West Coast Editor

Gearing up for Phase II studies of its vitamin E-based delivery formulation of the cancer drug paclitaxel, Sonus Pharmaceuticals Inc. raised $13.6 million in a private placement with institutional investors.

The Bothell, Wash.-based firm, which had $16.4 million in cash as of last year’s third quarter, issued about 1.9 million shares of common stock, and warrants to purchase 385,800 shares of common stock at an exercise price of $9.40 per share.

If its stock trades above $12 per share for 20 days in a row, Sonus can require the warrant-holders to exercise them in full, thus pulling down $3.6 million more.

Sonus’ stock (NASDAQ:SNUS) closed Tuesday at $7.49, up 14 cents.

“Historically, during 2001, we averaged about $600,000 a month in cash burn,” said Richard Klein, chief financial officer, which means the firm had about $15 million at the end of the fourth quarter and has between $26 million and $27 million now.

In the next 12 to 18 months, Sonus plans to start Phase II efficacy studies with Tocosol Paclitaxel (S-8184), scale up manufacturing of the drug, and move two more drug delivery products into Phase I studies.

“We think during the early part of 2002 the burn rate will mostly likely be in the $800,000 per quarter range, and in the second part, about the $1 million range,” Klein said. “It’s safe to say the bulk of our budget will go toward [Tocosol Paclitaxel].”

S-2646 is a reformulation of an intravenous cardiac drug that is marketed for ventricular fibrillation and unstable ventricular tachycardia. It’s designed for better effectiveness in emergencies, with lower toxicity.

S-9156 deploys Sonus’ core emulsion formulation technology, and consists of stabilized fluorocarbon gas microbubbles for transporting oxygen. It has been shown to carry larger volumes of oxygen at doses that are many times lower than liquid fluorocarbons under development, and might be useful in oxygenating solid tumors to increase the effectiveness of radiotherapy, or in trauma situations where patients need quick oxygenation and medics have no time for cross-matching and typing blood.

The next products to move forward may not be those, however, Klein said.

“The current discovery pipeline is made up of those two products as well as a number of others,” Klein said.

The lead product has proven in Phase I trials, which are expected to finish in mid-2002, to be well tolerated at higher levels than existing paclitaxel formulations, and can be delivered in a 15-minute bolus dose, compared to the three-hour infusion required for Taxol. (See BioWorld Today, Oct. 31, 2001.)

“We do think we’ve had some value propositions in terms of the product profile, where we can eliminate the long infusion technique,” Klein said. “That’s a compelling competitive advantage, and we’re not using steroid pre-medications, which are used by existing products. We’re also seeing indications of clinical activity.”

An update is coming in the next two weeks at the quarterly conference call, he said. Investors in the private placement included S.A.C. Capital Associates LLC; S.A.C. HealthCo Fund LLC; Narragansett Asset Management LLC; Domain Public Equity Partners LP; and Symmetry Capital Management. Punk, Ziegel & Co., of New York, served as the placement agent.