Avalon Pharmaceuticals (AVRX)

Item 2.05 Costs Associated with Exit or Disposal Activities.

On August 6, 2008, the Board of Directors of the Company approved a plan to reduce the Company’s workforce by 19 employees, or approximately 1/3rd of its regular full-time staff. On August 13, 2008, the Company notified the employees affected by this plan. The reduction in workforce is intended to allow the Company to focus its operations on its existing collaborations and on the pre-clinical and clinical development of its Beta-catenin inhibitor program. The Company is curtailing its other development programs and is seeking a partner for its AVN944 development program.

The Company currently expects to record between $0.9 million and $1.1 million of pre-tax restructuring charges in 2008 related to cash expenditures for severance and related costs resulting from this workforce reduction.

Information contained in this Current Report on Form 8-K that relates to the Company’s anticipated restructuring charges, business plans and similar matters are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statement involve risks and uncertainties that could cause the Company’s actual results to differ materially from the future results expressed or implied by these statements. For further information regarding risks and uncertainties associated with the Company’s business, please refer to the "Risk Factors" section of the Company’s filings with the Securities and Exchange Commission, including, but not limited to, its latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q.