A Medical Device Daily

Clinical Data (Newton, Massachusetts) said it will buy struggling Avalon Pharmaceuticals (Germantown, Maryland) in an all-stock transaction valued at $10 million.

Avalon said it will keep its operations in Germantown and current staff of 35. The deal is expected to close in two to four months.

According to Critcal Data, the combined company will have expanded development capabilities in targeted therapeutics and molecular diagnostics for oncology.

"Avalon's comprehensive biomarker discovery platform, validated by partnerships with leading pharmaceutical companies, extensive library of biomarkers and compounds, and oncology expertise, add to our growing estate of proprietary oncology biomarkers and in-depth knowledge of biomarker and pharmacogenetic test development," said Drew Fromkin, Clinical Data's president/CEO, in a statement.

Avalon's shares have steadily decreased from above $1 at the beginning of the summer to closing at 8 cents a share on Monday — its lowest level since going public in 2005.

On Sept. 24 the company got word that its common stock would be delisted from the Nasdaq Global Market if it didn't hit minimum bid price requirements by March 23, 2009.

In response to its stock losing 80% of its value in the past year and a funding shortage, Avalon said in August it was cutting a third of its work force.

Avalon, which ended the second quarter with $16.7 million in the bank, said without additional investment it wouldn't be able to fund operations past the end of 2008. It ended the quarter with a net loss of $5.6 million, or 33 cents per share.

It booked $137,000 in revenue, compared to $78,000 a year earlier.

The agreement to merge was one of four separate definitive agreements signed by the companies, which included a private placement, a secured term loan agreement, and an exclusive license to Avalon's drug and biomarker discovery platform.

Avalon's board approved the merger agreement and recommended approval of the transaction to Avalon's stockholders. The merge is subject to various closing conditions, including approval by Avalon stockholders. They will vote on the proposed transaction at an upcoming meeting.

Clinical Data completed a private placement of 3,390,547 shares of Avalon's common stock, equivalent to 19.9% of Avalon's issued and outstanding shares.

In addition, Clinical Data was issued warrants to purchase up to an additional 1,695,273 shares of Avalon's common stock.

Clinical Data provided a $3 million term loan to Avalon, secured by a first priority lien on all of Avalon's intellectual property. The loan, with 7% interest, will be due to Clinical Data on March 31, 2009.

Clinical Data provided $1 million in cash to Avalon for an exclusive license to Avalon's proprietary drug and biomarker discovery platform.

The merger was an opportunity for Avalon to keep using its biomarker-based drug discovery platform to build a pipeline and cancer therapeutics, according to Kenneth Carter, CEO of Avalon.

"With Clinical Data's oncology biomarker development programs and abilities, we can pursue drugs and diagnostics that offer the greatest potential value for patients, providers, payers and our stockholders," said Carter in a statement.

In other dealmaking news, Getinge (Stockholm, Sweden) reported that it has extended its previously disclosed $53 per share (a total of about $865 million) cash tender offer for all of the outstanding shares of Datascope (Montvale, New Jersey) until midnight, EDT, on Nov. 4, as such time may be extended (Medical Device Daily, Sept. 17, 2008). All other terms and conditions of the offer remain unchanged.

As of the close of business on Oct. 28, about 12,937,042 shares of Datascope common stock, representing roughly 81.361% of the total outstanding shares of Datascope common stock, had been tendered in the offer.

The offer has not been popular with all Datascope's shareholders and shortly after it was disclosed in September the New York-based law firm of Levi & Korsinsky (L&K) reported that it was investigating the company's board of directors for breaches of fiduciary duty and other violations of the state law.

L&K said the price is "unfair" given that the company has a book value of $25.59 per share that includes more than $15.80 a share in cash and no debt, so that Getinge is effectively only paying approximately $615 million for the company. Also, it said, the $53 price offers shareholders essentially no premium over the company's Sept. 3, closing stock price of $52.95.

Furthermore, L&K said the sales process the company conducted was flawed, given that the company's board agreed to a "no-shop" provision and a $30 million termination fee which the law firm said will ensure that no superior offer will be forthcoming.

The proposed acquisition is subject to customary conditions and regulatory approvals.