Ebb & Flow

Southern exposure

By Stacy Lawrence & Mike Ward

With only one Phase I compound left in its pipeline, cancer company Sonus (NASDAQ:SNUS) last week announced a 50-50 reverse merger with private Canadian cancer company OncoGenex, giving the latter a route onto a U.S. exchange.

The companies' shareholders will each have 37 million shares. But OncoGenex shareholders stand to gain up to an additional 25 million shares upon the achievement of undisclosed milestones; receiving the full amount would give them 62.6% of the combined company.

OncoGenex had filed for a US$48 million IPO in December 2006, but pulled the deal in March 2007.

In the meantime, Sonus hired Ferghana Partners in October 2007 to help explore strategic options. The prior month, the biotech and partner Bayer (Xetra:BAY) stopped development of Tocosol paclitaxel after it missed the primary endpoint in a Phase III trial to treat metastatic breast cancer. Then Sonus cut staff earlier this year by 16 (37%) to 26 employees.

Sonus had $28.8 million in cash at March 31. On a conference call, Sonus CFO Alan Fuhrman said OncoGenex had about $4 million in cash at March 31. OncoGenex President and CEO Scott Cormack said the combined cash will provide about 25 months of runway.

The newco's lead compound will be OGX-011, a second-generation antisense inhibitor of clusterin mRNA. The product, partnered with Isis (NASDAQ:ISIS), is in Phase II trials to treat hormone-refractory prostate cancer (HRPC).

Two Phase I candidates include OGX-427, a second-generation antisense compound that inhibits expression of Hsp27 to treat cancer, and Sonus's SN2310, a tocopheral conjugate of SN38 (an active metabolite of irinotecan).

The newco will have one preclinical candidate it hopes to move into Phase I within 18 months: OGX-225, a second-generation, bi-specific antisense inhibitor that targets both IGF-BP5 and IGF-BP2.

The seven-member board will include

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