Sonus fuels ultrasound contrast R&D with cash from initial public offering

Researchers pursue therapeutic uses of EchoGen

Sonus Pharmaceuticals plans to use proceeds from an initial publicoffering in October to fund ongoing development of EchoGen, itslead ultrasound contrast agent. The Bothell, WA, company has completedphase-III clinical trials of the agent, but has also presentedintriguing results with its contrast technology at recent conferences.

Sonus netted $18.5 million from the IPO, which will providethe company with about 18 months of capital, according to Dr.Steven Quay, president and CEO. Sonus will use the funds for R&D,working capital and other purposes.

The company's stock went public with 2.85 million shares issuedat $7 a share, well below the $11 share price the company hadexpected. Softness in the biotechnology sector in the weeks aroundthe offering contributed to the shortfall, according to Quay.

"There was a real change in the market tenor (at the time),"Quay said. "The investors just shut down."

Once the stock found its new level, however, demand increased,and as a result Sonus was able to exercise its over-allotmentoption by issuing an additional 427,500 shares, with a total of8.4 million shares outstanding after the over-allotment. The stockwas trading at about $10.50 a share in mid-December on the NASDAQexchange. Both UBS Securities and Montgomery Securities begancoverage of Sonus with "buy" ratings, while Hambrecht& Quist initiated coverage Nov. 7 with a "strong buy"rating that was the catalyst for much of the stock's recent shareprice growth.

Sonus does not anticipate requiring a secondary public offeringbefore EchoGen reaches the market, according to Quay. The IPOwill give the firm enough cash to fund operations until it beginsreceiving milestone and royalty payments from marketing partnersGuerbet and Daiichi Pharmaceutical. Guerbet is licensed to marketEchoGen in Europe while Daiichi has similar rights in Japan.

Agreements with those firms call for a total of $70 millionin milestone payments over the next three to four years as EchoGenis developed, Quay said. Sonus has already received $15 millionfrom the firms.

In accordance with the IPO, Sonus released financial resultsfor its third quarter (end-September). The company reported anet loss of $1.9 million for the period, compared to a loss of$2.7 million in the same quarter in 1994. The company had revenuesof $400,000 in the quarter due to licensing payments from Daiichi.Sonus had no revenue in the third quarter of 1994.

EchoGen completes trials. Sonus completed phase-III clinicaltrials for use of EchoGen in radiology applications shortly beforelast month's Radiological Society of North America meeting. Sonussaid the agent, which is based on a dodecafluoropentane emulsionthat turns into a contrast-enhancing gas on injection, finishedthe trials ahead of schedule.

Sonus hopes to file a new drug application (NDA) with the Foodand Drug Administration by the middle of 1996, Quay said. Sonusplans to sign up a U.S. marketing partner for EchoGen before theNDA is filed and hopes to have EchoGen on the market by the firstquarter of 1998.

As it moves EchoGen to market, Sonus is sponsoring researchto demonstrate both the clinical utility of EchoGen as well asthe cost savings possible through use of the agent. At last month'sRSNA meeting, a team led by Dr. Lawrence Needleman of Thomas JeffersonUniversity in Philadelphia presented the outcome of EchoGen'sphase-II clinical trials that showed that the agent provided nineminutes of contrast enhancement that facilitated visualizationof blood flow in 89% of cases and assisted diagnosis in 75% ofcases.

Those numbers compare favorably to MRI contrast agent Omniscan,which Quay invented while with Salutar. Phase-III trials withOmniscan facilitated visualization of abnormal structures in 77%of cases, Quay said.

Other studies presented at the RSNA meeting included imagingof liver hemangiomas and a pharmacokinetics study of EchoGen.

At the American Heart Association meeting in Anaheim, researchersworking with EchoGen presented five abstracts, several of whichcover interesting new applications for ultrasound contrast.

Research led by Dr. Robert Siegel at Cedars-Sinai Medical Centerin Los Angeles indicates that EchoGen could have therapeutic effectswhen used in conjunction with ultrasound. Siegel and his colleaguesfound that EchoGen greatly enhanced the thrombolysis of bloodclots in vessels in the ultrasound beam. Sonus will explore thefindings as a possible alternative to thrombolytic therapy, Quaysaid.

In another finding, Dr. David Sahn and colleagues at OregonHealth Science University in Portland are investigating myocardialperfusion imaging using EchoGen and second harmonic imaging techniques.Clinicians using this technique focus the ultrasound transducerto receive only the second harmonic echoes of the primary ultrasoundtransmission, such as a 7-MHz harmonic of an initial 3.5-MHz transmission.This causes the transducer to receive only echoes from the contrastagent, which improves contrast detection, Quay said.