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Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS)(D*)

* Financial status indicator is deficient: Issuer failed to meet NASDAQ continued listing requirements.

Sunesis Pharmaceuticals Inc. (SNSS) is a biopharmaceutical company focused on the development and commercialization of new oncology therapeutics for the treatment of hematologic and solid tumor cancers. As of December 31, 2008, the Company was advancing voreloxin through phase II development. Voreloxin is an anticancer quinolone derivative (AQD). As of December 31, 2008, SNSS was conducting three clinical trials of voreloxin: a phase II clinical trial (known as the REVEAL-1 trial) in previously untreated elderly patients with acute myeloid leukemia (AML), a phase Ib/2 clinical trial combining voreloxin with cytarabine for the treatment of patients with relapsed/refractory AML, and a phase II single agent clinical trial in advanced platinum-resistant ovarian cancer patients. The Company has worldwide development and commercialization rights to voreloxin.

It was formerly known as Mosaic Pharmaceuticals Inc. The Company was founded in 1998 and is headquartered in South San Francisco, California.

Share Statistics (11-Nov-09)			FY 2007	FY 2008	% Chg	Q3 2008	Q3 2009	% Chg
Symbol	SNSS	Revenue, $Mn	9.66M	5.42M	43.9%	0.51M	0.01M	98.0%
Current price	$0.55	Gross marg.	100.0%	100.0%	0.0%	100.0%	100.0%	0.0%
52wk Range:	$0.05-1.00	Oper. Margin	-429.7%	-704.7%	39.0%	-14400%	n/a	n/a
Avg Vol (3m):	407,725	Net margin	-401.2%	-686.2%	41.5%	-14200%	n/a	n/a
Market Cap.	19.0M
Dil. Shares Outst.	34.4M	EPS, $	-1.20	-1.08	10.0%	-0.21	-0.14	33.3%

Source: Reuters.com, SEC Filings.

Financial Summary

Revenues for the three and nine months ended September 30, 2009, were $12,500 and $3.7 million, as compared to $0.5 million and $5.4 million for the same periods in 2008. The decrease of $0.5 million between the three-month periods was due to SARcode license fee revenue recognized in the 2008 period. The decrease of $1.7 million between the nine-month periods was primarily due to the completion of research funding and technology access fee amortization under the Biogen Idec collaboration in June 2008, partially offset by the recognition in the 2009 period of $1.5 million for the Biogen Idec Raf kinase inhibitor milestone and $2.0 million for the sale to SARcode of SNSS’ interest in the lymphocyte function-associated antigen-1, or LFA-1, patents and related know-how that SNSS had previously licensed to SARcode.

Research and development expenses decreased to $3.4 million and $11.1 million for the three and nine months ended September 30, 2009, as compared to $4.7 million and $21.7 million for the same periods in 2008. The decrease of $1.3 million between the three-month periods was primarily due to decreases in facility costs, outside services and clinical expenses. The decrease of $10.6 million between the nine month periods was primarily due to savings from the termination of substantially all discovery research activities in June 2008.

General and administrative expenses for the first three and nine months of 2009 were $1.5 million and $5.9 million, as compared to $2.8 million and $9.3 million for the same periods in 2008. The decreases were primarily due to reduced administrative headcount and facility costs as a result of SNSS’ June 2008 and March 2009 restructurings.

Restructuring charges of $1.9 million were recorded in the first nine months of 2009, including $1.3 million for lease termination costs and $0.6 million for employee termination costs related to the March 2009 restructuring. For the three and nine months ended September 30, 2008, restructuring charges were $0.2 million and $5.4 million, relating primarily to the June 2008 restructuring.

Other expense of $21.1 million was recorded in the nine months ended September 30, 2009, primarily resulting from non-cash charges of $21.0 million related to the accounting for the initial closing of the private placement in April 2009.

SNSS reported net losses of $4.9 million and $36.2 million for the three and nine months ended September 30, 2009, as compared to reported net losses of $7.1 million and $30.3 million for the same periods in 2008.

Cash used in operations was $3.5 million and $15.9 million for the three and nine month periods ending September 30, 2009, as compared to $9.8 million and $28.5 million for the same periods in 2008.

Financial Strength (8-Dec-2009)	Company	Industry	Sector	S&P 500
Quick Ratio (MRQ)	2.39	6.41	2.57	0.85
Current Ratio (MRQ)	2.39	6.83	3.06	1.00
Long-Term Debt to Equity (MRQ)	0.00	24.37	26.27	130.15
Total Debt to Equity (MRQ)	0.00	28.99	33.89	200.30

Source: Reuters.com, SEC Filings.

Analyst Consensus

Buy

Outperform

Hold

Underperform

Sell

No Opinion

This is the consensus forecast amongst 3 polled investment analysts. Against the Sunesis Pharmaceuticals Inc.  company.

Analyst Detail	Buy	Outperform	Hold	Underperform	Sell	No Opinion
Latest	2	0	1	0	0	0
4 weeks ago	2	0	1	0	0	0
2 months ago	2	0	1	0	0	0
3 months ago	2	0	1	0	0	0
Last year	1	2	1	0	0	1

The 2 analysts offering 12-month price targets for SNSS have a median target of 1.00, with a high estimate of 1.00 and a low estimate of 1.00. The median estimate represents a 127.27% increase from the last price of 0.44.

Source: www.ft.com

	# of Estimates	Mean	High	Low	1 Year Ago
SALES (in millions)
Quarter Ending Dec-09	2	0.55	1.00	0.10	1.30
Quarter Ending Mar-10	1	1.00	1.00	1.00	–
Year Ending Dec-09	3	4.42	5.70	3.70	6.57
Year Ending Dec-10	2	3.83	5.00	2.65	5.50
EARNINGS (per share)
Quarter Ending Dec-09	3	-0.26	-0.14	-0.47	-0.19
Quarter Ending Mar-10	1	-0.16	-0.16	-0.16	–
Year Ending Dec-09	3	-2.08	-1.95	-2.28	-0.89
Year Ending Dec-10	3	-0.62	-0.42	-0.74	-0.82

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=SNSS.W

Investment Highlights

SNSS last week announced positive data from two phase II clinical trials of the Company’s lead drug candidate, voreloxin. The results highlight voreloxin’s strong efficacy and safety profile when used as a single agent or in combination with chemotherapy in patients with difficult to treat acute myeloid leukemia (AML). The trial results were presented at the 51st American Society Hematology (ASH) Annual Meeting in New Orleans, La.

SNSS in mid November reported data from two nonclinical studies of voreloxin at the AACR-EORTC-NCI Molecular Targets and Cancer Therapeutics Conference, which is being held in Boston, Mass., from November 15-19, 2009. In one study, clinical proof-of-mechanism is established in samples from patients treated with voreloxin in the Company’s ongoing phase II clinical study of voreloxin in combination with cytarabine in relapsed or refractory acute myeloid leukemia (AML). In an additional study, voreloxin’s synergistic and additive effects are demonstrated in combination with cytarabine, azacitidine, decitabine and clofarabine, agents, which are currently used in the treatment of AML. Results from both of these studies support the current combination study and identify potential opportunities for further clinical evaluation.

Source: http://www.sunesis.com/index.php

Technical Analysis

Source: http://stockcharts.com

SNSS is trading above its 50-day moving average. While this is normally considered to be a bullish sign, the moving average is downward sloping, which means that investors have been liquidating shares during this time period and tempers the bullishness of the signal.

SNSS’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, SNSS is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for SNSS currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Dec-8-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
AstraZeneca Plc	AZN	45.59	66.11B	9.15	n/a	2.09	n/a
Abbot Laboratories	ABT	53.01	81.99B	14.36	n/a	n/a	n/a
Bristol-Myers Squibb Co.	BMY	25.20	49.92B	13.04	n/a	n/a	n/a
Drug Manufacturers Median			66.01B	12.18	n/a	n/a	n/a
Sunesis Pharmaceuticals Inc.	SNSS	0.55	19.0M	n/a	n/a	4.03	n/a

Source: Thomson Financial

Insider Trading Activity

NET SHARES PURCHASE ACTIVITY Inside Purchases – Last 6 Months
	Shares	Transaction
Purchases	n/a	0
Sales	1,100,000	3
Net Shares Purchased (Sold)	(1,100,000)	3
Total Insider Shares Held	16.37M	n/a
% Net Shares Purchased (Sold)	(6.3%)	n/a

Net Institutional Purchases — Prior Qtr to Latest Qtr
	Shares
Net Shares Purchased (Sold)	(5,076,080)
% Change in Institutional Shares Held	1739.5%

Source: Yahoo Finance

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