GERMANTOWN, Md., May 9 /PRNewswire-FirstCall/ -- Avalon
Pharmaceuticals, Inc. (NASDAQ:AVRX) today announced financial and
operational results for the fiscal quarter ended March 31, 2007.
For the three months ended March 31, 2007, total revenues were $0.7
million and net loss was $5.3 million. As of March 31, 2007, cash,
cash equivalents and marketable securities totaled $24.6 million.
"Avalon is off to a good start in 2007 as demonstrated by the
status of our AVN944 program, which is progressing well through the
Phase I trial," stated Kenneth C. Carter, Ph.D., President and CEO
of Avalon. "Preparations are well underway for Phase II trials of
AVN944 in both hematological cancers and solid tumors. Our recently
announced collaboration with Merck this quarter is a very
significant event for our company. We also continue to build a
pipeline of first-in-class drugs for Avalon and our growing list of
partners." 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, 37 patients have completed a total of 83 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. -- The Company gave two poster presentations regarding
AVN944 at the recent American Association for Cancer Research
Annual Meeting held April 14-18, 2007, in Los Angeles. The first
presentation described the potent antiproliferative activity of
AVN944 in human endothelial cells (HUVEC), and showed that the
compound prevents blood vessel formation in a mouse model. "Results
of this study provide new insight into the mechanism of action of
AVN944," stated Zo� Weaver, Ph.D., staff scientist at Avalon and
lead investigator in the study. "The suppression of blood vessel
growth, without any adverse effects to the mice, gives us a strong
rationale to include solid tumors, especially those that may be
more sensitive to agents that inhibit tumor angiogenesis, in our
Phase II." -- The second study described the generation of
biomarkers that may have utility in identifying patients most
likely to benefit from AVN944 therapy. "Our biomarker-driven
approach to drug development allows us the opportunity to enrich
our clinical trials with patient populations more sensitive to
AVN944 therapy," stated Jeffrey Strovel, Ph.D., senior scientist at
Avalon and lead investigator in the study. "We can now validate
these gene signatures for utility in patient stratification in our
upcoming Phase II trials, as well as for their use as prognostic
signatures. If this approach works, it could significantly
accelerate the development of AVN944 and enhance its utility as a
marketed product." 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.
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 that is generally regarded as
"intractable" based on the difficulty in identifying inhibitors.
Avalon will select compound families and optimize these compounds
to a preclinical candidate selection stage. Merck will be
responsible for the clinical development, regulatory approval and
commercialization of any potential product candidates. Under the
terms of the agreement Avalon may receive discovery, development,
regulatory and commercial milestones payments exceeding $200
million as well as royalties on any potential future marketed
products. Existing Partnerships: -- During the quarter, the Company
began the screening phase of the Novartis collaboration which
triggered a $500,000 payment to Avalon for research support. Data
analysis of the results of the screen is now underway. -- During
the quarter, Avalon's drug discovery collaboration with MedImmune
completed the high throughput screening phase of the project, and
now characterization of several compound series has advanced to a
decision point by MedImmune on selection of compounds for lead
optimization. Avalon did not recognize revenues from the
collaboration with MedImmune pending that decision. Internal
Programs: -- Avalon's programs to identify inhibitors of the
Beta-catenin pathway and to identify inhibitors of the Aurora
pathway are currently in lead optimization activities. It is the
company's intent to select a preclinical candidate for one of these
programs in 2007. -- Significant progress is being made on the
early stage drug discovery programs 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. New Chief Financial Officer -- The
Company recently announced that C. Eric Winzer, 50, will become the
company's new Chief Financial Officer effective July 2, 2007. Mr.
Winzer will succeed Gary Lessing, who has chosen to leave the
company to pursue entrepreneurial opportunities. Mr. Winzer was
most recently with Invitrogen Corporation (NASDAQ:IVGN), a provider
of life science technologies for disease research and drug
discovery, from 2000 to 2006, where he served as Senior VP and
Chief Financial Officer, Executive Sponsor for Invitrogen's ERP
implementation and VP, Finance. Stockholder Rights Plan -- The
Avalon Board of Directors approved the adoption of a Stockholder
Rights Plan. The Rights Plan is designed to deter coercive takeover
tactics and to prevent an acquirer from gaining control of the
company without offering a fair and adequate price and terms to all
of the company's stockholders. A full description of the Rights
Plan is contained in our publicly available filings with the
Securities and Exchange Commission. 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. Financial Highlights: -- Total revenues increased
to $0.7 million for the three months ended March 31, 2007, compared
to $0.5 million for the three months ended March 31, 2006. All
revenues during the quarter were related to our collaboration with
Novartis. -- Operating expenses. Total costs and expenses from
operations increased to $6.3 million for the three months ended
March 31, 2007, compared to $5.4 million for the three months ended
March 31, 2006. -- Net loss was $5.3 million for the first quarter
of 2007, compared to a net loss of $4.6 million in the first
quarter of 2006. -- Net loss per share applicable to common
stockholders during the first quarter of 2007 was $0.43 compared to
a loss of $0.51 in the comparable quarter of last year. As of March
31, 2007, cash, cash equivalents and marketable securities totaled
$24.6 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 Thursday, May 10,
2007 at 8:00 a.m. Eastern Daylight Savings Time, 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 (866) 202-3109 (in the U.S.) and (617) 213-8844
(internationally), and providing the participant pass code,
34650950. 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 June 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-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 2006 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 March
31, 2007 2006 Revenues $731 $539 Costs and expenses: Research and
development 4,111 3,149 General and administrative 2,228 2,253
Total costs and expenses 6,339 5,402 Loss from operations (5,608)
(4,863) Total other income 263 305 Net Loss $(5,345) $(4,558) Net
loss per share - basic and diluted $(0.43) $(0.51) Weighted average
number of shares - basic and diluted 12,410,483 9,009,437 AVALON
PHARMACEUTICALS, INC. BALANCE SHEETS (in thousands) March 31
December 31, 2007 2006 (Unaudited) ASSETS Cash, cash equivalents
and marketable securities $19,095 $14,910 Restricted cash and
securities 5,520 5,520 Property and equipment, net 8,641 8,923
Other assets, net 1,721 2,038 Total assets $34,977 $31,391
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities 4,356
$5,641 Long-term liabilities 7,863 7,876 Total stockholders' equity
22,758 17,874 Total liabilities and stockholders' equity $34,977
$31,391 Contacts: Avalon Pharmaceuticals, Inc. Russo Partners, LLC
David D. Muth Wendy Lau (Media) Executive Vice President Tel: (212)
845-4272 and Chief Business Officer Tel: (301) 556-9900 The Trout
Group LLC Fax: (301) 556-9910 Chad Rubin (Investors) Email: Tel:
(646) 378-2947 DATASOURCE: Avalon Pharmaceuticals, Inc. CONTACT:
David D. Muth, Executive Vice President and Chief Business Officer,
Avalon Pharmaceuticals, Inc., +1-301-556-9900, Fax:
+1-301-556-9910, ; Media: Wendy Lau, of Russo Partners, LLC,
+1-212-845-4272, Investors: Chad Rubin, of The Trout Group LLC,
+1-646-378-2947 Web site: http://www.avalonrx.com/
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