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AVALON CLOSES $70 MILLION IN SERIES B FINANCING

Company to Use Proceeds to Advance Next-Generation Genomic Drug Discovery

Gaithersburg, MD, December 17, 2001

Avalon Pharmaceuticals today announced the close to new investors of a $70 million private equity financing through the issuance of Series B Shares. This offering represents one of the largest private biotechnology financings this year. CDP Sofinov served as lead investor in this financing. Other new investors in Series B include EuclidSR Partners, AIG Global Investment Group, Hambrecht & Quist Capital Management, MDS Capital, RBC Capital Partners, GeneChem, OrbiMed Advisors LLC, and KBL Healthcare Ventures. Existing Series A investors who participated in the round included Oxford Bioscience Partners, GIMV n.v., Forward Ventures, and Emerging Technology Partners. Array Capital LLC acted as lead placement agent for the offering.
 
"This marks an important milestone for the company," said Kenneth Carter, Ph.D. Chief Executive Officer of Avalon. "This funding allows us to expand the development of our genomics-based drug screening approach, which we believe will lead to the accelerated identification of innovative small molecule drugs. This funding reflects a recognition of the need for more effective approaches to genomics-based drug discovery and Avalon's leadership in this area."
 
The proceeds of the company's first round of financing were used to establish the first generation drug discovery and bioinformatics platform. The proceeds from the Series B financing will fund Avalon's ongoing efforts to discover novel therapeutics for cancers and the cost of pre-clinical development of a series of lead compounds. The funds will also be used to establish Avalon's second generation of drug discovery, automation and bioinformatics technologies.
 
"We are very pleased with our $70 million offering in this difficult market environment," noted Alan Walton, General Partner in Oxford Bioscience Partners and Chairman of Avalon's Board of Directors. "Avalon has made tremendous progress in the 18 months since completion of the Series A financing. I believe the investment community recognizes that Avalon's approach is leading to a paradigm shift in the way drugs are discovered. We cannot continue to focus on the current target based approaches if we are to discover better drugs faster, and Avalon is pioneering the invention of new and more productive approaches."
 
The Maryland Department of Business and Economic Development invested in both the Series A and the Series B financing. Dr. Carter commented, "We have been fortunate to enjoy broad support from both the State of Maryland and the Montgomery County Department of Economic Development."
 
Avalon Pharmaceuticals (www.avalonrx.com) is a next-generation genomics-based company utilizing unique and proprietary methods to improve and accelerate the discovery of small molecule drugs directly from genomics data. Through its comprehensive approach, Avalon can identify gene expression markers for disease activity and directly screen for drug effects on these in complex biological systems. The company is thus able to rapidly identify small molecule drug candidates and to optimize these for highly disease specific activity, thereby producing very high quality lead compounds much faster than traditional target based drug discovery. Currently, Avalon is focusing its efforts on identifying therapeutics with novel mechanisms of actions that counteracts or arrest the malignant transformation of cancer cells.
 
Contacts:
 
Avalon Pharmaceuticals
Kenneth C. Carter, Ph.D.
President & Chief Executive Officer
Tel: (301) 556-1000
 
Noonan/Russo Communications, Inc.
(212) 696-4455
Matthew Orsagh (investor) ext. 357
Miriam Weber (media) ext. 352

 
This press release includes forward-looking statements based on management's current expectations. Factors that could cause future results to differ materially from such expectations include, but are not limited to: the ability to secure future funding; the success of the Company's research strategy; the applicability of the discoveries made therein; the difficulties inherent in the development of pharmaceuticals, including uncertainties as to the timing and results of pre-clinical studies; delayed achievements of milestones; reliance on collaborators; uncertainty as to whether the Company's potential products will succeed in entering human clinical trials and uncertainty as to the results of such trials; uncertainty as to whether adequate reimbursement for these products will exist from the government, private healthcare insurers and third-party players; and the uncertainties as to the extent of future government regulation of the pharmaceutical business.