Tuesday, October 28, 2008

Clinical Data to buy Avalon Pharmaceuticals in complex $10M deal

By Mass High Tech Staff

Biotechnology company Clinical Data Inc. reports it will purchase Maryland-based Avalon Pharmaceuticals Inc. for approximately $10 million in stock. The deal also includes loans, licensing fees and private stock placements, officials said.

As part of the acquisition deal, Clinical Data (Nasdaq: CLDA) will issue rights to Avalon stockholders, that could result in them receiving up to $2.5 million of additional shares of Clinical Data’s common stock, based on certain milestone payments that Avalon (Nasdaq: AVRX) could receive under its collaboration agreements with Merck & Co. Inc. and Novartis Institute for Biomedical Research Inc. prior to June 30, 2010.

Clinical Data also completed a private placement of 3.39 million shares of Avalon’s common stock, for 7 cents per share, for a total purchase price of approximately $240,000. In addition, Newton-based Clinical Data was issued warrants to purchase up to an additional 1.7 million shares of Avalon’s common stock at an exercise price of 86 cents per share.

Avalon, also as part of the acquisition, received a $3 million term loan from Clinical Data, which secured by a first priority lien on all of Avalon’s intellectual property. And Clinical Data paid $1 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.

Avalon’s board of directors has approved the deal and has recommended the company’s stockholders do the same. According to officials, Clinical Data will have a much bigger oncology business, with a pipeline that includes oncology biomarkers and compounds.

In September, Clinical Data raised $25 million in a financing through a private placement through affiliates of Randal Kirk, chairman of Clinical Data’s board of directors. The stated the proceeds are for “general working capital purposes.”

In August, Clinical Data made another convoluted purchase, this time a $66 million acquisition of Adenosine Therapeutics LLC. a Virginia-based developer of drug products based on regulating adenosine receptors, to treat diseases including Type 2 diabetes, sickle cell anemia and asthma.

The company paid $11 million in cash, and entered into a $22 million, five-year promissory note and a separate $3.2 million, 32-month promissory note, all as part of the deal for Adenosine, which could also receive up to $30 million more in cash on achievement of certain regulatory and commercial milestones.

Clinical Data, which employs 459 workers, reported a 2008 net loss of $35.3 million on revenue of $34 million during its fiscal year ending March 31.