By David Moskowitz

Sunesis Pharmaceuticals (NASDAQ:SNSS) has had a great year thus far, up 350% since January, and importantly, the smart money continues to flock to the name. The key driver is the company’s development-stage asset, vosaroxin, a potential cancer treatment with a unique mechanism of action. The compound is being studied in multiple cancer indications, however, the focus is on the VALOR trial, which is evaluating the therapy in patients with acute myeloid leukemia (AML) that have had a first relapse or are refractory to conventional therapy (inability to obtain a complete response). Notably, AML remains an unmet need with no new therapies approved for the disease in several decades. As a result, analysts estimate that vosaroxin has potential to achieve peak sales in the $500 million range.
In September, the company received word from the Data Safety Monitoring Board (DSMB) overseeing the VALOR study that based on a planned interim analysis, the DSMB recommended upsizing the trial from 450 patients to 650 patients. Per the trial’s protocol, expansion of the base of patients to be treated signals that there is an efficacy trend that appears clinically relevant. This positive news triggered two financings to occur, a debt facility and a payment for rights to a royalty on potential sales of vosaroxin, both totaling $40 million. The company noted that the new capital plus its previous cash balance (estimated $22 million at the end of 3Q) will enable SNSS to fully fund the VALOR trial and execute on other components of its business into 2014. With no overhang related to the need for new capital, SNSS is now free to trade on the opportunity for vosaroxin and the rest of the pipeline.

The company will host an Analyst and Investor Day tomorrow in NY at 5:00pm, featuring key opinion leaders speaking about AML and the need for new treatments. Among the physicians speaking is Dr. Farhad Ravandi, principal investigator in the VALOR trial, as well as Dr. Eric Feldman, Chair of the VALOR steering committee. We would expect these physicians to be quite positive on the drug candidate, particularly given the recent interim analysis and upsizing of the trial. While the average price target by Wall St. analysts on SNSS is currently around $7.00, an analyst from Leerink raised his price target today to $10.00, and we would expect others to follow suit after tomorrow’s meeting. Look for those analysts to cite what the physician panel says about the VALOR trial and the chance for vosaroxin’s success. SNSS shares are likely to continue to strengthen into and through tomorrow’s Analyst & Investor Day, as expectations for the stock become more bullish.