GERMANTOWN, Md., Nov. 8 /PRNewswire-FirstCall/ -- Avalon
Pharmaceuticals, Inc. (Nasdaq: AVRX; ArcaEx(R)), a
biopharmaceutical company focused on the discovery and development
of small molecule therapeutics, today announced financial and
operational results for the quarter and nine months ended September
30, 2005. "In the first nine months of 2005, Avalon has made
significant progress delivering on our corporate objectives,"
stated Kenneth C. Carter, Ph.D., President and CEO. "We have
acquired a clinical phase oncology compound, established two drug
discovery partnerships, filed and activated our first IND, and
completed our IPO. Looking ahead, the initiation of clinical trials
in cancer patients with AVN944, further progress on our
beta-catenin and aurora kinase inhibitor programs, and momentum in
our discovery partnerships, will continue to create value as we
advance our development programs." OPERATIONAL HIGHLIGHTS -- Avalon
IPO: On September 28, 2005, Avalon Pharmaceuticals announced the
pricing of its initial public offering of 2,750,000 shares of its
common stock at a price to the public of $10.50 per share. All of
the shares were offered by Avalon. The offering was closed on
October 4, 2005 with gross proceeds of $28,875,000 and proceeds to
Avalon, net of underwriters discount, of $26,853,750. -- AVN944 IND
filing and activation: On September 1, 2005, Avalon submitted an
Investigational New Drug (IND) application to the U.S. Food and
Drug Administration (FDA) for its lead candidate, AVN944, for
treatment of cancer. On September 30, 2005 Avalon announced the
activation of the IND by the FDA. Avalon plans to begin its first
U.S. Phase I clinical trial of AVN944 in patients with hematologic
malignancies as soon as details are completed with the clinical
sites. -- Novartis Collaboration: On September 13, 2005, Avalon
announced a collaboration with Novartis to discover small molecule
therapeutic compounds targeted against a pathway selected by
Novartis. Avalon will use its AvalonRx(R) drug discovery engine in
this program to identify hits from compounds in Novartis' chemical
library. Novartis will be responsible for lead optimization,
preclinical and clinical testing of any resulting product
candidates, as well as all future development and sales and
marketing activities. Under the terms of the agreement, Avalon will
receive an upfront payment, research support, and milestone
payments. -- MedImmune Collaboration: During the quarter, Avalon
commenced work on the drug discovery partnership formed with
MedImmune, Inc. In the collaboration, formed in June 2005 to
discover and develop small molecule therapeutic compounds in the
area of inflammatory disease, Avalon will use its AvalonRx(R) drug
discovery engine to identify lead compounds. FINANCIAL DETAILS --
Total revenues increased to $748,000, for the three months ended
September 30, 2005, compared to $375,000 for the three months ended
September 30, 2004. All 2005 revenues are related to our
collaboration agreement with MedImmune, Inc. Total revenues
decreased to $748,000, for the nine months ended September 30,
2005, compared to $1,125,000 for the nine months ended September
30, 2004. All 2005 revenues were earned during the third quarter of
2005. -- Operating expenses. Total costs and expenses from
operations increased to $4.4 million for the three months ended
September 30, 2005, compared to $3.9 million for the three months
ended September 30, 2004. This increase is primarily related to an
accrual for year-end performance bonuses. Total costs and expenses
from operations increased to $16.8 million for the nine months
ended September 30, 2005, compared to $11.4 million for the nine
months ended September 30, 2004. The nine month period during 2005
included a $5 million expense related to our in-licensing agreement
with Vertex Pharmaceuticals. -- Net loss was $3.6 million for the
third quarter of 2005, compared to a net loss of $3.7 million in
the third quarter of 2004. For the first nine months of 2005, net
loss was $16.3 million, compared to a net loss of $10.7 million in
the first nine months of 2004. -- Net loss per share applicable to
common stockholders during the third quarter of 2005 was $(25.58)
compared to a loss of $(30.21) in the comparable quarter of last
year. During the first nine months of 2005, net loss per share
applicable to common stockholders was $(125.89) compared to a net
loss per share of $(88.20) in the first nine months of 2004. As a
result of the initial public offering closing on October 4, 2005,
subsequent to the end of the third quarter, the per share loss
applicable to common stockholders does not reflect the conversion
of preferred shares into 4,747,188 shares of common stock or
2,750,000 shares of common stock sold to the public. After the
closing of the offering on October 4, 2005, 8,404,958 common shares
were outstanding, compared to 156,972 weighted average number of
common shares for the three months ended September 30, 2005. -- As
of September 30, 2005, cash, cash equivalents and marketable
securities totaled $7.4 million. Of this amount, $6.3 million was
held in a restricted account to serve as collateral for our
long-term debt. Subsequent to the end of the quarter, total net
proceeds of $26.9 million were received by Avalon upon closing of
Avalon's initial public offering on October 4, 2005. CONFERENCE
CALL & WEBCAST INFORMATION Avalon Pharmaceutical's senior
management will host a conference call on Wednesday, November 9,
2005 at 8:00 am EST. During the call, Dr. Kenneth C. Carter,
President and CEO, Gary Lessing, Chief Financial Officer and Dr.
David Bol, Vice President, Pharmaceutical Development will discuss
quarterly results and other corporate activities. Live audio of the
conference call will be available to investors, members of the news
media and the general public by dialing (866) 510-0676 (in the
U.S.) and (617) 597-5361 (internationally) and requesting the
"Avalon Pharmaceuticals conference call hosted by Dr. Carter." 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
January 31, 2006 on Avalon's website. About Avalon Pharmaceuticals,
Inc. Avalon Pharmaceuticals is a biopharmaceutical company focused
on the discovery and development of small molecule therapeutics.
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). Avalon Pharmaceuticals was established in
1999 and is headquartered in Germantown, Maryland. Forward Looking
Statement: This announcement contains, in addition to historical
information, certain forward-looking statements that involve risks
and uncertainties, in particular, related to statements concerning
Avalon's future financial condition and other statements about its
research and development activities, its collaboration agreements,
and 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. All forward looking statements are qualified in
their entirety by this cautionary statement and the company
undertakes no obligation to revise or update this conference call
to reflect events or circumstances after the date hereof. AVALON
PHARMACEUTICALS, INC. (A DEVELOPMENT-STAGE COMPANY) STATEMENTS OF
OPERATIONS (Unaudited) Dollars in thousands except for per share
amounts. Three Months Nine Months Period from Ended Ended November
10, September 30, September 30, 1999 (inception) to September 30,
2005 2004 2005 2004 2005 Revenues $748 $375 $748 $1,125 $3,068
Costs and expenses: Research and development 3,174 2,802 13,188
8,144 61,619 General and administrative 1,185 1,060 3,634 3,209
21,920 Total costs and expenses 4,359 3,862 16,822 11,353 83,539
Loss from operations (3,611) (3,487) (16,074) (10,228) (80,471)
Total other income (expense): (32) (176) (249) (448) 653 Net Loss
$(3,643) $(3,663) $(16,323) $(10,676) $(79,818) Accretion of
convertible preferred Stock issuance costs (370) (218) (1,111)
(655) (5,702) Net loss attributed to common stockholders $(4,013)
$(3,881) $(17,434) $(11,331) $(85,521) Net loss attributed to
common stockholders per common share - basic and diluted $(25.58)
$(30.21) $(125.89) $(88.20) $(669.57) Weighted average number of
common share - basic and diluted 156,872 128,488 138,490 128,471
127,725 AVALON PHARMACEUTICALS, INC. (A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEETS Dollars in thousands. September 30, December 31,
2005 2004 (Unaudited) ASSETS Cash, cash equivalents and marketable
securities $1,102 $8,209 Restricted cash and securities 6,313 6,100
Property and equipment, net 11,401 13,398 Other assets, net 3,324
1,585 Total assets $22,140 $29,292 LIABILITIES AND STOCKHOLDERS'
DEFICIT Current liabilities $8,289 $3,288 Long-term liabilities
10,096 11,366 Preferred stock and stock warrants 75,156 80,609
Total stockholders' equity/(deficit) (71,401) (65,971) Total
liabilities, redeemable convertible preferred stock and
stockholders' deficit $22,140 $29,292 Contacts: Avalon
Pharmaceuticals, Inc. Noonan Russo Gary Lessing Wendy Lau (Media)
Chief Financial Officer Tel: (212) 845-4272 Tel: (301) 556-9900
Fax: (301) 556-9910 Jane Petrino (Investors) Email: Tel: (212)
845-4274 DATASOURCE: Avalon Pharmaceuticals, Inc. CONTACT: Gary
Lessing, Chief Financial Officer of Avalon Pharmaceuticals, Inc.,
+1-301-556-9900, Fax: +1-301-556-9910, ; or Media - Wendy Lau,
+1-212-845-4272, or Investors - Jane Petrino, +1-212-845-4274, both
of Noonan Russo for Avalon Pharmaceuticals, Inc. Web site:
http://www.avalonrx.com/
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