0000898432-08-001264.txt : 20081211 0000898432-08-001264.hdr.sgml : 20081211 20081211162054 ACCESSION NUMBER: 0000898432-08-001264 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20081211 DATE AS OF CHANGE: 20081211 GROUP MEMBERS: BIOTECHNOLOGY VALUE FUND II, L.P. GROUP MEMBERS: BVF INC. GROUP MEMBERS: BVF INVESTMENTS, L.L.C. GROUP MEMBERS: BVF PARTNERS L.P. GROUP MEMBERS: INVESTMENT 10, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AVIGEN INC \DE CENTRAL INDEX KEY: 0000932903 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 133647119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1121 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48313 FILM NUMBER: 081243760 BUSINESS ADDRESS: STREET 1: 1301 HARBOR BAY PARKWAY STREET 2: . CITY: ALAMEDA STATE: CA ZIP: 94502 BUSINESS PHONE: 5107487150 MAIL ADDRESS: STREET 1: 1301 HARBOR BAY PARKWAY CITY: ALAMEDA STATE: CA ZIP: 94502 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BIOTECHNOLOGY VALUE FUND L P CENTRAL INDEX KEY: 0000918923 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 363924731 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 900 N. MICHIGAN AVENUE, SUITE 1100 CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3125066500 MAIL ADDRESS: STREET 1: 900 N. MICHIGAN AVENUE, SUITE 1100 CITY: CHICAGO STATE: IL ZIP: 60611 SC 13D/A 1 sc13da.htm

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D/A

Under the Securities Exchange Act of 1934

(Amendment No. 3)

Avigen, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

053690103

(CUSIP Number)

Elizabeth Delaney
BVF Partners L.P.
900 North Michigan Avenue
Suite 1100
Chicago, Illinois 60611
(312) 506-6500

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

December 11, 2008
(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D/A, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box x

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

1.	Names of Reporting Persons. Biotechnology Value Fund, L.P.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 1,975,340
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 1,975,340
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,975,340
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 6.64%
14.	Type of Reporting Person (See Instructions): PN

1.	Names of Reporting Persons. Biotechnology Value Fund II, L.P.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 1,364,911
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 1,364,911
11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 1,364,911
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 4.58%
14.	Type of Reporting Person (See Instructions): PN

1.	Names of Reporting Persons. BVF Investments, L.L.C.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 4,969,764
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 4,969,764
11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 4,969,764
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 16.69%
14.	Type of Reporting Person (See Instructions): OO

1.	Names of Reporting Persons. Investment 10, L.L.C.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Illinois
Number of Shares Beneficially Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 509,585
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 509,585
11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 509,585
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 1.71%
14.	Type of Reporting Person (See Instructions): OO

1.	Names of Reporting Persons. BVF Partners L.P.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially by Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 8,819,600
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 8,819,600
11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 8,819,600
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 29.63%
14.	Type of Reporting Person (See Instructions): PN, HC

1.	Names of Reporting Persons. BVF Inc.
2.	Check the Appropriate Box if a Member of a Group (See Instructions) (a) x (b) o
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially by Owned by Each Reporting Person With	7.	Sole Voting Power 0
	8.	Shared Voting Power 8,819,600
	9.	Sole Dispositive Power 0
	10.	Shared Dispositive Power 8,819,600
11.	Aggregate Amount Beneficially Owned by Each Reporting Person: 8,819,600
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o
13.	Percent of Class Represented by Amount in Row (11): 29.63%
14.	Type of Reporting Person (See Instructions): CO, HC

The following constitutes Amendment No. 3 to the Schedule 13D filed by the undersigned ("Amendment No. 3"). This Amendment No. 3 amended the Schedule 13D as specifically set forth.

ITEM 3. Source and Amount of Funds or Other Consideration

Item 3 is hereby amended and restated to read as follows:

Partners, in its capacity as (i) general partner of BVF, has purchased on behalf of such limited partnership an aggregate number of 1,975,340 shares of the Common Stock for an aggregate consideration of $1,217,990.09 (ii) general partner of BVF2, has purchased on behalf of such limited partnership an aggregate number of 1,364,911 shares of Common Stock for an aggregate consideration of $845,739.77, (iii) manager of BVLLC, has purchased on behalf of such limited liability company an aggregate number of 4,969,764 shares of Common Stock for an aggregate consideration of $3,415,612.79, and (iv) investment adviser to ILL10, purchased on behalf of such limited liability company an aggregate of 509,585 shares of Common Stock for an aggregate consideration of $321,319.25. Each of BVF, BVF2, BVLLC and ILL10 purchased the shares held by it using its own working capital. No borrowed funds were used to purchase the Common Stock other than any borrowed funds used for working capital purposes in the ordinary course of business.

ITEM 4. Purpose of Transaction

Item 4 is hereby amended and restated to read as follows:

On December 11, 2008 BVF sent a letter to the Issuer expressing its displeasure with the Issuer’s recent performance and continued destruction of shareholder value. The letter noted that since January 1, 2004, the Issuer's stock price has fallen more than 90% and the Issuer has accumulated a deficit of more than $110 million, with the Issuer's stock currently trading at less than 1/3 of its net per share cash value. The Reporting Persons also described their serious misgivings and concerns with recent unilateral actions by the Issuer’s Board of Directors (the “Board”), including to increase and broaden management’s “golden parachute” severance agreements with total payouts of at least $3 million, representing 20% of the Issuer's market value, and to adopt a “poison pill”.

The letter questions why such actions are necessary to "attract and retain key employees" when the Issuer has no real business at this time and has abandoned the development of all of its products. The letter also highlights BVF’s concern that management and the Board are more interested in retaining their jobs and compensation than in maximizing shareholder value in light of the Board’s institution of a “poison pill.” The letter calls for the recent severance arrangements to be revoked and the poison pill to be redeemed.

In the letter, BVF implores the Board to have the Issuer immediately guarantee the worst case outcome for all shareholders. This guarantee could be accomplished in several ways, including by dividending or distributing all excess cash to shareholders now, or by offering to buy back any and all shares from holders that wish to sell at a specific price at a specific future date (i.e. $1. 25 share in December , 2009). A copy of the letter is attached hereto as Exhibit B and incorporated herein by reference.

ITEM 5. Interest in Securities of the Issuer

Items 5(a) and (b) are hereby amended and restated to read as follows:

The Reporting Persons’ percentage ownership of Common Stock is based on 29,769,115 shares being outstanding.

(a) As of November 19, 2008, BVF beneficially owns 1,975,340 shares of Common Stock, BVF2 beneficially owns 1,364,911 shares of Common Stock, BVLLC beneficially owns 4,969,764 shares of Common Stock, ILL10 beneficially owns 509,585 shares of Common Stock and each of Partners and BVF Inc. may be deemed to beneficially own 8,819,600 shares of Common Stock, representing percentage ownership of approximately 6.64%, 4.58%, 16.69%, 1.71% and 29.63%, respectively.

(b) Each of BVF, BVF2, BVLLC and ILL10 shares with Partners voting and dispositive power over the Common Stock each such entity beneficially owns. Partners and BVF Inc. share voting and dispositive power over the 8,819,600 shares of Common Stock they may be deemed beneficially to own with BVF, BVF2 and BVLLC, and ILL10.

Item 5(c) is hereby amended to add the following:

			BVF	ILL10	BVF2	BVLLC
Date of Transaction	Type of Securities	Price Per Share					Exchange	Type of Transaction
11/12/08	Common Stock	0.7496	19,000	5,000	14,000	49,000	NASDAQ	PURCHASE
11/13/08	Common Stock	0.7478	6,500	2,000	4,000	16,000	NASDAQ	PURCHASE
11/18/08	Common Stock	0.7355	9,700	3,000	7,000	24,000	NASDAQ	PURCHASE
11/19/08	Common Stock	0.7494	7,300	2,000	5,000	18,000	NASDAQ	PURCHASE

ITEM 7. Material to be filed as Exhibits

Item 7 is hereby amended to add the following exhibits:

Exhibit A: Joint Filing Agreement on behalf of the Reporting Persons.

Exhibit B: Letter dated December 11, 2008 from Biotechnology Value Fund, L.P. to the Board of Directors of Avigen, Inc.

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct.

Dated:	December 11, 2008

	BIOTECHNOLOGY VALUE FUND, L.P.*
	By:	BVF Partners L.P., its general partner
		By:	BVF Inc., its general partner
			By:	/s/ Mark N. Lampert
				Mark N. Lampert
				President

	BIOTECHNOLOGY VALUE FUND II, L.P.*
	By:	BVF Partners L.P., its general partner
		By:	BVF Inc., its general partner
			By:	/s/ Mark N. Lampert
				Mark N. Lampert
				President

	BVF INVESTMENTS, L.L.C.*
	By:	BVF Partners L.P., its manager
		By:	BVF Inc., its general partner
			By:	/s/ Mark N. Lampert
				Mark N. Lampert President

	INVESTMENT 10, L.L.C.*
	By:	BVF Partners L.P., its investment manager
		By:	BVF Inc., its general partner
			By:	/s/ Mark N. Lampert
				Mark N. Lampert
				President

	BVF PARTNERS L.P. *
	By:	BVF Inc., its general partner
		By:	/s/ Mark N. Lampert
			Mark N. Lampert
			President

	BVF INC.*
	By:	/s/ Mark N. Lampert
		Mark N. Lampert
		President

*The Reporting Person disclaims beneficial ownership except to the extent of its pecuniary interest therein.

EX-99 2 exhibita.htm

Exhibit A

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k)(l)(iii) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them that certain Amendment No. 3 to the Statement on Schedule 13D filed on October 23, 2008 (including additional amendments thereto) with respect to the shares of Common Stock of Avigen, Inc. This Joint Filing Agreement shall be filed as an Exhibit to such Statement.

BIOTECHNOLOGY VALUE FUND, L.P.
By:	BVF Partners L.P., its general partner
	By:	BVF Inc., its general partner
		By:	/s/ Mark N. Lampert
			Mark N. Lampert President

BIOTECHNOLOGY VALUE FUND II, L.P.
By:	BVF Partners L.P., its general partner
	By:	BVF Inc., its general partner
		By:	/s/ Mark N. Lampert
			Mark N.Lampert President

BVF INVESTMENTS, L.L.C.
By:	BVF Partners L.P., its manager
	By:	BVF Inc., its general partner
		By:	/s/ Mark N. Lampert
			Mark N. Lampert President

INVESTMENT 10, L.L.C.
By:	BVF Partners L.P., its investment manager
	By:	BVF Inc., its general partner
		By:	/s/ Mark N. Lampert
			Mark N. Lampert President

BVF PARTNERS L.P.
By:	BVF Inc., its general partner
	By:	/s/ Mark N. Lampert
		Mark N.Lampert President

BVF INC.
By:	/s/ Mark N. Lampert
	Mark N. Lampert President

EX-99 3 exhibit-b.htm

BIOTECHNOLOGY VALUE FUND, L.P.

One Sansome St., 39th Floor
San Francisco, CA 94104
Tel: (415) 288-2395
Fax: (415) 288-2394

December 11, 2008

Board of Directors
Avigen, Inc.
1301 Harbor Bay Parkway
Alameda, California 94502

Members of the Board:

As you know, Biotechnology Value Fund, L.P., together with its affiliates, is the largest shareholder of Avigen, Inc. (“Avigen” or the “Company”), holding an ownership stake of approximately 29% of Avigen’s outstanding common stock. We first became investors in Avigen in 2004 and have provided capital directly to the Company. We are writing to express our frustration with recent developments at Avigen, particularly with what we perceive to be this Board’s self-serving actions and disregard of shareholder interests.

Since January 1, 2004, Avigen’s stock price has fallen more than 90% and the Company has accumulated a deficit of more than $110 million. Presently, Avigen’s stock trades at less than 1/3 of its net per share cash value, indicative of the investment community’s conviction that Avigen’s Board will destroy its remaining value. We have repeatedly reached out to the Company and have offered to work collaboratively to maximize shareholder value. The Company responded to our offers by unilaterally increasing and broadening management’s "golden parachute" severance agreements and by unilaterally adopting a “poison pill.”

The Board’s increase and broadening of its “golden parachute” severance agreements with management, under the ridiculous justification that such payouts are necessary to “attract and retain key employees,” is particularly outrageous given Avigen’s current circumstances. Our analysis indicates that these payouts, which we believe would be triggered by most “change in control” scenarios, including a liquidation, total at least $3 million, an incredible 20% of the Company’s entire market value. The recipients of these golden parachute arrangements include Avigen’s CEO, Ken Chahine, who resides in Park City, Utah, while the Company is based in California. How can the Company justify such actions as necessary to “attract and retain key employees" when Avigen has no real business at this time and has abandoned the development of all its products? These hastily adopted severance arrangements need to be revoked.

In addition, we believe the Board’s implementation of the "poison pill” serves no purpose other than to keep BVF from purchasing additional stock in the Company. We are concerned that management and Board members are more concerned with retaining their jobs and compensation than with maximizing shareholder value. As evidence, Avigen's stock price has fallen more than 20% since the adoption of the poison pill. We find the poison pill to be disrespectful and offensive, given our substantial ownership position and our long history with the Company. Nevertheless, our response was to offer a compromise proposal: modify the poison pill to allow anyone to acquire as much stock as they like, however, neutralize the voting power on all shares of Avigen stock above a specified threshold. We specifically offered to have any additional shares that we acquire to abstain from voting or to vote in proportion to all other outstanding shares. This offer was not accepted. The pill should be redeemed altogether.

The Board’s recent actions reveal its true self-interest and leave us concerned that Avigen will indeed destroy and/or take all remaining value. Consequently, our primary issue has been and remains that Avigen immediately guarantee the worst case outcome for all shareholders. This guarantee could be accomplished in several ways, including by dividending or otherwise distributing all excess cash to shareholders now, or by offering to buy back any and all shares from holders that wish to sell at a specific price at a specific future date (i.e., $1.25 per share in December, 2009). In both cases, shareholders could stand to reap potentially substantial upside derived from the monetization of Avigen’s remaining assets and could finally stop worrying about whether the Company will destroy its substantial cash value. To the extent the Board believes it can generate value in excess of its cash in the bank today, offering downside protection ultimately costs the Company nothing. However, by rejecting our proposal to provide a downside guarantee, the Board has indicated its willingness to place its remaining cash at continued risk, without shareholder consent.

As the Company’s largest shareholder, we are fighting to return value to all shareholders, not just ourselves, and we feel a responsibility to do so. To be clear, we do not seek to impose our own agenda on Avigen, we only ask that shareholders be empowered to decide the fate of the Company’s residual cash, rather than the management and Board of a company which has repeatedly tried and failed to create any shareholder value whatsoever. Shareholders have good reason to worry that Avigen's management fully intends to put its remaining cash at risk. Yesterday, at the RBC Capital Markets Healthcare Conference, CEO Ken Chahine said, “We are going to be looking at building…How do we do that?...There are some opportunities as well that have emerged from the credit crisis. There are some commercialization, or near-commercialization, type companies that could use an infusion of cash…Those are some of the things we are looking at. Now, will that be in the therapeutic space? It could be…We’re opening it up because I think that there are opportunities outside of therapeutics…We will spend the balance of 2009 trying to look for opportunities." Mr. Chahine, shareholders do not need or want you to invest their money.

If recent empirical evidence with respect to numerous other failed biotech companies is any guide (e.g., Corgentech, Renovis, Novacea, Nitromed, Nuvelo and others), the future does not bode well for Avigen shareholders if left to its own devices. In one similar situation, the company could have returned in excess of $10/share in cash to shareholders had it been liquidated in 2005. Instead, after opting for a value-destroying merger, that company today trades at a mere 0.09 cents per share - a 99% decline! Avigen's golden parachutes have incentivized management to merge with any company that will take it. Management would walk away with its $3 million cash windfall; shareholders would get stuck with potentially worthless stock in a merged company. In the current fiscal environment, shareholders will no longer tolerate such self-interested behavior on the part of failed biotechnology companies.

We believe the Avigen Board is not only willing to sacrifice and squander shareholder money but, in the process, its members are making a mockery of their obligations to fulfill their fiduciary duties as directors of the Company. To that end, please be advised that we intend to hold each member of the Board and management fully accountable for any continued erosion of value from the current liquidation value of the Company.

Sincerely,

Mark Lampert