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Sunesis Pharma Slides Following Analyst Downgrade


From Associated Press (October 11, 2011)

NEW YORK -- Shares of drug developer Sunesis Pharmaceuticals Inc. fell Tuesday after an RBC Capital Markets analyst downgraded the shares, saying Sunesis stock won't trade higher until mid-2012, when the company will report data from a trial of its experimental cancer drug vosaroxin.

THE SPARK: Analyst Jason Kantor lowered his rating on Sunesis shares to "Sector Perform" from "Outperform," and cut his price target to $3 per share from $4. Based on earlier studies, Kantor said he thinks there is evidence that vosaroxin is an effective treatment for acute myeloid leukemia, but there is little reason for the stock to rise right now. He added that the design of the company's current late-stage trial of vosaroxin could inflate its spending.

THE BIG PICTURE: Vosaroxin is the South San Francisco, Calif., company's most advanced drug candidate. Sunesis is studying the drug as a treatment for acute myeloid leukemia that has recurred or not responded to other treatment. Acute myeloid leukemia, or AML, is a cancer of the blood that is most frequently diagnosed in people in their mid-to-late 60s. The company plans to report the first data from a late-stage study called VALOR in mid-2012, and it intends to report final results in 2013.

The VALOR study is designed to compare vosaroxin and cytarabine, which is a standard treatment for AML, to cytarabine and a placebo in extending the lives of patients. Most clinical trials are designed to end early if there is overwhelming evidence the drug works or if it is clear it does not work. If neither of those events happens, the study will proceed to its planned conclusion. Unlike most other trials, the VALOR study can be expanded if necessary to help prove the difference between vosaroxin and the placebo is statistically significant.

That would be an indication the drug is working, but Kantor said it could worry investors because it will make the study longer and more expensive.

In a telephone interview, Sunesis CEO Dan Swisher said the company would enroll another 225 patients if vosaroxin is effective but is not on track to meet the company's specified goals. Swisher said the trial will last another six to nine months if that happens, with final results being reported in early 2014. He said that would add about $15 million to the cost of the trial.

"We think that's a very manageable number that can be covered through a variety of different funding sources including partner capital, equity capital, and debt capital," Swisher said.

SHARE ACTION: Sunesis stock lost 9 cents, or 6.5 percent, to $1.30 on Tuesday. Since June 6, when the company made a presentation about the design of the VALOR study, the shares have fallen 56.8 percent.


Posted: October 2011