GERMANTOWN, Md., Nov. 7 /PRNewswire-FirstCall/ -- Avalon
Pharmaceuticals, Inc. (Nasdaq and NYSE Arca: AVRX), a
biopharmaceutical company focused on the discovery and development
of small molecule therapeutics, today announced financial and
operational results for the third quarter and nine months ended
September 30, 2006. "In the third quarter of 2006, our internal
discovery and development programs, focused on novel drugs to treat
cancer, continued to make great progress and we continue to be
encouraged by the progress of our phase I clinical trial for
AVN944, showing tolerance by patients to increasing dose levels,"
stated Kenneth C. Carter, Ph.D., President and CEO of Avalon. "Our
discovery programs and partnerships with Novartis, MedImmune and
ChemDiv also continue to advance. We are also very pleased to have
made several important additions to our management and leadership
support." THIRD QUARTER AND RECENT OPERATIONAL HIGHLIGHTS AVN944:
The AVN944 phase I repeat-dose dose escalation trial in patients
with advanced hematological malignancies, divided into two cohorts,
continues to progress. Cohort 1 has patients with acute myelogenous
leukemia and cohort 2 has enrolled patients with multiple myeloma
and chronic lymphocytic leukemia. The enrollment and progress of
the trial is on schedule with seven dose groups completed and two
additional groups enrolling. Avalon's AvalonRx(R) technology is
also in use, showing that even the lowest doses of AVN944 given to
patients is having a biologic effect on cancer cells. Internal
Programs and Partnerships: Both the Beta-catenin and Aurora pathway
inhibitor programs are now in lead optimization. The Company
continues to synthesize active analogs in both programs, and is
improving the biological properties of each series and
characterization of the structure- activity-relationship using
AvalonRx(R). Additional testing has also been initiated in both
series to define the toxicological and pharmacological properties
of the selected compounds. Avalon's drug discovery collaboration
with MedImmune has completed the high-throughput screening phase
and several compound families have been selected for further
characterization. These compound families have progressed into the
hit-to-lead process, and are being qualified in assays at both
Avalon and MedImmune. Additionally, the drug discovery
collaboration with Novartis has reached the final stages of
signature selection and work on the high-throughput screening phase
is expected to begin by the end of the year. Work on the ChemDiv
collaboration has started with the first screening project selected
and screen design and signature generation is underway. During this
quarter, Avalon also made significant progress on its early stage
discovery initiatives and has begun a high-throughput screen
targeting the Survivin pathway. Leadership Highlights: * New Chief
Business Officer: The Company appointed David D. Muth to the newly
created position of Executive Vice President, Chief Business
Officer, effective September 21, 2006. Mr. Muth will contribute to
the development of the corporate strategy, be responsible for
developing new commercial opportunities and direct all business
development activities. Mr. Muth has over 25 years of business
experience in the biotechnology and pharmaceutical industries. *
New Board of Directors Member: The Company recently announced the
appointment of David Kabakoff, Ph.D., to its board of directors.
Dr. Kabakoff is the current President and CEO of Strategy Advisors
which he established in 2001 to provide business and strategic
advisory services to life sciences companies. Prior to its
acquisition by Cephalon, Inc. in June 2005, Dr. Kabakoff served as
Chairman and Chief Executive Officer of Salmedix, Inc., a company
he co-founded in 2001 to develop novel oncology drugs. * New
Scientific Advisory Board Member: The Company appointed Todd R.
Golub, M.D., to the position of Chairman of its Scientific Advisory
Board. Dr. Golub is a founding member of the Broad Institute and
serves as director of its Cancer Program. FINANCIAL DETAILS * Total
revenues increased to $1.1 million, for the three months ended
September 30, 2006, compared to $748,000 for the three months ended
September 30, 2005. Total revenues increased to $2.1 million, for
the nine months ended September 30, 2006, compared to $748,000 for
the nine months ended September 30, 2005. Substantially all 2006
revenues are related to our collaboration agreements with
MedImmune, Inc. and Novartis Institutes for Biomedical Research,
Inc. A small portion of revenue was attributable to our
collaboration agreement with the University of Louisville. *
Operating expenses. Total costs and expenses from operations
increased to $5.1 million for the three months ended September 30,
2006, compared to $4.4 million for the three months ended September
30, 2005. This increase is primarily related to compensation
expense related to the issuance of stock options under FAS123(R),
an increase in clinical trial costs related to our AVN944 drug
candidate, an increase in lab supplies expense related, in part, to
our collaboration agreements with MedImmune and Novartis and other
expenses directly related to operating as a public company. Total
costs and expenses from operations decreased to $15.6 million for
the nine months ended September 30, 2006, compared to $16.8 million
for the nine months ended September 30, 2005. This decrease was
primarily attributable to the inclusion in the prior year period of
an upfront payment of $5.0 million to Vertex Pharmaceuticals for
the in-license of AVN944. This decrease was offset by increases in
compensation expense related to the issuance of stock options under
FAS123(R), an increase in clinical trial costs related to our
AVN944 drug candidate, an increase in lab supplies expense related,
in part, to our collaboration agreement with MedImmune and Novartis
and other expenses directly related to operating as a public
company. * Net loss was $3.7 million for the third quarter of 2006,
compared to a net loss of $3.6 million in the third quarter of
2005. For the first nine months of 2006, net loss was $12.7
million, compared to a net loss of $16.3 million in the first nine
months of 2005. * Net loss per share applicable to common
stockholders during the third quarter of 2006 was $0.37 compared to
a loss of $25.58 in the comparable quarter of last year. During the
first nine months of 2006, net loss per share applicable to common
stockholders was $1.30 compared to a net loss per share of $125.89
in the first nine months of 2005. As a result of the initial public
offering, which closed on October 4, 2005 - subsequent to the end
of the third quarter of 2005, the per share loss applicable to
common stockholders for the three and nine month periods ending
September 30, 2005, does not reflect the conversion of preferred
shares into 5,021,014 shares of common stock or shares of common
stock that were sold to the public. As of September 30, 2006, cash,
cash equivalents and marketable securities totaled $23.9 million.
Of this amount, $5.5 million was held in a restricted account to
serve as collateral for our long-term debt. CONFERENCE CALL &
WEBCAST INFORMATION Avalon Pharmaceuticals' senior management will
host a conference call on Wednesday, November 8, 2006, at 8:00 a.m.
EST, to discuss the quarterly results. Live audio of the conference
call will be available to investors, members of the news media and
the general public by dialing (800) 561-2813 (in the U.S.) and
(617) 614-3529 (internationally), and providing the participant
pass code, 80900111. To access the call by live webcast, please
visit the Investor Relations section of our website at
http://www.avalonrx.com/. An archived version of the webcast will
also be available through December 30, 2006 on Avalon's website.
About Avalon Pharmaceuticals Avalon Pharmaceuticals is a
biopharmaceutical company focused on the discovery and development
of small molecule therapeutics for the treatment of cancer. Avalon
seeks to discover and develop novel therapeutics through the use of
a comprehensive, innovative and proprietary suite of technologies
based upon large-scale gene expression analysis which it calls
AvalonRx(R). This platform facilitates drug discovery by expanding
the range of therapeutic targets for drug intervention, including
targets and target pathways frequently considered intractable using
conventional HTS approaches, allows more informed decisions about
which compounds to advance towards clinical trials, and facilitates
drug development through identification of biomarkers of efficacy
that can stratify patients or provide early indicators of response.
Avalon Pharmaceuticals was established in 1999 and is headquartered
in Germantown, Maryland. This announcement contains, in addition to
historical information, certain forward-looking statements that
involve risks and uncertainties, in particular, related to progress
in our drug discovery programs and our collaborations, and clinical
progress in the development of AVN944. Such statements reflect the
current views of Avalon management and are based on certain
assumptions. Actual results could differ materially from those
currently anticipated as a result of a number of factors, risks and
uncertainties including the risk that the discovery programs and
collaborations may not be successful and that AVN944 will not
progress successfully in its clinical trials, and other risks
described in our SEC filings. There can be no assurance that our
development efforts will succeed, that AVN944 will receive required
regulatory clearance or, even if such regulatory clearance is
received, that any subsequent products will ultimately achieve
commercial success. The information in this Release should be read
in conjunction with the Risk Factors set forth in our 2005 Annual
Report on Form 10-K and updates contained in subsequent filings we
make with the SEC. AVALON PHARMACEUTICALS, INC. STATEMENTS OF
OPERATIONS (in thousands except for per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30,
2006 2005 2006 2005 Revenues $1,115 $748 $2,071 $748 Costs and
expenses: Research and development 3,422 3,174 9,909 13,188 General
and administrative 1,685 1,185 5,734 3,634 Total costs and expenses
5,107 4,359 15,643 16,822 Loss from operations (3,992) (3,611)
(13,572) (16,074) Total other income (expense): 269 (32) 861 (249)
Net Loss $(3,723) $(3,643) $(12,711) $(16,323) Accretion of
redeemable convertible preferred stock issuance costs - (370) -
(1,111) Net loss attributed to common stockholders $(3,723)
$(4,013) $(12,711) $(17,434) Net loss attributed to common
stockholders per common share - basic and diluted $(0.37) $(25.58)
$(1.30) $(125.89) Weighted average number of common share - basic
and diluted 10,106,947 156,872 9,744,184 138,490 AVALON
PHARMACEUTICALS, INC. BALANCE SHEETS (in thousands) September 30,
December 31, 2006 2005 (Unaudited) ASSETS Cash, cash equivalents
and marketable securities $18,428 $21,436 Restricted cash and
securities 5,520 6,313 Property and equipment, net 9,260 10,997
Other assets, net 2,284 2,536 Total assets $35,492 $41,282
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $5,717
$5,514 Long-term liabilities 7,857 9,885 Total stockholders' equity
21,918 25,883 Total liabilities and stockholders' equity $35,492
$41,282 Contacts: Avalon Pharmaceuticals, Inc. Noonan Russo Gary
Lessing Wendy Lau (Media) Executive Vice President and CFO Tel:
(212) 845-4272 Tel: (301) 556-9900 Fax: (301) 556-9910 The Trout
Group LLC Email: Chad Rubin (Investors) Tel: (212) 477-9007 ext. 47
DATASOURCE: Avalon Pharmaceuticals, Inc. CONTACT: Gary Lessing,
Executive Vice President and CFO, Avalon Pharmaceuticals, Inc. Tel:
+1-301-556-9900, or Fax: +1-301-556-9910, ; or Wendy Lau, Media,
Noonan Russo, +1-212-845-4272; or Chad Rubin, Investors, The Trout
Group LLC, +1-212-477-9007 ext. 47 Web site:
http://www.avalonrx.com/
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