Return to search

Oncogenex Merging with Sonus Pharma

Oncogenex Technologies Inc., a Vancouver-based drug company focused on cancer therapeutics, is going public via a reverse merger with Sonus Pharmaceuticals Inc. (SNUS). OncoGenex backers will receive 37 million Sonus shares, which were valued at around $10.4 million after Sonus shares slumped down to just $0.28 on the merger news. They also could receive another 25 million shares based on certain milestone earnouts.

 

Oncogenex has raised VC funding from such firms as Ventures West, BDC Venture Capital, GrowthWorks, HIG Capital and Milestone Medica Corp. It had once planned to go public on its own, but canceled the offering in March 2007 due to “market conditions.”

 

PRESS RELEASE 

Sonus Pharmaceuticals, Inc. (NASDAQ: SNUS) and OncoGenex Technologies Inc., a privately held biopharmaceutical development company, today jointly announced the signing of a definitive agreement to merge the two companies. The combined company will operate as OncoGenex Pharmaceuticals, Inc. Scott Cormack, OncoGenex' current President and Chief Executive Officer will continue as President and CEO of the company. As a result of the merger, the combined company will have a strong oncology pipeline addressing distinct unmet needs in the treatment of cancer, including three candidates in various stages of clinical development. Its lead candidate, OGX-011, is being evaluated in five Phase 2 clinical trials, each of which has completed patient enrollment. Interim study results have previously been presented for each of the five clinical trials.

“In October 2007, Sonus outlined its strategy to rebuild shareholder value,” said Mr. Michael Martino, President and Chief Executive Officer of Sonus. “Our goal was to identify quality assets to enhance, complement and leverage the strengths of our existing clinical pipeline, capabilities, infrastructure, cash and public listing. Today we are pleased to announce the result of that rigorous process in the proposed merger of Sonus and OncoGenex Technologies. We believe that this transaction represents an outstanding value creation opportunity for shareholders.”

“We were attracted by the immediate value and the potential future value this transaction creates for Sonus and OncoGenex shareholders,” said Mr. Cormack. “Our companies are built around very similar approaches to developing oncology products that provide better therapeutic alternatives for cancer patients. This transaction provides an exciting opportunity for the stockholders of both companies to realize the full value of each company's assets.”

The combined company will have a deep oncology pipeline, with each product candidate having a distinct mechanism of action and representing a unique opportunity for cancer drug development. In addition to OGX-011, the pipeline includes two product candidates in Phase 1, and one additional product candidate that the company anticipates will move into Phase 1 clinical development within 18 months. Details on the specific products follow:

–   OGX-011, also known as custirsen sodium, inhibits the production of
        clusterin, a protein that is associated with treatment resistance in
        a number of solid tumors, including prostate, breast, non-small cell
        lung, ovarian, and bladder cancers. It has potential applicability as
        a therapeutic in a broad number of cancers at different stages and
        can potentially be used in combination with a variety of commonly
        used cancer treatments, including chemotherapy, radiation therapy,
        and hormone ablation therapy. Preliminary data in a Phase 2 clinical
        trial evaluating OGX-011 in combination with second-line chemotherapy
        in patients with hormone refractory prostate cancer has shown that
        retreatment with docetaxel in combination with OGX-011 may reverse
        docetaxel resistance and improve survival. OGX-011 is planned to
        enter randomized clinical trials in patients with hormone refractory
        prostate cancer that will support a NDA submission;
    –   OGX-427 is designed to reduce production of Hsp27, a protein that is
        over-produced in response to many cancer treatments including hormone
        ablation therapy, chemotherapy and radiation therapy. OGX-427 is in a
        Phase 1 clinical trial for the treatment of solid tumors including
        prostate, non-small cell lung, breast, ovarian, and bladder cancers.
        The company anticipates that the single-agent aspect of this trial
        will be completed in the second half of 2008, and Phase 2 clinical
        development will begin in 2009. Like OGX-011, this product candidate
        has potential as a treatment in a broad number of cancers;
    –   SN2310 is a novel prodrug of SN-38, which is a potent anti-cancer
        drug belonging to the class of topoisomerase I inhibitors. It is
        currently in a Phase 1 trial and progress is being made to determine
        its safety and pharmacokinetic profile, in addition to the maximum
        tolerated dose. SN2310 is designed to enhance the delivery and
        exposure of SN-38 to the tumor by providing greater prodrug
        conversion and a longer half-life than achieved with irinotecan; and
    –   OGX-225 aims to reduce the production of both Insulin-Like Growth
        Factor Binding Protein -2 and Insulin-Like Growth Factor Binding
        Protein -5 with a single product to enhance treatment sensitivity and
        delay tumor progression. IGFBP-2 and IGFBP-5 are both hormones that
        make an alternate hormone, IGF-1, available to the tumor that
        facilitates continued tumor growth. Employing OGX-225 as a single
        product to simultaneously inhibit the production of both IGFBP-2 and
        IGFBP-5 has the potential to delay disease progression in cancers
        dependent upon IGF-1 for tumor growth. OGX-225 is in pre-clinical
        development and has completed pre-clinical pharmacology.
   
   
Terms of the Agreement

Under the terms of the proposed merger, OncoGenex' stock and debenture holders will receive approximately 37 million shares of Sonus common stock and OncoGenex will become a wholly owned subsidiary of Sonus Pharmaceuticals, Inc. Following the close of the proposed transaction, OncoGenex stockholders will hold 50% of Sonus' outstanding shares of common stock. An additional 25 million shares will be held in escrow and released to OncoGenex' shareholders upon achievement of specific milestones that are intended to demonstrate continued development of OncoGenex' assets and execution of the combined company's business plan. The proposed transaction received unanimous approval from the Boards of Directors of Sonus and OncoGenex, and is expected to be completed in the third quarter of 2008, subject to regulatory approval, and the approval of Sonus' and OncoGenex' shareholders.

The Board of Directors of the combined company will be composed of seven members, most of whom will be drawn from the existing Boards of both companies. Three members will be nominated by the Sonus Board members, three members will be nominated by OncoGenex Board members and those combined six members will appoint a seventh Board member.

Ferghana Partners acted as financial adviser to Sonus throughout the selection, analysis and negotiation of this transaction. Additionally, Leerink Swann & Co. provided an independent fairness opinion to the Board of Directors of Sonus.

Conference Call

The company will hold a joint conference call on Wednesday, May 28, 2008 at 11:00 a.m. Pacific Time to discuss the proposed merger. Mike Martino, President and CEO of Sonus, and Scott Cormack, OncoGenex' President and CEO will host the call.

To participate in the live call by telephone, please dial (866) 250-2351 from the U.S. or (303) 262-2143 from outside the U.S. Please use conference ID number 11114594 followed by the number sign. Participants are asked to call the above numbers approximately 5-10 minutes prior to the start time. Additionally, the call will be broadcast live and can be accessed on the Sonus web site at http://ir.sonuspharma.com/events.cfm. A telephone replay of the call will be available from May 28, 2:00 p.m. Pacific Time, for three business days at 800-405-2236 or 303-590-3000 for international calls; Conference ID: 11114594 followed by the number sign.

Additional Information

As previously announced on November 5, 2007, Sonus received notification from the staff of The NASDAQ Stock Market indicating that the company is not in compliance with the $1.00 minimum bid price requirement for continued listing under Marketplace Rule 4450(a)(5). Sonus announced on May 8, 2008, that it had received a Determination Letter from NASDAQ indicating that the company had failed to regain compliance and is therefore to be delisted from The NASDAQ Global Market. Sonus has requested a hearing before a NASDAQ Listing Qualifications Panel to appeal NASDAQ's determination and intends to seek continued listing of its common stock. As part of its plan of compliance, Sonus also intends to effect a reverse stock split, subject to stockholder approval. Subject to NASDAQ's determination, Sonus intends to submit an application to change the ticker symbol to “OGXI” following consummation of the merger.

About Sonus Pharmaceuticals, Inc.

Headquartered near Seattle, Washington, Sonus Pharmaceuticals, Inc. is focused on the development of cancer drugs that are designed to provide better efficacy, safety and tolerability, and ease of use. Sonus moved an oncology product candidate, SN2310, into a Phase 1 clinical trial in September 2006. For additional information on Sonus, including past news releases, please visit www.sonuspharma.com.

About OncoGenex Technologies Inc.

OncoGenex Technologies Inc. is a private biopharmaceutical company committed to the development and commercialization of new cancer therapies that address treatment resistance in cancer patients. The company's three product candidates are designed to inhibit the production of specific proteins associated with treatment resistance and which are over-produced in response to a variety of cancer treatments. OGX-011 is completing evaluation in five Phase 2 clinical studies in prostate, lung, and breast cancers. OGX-427 has begun evaluation in Phase 1 clinical studies, while the third product candidate, OGX-225, has completed preclinical pharmacology studies. More information is available at www.OncoGenex.ca.