Biotech Values

[DewDiligence]

Here’s the CLDA-AVRX deal for archival purposes. The
$12.49 share price of CLDA cited in the PR is an artificial
figure inasmuch as CLDA’s closing price on Monday was
$10.81; this lowers the nominal deal value (excluding the
contingent rights) from $10M to $8.7M, which is barely
more than AVRX’s net cash.

http://biz.yahoo.com/bw/081028/20081028005894.html

›Clinical Data, Inc. to Acquire Avalon Pharmaceuticals

Tuesday October 28, 8:26 am ET

- Expands development capabilities in targeted therapeutics and molecular diagnostics for oncology -

NEWTON, Mass. & GERMANTOWN, Md.--(BUSINESS WIRE)--Clinical Data, Inc. (NASDAQ: CLDA ) and Avalon Pharmaceuticals, Inc. (NASDAQ: AVRX ) today announced that they have entered into a definitive merger agreement for Clinical Data to acquire Avalon in an all-stock transaction valued at approximately $10 million. The combined company will have a significantly expanded oncology business with a pipeline of promising oncology biomarkers and compounds, and a biomarker discovery platform to identify additional therapeutic and diagnostic candidates. The merger agreement was part of a series of transactions entered into by the companies.

“The acquisition of Avalon is aligned with our core strategy of identifying proprietary biomarkers that correlate with safety and efficacy in the development of targeted therapeutics and genetic tests used to diagnose disease and guide treatment decisions,” said Drew Fromkin, Clinical Data’s President and Chief Executive Officer. “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.”

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

Merger Agreement

Clinical Data entered into a definitive merger agreement to acquire Avalon for approximately $10 million in Clinical Data’s common stock, payable to current Avalon stockholders based upon the 15-day volume weighted average price of $12.49 for Clinical Data’s common stock through Monday, October 27, 2008. Additionally, as part of the merger, Clinical Data will issue contingent value rights to Avalon stockholders, payable for up to $2.5 million of additional shares of Clinical Data’s common stock, upon the receipt of certain milestone payments that Avalon may receive under its collaboration agreements with Merck & Co., Inc. and Novartis Institute for Biomedical Research, Inc. prior to June 30, 2010. Avalon’s board of directors has approved the merger agreement and has recommended the approval of the transaction to Avalon’s stockholders. The merger agreement is subject to various closing conditions, including approval by Avalon stockholders. Avalon stockholders will be asked to vote on the proposed transaction at a special meeting to be announced.

Private Placement

Clinical Data has completed a private placement of 3,390,547 shares of Avalon’s common stock, equivalent to 19.9 percent of Avalon’s issued and outstanding shares. The shares were priced at a 15 percent discount to the closing price of Avalon’s common stock on October 27, 2008, or $0.07 per share, for a total purchase price of approximately $240,000. In addition, Clinical Data was issued warrants to purchase up to an additional 1,695,273 shares of Avalon’s common stock at an exercise price of $0.86 per share (equal to the book value per share). The warrants are not exercisable for six months or to the extent that their exercise would result in Clinical Data owning more than 19.9 percent of Avalon’s outstanding common stock.

Term Loan

Clinical Data provided a $3.0 million term loan to Avalon, secured by a first priority lien on all of Avalon’s intellectual property. The loan bears interest at seven percent and all principal and accrued interest will be due to Clinical Data in full on March 31, 2009.

Exclusive License Agreement

Clinical Data provided an upfront cash payment of $1.0 million to Avalon in exchange for a royalty-free, exclusive worldwide license to Avalon’s proprietary drug and biomarker discovery platform, AvalonRx®, with carve-outs for existing Avalon compounds and programs.

“The merger with Clinical Data represents an opportunity to continue using our biomarker-based drug discovery platform to build a pipeline and first-in-class cancer therapeutics,” said Kenneth C. Carter, Ph.D., President and Chief Executive Officer of Avalon Pharmaceuticals, Inc. “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.”

Piper Jaffray & Co. acted as financial advisor to Avalon Pharmaceuticals, Inc. in this transaction.

…About Clinical Data, Inc.

Clinical Data is a global biotechnology company unlocking the potential of molecular discovery, From Targeted Science to Better Healthcare™. Its PGxHealth® division focuses on proprietary biomarker and pharmacogenetic test development, as well as targeted therapeutics to help predict drug safety and efficacy, thereby reducing health care costs and improving clinical outcomes. Its Cogenics® division provides genomics services to both research and regulated environments. Through these divisions, Clinical Data is leveraging advances in molecular discovery to provide tangible benefits for patients, doctors, scientists and health plans worldwide. Visit the company's website at www.clda.com for more information.

About Avalon Pharmaceuticals

Avalon is a biopharmaceutical company focused on the discovery, development and commercialization of first-in-class cancer therapeutics. AvalonRx® is the company's proprietary platform which is based on large-scale biomarker identification and monitoring, used to discover and develop therapeutics for pathways that have historically been characterized as "undruggable." Avalon is headquartered in Germantown, MD.‹