Avigen Discontinues AAV Gene Therapy Funding to Focus Exclusively on Development of Traditional Pharmaceutical Products
Parkinson's Program Will Continue Through External Funding
Alameda, CA April 5, 2005 – Avigen, Inc. (Nasdaq: AVGN) announced today it will exclusively focus on the development of traditional pharmaceutical products, particularly small molecules and biologics. As part of the decision, Avigen will discontinue funding its proprietary AAV technology while ensuring that its ongoing clinical programs continue. Avigen has already secured one funding source for its Parkinson's disease program and is actively exploring additional options to fund its other AAV development activities through mechanisms that will allow Avigen to participate in the technology's commercial upside potential. The decision to fund AAV development through external sources will significantly reduce Avigen's operating expenses beginning this quarter with the full impact of reducing cash expenditures to an anticipated annual rate of approximately $13M being realized by the end of the third quarter. This lower annual rate of spending approximates more than a 40% reduction from the 2004 net cash burn of $23M. These savings will help to preserve Avigen's cash for the development and commercialization of its internal preclinical programs in neuropathic pain and the acquisition or in-license of later-stage clinical products.
“For more than a year, we have been assembling a strong management team with outstanding experience in small molecules and biologics and are now positioned to redirect our resources from viral-based gene therapy to fully commit to more traditional drug development,” said Kenneth Chahine, Ph.D., J.D., Avigen's President and CEO. “Although Avigen is a leader in the AAV field, when the challenges ahead are viewed objectively, we believe that focusing our existing resources on traditional pharmaceuticals offers a greater potential to increase shareholder value than staying the course and investing our existing capital in viral-based gene therapy programs.”
“We are currently evaluating three options, all of which are intended to preserve the ongoing gene therapy efforts, including our clinical program, AV201, for Parkinson's disease,” added Chahine. “One option is a spin-out of the AAV technology into an independent venture-backed company. Alternatively, we could combine our assets with another company with an existing gene therapy effort or complementary technology. Finally, we are considering operating the clinical programs through academic institutions; terminating internal operations, sub-leasing our two multi-use manufacturing facilities and retaining the intellectual property portfolio until the assets further appreciate in value. We are in advanced discussions with several parties and expect to make a decision very soon.”
Dr. Chahine concluded, “All of us at Avigen would like to extend our heart-felt gratitude to all of the scientists, medical institutions and collaborators who have assisted in moving the frontiers of gene therapy science forward and bringing our programs into clinical trials. Above all, I would like to express my deep appreciation to the participants in our clinical studies who have given so selflessly of their time and energy in the hopes of someday making better products for serious diseases a therapeutic reality.”
Looking Ahead
“I am enthusiastic about Avigen's future,” said Chahine. “Avigen will focus on developing and commercializing innovative drugs for the treatment of neurological conditions. We intend to build a strong neurologically-focused pipeline through a combination of internal research, acquisitions and in-licensing.”
Neuropathic Pain
Neuropathic pain is widely viewed as an underserved condition with limited and problematic treatment options. Patients with severe neuropathic conditions must often rely on increasing doses of morphine for pain relief. Pain accounts for
over 70 million doctor's visits per year in the U.S, according the International Association for the Study of Pain. Of the fifty per cent of individuals with chronic severe pain not associated with cancer, fewer than half reported that pain medication controlled the problem (American Pain Society, 1999.)
Avigen is working on a new and exiting class of molecules for the treatment of chronic pain. The Company has exclusively licensed rights to the treatment of chronic pain using anti-inflammatory cytokines, including interleukin 10 (IL-10), from the University of Colorado at Boulder. In addition, Avigen has established a collaboration with Dr. Linda Watkins, a world leader in the field and Professor of Psychology and Director, Interdepartmental Neuroscience Program at CU - Boulder. In addition, on April 2, 2005 Dr. Watkins received the Frederick W. L. Kerr Basic Science Award at the Annual American Pain Society Meeting. “Until recently, pain research focused exclusively on neurons, which relay pain messages to the brain. For example, for a broken foot, people take drugs that interrupt the neurons' pain message. But these treatments do little to control chronic pain,” said Dr. Watkins. During the past decade, Watkins and others discovered that treating pain is not just about neurons but also involves glial cells, which are active in creating and maintaining pain.
Normally, glia are the housekeepers of the central nervous system regulating the environment and cleaning up debris. However, when glia are activated in response to nerve damage, tumors, or particular viruses and bacteria, they produce increased levels of pro-inflammatory substances, which greatly enhance the neuron's response to pain signals.
In addition, these pain-enhancing substances further activate other glial. When this reaches a critical level, it produces a self-perpetuating feedback loop that potentially can continue even when the original cause of the pain has been resolved.
Avigen and its collaborators at CU-Boulder have focused on the effectiveness of one of the most powerful naturally occurring anti-inflammatory proteins, interleukin-10 (IL-10). Pre-clinical animal studies have confirmed that IL-10 prevents or reverses every enhanced pain state examined to date.
A growing body of evidence validates the efficacy of Avigen's candidate in the field, AV333, which demonstrated success in preclinical models by actually reversing neuropathic pain. AV333 is a nonviral-based therapy designed to deliver the gene that expresses the potent anti-inflammatory, interleukin-10 (IL-10), and thereby eliminates the pain signals emanating from the affected part of the body.
Considerable AAV Asset Value
Avigen will consider a number of possible deal structures. Among these options are out-licensing, joint ventures or complete divestiture of assets. As a leader in the field of AAV gene therapy for over a decade, Avigen has built an extensive asset base. These assets also include clinical and preclinical gene therapy programs in the neurological and coagulation fields; including Avigen's current Phase I clinical program, AV201 for Parkinson's disease, and an open IND for the treatment of hemophilia B.
Avigen has a dominant intellectual property portfolio related to AAV technologies. With ownership of, or access to, 40 issued U.S. patents and 29 issued foreign patents, Avigen has the largest and broadest patent portfolio related to AAV technologies. These patents cover the manufacture, delivery and treatment of numerous diseases.
In addition, Avigen has two multi-use rollerbottle–based GMP manufacturing facilities. These facilities can be used to produce commercial scale quantities of AAV but could also be used to manufacture other biologics, including cell therapeutics, recombinant proteins and monoclonal antibodies. Under certain strategic options, this facility would be available for sublease.
Avigen to Present at CIBC Biotechnology Conference Today
Ken Chahine will present more information on Avigen's new strategic initiative at the CIBC World Markets Biotechnology and Specialty Pharmaceuticals Conference today, April 5, 2005 at 10:00 a.m. EDT.
This presentation will be webcast live from the Millennium Broadway Hotel in New York City and may be accessed by following the link below.
http://www.veracast.com/webcasts/cibcwm/biotech05/06204336.cfm
Investors Please Note:
The statements in this news release regarding anticipated cost savings resulting from Avigen's decision to discontinue funding its proprietary AAV technology, Avigen's belief that its decision to focus its existing resources on traditional pharmaceuticals offers a greater potential to increase shareholder value, Avigen's expectation on making a decision soon on pursuing a transaction, Avigen's intention to build a strong neurologically-focused pipeline through a combination of internal research, acquisitions and in-licensing, and the benefits that Avigen believes it will obtain from its change in focus, are forward-looking statements that are subject to risks and uncertainties. These risks and uncertainties include: Avigen has not entered into any agreements regarding the three options that it is evaluating, and the parties with which Avigen is in discussions may determine not to pursue a transaction on the time frame that Avigen currently expects, on terms favorable to Avigen, or at all; the development of small molecule therapeutics is a time- and resource-intensive process with no guarantee of success, which may result in the expenditure of a significant amount of time and resources with no marketable product resulting from the effort; the risk that if the three options Avigen is evaluating or the alternative funding are delayed or do not occur, that Avigen will not be able to reduce its operational expenses as it currently expects; the risk that unexpected costs will arise in connection with the pursuit of these transactions that would result in Avigen not being able to reduce its operational expenses in the amount that it currently expects; and results obtained in animal models do not guarantee that similar results will be obtained in humans, which occurred in Avigen's treatment for hemophilia B. In addition, there are many other risks and uncertainties inherent in the development of drug products. Other risks relating to Avigen are detailed in Avigen's Annual Report on Form 10-K for the period ended December 31, 2004, under the caption "Risk Factors" in Item 1 of Part 1 of that report, which was filed with the SEC on March 16, 2005.
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Contact: Michael Coffee
Chief Business Officer
Avigen, Inc.
1301 Harbor Bay Parkway , Alameda , CA 94502
Tel: 510-748-7372
Fax: 510-748-7155
Internet: mcoffee@avigen.com
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