ALAMEDA, Calif., Dec. 22, 2008 (GLOBE NEWSWIRE) -- Avigen, Inc. (Nasdaq:AVGN), a biopharmaceutical company, today announced that its Board of Directors and Management issued the following comments in a letter to shareholders regarding the company's strategic plans and posted it on its website.
December 22, 2008
Dear Avigen Shareholders:
As Avigen stands at a crossroads, we are writing to provide you with an overview of the steps we took prior to the disappointing outcome of our recent clinical trial of AV650, our progress since then, and our strategies to create value for shareholders in 2009.
A Conservative Approach
Avigen will begin 2009 with top-line cash of more than $56 million. This is largely the result of our fiscally conservative actions prior to October -- and before we completed our AV650 Phase 2b trial. The data, as we now know, was disappointing, despite the early promise of AV650.
We have a strong cash position today, in part because our trial was well executed and completed in a timely and cost-effective manner. In addition to conserving our cash, the current management was careful to maintain a small infrastructure, avoid long-term liabilities and debt, and rejected the use of financing instruments that might have put Avigen's capital at risk or dilute its shareholders. We believe this responsible approach has positioned us to take orderly and careful steps to create value, despite the trial results.
Executing a Plan to Preserve Cash
Following the release of the AV650 data in October, Avigen's Management and Board took decisive steps to protect the company's assets.
We quickly articulated a plan to significantly reduce costs, monetize current assets, and assess our strategic options. As part of this strategic restructuring, we:
-- Immediately terminated all contracts with our partner Sanochemia
to avoid future financial obligations;
-- Immediately, and in compliance with applicable laws and
regulations, terminated all AV650 clinical trials;
-- Expanded our efforts to partner AV411 and deferred Phase 2
development in neuropathic pain;
-- Reduced headcount by 70% and shut down non-core lab and animal
facilities, retaining only the staff we believe we need to execute
our plan to deliver value to shareholders; and,
-- Monetized an early stage asset, AV513, adding $7 million to our
cash reserves.
While we are fortunate to maintain a strong balance sheet, we also recognize that our low stock price relative to our cash position made us potentially vulnerable to hostile offers that may not fairly value the company. As a precaution, Avigen instituted a shareholder rights plan intended to discourage abusive and coercive takeover tactics that could result in a rapid, forced sale of the company for an unfairly low price. This plan is designed to increase the likelihood that, in the event of a sale of the company, the Board would have the opportunity and time to negotiate on behalf of all shareholders to help ensure that the true value of the company's assets accrues to its shareholders.
Opportunities for Shareholders
We believe our strong balance sheet provides shareholders with an opportunity for an attractive return on their investment. We recognize that the distribution of cash is one option. Any decision, however, must responsibly weigh this choice against the value that Management's unique know-how and proven track record could garner from monetizing the remaining company assets, selling the company, or pursuing acquisition opportunities -- any one of which could result in returns that exceed the current liquidation value.
To that end, over the next year, Avigen's Board intends to focus on two key objectives -- monetizing the AV411 asset and assessing merger and acquisition opportunities.
-- Monetizing the AV411 Asset. AV411 and its analogs are novel,
first-in-class, non-opioid drugs for the treatment of several
large disease indications including pain and drug addiction.
AV411 is currently in a National Institute on Drug Abuse-funded
Phase 1b/2a trial, and the program is fully enabled under current
U.S. Food and Drug Administration standards to enter Phase 2
development in pain.
-- Assessing Potential M&A Opportunities. We believe current
economic conditions may create strategic opportunities for Avigen
shareholders to realize attractive returns. We have assessed the
recent transactions proposed by our peers and believe our
criteria fundamentally differ. If, at any point during the
review, it becomes evident to our Board of Directors that a
favorable M&A transaction meeting our strict standards is
unlikely, we intend to reconsider all other strategic options.
Our Pledge to Shareholders
Avigen's Board and Management intend to continue to be good stewards of shareholder assets. Since the announcement of our AV650 trial results on October 21, 2008, Avigen's Board of Directors and Management have acted swiftly and decisively to preserve cash. We believe the value of Avigen's remaining assets is significant and the potential for a strategic merger worthy of consideration. Whatever the outcome, we intend to apply the same financial judgment used in the past to decisions going forward. In the meantime, Avigen intends to provide its shareholders with regular updates and to continue to work with all its shareholders in a thoughtful, collaborative and respectful manner.
Respectfully,
Signed for the Board of Directors:
Zola Horovitz, Ph.D. as Chairman of the Board
Kenneth G. Chahine, Ph.D., J.D. as Chief Executive Officer
The Avigen, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=2981
The statements in this letter regarding Avigen's cash at the end of 2008, Avigen's potential to create shareholder value, Avigen's staff is sufficient to execute on Avigen's plan to deliver shareholder value, the benefits that may result from a potential merger or acquisition transaction, Avigen's anticipated focus for the next year, the actions that Avigen intends to take if a favorable transaction is unlikely, and the other actions that Avigen intends to take over the next year, are forward looking statements that are subject to risks and uncertainties. Actual results may differ materially due to numerous risks, including: potential partners or other entities may not value AV411 as much as Avigen does; potential strategic transactions may not be available on terms favorable to Avigen; Avigen cannot guarantee that its remaining staff will remain with Avigen through 2009; and other risks and uncertainties relating to Avigen detailed in reports filed by Avigen with the Securities and Exchange Commission, including Avigen's Quarterly Report on Form 10-Q for the period ended September 30, 2008, under the caption "Risks Related to Our Business" in Item 2 of Part I of that report, which was filed with the SEC on November 10, 2008.