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.
Written by
Sunesis Pharmaceuticals |
Redirection after EMA application pulled |
Earnings report |
Pharma & biotech |
10 May 2017 |
Share price performance
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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 |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
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
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