H. Tracy: Thank you.
Operator: Matthew Campbell with Knott Partners, please go ahead with
your question.
Matthew Campbell: Yes, good morning. There's been a lot of talk about
adverse events from ADCON-L such as CSF leaks, and the FDA
went into Gliatech's headquarters. Just wondering -- has the
FDA made a final judgment from their inspection? Thank you.
Dr. Oesterling: With regard to the CSF leaks, the reports of that,
as we've stated previously, it's something that we're tracking
very carefully, and the incidence of the adverse events or
including the CSF leaks, is very low. It's below what's
reported in the literature, and it's below what we've seen in
our clinical trials. So we're tracking it. We're watching it.
If anything, the incidence being reported is going down in
recent times.
M. Campbell: Yes, but has the FDA made a final judgment on their
inspection? It's an open-ended question.
Dr. Oesterling: We never comment on FDA inspections -- whether the FDA is in
the company or not in the company. It's something we just
don't comment on.
M. Campbell: OK, thank you.
Operator: Arnold Snider with Deerfield Management, please go ahead with
your question.
Arnold Snider: Good morning. I wonder if you could talk about what
the management structure of the combined company is going to
be; particularly, how many from the Gliatech managerial staff
are going to be joining the company? And also I wondered if
you could comment if there was any technology or intellectual
property that related to the polymer technology at Gliatech
that was of particular interest at Guilford?
Dr. Smith: Sure, Arnie. This is Craig. I'm sorry, I was thinking ahead
and lost it here for just a second. Hold on, Arnie, just
for one moment, please.
First, regarding the management structure, we, as I said, are
in the process of working through this with all of the senior
executives at Gliatech and, obviously, they'll individually
have a lot to say about what they eventually elect to do, but
in our ideal world, Tom will be joining me in working on
strategic matters of a variety of different sorts.
We'll also be setting up a commercial operations group within
Guilford. This will include, certainly, Rod Dausch from the
Gliatech organization, and we would be seeking to hire a very
senior seasoned commercial executive to join the company. We
would be seeking to build a medical affairs department that
would strengthen our ability to report adverse events, carry
out Phase IV clinical trials, interact with the practicing
community.
We will be taking steps to shore up the research and
development activities regarding all of the biopolymer
programs at Guilford, and we would hope that one of the senior
executives at Gliatech could take major responsibility for
heading up, essentially, biopolymer research and development.
We have an excellent, albeit small, clinical group at Gliatech
that we would see as being fully engaged, given the breadth of
the clinical programs that we have
<PAGE> 7
ongoing. The manufacturing group will fit very nicely under
Jack Brennan, who is our senior vice president of operations
with both the Baltimore facilities and Solon, Ohio, facilities
reporting in that direction.
We have a very strong product team orientation here at
Guilford, and we would expect to be able to reasonably quickly
and, hopefully efficiently, incorporate that same project team
approach, given the several Gliatech programs that are
ongoing.
I think that one of the real strengths of what we propose to
do here is that the strengths of the two companies when put
together, I think, are substantial. Yet there will be some
areas that we will continue to need to recruit for and build.
The second part of your question, Arnie, was, again?
A. Snider: It was related to any particular aspect of Gliatech's
technology, intellectual property that was important to your
polymer future?
Dr. Smith: Yeah, very simply stated, we think they're well
protected, and the thing that was most interesting to us --
this stuff works, and that's important. You know, the basics
in this industry are very simple. You need products that work
and people that know what they're doing, and we think by
putting the companies together, we're going to have more of
both.
A. Snider: OK, thank you.
Operator: Barbara Rosenfelt with Loeb Partners, please go ahead with
your question.
Barbara Rosenfelt: Yes, good morning. Regarding the ADCON products,
what is the add-on cost of administering ADCON during the
surgical procedure? And can you give us some sense of the
market potential for these products and the competitive
environment?
Dr. Oesterling: Well, for ADCON-L, the product that's being sold
in the United States, the product is sold to the hospital for
$495, and the add-on cost to the patient depends on the
hospital and depends on the method of payment for the patient.
In some cases, the hospital will charge the patient from
between $1,000 or $2,000 for the product, depending on the
hospital and depending on the payor mix and the situation at
each individual hospital.
What was the other one?
B. Rosenfelt: The market--
Dr. Oesterling: Oh, the market potential? The market potential for ADCON-L on
a worldwide basis, we estimate to be about $400 million.
For the total group of products in the ADCON family that
we've targeted to develop, we estimate a U.S. market
potential of in excess of a billion dollars, and that's
broken down between ADCON-PA, which is intended for use in
the peritoneal cavity for abdominal and gynecological
surgeries; for ADCON-I, which is used in various implant
procedures where this technology can be used to prolong the
life of long indwelling implants in the body; and ADCON-C,
which would be used in cardiac surgeries-- in open heart
procedures, and for ADCON-L, the U.S. market is, roughly,
200 million, which would be half of the worldwide market
that I mentioned earlier.
The competitive environment -- ADCON-L has no competition.
There's no competition on the market for ADCON-L now to
prevent post-surgical adhesion formation following spinal
surgery. There is one product in development in some stage of
clinical testing that we're aware of. In the ADCON-PA, the
peritoneal cavity product, there are two products on the
market currently. One is a product called Seprafilm, which is
being marketed by Genzyme, and the other is a product called
Surgicel-- Entercede, which is being sold by Johnson and
<PAGE> 8
Johnson. Both of those products are films or materials that
must be applied directly to the particular site in the cavity
where the surgeon doesn't want adhesions to form, whereas
ADCON-PA will be a liquid which will coat all the tissues and
organs inside the cavity, be much more effective in preventing
adhesion formation throughout the cavity.
B. Rosenfelt: Thanks.
Operator: Eric Schmidt with SG Cowen, please go ahead with your
question.
Eric Schmidt: Good morning. Craig, could you just tell us in your
words, sort of off the script, as to why you're excited about
this opportunity and why you had to have Gliatech? And then,
second, could you give us a little flavor for some of the due
diligence you must have conducted? Particularly whether you
saw some of the interim upcoming data on ADCON-P and had
discussions yourselves with the FDA concerning the safety of
ADCON-L?
Dr. Smith: OK, well, in response to your first question, Eric, I think,
very simply stated, we see this as a very offensive move on
Guilford's part. We have, for some time, been saying that
our goal is to develop a specialty pharmaceutical company
that's product-oriented and that ultimately becomes a fully
integrated company, and the reason we've set that as our
long-term goal is we feel those are the companies that
return the greatest rewards to their shareholders. We think
that this move accelerates the process of creating a
specialty-based company with its own marketing and sales
organization, fully integrated, certainly on the biopolymer
side of the business and with what we believe to be a very
deep and rich pipeline, not only of products and clinical
development which we've touched on today, but also a
variety of programs in earlier stage research that we think
rivals some of the very best that exists in the
biotechnology industry, and that's a lot to say, but we
think the facts speak for themselves.
We think that this, combined with the financial resources that
Guilford and Gliatech have at their disposal now, we will be
able to move several of these programs reasonably rapidly into
commercialization. Regarding the other key part here is that
any pharmaceutical company deals with the probabilities of
product failure. These are well-known, well-documented by many
investigators and in the press, and what we need to do in any
organization is build critical mass so that the investor can
be reasonably confident, given the nature and the breadth of
what an individual company is doing that a sufficient number
of products will come through development to be able to
sustain very substantial growth over the course of time.
Regarding the due diligence that we carried out, it was
extensive, it involved many weeks of work, it involved not
only materials that we were provided by Gliatech, but also
independent work by our business development teams, clinical
teams, consultation with consultants who are expert in the
fields of neurosurgery and orthopedic surgery. It led us to
the belief that whatever may happen in the short term
regarding any of these programs, that we feel that the ADCON
line of products is very promising.
We did look into all of the specifics. We're well aware of the
issue of the reports of dural leaks. It probably goes without
saying that that discussion is something which would take a
substantial amount of time, and I don't think it's
particularly relevant, to be very honest with you, what we're
trying to do this morning, but we're reasonably convinced that
that product can be built into a very successful commercial
product. We have consulted regulatory attorneys, regulatory
counsel, regarding whatever corrective actions may be
required. We think that we should be able to weather not only
that storm, but any other storms that might come our way,
either from Gliatech or Guilford, and that's really, I think,
what one of the key challenges that any CEO faces in our
business today, and that is to create critical mass in terms
of products, programs, people, and facilities to be able to
deliver the long-term results.
<PAGE> 9
E. Schmidt: And did you get a look at the interim ADCON-P data?
Dr. Smith: Gliatech, to the best of my knowledge, shared everything they
have with us in all programs.
E. Schmidt: Thank you.
Operator: Dennis Harp with DB Alex Brown, please go ahead with your
question.
D. Harp: Yes, just a couple of follow-up questions. The first is
the regulatory status of ADCON-TN in the U.S.? And the second
is, with products that are regulated as devices, is there a
two-step process to registration? A pilot and then pivotal?
And what are the typical timeframes to get a product
registered? And how long is the PMA review typically?
Dr. Oesterling: I'll take that one, Craig. I'll answer your second question
first. The normal regulatory pathway for a Class III device
like the ADCON products are, is a pilot trial, which is
basically a combined safety/efficacy trial, and then
assuming success with that trial, then the next step would
be the pivotal trial, which would be a multi-center
double-blind randomized trial to demonstrate efficacy of
the product. The trial, depending on the followup, can last
a few months to several months. For example, ADCON-A for
abdominal surgeries, the followup was two months so that
the trial could be concluded fairly quickly. The same is
true for ADCON-P, the gynecological product. Both of these
have relatively short follow-up periods. ADCON-L, the
follow-up was six months for efficacy, although we did
agree to obtain 12-month data for information. So that
varies.
The approval time is, again depending on the status. If you
have accelerated review because it's the only product of its
type, such as ADCON-L, the time for approval for that product
took 18 months. It was 12 months to the panel meeting and then
six months following the panel meeting, we obtained approval
for the product in the U.S. So that's probably a good
timeframe there to think about, which would be 12 to 18 months
for approval.
Back to the first part of your question on ADCON-TN, we
announced a few months ago, that our clinical trial that we
were running in the U.S., we had demonstrated efficacy, and we
reviewed this data with the FDA, and they felt that we needed
a much larger study just to expand the power of the statistics
to complete it and to make a submission. Since we need to do
the same type of study for each of the ADCONs, a full-blown
efficacy pivotal trial, we just simply didn't have the
resources to do that, and we had to, basically, put ADCON-TN
on the back burner, and we want to move forward aggressively
with ADCON-P and ADCON-A, which we are doing. Now that we've
entered into the merger, this is another area where Craig and
I will need to revisit this when we're combining all of the
resources and the projects of the two companies and decide
whether this is another area where we might want to invest
some more.
D. Harp: Thank you.
Operator: Brett Patelski with Tiedemann, please go ahead with your
question.
Brett Patelski: Congratulations on the deal, guys. I just had a
quick question -- I wanted for you guys to go over the drug
approval process again for each one of the Gliatech's
products, and if any of those approvals would be conditioned
on this transaction being completed?
Dr. Smith: Well, certainly, the product approvals would not be
conditioned upon-- from a regulatory perspective-- on this
particular transaction. Tom, would you like to just review
again the status of each of the ADCON products?
<PAGE> 10
Dr. Oesterling: Sure. ADCON-L, of course, is approved and on the market in
the U.S. with a broad claim for use in spinal surgery.
ADCON-P, which is for use in surgeries in the peritoneal
cavity. ADCON-P, for the lower peritoneal cavity, for the
gynecological procedures, we are now completing enrollment
in the pivotal trial. Then there's a two-month followup to
that study. So we are targeting a submission of the PMA for
ADCON-P yet this year. ADCON-A, we have completed the
enrollment in the followup in the pilot trial, and we're
now analyzing the data and preparing to make a submission
to the FDA, which would include a proposal to begin a
pivotal clinical trial, and we're targeting the beginning
of that pivotal trial towards in the fourth quarter of this
year. So that's kind of the status of where we are. We do
have one drug in development at Gliatech. That's Perceptin
- for attention hyperactivity disorder, and here we have
just begun enrollment in the Phase II trial.
B. Patelski: And I've just got a follow-up question. For any of
our collaborative efforts on those drugs, any reason why any
of the parties that we are working with on those would not
actually want to continue their collaboration efforts? I know
on the Perceptin side, you know, we've been working with
Abgenix?
Dr. Oesterling: Actually, Abgenix is a collaboration between-- with Gliatech
on another project. That's a project that's our
anti-inflammation project where we are working with Abgenix.
We've contracted Abgenix to develop a fully human antibody for
us that we can take into clinical trials, and we will
definitely continue this relationship with them, and I think
this is a project, again, that will be folded into the total
number of projects, and then Craig and his management team
will need to assign priorities on how much resources will be
applied to them.
B. Patelski: Thank you.
Operator: Tom Claugus with GMT Capital Corporation, please go ahead with
your question.
Tom Claugus: Thanks, my question has been answered.
Operator: Cathy Reese with Bulldog Capital Management, please go ahead
with your question.
Cathy Reese: Yes, good morning. I was wondering if you could give me some
type of a range on the proforma revenue sales that you're
expecting for the year 2000?
Dr. Smith: Well, I think that, obviously, this is something that
we have to be very careful about. What I would refer you to is
both companies are covered by several analysts, and I would
strongly suggest that you begin by looking at the projections
that are being made by both sets of analysts on the top line
revenue side. Needless to say, we aren't going to rest on our
laurels here, and would hope that we could continue to build
that top line through other potential transactions and/or
increased efficiencies of the marketing and sales efforts of
the combined company.
C. Reese: OK, and just a little add-on on that. Could you tell me
which product-- I know we've talked a lot about the pipeline,
but which product do you think will actually enter and when it
will enter the market next?
Dr. Smith: Well, I would say that there are two-- the two most
likely would be GLIADEL for first-line therapy. The Phase III
trial results will be in here in the next couple of months.
The approval time, when we got the product initially approved
was seven months, so we would think that sometime in 2001, we
could potentially get a significant label expansion for
GLIADEL. Second, as Tom just mentioned, we're targeting a PMA
submission for ADCON-P at the end of the year, which would
trigger, probably, a 12-month to 18-month march to the market
for that particular product.
<PAGE> 11
C. Reese: OK. Thank you very much.
Operator: Our last question comes from Zach Schiller of Cleveland Plain
Dealer. Please go ahead with your question.
Zach Schiller: Tom, I'm interested in finding out two things, I guess. One,
the price that you're getting here is a good deal below
what Gliatech was trading for just a few months ago. Can
you explain why you would feel that, on a long-term basis,
this would be the best thing for shareholders? And then,
secondly, I'm interested in the ramifications of this for
the city here in Cleveland in terms of-- it appears that
all would be left is the manufacturing operation, and I'm
wondering, basically, what caused you to-- I guess it's the
same question, really. What does this mean for the local
environment and why is it that you feel that is the best
thing for the company?
Dr. Oesterling: OK, yeah. Good morning, Zach.
Z. Schiller: Good morning.
Dr. Oesterling: On your first question, if you followed our market sector, the
biotechnology market sector in recent months, it's been--
the sector itself has been extremely volatile, and both of
Gliatech's and Guilford stocks have been part of that and
have shown a high degree of volatility, and that's why we
entered into the type of relationship we did, which is a
fixed-exchange ratio for the stock. If you read in the
press release there, the Gliatech shareholders will hold 37
percent ownership in the new company. We'll have three
members of the Gliatech board become part of the board
management of the new company, and we think it's just a
very good combination, where we have products that fit very
nicely together and research programs that fit very nicely
together. Guilford has a lot of cash. The combined company
will have $150 million in cash. That will give us a lot
more options for the way we move forward, and the cultures
of the two companies are very similar and tend to be a very
nice melding of the two cultures.
Z. Schiller: Does your own status as CEO have anything to do with this?
Dr. Oesterling: My own status as CEO?
Z. Schiller: Yeah.
Dr. Oesterling: I don't believe so, no, it doesn't. The second part of your
question regarding the facility -- of course, we have to
wait-- you know, we have to go through the approval
processes for this deal for completion of the deal, and we
have two government reviews, and we have a shareholder
vote, so once we get through all that, then the new
combined entity will begin to think seriously about what to
do with the proposed headquarters facility here in
Cleveland.
Operator: Dr. Smith, do you have any concluding remarks?
Dr. Smith: Yes. First I'd like to thank all of you for your time this
morning and your interest in the proposed merger between
Gliatech and Guilford. Suffice it to say that for all the
reasons we've discussed this morning, we think that this is
a transaction which we believe, and our boards of directors
believe, are in the best interests of our shareholders. We
look forward to the challenges that face us in the coming
days and look forward to what we hope will be a successful
conclusion to this transaction later this year, and are
obviously looking forward with great optimism and
enthusiasm toward what lies beyond the successful
completion of this transaction. I thank you again and good
morning.
Operator: Ladies and gentlemen, that does conclude your conference for
today. You may all disconnect and thank you for
participating.
<PAGE> 12
These communications include certain "forward-
looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements
are based on management's current expectations and are
naturally subject to uncertainty and changes in
circumstances. Actual results may vary materially from the
expectations contained herein. The forward-looking
statements in this document include statements about future
financial and operating results and the proposed
Guilford/Gliatech transaction. The following factors, among
others, could cause actual results to differ materially
from those described herein: inability to obtain, or meet
conditions imposed for, governmental approvals for the
merger between Guilford and Gliatech, failure of the
Guilford or Gliatech stockholders to approve the merger;
the risk that the Guilford and Gliatech business will not
be integrated successfully; there can be no assurance that
the contemplated advantages will be achieved upon any
consummation of the merger, the costs related to the
merger; and other economic, business, competitive and/or
regulatory factors affecting Guilford's and Gliatech's
business generally. More detailed information about those
factors is set forth in Guilford's and Gliatech's filings
with the Securities and Exchange Commission, including
their Annual Reports filed on Form 10-K for the fiscal year
ended 1999, especially in the Management's Discussion and
Analysis section, their most recent quarterly reports on
Form 10-Q, and their Current Reports on Form 8-K. Guilford
and Gliatech are under no obligation to (and expressly
disclaim any such obligation to) update or alter their
forward-looking statements whether as a result of new
information, future events or otherwise.
Guilford, its directors, executive officers and
certain other members of management and employees may be
soliciting proxies from Guilford stockholders. Gliatech,
its directors, executive officers and certain other members
of management and employees may be soliciting proxies from
Gliatech stockholders.
INVESTORS ARE URGED TO READ THE JOINT PROXY
STATEMENT - PROSPECTUS RELATING TO THE FOREGOING TRANSACTION
TO BE FILED WITH THE SEC BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. THE JOINT PROXY STATEMENT - PROSPECTUS AND OTHER
DOCUMENTS FILED BY GUILFORD AND GLIATECH WITH THE SEC MAY BE
OBTAINED WHEN THEY BECOME AVAILABLE FOR FREE AT THE SEC'S WEB
SITE, WWW.SEC.GOV. THE JOINT PROXY STATEMENT-PROSPECTUS AND
THESE OTHER DOCUMENTS MAY ALSO BE OBTAINED FOR FREE FROM
GUILFORD OR GLIATECH, AS THE CASE MAY BE. REQUESTS TO GUILFORD
MAY BE DIRECTED TO 6611 TRIBUTARY STREET, BALTIMORE, MD.
21224, ATTENTION: INVESTOR RELATIONS. REQUESTS TO GLIATECH MAY
BE DIRECTED TO 23420 COMMERCE PARK ROAD, CLEVELAND, OH. 44122,
ATTENTION: INVESTOR RELATIONS.
