Sonus Pharmaceuticals Inc. had nearly everything riding on its pivotal Phase III trial of Tocosol Paclitaxel, and the company's shares lost more than 80 percent of their value Monday when the product failed in that study in patients with metastatic breast cancer.

The primary endpoint of the trial was to show that Sonus' paclitaxel formulation, designed to have improved properties vs. paclitaxel, provided noninferior objective response rates when compared to Taxol, the widely used paclitaxel agent from Bristol-Myers Squibb Co. Instead, the trial showed the drug was less effective and less safe than the comparator agent.

Sonus CEO Michael Martino called the result "profoundly surprising and disappointing." Based on the data, all trials of Tocosol Paclitaxel are being ended, he said. Furthermore, Martino added, following discussions and a review of the data with partner Bayer Schering Pharma AG, "I do expect Bayer Schering to terminate the agreement."

The Bothell, Wash.-based company plans to further review the data before deciding on its next steps, although officials there did not suggest that the data could be salvaged easily to support moving forward.

"The results do not support a fileable NDA [new drug application]," Martino said on a conference call. "I recognize this news is extremely disappointing for all of us," including patients, employees and investors. "I wish I could put a better face on this."

The second product in the company's pipeline, far behind the lead program, is Tocosol Camptothecin, for which Phase I data were expected by the end of the year. Martino said it was too early to draw conclusions about the Tocosol technology from the paclitaxel result, and also too early to say where the company will go from here.

Sonus intends to conduct further analysis and provide more information about the failed study in its scheduled quarterly conference in early November, or sooner if data become available. The company also has to investigate, Martino said, whether the product could have clinical benefit in another trial, and if the economics of that justify the investment that would be required.

Company officials on the conference call did not do much speculating about the result, but at various times made points that there is some indication lower doses of the drug could have been advantageous; that the problem could be more with the drug than with the Tocosol platform, which entails different formulations for different products; and that it is possible the problem was with trial design and implementation rather than the drug.

The Tocosol platform entails application of a vitamin E-based technology to hard-to-formulate cancer drugs. The technology uses vitamin E oil and tocopherol derivatives to create, solubilize and stabilize drugs, a process designed to result in products with equivalent or better efficacy, decreased side effects and improved dosing convenience. The paclitaxel product, for example, is delivered in 15 minutes vs. three hours for Taxol.

In the 800-patient trial in breast cancer, which was being run under an FDA special protocol assessment, the objective response rate for Tocosol Paclitaxel was 37 percent vs. 45 percent for Taxol (p= 0.085). Also, the rates of neutropenia and febrile neutropenia in the Tocosol Paclitaxel arm were significantly higher than the Taxol arm, which may be related to the higher dose of drug used in the study vs. Taxol, Sonus said. Additionally, the study results did not demonstrate the expected benefit in peripheral neuropathy, which was not statistically different between the two arms.

The pivotal trial was started in September 2005. About a month later, Sonus entered a partnership with the German firm Schering AG, now part of Bayer Schering. That potential $168 million deal entailed a license fee of $20 million to Sonus and an equity investment of $15.7 million by Schering, at $4.02 per share. About $132 million more could have been earned in development and regulatory milestones, while Sonus would have been entitled to sales milestones and escalating royalties starting at 15 percent.

Sonus, which has 65 employees, transitioned to its focus on drug delivery around 2000. Before then, its main efforts had been on developing diagnostic ultrasound agents, with lead product EchoGen the subject of an FDA approvable letter in 2000. Martino said the decision to restructure the company at that time was based on regulatory and commercial assessments. Tocosol technology was in the early stage of internal development at the time.

He said decisions on the Tocosol product will involve the same assessments.

"The view of the board and myself is our job is to maximize shareholder value," Martino told BioWorld Today. "We believed Tocosol Paclitaxel would give us the vehicle to do that as a stand-alone development company. We have to reevaluate that."

Options range from continuing to invest in Tocosol Paclitaxel and other related products, to focus only on other pipeline products, to evaluating various corporate development options, he said. Decisions will be made from both scientific and economic perspectives, Martino said, noting that the cost of the current trial had been estimated at $50 million.

Sonus had cash and investments of about $44.9 million as of June 30, with a net loss of $9.2 million in the first half of this year. Previous guidance from company officials was that Sonus would expect to have $22 million to $25 million in cash at the end of the year, enough to last through the second quarter of 2008. The year-end figure and how long the money will last both are expected to increase due to the reduced burn rate.

Sonus had about 36.9 million shares outstanding. Its stock (NASDAQ:SNUS) fell $3.65 Monday, or 84 percent, to close at 70 cents.