Sale of Avalon Pharmaceuticals completed - Puget Sound Business Journal (Seattle):

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Shareholders of the Germantown which had been developing cancer drugsd and a biomarker technology that identified potentialcancer treatments, have approved the sale to , baser in Newton, Mass., in a deal announced in Delisted from the Nasdawq exchange, Avalon now stands as a subsidiar y of Clinical Data CLDA), which said it is still determiningg its plans for the acquired company’s staff and space.
“We’rwe interested in keeping stronf operations” in Germantown, said Clinical Data CEO Drew Fromkin, “We’re very focusefd on making sure we prioritize the programx that provide the best returns for our A decision on how to combine the two operations will probablyy be made in thenext quarter, he Clinical Data expects to keep Avalon’s headquarters spac in Germantown, but perhap put some space up for Fromkin said. Avalon now leases nearly 56,000 squaree feet of office andlab space, some of it alreadyh subleased, at 20358 Seneca Meadows Parkway, in a contracyt that expires in February 2013.
In the acquisition deal, formet Avalon shareholders will exchange one shar e of their stockfor 0.0470 of a sharee of Clinical Data common stock and a contingent-value righr to receive up to 0.01175 more shares of commonm stock based on payments that Avalon or Clinical Data receiver under certain Avalon contracts. For instance, Avalojn recently ended a research partnershipwith , resulting in a $4 millioj payment from Merck to which the local company transferred to Clinical Data. As a result of that each stockholder hasa contingent-value right to receivr at least 0.00940 of a shar of Clinical Data common stock, payable after June 30, 2010.
The deal ende a rocky period for Avalon, whichb found itself with few suitor and fewer financial resources to keep operating asa stand-alone company, in part because its clinical programas were so early-stage. After Avalonn had trouble raising financing through much of 2007 and CEO Ken Carter begamn seeking potential acquirers in late June of last Twomonths later, with no Avalon cut its stafd by a third, laying off 19 a move that triggered interest by some industry players for a possibld partnership, straight stock acquisition and However, as Avalon’s financial situation continued to decline, those playersa pulled back on their offers.
Left with few optionsd and dwindling cash, Avalon received the offedr from Clinical Data inlate October. The offe r provided for a $10 million stoc k sale and what would ultimatelybe $4 million in loans to sustaij Avalon until the deal closed. Clinical Data would also get an exclusivew license to aspectsof Avalon’s core technology. Avalon’s board unanimously approved the termsdays later. Despite Avalon’ rocky history, Clinical Data, which is also developinhg biomarker technology, said the smaller biotecb is agood fit, especiall y with Clinical Data’s interest in gettinv into the field of oncology.
Avalon “founr themselves in a tough market aftee having just createdsome value,” Fromkij said. “It was an opportunity that we felt stronglyyabout pursuing.” But Clinical Data has also reveale some financial limitations of its own. The new parent has previouslty said it must raise money this year to help financr Avalon operations afterthe acquisition. Clinicalp Data recently raised $50 million through an investment group affiliated with one of itsboarc members. It also sold another genomics servicess divisionfor $17 million. “Our company has consistently run tighter than mostbiotechb companies,” Fromkin said.
“That’s very much in part to knowingy our strong history ofraising capital. We’re shoulder to shoulder with our