GERMANTOWN, Md., March 21 /PRNewswire-FirstCall/ -- Avalon
Pharmaceuticals, Inc. (Nasdaq and NYSE Arca: AVRX), a
clinical-stage biopharmaceutical company using its proprietary
technology, AvalonRx(R), to discover and develop cancer
therapeutics, today announced financial and operational results for
the fourth quarter and twelve months ended December 31, 2006. For
the three months ended December 31, 2006, total revenues were $0.7
million and net loss was $4.4 million. For the fiscal year ended
December 31, 2006, total revenues were $2.7 million and net loss
was $17.1 million. As of December 31, 2006, cash, cash equivalents
and marketable securities totaled $20.4 million. This amount does
not include the $9.5 million of net proceeds from the equity
offering completed in January 2007. "Avalon had a successful year
in 2006 as we continued to execute on our corporate strategy of
building a pipeline of first-in-class drugs for Avalon and our
partners," stated Kenneth C. Carter, Ph.D., President and CEO of
Avalon. "Our Phase I clinical trial of AVN944 is progressing well
and preparations are underway for Phase II trials in both
hematological cancers and solid tumors. We are off to a strong
start to 2007 with the initiation of our recently announced
collaboration with Merck and the completion of an equity financing
in January of this year." Recent Highlights Partnership with Merck:
In March 2007, Avalon entered into a drug discovery, development
and commercialization agreement with Merck & Co., Inc., to
identify and develop inhibitors against a selected target in the
area of oncology. In the partnership, Avalon will use its
AvalonRx(R) platform to screen a select set of compounds from
Merck's proprietary compound library and identify hits against this
target, which is generally regarded as "intractable" based on the
difficulty in identifying inhibitors to this target. Avalon is
responsible for the selection of compound families and optimization
of those compounds to a preclinical candidate selection stage.
Merck is responsible for the clinical development, regulatory
approval and commercialization of any resulting product candidates.
Under the agreement, Avalon will receive milestone payments based
on meeting a number of discovery, development and commercial
milestones relating to proof of concept, expansion of research
term, selection of license compound and filing of INDs for a first
cancer indication. Subsequent cancer indications, initiations of
different levels of clinical trials for those indications, the
filing and approval of NDAs for those indications, and achievement
of a specified level of net sales will also result in milestone
payments. If all of the milestones under the agreement are
achieved, Avalon will receive in excess of $200 million in
milestone payments. Avalon will also receive royalties on net sales
of products developed in the collaboration. This collaboration
allows Avalon to combine its unique approach of targeting otherwise
intractable cancer pathways with Merck's strong drug discovery and
development capabilities, and has the potential to lead to the
identification of first-in-class drug candidates against the
selected target. AVN944: * Data from the ongoing Phase I study of
AVN944 show that AVN944 demonstrates a good safety profile, has
dose-dependent pharmacokinetics, induces biomarkers of programmed
cell death in cancer cells from patients and has clear biologic
activity in a subset of the patients that have been treated thus
far. For the lymphoma and myeloma arm, patients are currently being
treated with 150 mg twice daily. For the leukemia arm of the study,
patients are currently being treated with 200 mg twice daily. To
date, 36 patients have completed a total of 75 28-day cycles of
treatment. Correlation of biomarkers and clinical activity suggest
that gene expression patterns in patients' malignant cells may
predict those patients most likely to benefit from AVN944
treatment. Existing Partnerships: * Avalon's drug discovery
collaboration with Novartis continues to progress well. The recent
initiation of the screening phase triggered a $500,000 payment to
Avalon for research support. * Avalon's drug discovery
collaboration with MedImmune completed the high throughput
screening phase of the project, and now characterization of several
compound series is underway with the intention of selecting
compounds for lead optimization. * Work on the ChemDiv
collaboration has started with the first screening project selected
and screen design and signature generation is now underway.
Internal Programs: * Avalon's program to identify inhibitors of the
Beta-catenin pathway, which is abnormally activated in a large
number of cancers, including over 85% of colon cancers, is
currently in late stage lead optimization. Lead candidate compounds
are currently being tested in preclinical tumor efficacy models and
in toxicological and pharmacological studies. It is our intent to
select a preclinical candidate for this program in 2007. * Avalon's
program to identify inhibitors of the Aurora pathway, a key
regulator of cell division and survival, is in lead optimization.
We are currently optimizing a series that appears to affect the
Aurora pathway through a mechanism that is different than compounds
that are currently in clinical development by other companies. We
are testing those compounds in preclinical tumor efficacy models
and in toxicological and pharmacological studies with the intent of
selecting preclinical candidate in 2007. * We are making
significant progress on our early stage drug discovery program
targeting the Survivin and Myc pathways. These programs target two
pathways that are critically involved in cancer cell survival and
have been recognized as conventionally intractable. Equity
Financing: * In January 2007, Avalon closed a $10 million private
placement to institutional investors. A total of 3 million shares
of Avalon's common stock were issued in the private placement at a
price per share of $3.34. The price represented a $0.26 or 8.4%
premium to Avalon's closing price prior to signing the purchase
agreement. Proceeds will be used to fund further development of
Avalon's lead oncology drug, AVN944, and the continued development
of additional pipeline programs using the company's proprietary
technology, AvalonRx(R). Financial Highlights: * Total revenues
decreased to $0.7 million for the three months ended December 31,
2006, compared to $0.8 million for the three months ended December
31, 2005. Total revenues increased to $2.7 million, for the twelve
months ended December 31, 2006, compared to $1.5 million for the
twelve months ended December 31, 2005. Substantially all 2006
revenues are related to our collaboration agreements with
MedImmune, Inc. and Novartis Institutes for Biomedical Research,
Inc. * Operating expenses. Total costs and expenses from operations
increased to $5.3 million for the three months ended December 31,
2006, compared to $4.0 million for the three months ended December
31, 2005. This increase is primarily attributable to higher
stock-based compensation expense, an increase in clinical trial
costs and an increase in lab supplies expense. Total costs and
expenses from operations were $20.9 million for the twelve month
periods ended December 31, 2006 and 2005. During 2006, increases in
compensation expense related to the issuance of stock options under
FAS123(R), clinical trial costs, 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 were offset by the inclusion in 2005 of a $5 million
expense related to the in-licensing of AVN944. * Net loss was $4.4
million for the fourth quarter of 2006, compared to a net loss of
$3.0 million in the fourth quarter of 2005. For the twelve months
of 2006, net loss was $17.1 million, compared to a net loss of
$19.3 million in the twelve months of 2005. * Net loss per share
applicable to common stockholders during the fourth quarter of 2006
was $0.43 compared to a loss of $0.37 in the comparable quarter of
last year. For 2006, net loss per share applicable to common
stockholders was $1.74 compared to a net loss per share of $9.58
for 2005. As a result of the initial public offering, which closed
on October 4, 2005, the per share loss applicable to common
stockholders for the twelve month period ending December 31, 2005,
does not fully 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. * In 2007, Avalon expects a net cash burn
rate of approximately $19 million assuming no incremental cash
inflows from new collaborations. The increase in net cash burn is
attributable to the projected increase in clinical activity for
AVN944. Delisting from NYSE Arca, Inc. Avalon Pharmaceuticals plans
to withdraw the listing of its common stock from NYSE Arca, Inc.,
formerly the Pacific Exchange. Avalon Pharmaceuticals' common stock
will continue to be listed on NASDAQ. Avalon Pharmaceuticals has
decided to withdraw its listing from NYSE Arca, Inc. to reduce cost
and to eliminate duplicative administrative requirements inherent
with dual listings. The withdrawal is expected to be effective
within the next month. CONFERENCE CALL & WEBCAST INFORMATION
Avalon Pharmaceuticals' senior management will host a conference
call on Thursday, March 22, 2007 at 8:00 a.m. Eastern Time, to
discuss the quarterly and annual results. Live audio of the
conference call will be available to investors, members of the news
media and the general public by dialing (866) 383-8108 (in the
U.S.) and (617) 597-5343 (internationally), and providing the
participant pass code, 31676140. 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 April 30, 2007 on Avalon's website.
About Avalon Pharmaceuticals Avalon Pharmaceuticals is a
biopharmaceutical company focused on the discovery and development
of potential first-in-class cancer therapeutics. Avalon has a lead
product in Phase I clinical development (AVN944), preclinical
programs to develop inhibitors for the Beta (B)-catenin and Aurora
pathways, discovery programs for Survivin and Myc pathway
inhibitors, and value generating partnerships with Merck,
MedImmune, Medarex, and Novartis. By utilizing AvalonRx(R) our
platform technology, based upon the proprietary use of large-scale
gene expression, we are uniquely positioned to develop therapeutics
focused on pathways that have historically been characterized as
"undruggable". Avalon was established in 1999 and is headquartered
in Germantown, Md. Forward Looking Statements 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 Twelve
Months Ended December 31, December 31, 2006 2005 2006 2005 Revenues
$653 $796 $2,724 $1,544 Costs and expenses: Research and
development 3,360 2,601 13,269 15,789 General and administrative
1,928 1,432 7,661 5,066 Total costs and expenses 5,288 4,033 20,930
20,855 Loss from operations (4,635) (3,237) (18,206) (19,311) Total
other income (expense): 244 267 1,104 19 Net Loss $(4,391) $(2,970)
$(17,102) $(19,292) Accretion of redeemable convertible preferred
stock issuance costs - - - (1,111) Net loss attributed to common
stockholders $(4,391) $(2,970) $(17,102) $(20,403) Net loss
attributed to common stockholders per common share - basic and
diluted $(0.43) $(0.37) $(1.74) $(9.58) Weighted average number of
common share - basic and diluted 10,129,223 8,057,996 9,841,235
2,129,388 AVALON PHARMACEUTICALS, INC. BALANCE SHEETS (in
thousands) December 31, December 31, 2006 2005 (Unaudited) ASSETS
Cash, cash equivalents and marketable securities $14,910 $21,435
Restricted cash and securities 5,520 6,313 Property and equipment,
net 8,923 10,997 Other assets, net 2,038 2,537 Total assets $31,391
$41,282 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
$5,641 $5,514 Long-term liabilities 7,876 9,885 Total stockholders'
equity 17,874 25,883 Total liabilities and stockholders' equity
$31,391 $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: (646) 378-2947
DATASOURCE: Avalon Pharmaceuticals, Inc. CONTACT: Gary Lessing,
Executive Vice President and CFO of Avalon Pharmaceuticals, Inc.,
+1-301-556-9900, Fax: +1-301-556-9910, ; or Wendy Lau, Media,
Noonan Russo, +1-212-845-4272; or Chad Rubin, Investors, The Trout
Group LLC, +1-646-378-2947; both for Avalon Pharmaceuticals, Inc.
Web site: http://www.avalonrx.com/
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