The USA’s Sonus Pharmaceuticals, which has been looking at its strategic alternatives since October after the failure of its lead product, is to merge with OncoGenex Technologies of Canada in a bid to create a firm with a deep cancer drug pipeline.

Under the terms of the deal, privately-held OncoGenex will receive 37 million shares of Sonus common stock and following the close of the proposed transaction, the Canadian firm’s shareholders will hold 50% of the newly combined company, to be called OncoGenex Pharmaceuticals. The agreement is expected to close in the third quarter.

Sonus was forced into action last autumn when its paclitaxel-based breast cancer drug Tocosol failed in a Phase III trial. Partner Bayer pulled out of the development deal and Sonus stock slumped over 80% as the firm was forced to lay off around half (32 people) of its staff.

However Sonus does have $30 million in cash and by linking up with OncoGenex, it has added three new drugs to join its last remaining product candidate SN-2310, a topoisomerase I inhibitor that is currently in Phase I trials. The Vancouver-based group’s most advanced compound is OGX-011 (clusterin), a protein associated with treatment resistance in a number of solid tumours, including prostate, breast, non-small cell lung, ovarian, and bladder cancers.

Preliminary data from a Phase II clinical trial evaluating OGX-011 in patients with hormone refractory prostate cancer has shown that retreatment with docetaxel may reverse resistance to the latter and improve survival. Its second drug is OGX-427, which is designed to reduce production of Hsp27, a protein that is over-produced in response to many cancer treatments and the compound is in Phase I. It should be joined there within the next 18 months by OGX-225 which aims to reduce the production of both insulin-like growth factor binding proteins -2 and -5.

Scott Cormack, OncoGenex' current chief executive who will hold the same posts in the new entity, said that “we were attracted by the immediate value and the potential future value this transaction creates”. He added that our companies “are built around very similar approaches to developing oncology products that provide better therapeutic alternatives for cancer patients”.