West Coast Editor
With a licensing deal under its belt and an early stage pipeline of several drugs on the runway, Avalon Pharmaceuticals Inc. filed for an initial public offering to raise an unspecified amount.
The Germantown, Md.-based firm plans to use the proceeds for, among other things, the clinical development of AVN944, licensed earlier this year from Vertex Pharmaceuticals Inc., of Cambridge, Mass. That arrangement could mean more than $73 million for Vertex and it gave Avalon rights to an oncology compound ready for Phase I trials in leukemia and lymphoma indications by the end of the year. (See BioWorld Today, Feb. 13, 2005.)
AVN944, an oral small molecule, inhibits the enzyme inosine monophosphate dehydrogenase to reduce the nucleotides available to a cancer cell and inhibit cell proliferation. Avalon plans to investigate other indications with the compound, including possible efficacy against solid tumors.
Since its inception in November 1999, Avalon has funded operations mainly through private placement of equity securities, which have provided proceeds of about $80 million. The company has focused mainly on developing AvalonRx, its drug discovery platform for large-scale gene-expression analysis. In one step, the platform determines how a genome reacts to a specific drug. The second step identifies oncogenic targets.
AvalonRx, which deploys software and hardware with robotics, microfluidics and bioinformatics, has been used to identify a series of compounds impacting the beta-catenin regulatory pathway. Another Avalon program takes aim at Aurora kinases, enzymes believed to play a role in the growth of cancer cells.
The company entered deals in 2003 with Princeton, N.J.-based Medarex Inc. for the development of antibody products and with Sanofi-Aventis Group, of Paris, to find and validate druggable screening targets. A novel target has been identified in the Medarex deal, and a therapeutic antibody will be selected next year, according to Avalon's IPO prospectus.
Last year, Avalon got $1.9 million from a feasibility study with Sanofi-Aventis for work performed and milestones achieved during 2004, and the year before, Avalon took in $100,000 in revenue for another feasibility study. The firm had no revenue in 2002, and spent $12.8 million that year on research and development, as compared to $12.5 million in 2003 and $10.7 million in 2004.
At the end of 2004, Avalon had an accumulated deficit of $65.9 million, with net losses of $13.7 million for that year, at the end of which the firm had about $14.3 million in cash, cash equivalents and marketable securities.
Other uses of the proceeds would include development of additional lead programs, selection of drug candidates, and matters pertaining to intellectual property rights, along with general corporate purposes. Avalon intends to trade on Nasdaq under the symbol "AVRX."
Legg Mason Wood Walker Inc., of New York, is acting as sole book-running manager for the IPO, with Jefferies & Co. Inc., also of New York, acting as co-manager.
In other financing news:
• HTG Inc., of Tucson, Ariz., closed a $3.4 million Series B financing that will support the expansion of the company's manufacturing, sales and marketing activities. HTG intends to hire additional personnel with the funds and to increase product trials of its ArrayPlate gNPA technology. Investors included Solstice Capital, Valley Ventures, Emerging Technology Partners, Deimos Ventures, Village Ventures, members of the Tucson Desert Angels and HTG founder Bruce Seligmann.
• Intercept Pharmaceuticals Inc., of New York, closed a $1.25 million convertible debt financing from individual and institutional life sciences investors led by Rodman & Renshaw. The new financing brings the total raised by the company to $4.1 million and it will be used to advance Intercept's lead drug, INT-747, into the clinic later this year. The product is an oral drug being developed for chronic liver diseases. Intercept also appointed one investor, Yuichi Iwaki, to its board.
• Miravant Medical Technologies Inc., of Santa Barbara, Calif., closed an $8 million private placement of convertible preferred stock led by Scorpion Capital Partners LP, of New York. The preferred stock is convertible into common stock at $1 per share. The company also issued a warrant to purchase one share of common stock at $1 apiece for each convertible share of common stock purchased. Miravant focuses on its PhotoPoint photodynamic therapy, developing photoreactive drugs to selectively target diseased cells and blood vessels.
• Senesco Technologies Inc., of New Brunswick, N.J., entered definitive agreements with institutional and other accredited investors to privately place 1.6 million units, comprised of one share and a warrant to purchase half of a share at $3.38 per share. Proceeds would be about $3.3 million and the placement is expected to close this week. The funds should allow the company to continue its research and operating plans for the next two years. Oppenheimer & Co. Inc. is acting as placement agent.