A late attempt by three Oncologix Inc. shareholders tostop a three-way merger scheduled to close Friday failedwith a judge's decision to deny a temporary restrainingorder.

Argus Pharmaceuticals Inc. and Triplex Pharmaceu-ticalsCorp., both of The Woodlands, Texas, and Gaithers-burg,Md.-based Oncologix are scheduled to complete theirmerger Friday. The new company will be called AronexPharmaceuticals Inc. and will be based in TheWoodlands.

Privately held Oncologix has about 13 million sharesoutstanding, only 651,000 of which are common shares.Three shareholders owning about 20 percent of thecommon stock sued to stop the merger. Those withcommon stock are getting no piece of the new company.Preferred Oncologix shareholders, however, get warrantsthat, if exercised, would give them a significant stake inAronex.

Argus has about 11 million shares outstanding. Triplexshareholders are getting about 7 million shares in the newcompany and Oncologix debt-holders are receiving854,000 common Aronex shares.

The merger of three companies, proposed in February,was the first three-way merger in the industry, companyofficials said. (See BioWorld Today, Feb. 24, 1995, p. 1.)Oncologix at that time was out of cash and struggling toget financing.

So the company's board determined that merging intoArgus, the only public company of the three, was the bestoption. And Oncologix decided to divide up its expectedshares in the new company among its preferredshareholders.

The suit was filed by the three shareholders lastThursday. The Delaware Chancery Court handed down itsdenial on Tuesday. The Oncologix facility in Marylandhas been closed down and officials there could not bereached for comment.

James Chubb, president of Triplex and the combinedcompany, said, "A lot of money had been put intoOncologix. Their board evaluated the contributions madeby the preferred and common stockholders and elected togo in the direction they went. That's clearly legal andwell-documented.

"We're moving forward," Chubb said. "We're convincedthis is the right thing to do. At the end we'll have astronger company with a balanced portfolio of products inclinical trials."

The new company will have four technology areas: lipid-based drug delivery, oligonucleotides, immunotoxins anddifferentiation therapy.

Argus has three products in development. A liposomalformulation of nystatin is completing a Phase II study insystemic fungal infections and has completed Phase I/IIHIV studies. Tretinoin, a liposomal form of all-transretinoic acid, is in Phase II studies for leukemia and inPhase II/III for Kaposi's sarcoma. And Annamycin, aliposomal form of anthracycline, is about to enter Phase Ifor drug-resistant cancers.

Oncologix's portfolio includes AR-102 (formerly OLX-102), an adjuvant for non-small cell lung cancer and isnearing Phase III. AR-103 has completed Phase I bladdercancer studies. And AR-209 is in preclinical developmentfor cancer indications. An investigational new drugapplication has been filed for Triplex's lead candidate,AR177, a guanine-thymine oligonucleotide for HIV.

Chubb said Aronex has about $14 million in cash, enoughto last well into the fourth quarter of 1996. Argus' stock(NASDAQ:ARGS) closed Wednesday at $2 per share,down 25 cents.

Oncologix shareholders will receive Series A warrants topurchase, for 15 months after closing, 4.8 million sharesat $2.25 each. Series B and C warrants will be issued tothose exercising Series A.

Chubb said the stock is undervalued at its current priceconsidering the product portfolio, upside potential andcorporate partners (Germany-based Hoechst AG andGenzyme Corp., of Framingham, Mass). n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.