BioWorld Today West Coast Editor

Adding three preclinical drug candidates for pain to its pipeline, Sonus Pharmaceuticals Inc. is acquiring the French firm Synt:em for $10 million in stock up front, and $20 million more as development milestone payments.

Sonus' shares (NASDAQ:SNUS) closed Thursday at $2.61, down 28 cents.

"This is a pretty unusual deal," said Michael Martino, president and CEO of Bothell, Wash.-based Sonus, noting that the agreement is structured so that it's "significantly back-end loaded" with "each and every share subject to lockup" for a period between nine months and 18 months.

Under the terms, $10 million in Sonus stock will be paid at closing, which is expected in the first quarter of 2005. The second and third installments of $10 million each (also in Sonus shares) are contingent on Synt:em candidates reaching Phase I trials, and the share price for all three installments will be based upon its average closing price for 20 consecutive trading days, ending two days before the date of closing.

The number of shares issuable to Nimes, France-based Synt:em shareholders is subject to upper and lower collars, so the total number of shares to be issued by Sonus will not rise above 29 percent or dip below 26 percent.

Sonus disclosed the deal last week; given the closing price of $2.65 per share Nov. 2, the initial batch of shares would give Synt:em stockholders about 3.9 million shares, or 15 percent of Sonus. And if both contingency milestones are reached, the added shares would give Synt:em's stockholders a total of between 7.6 million and 8.9 million shares.

Sonus' lead candidate nearing Phase III trials is Tocosol Paclitaxel, an improved version of the well-known chemotherapy drug using vitamin E-based oil-in-water emulsion for delivery. The company is seeking a partner, Martino said.

"We have the resources to start that trial," he said. "At the same time I would say you need to make an ethical commitment that you have the financial wherewithal to complete the trial, and we don't [have it]."

If conditions seem favorable, Sonus might try to raise more money for the Phase III program. "I wouldn't rule that out," Martino said.

Sonus also has several alternative formulations of camptothecin in preclinical stages. Early data last year showed "quite compellingly" that Sonus' drug offers greater tumor suppression for a longer period with better side effects than irinotecan, Martino said. Phase I trials are expected to start in mid-2005.

Synt:em's platform has two parts. One is Pep:trans, which has yielded a series of peptides that are either active on their own or linked to active drugs for transport across complex membranes such as the blood-brain barrier. Combined with Sonus' Tocosol, the approach could allow for more selective organ targeting and cell uptake of drugs.

The second part is a drug discovery process, Acti:map, which has designed and optimized a short peptide known as RDP58 for SangStat Medical Corp., of Fremont, Calif., (bought by Cambridge, Mass.-based Genzyme Corp. for $600 million last year) that successfully completed Phase III trials against inflammatory bowel disease. RDP58 is being developed by Proctor & Gamble Pharmaceuticals Inc., of Cincinnati.

Two of the three compounds gained in the Sonus buyout could be in the clinic by "mid- to end of 2005," Martino said. One is for inflammatory and neuropathic pain.

"It has a different mechanism of action, but we think it could compete against the COX-2 inhibitors," he said. "It's very tolerable at large doses, and we think that will give us flexibility" in terms of formulating.

Another Synt:em drug is a novel opioid for acute and chronic pain.

"It would compete in the morphine space and the opioid-derivative space," Martino said. "We're seeing very good analgesic effects in animals, better than other opioids with much lower side effects," such as dependency and respiratory problems. An investigational new drug application is expected by the end of 2005.

The third compound from Synt:em, also a novel opioid analgesic targeting post-operative pain, probably won't move into the clinic until later, with an investigational new drug application planned in 2006, Martino said.

"We already have significant Phase I data on it," he said. "There's every indication that it crosses the blood-brain barrier." Martino called the drug - which was Synt:em's lead candidate - "very interesting," but said the other company had conducted its Phase I trial "based on a sub-optimal formulation" that Sonus hopes to improve upon.

"Our intent would be not to press forward with generation one [of the compound]," he said.

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