BOTHELL — Sonus Pharmaceuticals, which saw its once-promising cancer drug fail in clinical trials last fall, will merge with a Canadian biotechnology firm in a deal worth more than $10 million.
The newly combined company, to be called OncoGenex Pharmaceuticals, plans to keep biotech operations in Bothell, where Sonus is based.
Michael Martino, Sonus’ president and chief executive officer, said merging with Vancouver, B.C.-based OncoGenex Technologies presented the best chance for success among 100 opportunities Sonus reviewed.
“This proposed merger is a significant step in the growth of our companies. The combined company’s broad pipeline encompasses a total of four drug candidates,” Martino said.
That was a key factor, Martino said. Sonus had just one drug candidate in clinical testing after Tocosol paclitaxel, a chemotherapy drug, failed in late-stage human trials against breast cancer last September.
OncoGenex, on the other hand, has three potential cancer treatments going through clinical trials. The lead candidate, OGX-011, is in phase 2 trials against prostate, breast and lung cancers.
The other two drug candidates in OncoGenex’s development pipeline are in phase 1 tests.
Scott Cormack, OncoGenex’s president and CEO, said joining Sonus gives his company a financial boost it needs to move its drug candidates further along. As of March 30, Sonus reported it had $30 million in cash and securities.
“We obviously had a very healthy clinical pipeline, and we were looking to access the capital markets because we thought the data justified doing so,” Cormack said.
OncoGenex will become a wholly owned subsidiary of Sonus, with Cormack leading as CEO from the Vancouver headquarters. Martino said he intends to leave once the merger is completed.
Under terms of the deal, Sonus will give OncoGenex’s investors approximately 37 million shares of Sonus stock. Following the transaction’s close, OncoGenex stockholders will hold about half of Sonus’ shares. With Wednesday’s closing price for Sonus’ stock, the deal would be worth $10.36 million.
An additional 25 million shares will be released to OncoGenex’s shareholders upon achievement of specific milestones related to drug development and the combined company’s business plan.
Shareholders in Sonus and OncoGenex, as well as regulators, still need to give final approval to the proposed merger. If all goes smoothly, the transaction could be completed by the fall, said Alan Fuhrman, Sonus’ chief financial officer.
Fuhrman said shareholders also may vote on a proposed reserve split of Sonus’ stock in order to drive the share price back above $1. The Nasdaq market has threatened to remove Sonus’ stock from trading on that exchange if the share price doesn’t rise above that level.
The new company’s headquarters staff in Vancouver, B.C., will have about 15 employees, Cormack said. OncoGenex’s laboratory staff, now in Seattle, will move to Sonus’ facility in Bothell to create a combined staff there of about 35 people.
Cindy Jacobs, OncoGenex’s chief medical officer, said she thinks the combined research team will be a strong one.
“The combined pipeline fits very nicely together,” said Jacobs, who came to OncoGenex from Seattle’s Corixa Corp., which was acquired in 2005.
David Miller, president of Biotech Stock Research in Seattle, said OncoGenex’s local presence should make the merger go easier. But he’s not convinced that this combination is the best possible one for Sonus.
“How this works out for Sonus’ shareholders, I don’t think we’ll know for a few years,” he said.
Those shareholders drove down Sonus’ share price by nearly 5 cents, or 14 percent, on Wednesday to 28 cents. Before Sonus’ lead candidate failed last fall, shares traded well above $4.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com
Facts about Sonus Pharmaceuticals Inc.
Headquarters: Bothell
Number of employees: 27
Founded: 1991
Stock symbol: SNUS
Web site: www.sonuspharma.com
Sonus timeline
1991: Steven Quay, now CEO at Bothell’s Nastech Pharmaceuticals Co., founds Sonus PharmaÂceuticals.
1995: Company goes public.
1996: Company submits regulatory application for EchoGen, an ultrasound contrast agent.
1999: Michael Martino takes over from Quay as Sonus’ CEO.
2000: The company refocuses and drops its application for EchoGen’s approval. Shares of Sonus plummet to 41 cents; the company lays off one-quarter of its staff.
2001: Company announces start of tests on Tocosol paclitaxel.
2005: Bayer Schering agrees to a drug partnership that brings Sonus $36 million immediately.
2007: Tests of Tocosol paclitaxel halted after disappointing phase 3 results.
2008: Sonus agrees to merge with OncoGenex Technologies.
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