VioQuest Pharmaceuticals Inc. is acquiring the first two compounds for its new therapeutic pipeline through a merger with privately owned Greenwich Therapeutics Inc.

Founded in 2000 as a chiral chemistry business, VioQuest has had "the intention, for some time, to also develop into a drug development and therapeutics company," said Dan Greenleaf, who joined the Monmouth Junction, N.J.-based company as president and CEO three months ago. "My chief responsibility was to ensure the company was in a position to make acquisitions relating to therapeutics."

VioQuest signed a letter of intent with New York-based Greenwich Therapeutics to merge in an equity deal in which Greenwich Therapeutics will receive up to 47 percent of VioQuest Pharmaceuticals, half of which will be held in escrow to be released upon the achievement of certain milestones related to the clinical development of the two compounds.

"It's very much a performance-based arrangement, predicated upon how well the drugs do," Greenleaf said. "If they do well, the rest of the shares will be released."

He estimated that the deal would close in late July, subject to reincorporation proceedings.

Both drug candidates from Greenwich are aimed at treating cancer, a market in which VioQuest sees opportunities to provide unmet needs while making strides in the idea of personalized medicine.

"That's the underlying theme for both of these products," Greenleaf told BioWorld Today.

The first product, sodium stibogluconate (SSG), is an inhibitor of protein tyrosine phosphatases that are found in certain cancers. The product demonstrated effectiveness in preclinical studies in combination with interferon, and showed greater efficacy than interferon as a monotherapy, with a potential for treating melanoma, myeloma and lymphoma. SSG is in a Phase I/II study at the Cleveland Clinic Taussig Cancer Center.

The second compound, API-2, is a tricyclic nucleoside designed to inhibit Akt phosphorylation, which is expressed in certain diseases, such as breast and prostate cancer.

API-2 was one of about 2,000 Akt inhibitors screened by the National Cancer Institute, and researchers "felt this one has the most potential," Greenleaf said, adding that preclinical studies have shown the drug works well in tumors that express Akt. The company also gained an assay along with the product to determine which tumors are expressing Akt.

The Moffitt Cancer Center in Florida has been investigating API-2, and VioQuest expects to see the product in the clinic later this year.

With the addition of its drug development efforts, VioQuest now operates under two subsidiaries: Chiral Quest Inc., which offers five chiral catalyst products, and VioQuest Drug Development, created to acquire and develop late preclinical and early clinical-stage compounds for metabolic disease, inflammatory disease and cancer.

The company initially was incorporated as Chiral Quest by Pennsylvania State University professor Xumu Zhang, as a chemistry-based business that offered chiral products, technology and services to pharmaceutical and chemical companies. With five commercialized products, the company now supplies products to 50 companies.

"We're on track to break even on that side of the business in 2006," Greenleaf said, adding that by the latter part of 2006 or early 2007 the company should post a profit.

"The cash we receive will certainly help underwrite a part of the therapeutics business," he said.

Last year, VioQuest gained a foothold in China, with the opening of a production facility in Jiashan to expand the company's manufacturing capabilities for its Chiral Quest subsidiary, and 10 of the company's 45 employees are working in the Jiashan facility. Greenleaf said that move also could open the door for in-licensing opportunities with Chinese firms.

Overall, the combination of a drug development pipeline with its existing chemistry business could drive greater shareholder value, he said.

"We're a company that will have two drugs that are on the cutting edge of personalized medicine, and are also on the cutting edge as far as their mechanisms of action," he said. "We feel we could be very much a leader in the science of these two inhibitors."

Following the merger announcement Wednesday, shares of VioQuest (OTC BB:VQPH) lost 5 cents to close at 75 cents.