Sunesis has been enjoying a rally thus far in 2012 Print E-mail
By Brian Wilson, Contributor   
Thursday, 07 June 2012 08:52
icon_marketmoverSunesis Pharamceuticals (SNSS) is a $138 million dollar drug developer focused on a single drug: Vosaroxin (formerly known as Voreloxin).
This drug’s mechanism is based on its potent inhibition of the DNA-regulating enzyme topoisomerase II, which can inhibit DNA replication and trigger apoptosis (programmed cell death) in cancerous cells. Vosaroxin belongs to a class of compounds that have yet to be used in the oncologic drug market, so it could be an extremely useful second-line treatment once it gets brought to market. Right now, the drug is being developed for the treatment of acute myeloid leukemia (AML) and platinum-resistant ovarian cancer.

Sunesis has been enjoying a rally thus far in 2012, fueled by a stream of encouraging news about Vosaroxin. On March 29 a $25 million deal was signed with the acquisition-focused firm Royalty Pharma for royalty rights to Vosaroxin, which will take effect after results of Vosaroxin’s interim analysis of the VALOR trial (the VALOR trial is a phase III trial for patients with relapsed or refractory AML). The Data and Safety Monitoring Board (DSMB) will also provide a decision as to whether or not the clinical trial should be stopped early for efficacy concerns, which will affect the terms of the contract.

If the study is allowed to continue, Royalty Pharma can make the $25 million investment in exchange for a 3.6% stake in the drug. According to Sunesis CEO Daniel Swisher, this deal is essentially a validation of Vosaroxin’s potential in AML by a 3rd party. In addition, it provides Sunesis with capital that can be used for new clinical trials.

On May 3rd, Vosaroxin was given orphan drug status in the EU. The same designation was already given in the US. This allows Vosaroxin to take advantage of fee waivers, as well as 7 and 10 years of drug exclusivity in the US and EU respectively.

In addition to good news about the Vosaroxin’s progress and valuation, analysts have been increasingly bullish on the stock. Shares of SNSS have shot up more than 100% since the start of the year, and have been flirting with a sustained break of $3/share. With 11.3% of shares short, there is significant potential for more rallying on changing sentiment alone.

Vosaroxin presented a poster at the 2012 annual meeting of ASCO (The American Society of Clinical Oncology) detailing the VALOR trial, which should be the primary driver of Sunesis stock for the foreseeable future. As you can see, there are three possibilities based on the DSMB decision which is due at some point in Q3 2012. If the current data (with 187 events) is deemed sufficient in efficacy (p<.0015), the clinical trial will immediately end in success. There is also the possibility that the trial is ended early due to futility. If the results are deemed “promising”, the trial size will be expanded.

Expect Sunesis to react heavily to the results of this interim phase III analysis. Vosaroxin is the company’s only drug, and although the downside is apparent, a premature conclusion of the VALOR trial based on favorable efficacy results gives the company $25 million, and high chance of FDA approval of an orphan drug.

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