12:00 AM
Jun 02, 2008
 |  BioCentury  |  Finance

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 three directors from each company, with the last director to be selected by the other six.

Both boards have unanimously approved the deal, which is expected to complete in 3Q08 pending shareholder approval, it.

Sonus shareholders weren't thrilled, with the shares edging up $0.02 to $0.34 on the week. As part of the merger, Sonus intends to do a reverse split to raise its share price above NASDAQ's $1 minimum bid price requirement. The newco will change its ticker to OGXI once the merger is completed.

At least two-thirds of OncoGenex shareholders have signed voting agreements in favor of the deal. Principal shareholders for OncoGenex include Ventures West; H.I.G. Horizon; Working Opportunity Fund; BDC Capital; and Milestone Medica.

EuroBiotech benchmark

NYSE Euronext announced the formation of the Next BioTech Index at last week's BioEquity Europe meeting in Amsterdam. The index is the first Eurozone biotech index, according to the exchange.

The market cap weighted index is comprised of the 25 biotechs with a primary listing on NYSE Euronext's European markets: Euronext and Alternext (see "Next BioTech").

Although the index will be listed (Euronext:BIOTK) for tracking purposes, it is not tradeable. Xavier Bommart, head of sales of domestic listings at NYSE Euronext, said the Next BioTech is a first step and can serve as a benchmark for the industry.

If there is a demand, NYSE Euronext may consider working on a tradeable pan-European biotechnology index.

The total market cap of the index companies was E4.7 billion ($7.4 billion) at May 26. The index has gained 80 points (9%) to 962 since April 7.

The index does not have a set number of constituents, but includes all stocks on the exchanges that are...

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