7. EXCESS LEASE LIABILITY

On August 21, 2008, Sonus Pharmaceuticals, Inc. (“Sonus”) completed a transaction (“the Arrangement”) with OncoGenex Technologies Inc., (“OncoGenex Technologies”) whereby Sonus acquired all of the outstanding preferred shares, common shares and convertible debentures of OncoGenex Technologies. Sonus then changed its name to OncoGenex Pharmaceuticals, Inc. Prior to the Arrangement, Sonus entered into a non-cancellable lease arrangement for office space located in Bothell, Washington, which is considered to be in excess of the Company’s current requirements. The liability is computed as the present value of the difference between the remaining lease payments due less the estimate of net sublease income and expenses and has been accounted for in accordance with the then effective EITF No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” This represents the Company’s best estimate of the liability. Subsequent changes in the liability due to changes in estimates of sublease and occupancy assumptions are recognized as adjustments to the related liability with an offset to restructuring (gain)/loss in future periods.

In December 2012, the Company decided to expand its occupancy of the Bothell facility and revised its assumptions used to estimate the excess lease facility liability. As of December 31, 2012 the estimated value of the liability was $4.6 million compared with $7.0 million as of December 31, 2011. The change in the estimated liability resulted from $0.7 million amortized into income through research and development expense and a reduction of the liability of $1.7 million recorded in the fourth quarter as a result of the updated assumptions related to occupancy of the Bothell facility.