In a $15 million deal with the world's largest drug company, Baltimore-based Guilford Pharmaceuticals Inc. said yesterday that it agreed to license a class of drugs used to treat nerve-degeneration disorders, such as Lou Gehrig's disease, to Pfizer Inc. Pfizer will pay for research and development of the drugs as well as their manufacturing and commercialization. It will pay $5 million on signing the licensing agreement and an additional $10 million by March 31, or earlier, according to the deal. Guilford will be eligible for royalties on the class of drugs and milestone payments of up to $42 million for each drug that goes to market. If Pfizer doesn't make the $10 million payment, rights for the drugs would revert to Guilford, along with data and other information generated by Pfizer. "This is a deal that a lot of us have been waiting for, that we've been hearing about for close to two years, and they delivered," said Stefan Loren, a managing director in health care at Legg Mason Wood Walker in Baltimore. Guilford's family of nerve-protectant drugs, known as Naaladase inhibitors, have been shown in animal tests to block excessive release of an enzyme believed to play a key role in nerve-degeneration disorders. Among them are Huntington's disease and diabetic neuropathy, which causes pain and numbness in extremities. "We are very pleased to license our Naaladase inhibitor program to Pfizer, the world's leading pharmaceutical company," Craig R. Smith, chairman, president and chief executive officer of Guilford Pharmaceuticals, said in a statement.

"Pfizer has a major commitment to the fields of central and peripheral nervous system disorders. Our agreement with Pfizer is consistent with Guilford's objective of finding the highest quality strategic partnerships for the programs we intend to license, while continuing to advance select product development efforts in the U.S. independently."

Guilford is developing variations of the Naaladase inhibitors that can be used to treat prostate cancer, head injury, spinal cord injury and drug addiction. Pfizer has exclusive rights to buy those drugs.

Loren, of Legg Mason, praised Guilford's management for bringing Pfizer to the negotiating table. The company, he said, has done a lot to improve financing this year. In addition to delivering on the Pfizer deal, Guilford has been more frugal with expenditures and has focused on the rate at which it burns through cash, Loren said. In July, the company laid off 60 employees, or about 20 percent of its work force.

"The bottom line is they got a deal, and that's a positive thing," Loren said.

The company also announced yesterday that its losses narrowed even as revenue decreased during the first quarter, which ended March 31.

Guilford reported a net loss of $11.2 million, or 37 cents per share, on revenue of $3.5 million in the quarter. That compares with a net loss of $13.5 million, or 45 cents per share, on revenue of $6.2 million in the first quarter of last year.

All revenue in the first quarter came from sales of the company's Gliadel wafer. The wafer is implanted in a cavity created in the human brain when surgeons remove malignant brain tumors. The wafers dissolve and release a chemotherapy drug.

Guilford had $84.3 million in cash, cash equivalents and marketable securities at the end of the quarter.

Guilford's shares gained 42 cents yesterday to close at $5.77 on the Nasdaq stock exchange.