Sale of Avalon Pharmaceuticals completed - Charlotte Business Journal:

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Shareholders of the Germantown company, which had been developinb cancer drugs and a biomarkefr technology that identified potentialcancerr treatments, have approved the sale to , basee in Newton, Mass., in a deal announcecd in October. Delisted from the Nasdaqa exchange, Avalon now stands as a subsidiaryg of ClinicalData (NASDAQ: CLDA), which said it is stillp determining its plans for the acquired company’s staff and “We’re interested in keeping strong operations” in Germantown, said Clinicak Data CEO Drew Fromkin, “We’re very focusedf on making sure we prioritize the programsw that provide the best returns for our shareholders.
” A decisio n on how to combine the two operations will probably be made in the next he said. Clinical Data expects to keep Avalon’z headquarters space in Germantown, but perhaps put some space up for Fromkin said. Avalon now leases nearly 56,000 square feet of office and lab space, some of it alreadhy subleased, at 20358 Seneca Meadows Parkway, in a contract that expirea inFebruary 2013. In the acquisition deal, forme r Avalon shareholders will exchange one share of theirt stockfor 0.0470 of a shares of Clinical Data commo n stock and a contingent-value right to receivd up to 0.
01175 more shares of common stockl based on payments that Avalon or Clinical Data receivew under certain Avalon contracts. For instance, Avalon recently endede a research partnershipwith , resulting in a $4 millioh payment from Merck to Avalon, which the loca company transferred to Clinicak Data. As a result of that payment, each stockholder has a contingent-valuwe right to receive at least 0.00940 of a share of Clinical Data common stock, payable aftef June 30, 2010. The deal ended a rocky periodefor Avalon, which found itselcf with few suitors and fewer financial resources to keep operatinfg as a stand-alone in part because its clinical programws were so early-stage.
After Avalon had trouble raisingb financing through much of 2007and 2008, CEO Ken Cartef began seeking potential acquirers in late June of last year. Two monthz later, with no bites, Avalon cut its staffv by a third, laying off 19 a move that triggered interest by some industryt players for apossibled partnership, straight stock acquisition and investments. However, as Avalon’xs financial situation continuedto decline, thosd players pulled back on thei offers. Left with few options and dwindling cash, Avalo n received the offer from Clinical Data inlate October.
The offerf provided for a $10 milliobn stock sale and what would ultimatelybe $4 milliojn in loans to sustaimn Avalon until the deal closed. Clinica l Data would also get an exclusive license to aspectsof Avalon’s core technology. Avalon’e board unanimously approved the terms days Despite Avalon’s rocky history, Clinical Data, which is also developing biomarker technology, said the smaller biotech is a good fit, especiallt with Clinical Data’s interes in getting into the fieled of oncology. Avalon “found themselves in a tough market after having just createdsome value,” Fromkin “It was an opportunity that we felt strongl y about pursuing.
” But Clinical Data has also reveales some financial limitations of its own. The new parent has previouslyy said it must raise moneu this year to help financwe Avalon operations afterthe acquisition. Clinical Data recentl y raised $50 million through an investment group affiliated with one of its board It also sold another genomics services divisionfor $17 million. “Oudr company has consistently run tighter than most biotech Fromkin said. “That’s very much in part to knowinhg our strong history ofraising capital. We’re shoulder to shoulde r with our investors.
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