GERMANTOWN, Md., May 10 /PRNewswire-FirstCall/ -- Avalon
Pharmaceuticals, Inc. (Nasdaq and ArcaEx(R): AVRX), a
biopharmaceutical company focused on the discovery and development
of small molecule therapeutics, today announced financial and
operational results for the quarter ended March 31, 2006. "During
the first quarter of 2006, we made excellent progress on our
internal product development programs, which are focused on new
treatments for cancer, the discovery of biomarkers to guide
development of our lead drug AVN944, and on our partnerships, which
expand the use of our proprietary technology, AvalonRx(R), into
other disease areas," stated Kenneth C. Carter, Ph.D., President
and CEO of Avalon. "During the remainder of 2006, we look forward
to continued progress on these programs and to sharing the ongoing
results of the Phase I trial for AVN944." FIRST QUARTER AND RECENT
OPERATIONAL HIGHLIGHTS * AVN944: Our U.S. Phase I clinical trial
with AVN944 is underway and progressing on schedule. The trial has
a sophisticated design that divides the hematologic malignancy
field into two cohorts: acute leukemias in cohort one, and myeloma
and lymphoma patients in cohort two. To date, some patients have
gone through multiple dose cycles of AVN944 providing greater
experience with the safety of continued dosing. No drug-related
adverse effects have been reported. We have also now engaged Dr.
Tibor Kovacscovics at Oregon Health Sciences University as an
additional investigator, and have initiated patient recruitment
there, which brings us to a total of five clinical trial sites. The
four other sites currently involved are all leading cancer centers
in the United States, include the University of Arkansas for
Medical Sciences, The University of Texas MD Anderson Cancer
Center, Stanford University, and The Ohio State University
Comprehensive Cancer Center -- Arthur G. James Cancer Hospital and
Richard J. Solove Research Institute. Information on the trial,
including other site locations when they initiate treatment, is
available at the National Institutes of Health clinical trial
database at http://www.clinicaltrials.gov/ (a service of the U.S.
National Institutes of Health developed by the National Library of
Medicine). * Beta-catenin and Aurora kinase: Lead optimization
continues on both the Beta-catenin and Aurora kinase pathway
programs. Chemistry has been established for both programs, and
analogs of both series are being synthesized in-house. We have
initiated animal studies on the Aurora kinase pathway inhibitor
program. As we have announced previously, we are developing a
comprehensive plan for an expanded screening program for this year
and we anticipate the initiation of at least three new screens in
the second half of this year. * MedImmune and Novartis
partnerships: The drug discovery collaboration with MedImmune is
progressing well and in accordance with our expectations. A HITS
screening signature has been selected, and we have entered the
high-throughput screening phase of the project. The work on the
partnership with Novartis is currently in the signature generation
and assay development phase with work continuing at both Novartis
and at Avalon. * Private Financing: As previously disclosed, in
February 2006, Avalon raised $7.25 million through a private
placement of common stock to Biotechnology Value Fund and other
institutional investors. The proceeds from this financing will
allow us to take greater advantage of the AvalonRx(R) engine in
expanding our internal oncology drug discovery programs without
compromising our progress on AVN944 and other more mature programs.
FINANCIAL DETAILS * Total revenues increased to $539,000, for the
three months ended March 31, 2006, compared to $0 for the three
months ended March 31, 2005. Substantially all 2006 revenues are
related to our collaboration agreement with MedImmune, Inc. A small
portion of revenue was attributable to our collaboration agreement
with the University of Louisville. * Total costs and expenses from
operations decreased to $5.4 million for the three months ended
March 31, 2006, compared to $8.6 million for the three months ended
March 31, 2005. This decrease is primarily related to the inclusion
in the prior year period of a $5.0 million up-front payment under
our in-license agreement with Vertex Pharmaceuticals, Inc. relating
to AVN944. The decrease was offset somewhat by accrued bonuses for
executives and staff (of which none were accrued in the prior year
period), public company operating expenses and the stock
option-related compensation expense associated with our
implementation of FAS 123R. * Our net loss was $4.6 million for the
first quarter of 2006, compared to a net loss of $8.7 million
during the first quarter of 2005. The net loss per share applicable
to common stockholders during the first quarter of 2006 was $(0.51)
compared to a loss of $(70.49) in the comparable quarter of last
year. * As of March 31, 2006, cash, cash equivalents and marketable
securities totaled $31.4 million. Of this amount, $6.3 million was
held in a restricted account to serve as collateral for our
long-term debt. CONFERENCE CALL & WEBCAST INFORMATION Avalon
Pharmaceutical's senior management will host a conference call on
Thursday, May 11, 2006 at 8:00 am EDT. During the call, Dr. Kenneth
C. Carter, President and CEO, Gary Lessing, Executive Vice
President and CFO and Dr. David Bol, Vice President, Pharmaceutical
Development will discuss the 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) 713-8307 (in the U.S.) and (617) 597-5307
(internationally) and providing the participant passcode 67310263.
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, 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 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 MedImmune and Novartis
collaborations, use of the proceeds of the private placement in
future drug discovery programs, the potential to expand Avalon's
cancer pipeline, the ability to take greater advantage of the
AvalonRx(R) engine 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, the cancer pipeline may not be expanded, Avalon may not
be able to take greater advantage of the AvalonRx(R) engine and
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 (Unaudited) Dollars in thousands except for per share
amounts. Three Months Ended March 31, ------------------ 2006 2005
------- ------ Revenues $539 - Costs and expenses: Research and
development 3,149 7,392 General and administrative 2,253 1,165
------- ------- Total costs and expenses 5,402 8,557 -------
------- Loss from operations (4,863) (8,557) ------- ------- Total
other income (expense): 305 (145) ------- ------- Net Loss (4,558)
(8,702) Accretion of convertible preferred Stock issuance costs -
(370) ------- ------- Net loss attributed to common stockholders
$(4,558) $(9,072) ======= ======= Net loss attributed to common
stockholders per common share - basic and diluted $(0.51) $(70.49)
======= ======= Weighted average number of common share - basic and
diluted(*) 9,009,437 128,690 (*) Includes the issuance of 2,700,000
shares of common stock and the conversion of all outstanding
preferred stock and convertible notes into 5,525,166 shares of
common stock upon the close of the IPO in October 2005. AVALON
PHARMACEUTICALS, INC. BALANCE SHEETS (Unaudited) Dollars in
thousands. March 31, December 31, 2006 2005 ------------
------------ ASSETS Cash, cash equivalents and marketable
securities $31,437 $27,748 Total current assets $25,681 $22,584
Restricted cash and securities $6,313 $6,313 Total assets $43,678
$41,282 LIABILITIES AND STOCKHOLDERS' EQUITY Total current
liabilities $4,642 $5,515 Long-term liabilities $9,559 $9,884 Total
stockholders' equity $29,477 $25,883 Total liabilities and
stockholders' equity $43,678 $41,282 Contacts: Avalon
Pharmaceuticals, Inc. Gary Lessing Executive Vice President and CFO
Tel: (301) 556-9900 Fax: (301) 556-9910 Email: Noonan Russo Wendy
Lau (Media) Tel: (212) 845-4272 Jane Petrino (Investors) Tel: (212)
845-4274 DATASOURCE: Avalon Pharmaceuticals, Inc. CONTACT: Gary
Lessing, Executive Vice President and CFO of Avalon
Pharmaceuticals, Inc., Tel: +1-301-556-9900, or Fax:
+1-301-556-9910, or ; or Wendy Lau, Media, of Noonan Russo,
+1-212-845-4272, or Jane Petrino, Investors, of Noonan Russo
+1-212-845-4274, both for Avalon Pharmaceuticals, Inc. Web site:
http://www.avalonrx.com/ http://www.clinicaltrials.gov/
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