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Biotechnology Value Fund (BVF) responded on Friday to Avigen, Inc.’s (NASDAQ:AVGN) announcement that its board is “considering ‘strategic alternatives,'” announcing that it is “gravely concerned” that AVGN’s announcement is “silent on downside protection for all stockholders.”

The full text of BVF’s announcement is reproduced below:

BVF WARNS STOCKHOLDERS: AVIGEN CONTINUES TO REMAIN SILENT ON DOWNSIDE PROTECTION

AVIGEN’S LATEST MOVES REINFORCE TROUBLING PATTERN OF DISMISSING ALTERNATIVES WHICH PROTECT STOCKHOLDER VALUE

BVF URGES AVIGEN BOARD TO CALL SPECIAL MEETING SO STOCKHOLDERS CAN VOTE FOR DIRECTORS COMMITTED TO MAXIMIZING VALUE AND MINIMIZING RISK AND WASTE

NEW YORK, February 6, 2009 – BVF Acquisition LLC (the “Purchaser”), an affiliate of Biotechnology Value Fund L.P. (“BVF”), announced today that it is gravely concerned that today’s announcement by the Board of Directors of Avigen, Inc. (NASDAQ:AVGN) that it is considering “strategic alternatives” is silent on downside protection for all stockholders.

Speaking on behalf of BVF, Mark Lampert, BVF’s General Partner, stated, “As the largest stockholder in Avigen, holding 8,819,600, or approximately 29.63% of Avigen’s outstanding shares, we are worried that this Board is embarking on a path that will use the companies cash and valuable assets in a misguided transaction which offers no downside protection to stockholders — a key feature of the proposed merger with MediciNova . The landscape is littered with numerous parallels in which cash shells like Avigen have entered into transactions promoted as value-creating, but which ultimately left investors holding nearly worthless stock. Our nominees are committed to closing the downside-protected merger with MediciNova. We are disappointed that the current Board seems to be more interested in entrenching itself by means of implementing golden parachutes and a poison pill, actions that we believe are detrimental to the creation of value at Avigen. We reiterate our call to the Avigen Board to institute downside protection for all stockholders.”

Separately, BVF is notifying the SEC of significant and blatant inaccuracies in Avigen’s 14D-9 filing. BVF will hold Avigen responsible for any harm caused to BVF by these inaccuracies.

“We believe Avigen’s board and management has a long history of failure and waste and do not believe this Board should be making any decisions about Avigen’s future. Any decision by this Board for the direction of Avigen should be subject to a vote of stockholders,” Mr. Lampert said. “We note that Avigen’s directors and officers own an aggregate of 48,233 shares of Avigen stock, as opposed to BVF’s over 8.8 million shares. BVF shares the interests of all stockholders in the direction of the Company, and has never requested any benefit in which all stockholders would not fully participate. Our tender offer provides other stockholders with a liquidity option. We welcome any stockholders who do not wish to tender to continue as holders alongside BVF.”

BVF continues to urge the Avigen Board to stop stalling and to promptly call a special meeting of stockholders to enable the true owners of the company, the stockholders, to determine the fate of their investment. BVF submitted a request on January 9, 2009 for Avigen to call special meeting. Today, nearly one month later, the Company has taken no action in this regard. At the special meeting, stockholders will be asked to replace the existing Board with directors who would be dedicated to maximizing value and minimizing risk and waste on behalf of all Avigen stockholders. BVF believes that stockholders who are concerned about the continuing destruction of value at Avigen – whether or not they intend to tender their shares – should urge the Board to call a meeting as soon as possible.

On January 23, 2009, BVF commenced a tender offer at $1.00 per share, which represented a premium of 35% over the closing stock price of $0.74 on January 8, 2009, the day before BVF announced its desire to replace Avigen’s incumbent Board of Directors. Subsequent to the commencement of BVF’s tender, Avigen’s stock price has increased to above the tender price. The offer, which is not subject to any financing condition, was and is intended to give certain stockholders, who desire near-term liquidity, an alternative to the proposed merger with MediciNova. Each stockholder should make their own decision on whether or not to tender.

The tender offer is conditioned upon, among other things, the BVF nominees being elected or appointed to the Avigen Board of Directors so that they would constitute a majority of the Board. If placed on the Board, the BVF nominees would, subject to their fiduciary duties, pursue merger negotiations with MediciNova, Inc. or other actions that would be designed to enhance value and minimize risk for all Avigen stockholders.

MacKenzie Partners, Inc. is the Information Agent for the tender offer and any questions or requests for the Offer to Purchase and related materials with respect to the tender offer or the special meeting may be directed to MacKenzie Partners, Inc.

[Full Disclosure: We have a holding in AVGN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.]