test tube close up

Redirection after EMA application pulled

Sunesis Pharmaceuticals 10 May 2017 Update
Download PDF

Sunesis Pharmaceuticals

Redirection after EMA application pulled

Earnings report

Pharma & biotech

10 May 2017

Price

US$3.06

Market cap

US$66m

Net cash ($m) at 31 March 2017

20.7

Shares in issue

21.5m

Free float

58%

Code

SNSS

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(21.1)

(25.2)

3.0

Rel (local)

(22.5)

(28.0)

(11.5)

52-week high/low

US$5.5

US$2.7

Business description

Sunesis Pharmaceuticals is a pharmaceutical company focused on oncology. Its lead asset is SNS-062, a BTK inhibitor for CLL for Imbruvica refractory patients. The program is entering a dose escalation Phase Ib/II. It has also developed TAK-580 with partner Takeda, and the preclinical PDK1 inhibitor SNS-229.

Next events

SNS-062 Phase Ib/II trial initiation

Q217

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Sunesis Pharms. is a research client of Edison Investment Research Limited

Sunesis reported in May 2017 that it has pulled its application to the EMA for the approval of vosaroxin for the treatment of acute myeloid leukemia, based on feedback from the agency. The program has been de-emphasized and the new lead is SNS-062, the company’s Bruton's tyrosine kinase (BTK) inhibitor with potential efficacy in Imbruvica-resistant chronic lymphocytic leukemia (CLL). The SNS-062 program will be initiating a Phase Ib/II clinical trial in Q217.

Year
end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/15

3.1

(36.7)

(3.02)

0.0

N/A

N/A

12/16

2.5

(38.0)

(2.42)

0.0

N/A

N/A

12/17e

0.7

(30.9)

(1.44)

0.0

N/A

N/A

12/18e

0.0

(32.5)

(1.45)

0.0

N/A

N/A

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

Vosaroxin application pulled

The company’s MAA for vosaroxin was voluntarily recalled by the company following meetings with the EMA’s rapporteurs and consultants, in which it became clear that the product will not get sufficient support at the agency to receive approval. The drug is being studied in two investigator-sponsored trials, which will continue unchanged although expense will be minimal, so there might be more data from the program but all other operations for the program will cease.

SNS-062 now the lead: Entering Phase Ib/II

The company has reprioritized and the SNS-062 program for CLL is now the lead clinical program. The drug is an inhibitor of BTK that binds and inhibits the enzyme even in the presence of mutations that confer resistance to the currently approved BTK inhibitor, Imbruvica. The drug is entering a Phase Ib/II dose escalation/ expansion trial starting in Q217 targeting completion by September 2018. The trial will enrol up to seven dose cohorts and up to 124 patients with confirmed Imbruvica resistance mutations.

Q117 results: Runway into 2018

The company ended Q117 with $35.2m in cash ($20.7m net), which it stated should be sufficient runway to reach mid-2018. Operational losses for the quarter were $9.4m. We expect cash burn to be lower in the coming quarters with the simplified pipeline and forecast operational losses of $29.2m for 2017. We have increased our future financing estimates for the company to $160m required before profitability (from $65m).

Valuation: Reduced to $94.3m/$4.40 per basic share

We have reduced our valuation to $94.3m or $4.40 per basic share ($3.66 diluted) from $219.0m or $10.47 per basic share ($8.42 diluted). This reduction is from the removal of vosaroxin from our model (former value of $137m), and partially offset by a reduction in unallocated cost.

A change in company direction

The company announced on 1 May 2017 that it would be withdrawing its EMA marketing application following feedback from the agency, which made it clear that it was unlikely to approve vosaroxin (Qinprezo) with the current data. There remains some possibility that the drug could be approved with new data, although the company has stepped away from internal development of the drug for the time being. There are two ongoing investigator-sponsored trials (at Vanderbilt-Ingram Cancer Center and University Hospital, Angers) that will continue as planned and could build a future value proposition for the asset. However, company investment into the program will be purely supportive to these investigator-sponsored studies in the future.

Refocus on SNS-062

The company has refocused its efforts squarely on SNS-062, which will now be the lead development program. The non-covalent Bruton's tyrosine kinase (BTK) inhibitor has the potential to be effective in patients that become resistant to other covalent BTK inhibitors such as Imbruvica (ibrutinib; AbbVie, Janssen). A common mutation in patients who become resistant to Imbruvica is cysteine 481 to serine (C481S), and SNS-062 has been shown to be active in this BTK isoform including the most recent data presented at the American Association for Cancer Research Annual Meeting. The company has a Phase Ib/II clinical trial that will begin in Q217 in patients with confirmed C481S mutations. It is a dose escalation trial with seven planned dosing cohorts, and once the maximum tolerated dose is found, it will expand into a total estimated enrolment of 124 patients. The program is taking place at some of the premiere cancer institutes in the US: UC Irvine Cancer Center and The Ohio State University Comprehensive Cancer Center, Dana-Farber Cancer Institute, MD Anderson Cancer Center and Weill Cornell Cancer Center. The target completion date for the study is September 2018, although this will be highly dependent on how quickly the appropriate dose is found.

Valuation

We have reduced our valuation to $94.3m or $4.40 per basic share ($3.66 diluted) from $219.0m or $10.47 per basic share ($8.42 diluted). This reduction is due to removing the vosaroxin program from our model. Although there is a possibility that the program may be restarted following results from investigator-sponsored trials or out-licensed for further development, given the current outlook we are not attaching any value. This adjustment was offset by a reduction in our unallocated costs (a negative NPV of $44m from $60m) due to adjustments in administrative expenses and working cash flow due to the company realignment, and advancing our NPVs to the latest period.

Exhibit 1: Sunesis valuation

Development program

Clinical stage

Expected commercialization

Prob. of success

Launch year

Launch pricing ($)

Peak sales ($m)

Patent/exclusivity protection

Royalty/ margin

rNPV ($m)

TAK-580

Phase Ib

Licensed to Takeda

15%

2021

138,000

727

2032

15%

$25

SNS-062

Phase Ib/II

Proprietary

20%

2022

152,000

605

2034

45%

$86

SNS-229

Preclinical

Proprietary

5%

2022

101,000

320

2031

44%

$6

Unallocated costs (discovery programs, administrative costs, etc.)

($44)

Total

 

 

 

 

 

 

 

 

$74

Net cash and equivalents (Q117) ($m)

$20.7

Total firm value ($m)

$94.3

Total basic shares (m)

21.5

Value per basic share ($)

$4.40

Convertible Pref stock (m)

4.3

Warrants

0.2

Total diluted shares

25.9

Value per diluted share

$3.66

Source: Sunesis reports, Edison Investment Research

Financials

The company reported operational losses of $9.4m in Q117, which is a slight increase from previous quarters ($8.1m in Q416). We have adjusted our spending forecasts to reflect the removal of the vosaroxin program from the model and now estimate operating losses of $29.2m for 2017 (down from $47.0m). The company ended Q117 with $35.2m in cash ($20.7m net of debt), which it stated would provide a runway into June 2018. At the current run rate, we expect the company to require $160m in financing before profitability in 2024, which we record as illustrative debt spread in yearly tranches of $10m to $40m. This is a $95m increase from previous financing estimates due to the lack of revenue expected from vosaroxin.

Exhibit 2: Financial summary

$'000s

2013

2014

2015

2016

2017e

2018e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

7,956

5,734

3,061

2,536

669

0

Cost of Sales

0

0

0

0

0

0

Gross Profit

7,956

5,734

3,061

2,536

669

0

Research and development

(28,891)

(27,665)

(23,701)

(22,881)

(17,617)

(16,936)

Selling, general & administrative

(10,838)

(23,112)

(18,662)

(16,115)

(12,242)

(12,610)

EBITDA

 

 

(31,701)

(41,312)

(35,764)

(36,313)

(29,190)

(29,545)

Operating Profit (before GW and except.)

(31,681)

(41,283)

(35,737)

(36,302)

(29,190)

(29,545)

Intangible Amortisation

0

0

0

0

0

0

Exceptionals/Other

0

0

0

0

0

0

Operating Profit

(31,681)

(41,283)

(35,737)

(36,302)

(29,190)

(29,545)

Net Interest

(2,917)

(1,719)

(939)

(1,721)

(1,719)

(2,923)

Other (change in fair value of warrants)

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(34,598)

(43,002)

(36,676)

(38,023)

(30,909)

(32,469)

Profit Before Tax (IFRS)

 

 

(34,598)

(43,002)

(36,676)

(38,023)

(30,909)

(32,469)

Tax

0

0

0

0

0

0

Deferred tax

0

0

0

0

0

0

Profit After Tax (norm)

(34,598)

(43,002)

(36,676)

(38,023)

(30,909)

(32,469)

Profit After Tax (IFRS)

(34,598)

(43,002)

(36,676)

(38,023)

(30,909)

(32,469)

Average Number of Shares Outstanding (m)

8.7

10.0

12.2

15.7

21.4

22.4

EPS - normalised ($)

 

 

(3.97)

(4.30)

(3.02)

(2.42)

(1.44)

(1.45)

EPS - IFRS ($)

 

 

(3.97)

(4.30)

(3.02)

(2.42)

(1.44)

(1.45)

Dividend per share ($)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

33

42

14

3

3

3

Intangible Assets

0

0

0

0

0

0

Tangible Assets

23

42

14

3

3

3

Other

10

0

0

0

0

0

Current Assets

 

 

40,492

44,204

46,988

43,231

20,554

6,909

Stocks

0

0

0

0

0

0

Debtors

0

0

0

0

0

0

Cash

39,293

42,981

46,430

42,588

19,911

6,266

Other

1,199

1,223

558

643

643

643

Current Liabilities

 

 

(25,858)

(19,395)

(12,728)

(5,814)

(6,525)

(6,509)

Creditors

(16,840)

(10,138)

(4,894)

(2,481)

(1,525)

(1,509)

Short term borrowings

(9,018)

(9,257)

(7,834)

(3,333)

(5,000)

(5,000)

Long Term Liabilities

 

 

(12,737)

(2,563)

(610)

(11,271)

(15,351)

(29,458)

Long term borrowings

(9,025)

0

0

(11,102)

(15,125)

(29,232)

Other long term liabilities

(3,712)

(2,563)

(610)

(169)

(226)

(226)

Net Assets

 

 

1,930

22,288

33,664

26,149

(1,318)

(29,055)

CASH FLOW

Operating Cash Flow

 

 

(37,423)

(43,181)

(38,731)

(36,962)

(28,367)

(27,752)

Net Interest

0

0

0

0

0

0

Tax

0

0

0

0

0

0

Capex

0

(48)

0

0

0

0

Acquisitions/disposals

0

0

0

0

0

0

Financing

12,570

56,277

43,826

26,111

0

0

Dividends

0

0

0

0

0

0

Other

0

0

0

0

0

0

Net Cash Flow

(24,853)

13,048

5,095

(10,851)

(28,367)

(27,752)

Opening net debt/(cash)

 

 

(46,966)

(21,250)

(33,724)

(38,596)

(28,153)

214

HP finance leases initiated

0

0

0

0

0

0

Exchange rate movements

0

0

0

0

0

0

Other

(863)

(574)

(223)

408

0

0

Closing net debt/(cash)

 

 

(21,250)

(33,724)

(38,596)

(28,153)

214

27,966

Source: Sunesis reports, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Sunesis Pharms. and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Sunesis Pharms. and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues