400mg data similar to previous cohort

Sunesis Pharmaceuticals 26 March 2020 Update
Download PDF

Sunesis Pharmaceuticals

400mg data similar to previous cohort

Clinical update

Pharma & biotech

26 March 2020

Price

US$0.45

Market cap

US$50m

Net cash ($m) at 31 December 2019

29.1

Shares in issue

111.4m

Free float

60%

Code

SNSS

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(56.3)

42.1

(64.8)

Rel (local)

(44.8)

85.0

(60.3)

52-week high/low

US$1.74

US$0.28

Business description

Sunesis Pharmaceuticals is a pharmaceutical company focused on oncology. Its lead asset is vecabrutinib, a Bruton’s tyrosine kinase inhibitor for chronic lymphocytic leukemia for Imbruvica-refractory patients. The program is in a dose-escalation Phase Ib/II. It has also developed pan-Raf inhibitor TAK-580, and the preclinical PDK1 inhibitor SNS-510.

Next events

500mg cohort readout

Q220

Analyst

Nathaniel Calloway

+1 646 653 7036

Sunesis Pharmaceuticals is a research client of Edison Investment Research Limited

On 18 March, Sunesis released the first assessments of the 400mg cohort in its ongoing dosing study of vecabrutinib for B-cell malignancies. Two (of three) patients in this cohort showed stable disease (SD), with one showing a 48% response. These results are largely similar to those seen with the 300mg cohort (one near-responder SD, two stabilized SD, and one progressor). We would like to have seen more definitive activity in this cohort, but there is still the possibility that Sunesis will cross the line of generating partial responses (PRs) in the upcoming 500mg cohort.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/18

0.2

(26.6)

(0.75)

0.0

N/A

N/A

12/19

2.1

(23.3)

(0.27)

0.0

N/A

N/A

12/20e

0.0

(28.5)

(0.24)

0.0

N/A

N/A

12/21e

0.0

(35.7)

(0.29)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortization of acquired intangibles, exceptional items and share-based payments.

No responders yet

The results from the 400mg cohort were disappointing, in our view, because they do not appear to signal any improvement over the 300mg cohort. We were encouraged by the 300mg data because one patient was very close to achieving a PR, so it appeared that the dose was on the cusp of activity. The 400mg dose did not improve on this profile, and moreover, that near-responder from the 300mg cohort remains on drug and has not yet quite reached PR status.

Is poor PK the explanation?

The company also presented pharmacokinetic (PK) data on the 400mg cohort, which may provide insight as to why it is not well differentiated from the 300mg dose. Serum levels of the drug were not well differentiated from 300mg and were in fact trending lower than 300mg at six hours post administration. Moreover, steady-state concentration of the drug at day 8 were lower for the 400mg cohort (vs 300mg), but this was not the case for the 500mg cohort, which is encouraging as it suggests that the drug has not reached saturating concentrations at these doses.

More cohorts might be needed

The last cohort in the study protocol is the 500mg cohort. The cohort is currently over-enrolling, and Sunesis has stated that it intends to release the initial response data (similar to those presented here) for the cohort in Q220. We believe the company would face no hurdles in adding additional higher dosing cohorts, which it may consider as we have still not seen definitive responses.

Valuation: Lowered to $188.7m or $1.56/diluted share

We have lowered our valuation to $188.7m or $1.56 per diluted share from $238.7m or $1.94 per diluted share, as we have reduced the probability of success for vecabrutinib to 15% from 20%. We expect to further update our assumptions with the release of data from the 500mg cohort.

400mg data similar to previous data

The data presented by Sunesis on the 400mg (n=3 patients) cohort fell short of providing definitive evidence of activity. This is discouraging, in our view, because the data on the 300mg (also n=3 patients) cohort showed one patient very close to a PR. This 300mg cohort patient had a response of 41% at the first report (ASH in December 2019) improving to a 47% response, which is what we would have hoped to see with an active drug. However, we would also like to have seen an increase in response rates for the higher 400mg dose. There was one near-responder (48%) in this cohort as well, which makes the data look roughly similar to 300mg. The drug could still potentially be on the cusp of clinical activity, but the question then becomes how high a dose will be needed. Neither one of these near-responders from either cohort was a C481S mutant, so as yet we cannot make any claims regarding the activity of this drug in this resistant population.

Exhibit 1: Vecabrutinib response data

Source: Sunesis Pharmaceuticals

One explanation for why this cohort was poorly differentiated is available in the pharmacokinetic data presented by the company. At longer time points, the 400mg dose showed similar or lower serum concentrations than 300mg. 400mg showed on average similar serum concentrations after several hours, and the steady-state concentration after eight days of dosing BID (C1D8 Cmin) was lower for the 400mg cohort compared to 300mg: 1,530ng/mL vs 1,950ng/mL, respectively. The reasons behind this are purely speculative, but it could have been caused by a single patient who, for whatever reason, eliminated the drug faster than expected, and this could have an exaggerated effect on the overall concentration data given that there were only three patients in each of these cohorts. It is worth noting that Cmax and the area under the curve (AUC) were higher for the 400mg data, which suggests normal absorption. It is also important to note that this trend was not continued with the 500mg cohort, which was also presented (C1D8 Cmin 2,555ng/mL, or higher than all lower dosed cohorts). This is important because it suggests that the 400mg dose was not saturating.

Exhibit 2: Pharmacokinetics of vecabrutinib by dose

Source: Sunesis Pharmaceuticals

The company also presented cytokine data as a biomarker for activity, which shows a trend in the direction of increasing activity with dose, but the trend does not appear to be statistically significant.

Exhibit 3: Cytokine CCL4 expression

Source: Sunesis Pharmaceuticals

Finally, a small hidden positive in the data presented by the company is that among the treatment-emergent adverse events (TEAEs) presented in the safety profile, Sunesis reported lymphocytosis for the first time in two patients. Lymphocytosis is seen in most chronic lymphocytic leukemia (CLL) responders to BTK inhibitors, and although considered an adverse event, is often indicative of activity in these patients. It is too early to make much of this result, but we should be looking for this value to increase with higher doses. It is also worth noting that lymphocytosis is not always present in responders (although it is seen in most ibrutinib CLL responders), and that it can appear as part of the normal progression of the disease in the absence of treatment, so it is not a perfect indicator.

Valuation

We have lowered our valuation to $188.7m or $1.56 per diluted share from $238.7m or $1.94 per diluted share. We have lowered the probability of success for vecabrutinib to 15% from 20% on account of the most recent data. Otherwise, our assumptions remain unchanged. We expect to update our models with the release of data from the 500mg cohort in Q220.

Exhibit 4: Valuation of Sunesis

Development program

Clinical stage

Expected commercialization

Probability of success

Launch year

Launch pricing ($)

Peak sales ($m)

Patent/ exclusivity protection

Royalty/ margin

rNPV
($m)

TAK-580

Phase I/II

Licensed to Takeda

5%

2025

500,000

600

2032

10%

$6

Vecabrutinib

Phase Ib/II

Proprietary

15%

2024

152,000

666

2034

55%

$149

SNS-510

IND ready

Proprietary

10%

2025

130,000

344

2031

51%

$26

Unallocated costs (discovery programs, administrative costs, etc)

($22)

Total

 

 

 

 

 

 

 

 

$160

Net cash and equivalents (YE19) ($m)

$29.1

Total firm value ($m)

$188.7

Total basic shares (m)

111.4

Value per basic share ($)

$1.69

Convertible pref stock (m)

19.7

Total diluted shares

131.1

Value per diluted share

$1.56

Source: Sunesis reports, Edison Investment Research

Financials

Our forecasts remain unchanged at this time. Please refer to our update report published on 12 March 2020 for further details.

Exhibit 5: Financial summary

$'000s

2018

2019

2020e

2021e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

237

2,073

0

0

Cost of Sales

0

0

0

0

Gross Profit

237

2,073

0

0

Research and development

(14,615)

(15,412)

(17,480)

(20,878)

Selling, general & administrative

(11,332)

(9,949)

(10,505)

(11,820)

EBITDA

 

 

(25,719)

(23,288)

(27,985)

(32,697)

Operating Profit (before GW and except.)

 

(25,710)

(23,288)

(27,985)

(32,697)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

0

0

0

0

Operating Profit

(25,710)

(23,288)

(27,985)

(32,697)

Net Interest

(905)

(42)

(467)

(3,029)

Other (change in fair value of warrants)

0

0

0

0

Profit Before Tax (norm)

 

 

(26,615)

(23,330)

(28,452)

(35,726)

Profit Before Tax (IFRS)

 

 

(26,615)

(23,330)

(28,452)

(35,726)

Tax

0

0

0

0

Deferred tax

0

0

0

0

Profit After Tax (norm)

(26,615)

(23,330)

(28,452)

(35,726)

Profit After Tax (IFRS)

(26,615)

(23,330)

(28,452)

(35,726)

Average Number of Shares Outstanding (m)

35.6

87.1

117.0

122.2

EPS - normalised ($)

 

 

(0.75)

(0.27)

(0.24)

(0.29)

EPS - IFRS ($)

 

 

(0.75)

(0.27)

(0.24)

(0.29)

Dividend per share ($)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

124

918

10

19

Intangible Assets

0

0

0

0

Tangible Assets

11

3

10

19

Other

113

915

0

0

Current Assets

 

 

15,200

36,322

12,914

10,894

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

13,696

34,625

11,217

9,197

Other

1,504

1,697

1,697

1,697

Current Liabilities

 

 

(11,323)

(9,416)

(5,549)

(6,409)

Creditors

(3,927)

(3,951)

(5,549)

(6,409)

Short term borrowings

(7,396)

(5,465)

0

0

Long Term Liabilities

 

 

(8)

(281)

(5,746)

(35,746)

Long term borrowings

0

0

(5,465)

(35,465)

Other long term liabilities

(8)

(281)

(281)

(281)

Net Assets

 

 

3,993

27,543

1,629

(31,242)

CASH FLOW

Operating Cash Flow

 

 

(24,404)

(22,185)

(23,401)

(32,011)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

0

0

(7)

(9)

Acquisitions/disposals

0

0

0

0

Financing

6,343

45,082

0

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

(18,061)

22,897

(23,408)

(32,020)

Opening net debt/(cash)

 

 

(24,546)

(6,300)

(29,160)

(5,752)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

(185)

(37)

0

0

Closing net debt/(cash)

 

 

(6,300)

(29,160)

(5,752)

26,268

Source: Sunesis Pharmaceuticals reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Sunesis Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Sunesis Pharmaceuticals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Sunesis Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Sunesis Pharmaceuticals. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues