UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
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|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the
quarterly period ended March 31, 2008
OR
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission
file number: 000-51531
SUNESIS
PHARMACEUTICALS, INC.
(Exact Name of Registrant
as Specified in its Charter)
Delaware
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94-3295878
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(State or Other
Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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341
Oyster Point Boulevard
South
San Francisco, California 94080
(Address of Principal
Executive Offices including Zip Code)
(650)
266-3500
(Registrants Telephone
Number, Including Area Code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file reports), and (2) has
been subject to such filing requirements for the past 90 days. YES
x
NO
o
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer,
a non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting
company
o
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(Do not check if a
smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2). Yes
o
No
x
The registrant had 34,364,906 shares of common stock,
$0.0001 par value per share, outstanding as of April 30, 2008.
SUNESIS
PHARMACEUTICALS, INC.
TABLE OF
CONTENTS
2
PART I FINANCIAL INFORMATION
Item 1.
Financial
Statements
SUNESIS PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
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March 31,
2008
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December 31,
2007
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(Unaudited)
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(1)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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6,235,762
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$
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11,726,126
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Marketable securities
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30,581,908
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35,957,933
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Prepaids and other current assets
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1,463,390
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945,583
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Total current assets
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38,281,060
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48,629,642
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Property and equipment, net
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3,971,051
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4,238,498
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Deposits and other assets
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377,798
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377,798
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Total assets
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$
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42,629,909
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$
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53,245,938
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LIABILITIES
AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable and other accrued
liabilities
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$
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4,475,117
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$
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4,515,426
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Accrued compensation
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1,405,065
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2,225,868
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Current portion of deferred revenue
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752,032
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1,227,031
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Current portion of equipment financing
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885,286
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953,940
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Total current liabilities
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7,517,500
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8,922,265
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Non-current portion of equipment financing
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1,164,819
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1,352,684
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Deferred rent liabilities
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1,472,418
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1,576,734
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Total liabilities
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10,154,737
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11,851,683
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Commitments
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Stockholders equity:
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Preferred stock, $0.0001 par value;
5,000,000 shares authorized, no shares issued and outstanding at
March 31, 2008 and December 31, 2007
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Common stock, $0.0001 par value;
100,000,000 shares authorized, 34,364,896 shares issued and outstanding
at March 31, 2008 and at December 31, 2007
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3,437
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3,437
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Additional paid-in capital
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321,116,162
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320,579,240
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Deferred stock-based compensation
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(134,619
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)
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(251,601
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)
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Accumulated other comprehensive income
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121,180
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69,262
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Accumulated deficit
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(288,630,988
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)
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(279,006,083
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)
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Total stockholders equity
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32,475,172
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41,394,255
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Total liabilities and stockholders equity
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$
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42,629,909
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$
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53,245,938
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(1)
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The consolidated balance
sheet at December 31, 2007 has been derived from the audited financial
statements at that date included in the Companys Form 10-K for the year
ended December 31, 2007.
|
See
accompanying notes to consolidated financial statements.
3
SUNESIS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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Three months ended
March 31,
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2008
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2007
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(Unaudited)
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Revenue:
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Collaboration revenue
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$
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537,500
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$
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229,167
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Collaboration revenue from related party
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1,765,683
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2,037,099
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License revenue
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250,000
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Total revenues
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2,303,183
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2,516,266
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Operating expenses:
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Research and development
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8,742,895
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9,307,478
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General and administrative
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3,266,129
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3,296,147
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Restructuring charges
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320,774
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Total operating expenses
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12,329,798
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12,603,625
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Loss from operations
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(10,026,615
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)
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(10,087,359
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)
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Interest income
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460,412
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769,626
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Interest expense
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(59,373
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)
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(52,043
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)
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Other income, net
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671
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|
739
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Net loss
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$
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(9,624,905
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)
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$
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(9,369,037
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)
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Basic and diluted loss per share
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$
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(0.28
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)
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$
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(0.32
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)
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Shares used in computing basic and diluted
loss per share
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34,364,896
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29,457,247
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See
accompanying notes to consolidated financial statements.
4
SUNESIS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
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Three months ended March 31,
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2008
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2007
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(Unaudited)
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Cash
flows from operating activities
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Net loss
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$
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(9,624,905
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)
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$
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(9,369,037
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)
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Adjustments to reconcile net loss to net
cash used in operating activities:
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Depreciation and amortization
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436,549
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427,892
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Stock-based compensation expense
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653,904
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848,203
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Non-cash restructuring charges
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11,561
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Changes in operating assets and
liabilities:
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Prepaids and other current assets
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(517,807
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)
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(385,497
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)
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Accounts payable and other accrued
liabilities
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(40,311
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)
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309,314
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Accrued compensation
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(820,803
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)
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(714,488
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)
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Deferred rent liabilities
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(104,316
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)
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13,911
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Deferred revenue
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(474,999
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)
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(666,666
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)
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Net cash used in operating activities
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(10,481,127
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)
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(9,536,368
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)
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Cash
flows from investing activities
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Purchases of property and equipment
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(180,663
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)
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(523,514
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)
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Purchases of marketable securities
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(14,320,299
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)
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(17,017,531
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)
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Proceeds from maturities of marketable
securities
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19,748,244
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31,937,077
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Net cash provided by investing activities
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5,247,282
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14,396,032
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Cash
flows from financing activities
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Proceeds from borrowings under equipment
financing
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252,533
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Payments on equipment financing
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(256,519
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)
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(254,282
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)
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Proceeds from issuance of common stock and
exercise of options, net of repurchases
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72,472
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Net cash (used in) provided by financing
activities
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(256,519
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)
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70,723
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Net (decrease) increase in cash and cash
equivalents
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(5,490,364
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)
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4,930,387
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Cash and cash equivalents at beginning of
period
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11,726,126
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6,075,449
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Cash and cash equivalents at end of period
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$
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6,235,762
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$
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11,005,836
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Supplemental
disclosure of cash flow information
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Interest paid
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$
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58,870
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$
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52,043
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Non-cash activities:
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Deferred stock-based compensation, net of
(reversal)
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$
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(11,238
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)
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$
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(2,533
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)
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See
accompanying notes to consolidated financial statements.
5
SUNESIS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008
(Unaudited)
1.
Organization
and Summary of Significant Accounting Policies
Organization
Sunesis Pharmaceuticals, Inc.
(Sunesis or the Company) was incorporated in the state of Delaware on February 10,
1998 and its facilities are headquartered at 341 Oyster Point Boulevard, South
San Francisco, California 94080. Sunesis is a clinical-stage biopharmaceutical
company focused on the discovery, development, and commercialization of novel
small molecule therapeutics for oncology and other serious diseases. The
Companys primary activities since incorporation have been conducting research
and development internally and through corporate collaborators, in-licensing
pharmaceutical compounds, conducting clinical trials, performing business and
financial planning, and raising capital. In January 2007, the Company
formed a wholly-owned subsidiary, Sunesis Europe Limited, a United Kingdom
corporation.
Sunesis, Tethering and the
Companys logo are registered trademarks of the Company. All other trademarks, trade names and service
marks appearing in this Quarterly Report on Form 10-Q are the property of
their respective owners.
Need to Raise Additional Capital
The accompanying
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has incurred significant losses
and negative cash flows from operations since its inception. At March 31,
2008, the Company had an accumulated deficit of $288.6 million. Management
believes that currently available cash, cash equivalents and marketable
securities, together with amounts available to be borrowed under existing
financing agreements (see Note 5), and revenue generated from our current
collaboration with Biogen Idec, Inc. (Biogen Idec) will provide
sufficient funds to enable the Company to meet its obligations through
approximately the middle of 2009. Management plans to continue to finance the
Companys operations with a combination of equity issuances, debt arrangements,
and revenues from collaborations with pharmaceutical companies, technology
licenses, and, in the long term, product sales and royalties. If adequate funds
are not available, the Company may be required to delay, reduce the scope of,
or eliminate one or more of its development programs or obtain funds through
collaborative arrangements with others that may require the Company to
relinquish rights to certain of its technologies, product candidates, or
products that the Company would otherwise seek to develop or commercialize
itself.
Principles of Consolidation
The Companys consolidated financial statements
include a wholly-owned subsidiary, Sunesis Europe Limited, a United Kingdom
corporation.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the amounts reported in the Companys consolidated financial statements and
accompanying notes. Actual results could differ materially from these
estimates.
Clinical Trial Accounting
The Company records accruals
for estimated clinical trial costs, comprising payments for work performed by
contract research organizations and participating clinical trial sites. These
costs may be a significant component of future research and development
expense. The Company accrues costs for clinical trials performed by contract
research organizations based on estimates of work performed under the
contracts. Costs of setting up clinical trial sites for participation in trials
are expensed immediately. Costs related to patient enrollment are accrued as
patients are entered in the trial, reduced by an initial payment made to the
hospital when the first patient is enrolled. These cost estimates may or may
not match the actual costs incurred for services performed by the organizations
as determined by patient enrollment levels and related activities. If the
Company has incomplete or inaccurate information, it may underestimate costs
associated with various trials at a given point in time. Although the Companys
experience in estimating these costs is limited, the difference between accrued
expenses based on its estimates and actual expenses have not been material to
date.
6
Basis of Presentation
The accompanying unaudited
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (GAAP) for
interim financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
notes required by GAAP for complete financial statements. The financial
statements include all adjustments (consisting only of normal recurring
adjustments) that management believes are necessary for a fair presentation of
the periods presented. The balance sheet at December 31, 2007 was derived
from the audited financial statements at that date. These interim financial
results are not necessarily indicative of results to be expected for the full
fiscal year or any other interim period.
These unaudited consolidated
financial statements and the notes accompanying them should be read in
conjunction with the Companys Annual Report on Form 10-K for the year
ended December 31, 2007.
Loss Per Share
Basic loss per share is
calculated by dividing the loss by the weighted-average number of common shares
outstanding for the period, less the weighted average unvested common shares
subject to repurchase. Diluted loss per common share is computed by dividing
the loss applicable to common stockholders by the weighted-average number of
common shares outstanding, less the weighted average unvested common shares
subject to repurchase, and dilutive potential common shares for the period
determined using the treasury-stock method. For purposes of this calculation,
preferred stock, options to purchase common stock, and warrants to purchase
common stock are considered to be potential common shares and are only included
in the calculation of diluted loss per common share when their effect is
dilutive.
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Three months ended
March 31,
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|
|
2008
|
|
2007
|
|
Outstanding securities not included in
diluted loss per share calculations:
|
|
|
|
|
|
Options to purchase common stock
|
|
5,002,098
|
|
3,965,988
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|
Warrants to purchase common stock
|
|
2,693,237
|
|
2,693,237
|
|
Total
|
|
7,695,335
|
|
6,659,225
|
|
Comprehensive Loss
Comprehensive loss is
comprised of net loss and unrealized gains on marketable securities.
Comprehensive loss is as follows:
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Net loss
|
|
$
|
(9,624,905
|
)
|
$
|
(9,369,037
|
)
|
Change in unrealized gain on marketable
securities
|
|
51,918
|
|
7,504
|
|
Comprehensive loss
|
|
$
|
(9,572,987
|
)
|
$
|
(9,361,533
|
)
|
Accumulated other
comprehensive income consists of the following:
|
|
March 31,
2008
|
|
December 31,
2007
|
|
Unrealized gain on marketable securities
|
|
$
|
121,180
|
|
$
|
69,262
|
|
|
|
|
|
|
|
|
|
7
Recent Accounting Pronouncements
In February 2007, the Financial Accounting
Standards Board (FASB) issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). SFAS No. 159 allows entities to choose, at specified
election dates, to measure eligible financial assets and liabilities at fair
value in situations in which they are not otherwise required to be measured at
fair value. If a company elects the fair value option for an eligible item,
changes in that items fair value in subsequent reporting periods must be
recognized in current earnings. SFAS No. 159 also establishes presentation
and disclosure requirements designed to draw comparison between entities that
elect different measurement attributes for similar assets and liabilities. SFAS
No. 159 is effective for fiscal years beginning after November 15,
2007. The Company chose not to elect the
fair value option for its financial assets and liabilities existing at January 1,
2008, and did not elect the fair value option for financial assets and
liabilities for transactions occurring in the three months ended March 31,
2008. Therefore, the adoption of SFAS No. 159 had no impact on the Companys
consolidated financial statements.
In June 2007, the FASB
ratified the Emerging Issues Task Force (EITF) 07-3,
Accounting for Nonrefundable Advance Payments for
Goods or Services Received for Use in Future Research and Development
Activities
(EITF 07-3). EITF 07-3 requires nonrefundable
advance payments for goods or services that will be used or rendered for future
research and development activities to be deferred and capitalized. Such
amounts should be recognized as an expense when the related goods are delivered
or services are performed. EITF 07-3 is effective for fiscal years beginning
after December 15, 2007. The
Company adopted EITF 07-3 in the first quarter of 2008. The adoption of EITF 07-3 did not have a
material effect on the companys financial position or results of operations.
In December 2007, the
EITF reached a consensus on EITF 07-1,
Accounting
for Collaborative Arrangements Related to the Development and Commercialization
of Intellectual Property
(EITF 07-1). EITF 07-1
discusses the appropriate income statement presentation and classification for
the activities and payments between participants in arrangements related to the
development and commercialization of intellectual property. The sufficiency of
disclosure related to these arrangements is also specified. EITF 07-1 is
effective for fiscal years beginning after December 15, 2008. The Company
will adopt EITF 07-1 in the first quarter of 2009 and currently does not
believe the adoption of EITF 07-1 will have a material impact on its
financial position or results of operations.
2.
License Agreements
In-Licenses
Dainippon Sumitomo Pharma Co., Ltd.
In October 2003, the
Company entered into an agreement with Dainippon Sumitomo Pharma Co., Ltd. (Dainippon)
to acquire exclusive worldwide development and marketing rights for Dainippons
anti-cancer compound, referred to as SNS-595.
In
addition to payments already made as of December 31, 2007, the Company may
in the future make a series of milestone payments of up to $8.0 million to
Dainippon based on successful development and regulatory approval of SNS-595
for cancer indications, as well as royalty payments based on any future product
sales. In return, the Company has received an exclusive, worldwide license to
develop and market SNS-595.
Bristol-Myers Squibb Company
In
April 2005, the Company entered into an agreement with Bristol-Myers
Squibb Company (BMS) to acquire worldwide development and commercialization
rights for BMS anti-cancer compound, referred to as SNS-032.
Under
the terms of this agreement, the Company may in the future be required to make
a series of milestone payments of up to $29.0 million in cash and equity to BMS
based on the successful development and approval for the first indication and
formulation of SNS-032. In addition, the Company may be required to make a series
of development and commercialization milestone payments totaling up to
$49.0 million in cash and equity to BMS, as well as royalty payments based
on any future product net sales. The Company may, at its election, pay some of
the initial milestone payments in equity or a mixture of cash and equity,
rather than entirely in cash. In return,
the Company received worldwide exclusive and non-exclusive diagnostic and
therapeutic licenses to SNS-032 and any future cyclin-dependent kinase (CDK)
inhibitors derived from the related intellectual property.
8
Out-Licenses
The University of California, San
Francisco
In
August 2005, and as amended in April 2006, the Company entered into
research and license agreements with the University of California, San
Francisco (UCSF) that allow UCSF a limited license to use Tethering, the
Companys proprietary fragment-based drug discovery approach, for academic
purposes. UCSF intends to leverage Tethering to identify novel, small molecule
drug candidates. In return, the Company received an exclusive royalty-free
license to any improvements to Tethering or fragment libraries that emerge from
UCSFs research. In the event that any small molecules are discovered using
Tethering, the Company will have a right of first negotiation to in-license the
compounds. UCSF is precluded from utilizing the technology for commercial
purposes and from conducting research in the kinase field or any other drug
target on which the Company is currently interested. The research at UCSF is
being conducted by Dr. James Wells. Dr. Wells was a founder of the
Company and is a member of the Companys Board of Directors.
SARcode Corporation
In March 2006,
the Company entered into a license agreement with SARcode Corporation (SARcode),
a privately-held biopharmaceutical company, that provides SARcode an exclusive,
worldwide license to all of the Companys lymphocyte function-associated
antigen-1 (LFA-1) patents and related
know-how. SARcode intends to use the license to develop small molecule drugs to
treat inflammatory diseases. The Company had discontinued its LFA-1 antagonist
program, which is outside of its strategic focus.
Pursuant to
the license agreement, in 2007 the Company received a $0.5 million license
fee, which the Company recorded as revenue, and two notes convertible into
preferred stock of SARcode, one in the amount of $0.3 million and the
other in the amount of $0.4 million. The Company did not record these two
notes receivable from SARcode, which are due in 2012, as revenue due to
uncertainty of collectibility. In addition to the $0.5 million of cash and
the convertible notes already received, the Company may receive up to
$0.4 million in convertible notes, $31.3 million in development and
marketing milestone payments, and royalties for the commercialization of a
licensed compound.
3.
Strategic Collaborations
Johnson & Johnson
Pharmaceutical Research & Development, L.L.C.
In
May 2002, the Company entered into a research collaboration with Johnson &
Johnson Pharmaceutical Research & Development, L.L.C (J&J PRD)
to discover small molecule inhibitors of Cathepsin S, an enzyme that is
important to regulating the inflammatory response. During the research term of
this collaboration, the Company applied its proprietary Tethering technology to
discover novel inhibitors of Cathepsin S.
The
research funding portion of the agreement expired on December 31, 2005.
Costs associated with research and development activities attributable to this
agreement approximated the research funding recognized. The Company may in the
future receive research and development milestones of up to $24.5 million
as well as royalty payments from J&J PRD based on future product sales. In February 2008, the Company received a
milestone payment from J&J PRD upon its selection of a development
candidate from the collaboration.
Biogen Idec, Inc. - Related
Party
In
August 2004, the Company entered into a research collaboration with Biogen
Idec, Inc. (Biogen Idec) to discover and develop small molecules
targeting kinases, a family of cell signaling enzymes that play a role in the
progression of cancer. The Company applies its proprietary Tethering technology
to generate novel, small molecule leads that inhibit the oncology kinase
targets that are covered by this collaboration. This collaboration is still in
the research phase and involves active participation by the Companys
personnel. This collaboration has a four-year research term, which, if not
extended, expires in August 2008.
Under
the terms of the collaboration agreement, the Company received a $7.0 million
upfront non-refundable and non-creditable technology access fee, which is being
recognized as revenue over an initial four-year research term. In the event
that Biogen Idec decides to exercise its option to extend the initial four-year
research term for one additional year, Biogen Idec is required to pay to the
Company an additional technology access fee as specified in the agreement. In
addition, the Company receives quarterly research funding of $1.2 million
from Biogen Idec, subject to inflation adjustments, which is paid in advance to
support some of the Companys scientific personnel, and the Company may in the
future receive pre-commercialization milestone payments of up to
$60.5 million and royalty payments based on any product sales. The Company
retains an option to participate in the co-development and co-promotion of
product candidates for up to two targets that may emerge from this collaboration.
9
Merck & Co., Inc.
In
February 2003, the Company and Merck & Co., Inc. (Merck)
entered into a research collaboration to identify and optimize inhibitors of
beta-secretase (BACE), which is believed to be important in the progression
of Alzheimers disease. This collaboration had an initial three-year research
term and a one-year option period. The research term of the collaboration ended
in February 2006. Accordingly, the upfront, non-refundable and non-creditable
technology access fee was recognized as revenue over the 36-month term of the
agreement ending February 2006. However, the Company retains the right to
earn future
milestone payments of up to $84.3 million, as well as
royalty payments depending on product sales.
In
July 2004, the Company and Merck entered into a multi-year research
collaboration to discover novel oral drugs for the treatment of viral
infections. The Company provided Merck with a series of small molecule
compounds targeting viral infections. These compounds were derived from
Tethering. Merck agreed to be responsible for advancing these compounds into
lead optimization, preclinical development, and clinical studies. Merck is
obligated to pay annual license fees for the Companys consulting services and
ongoing access to Tethering as a means of identifying additional compounds for
the treatment of viral infections.
Under
the terms of the anti-viral agreement, the Company received an upfront,
non-refundable and non-creditable technology access fee of $2.3 million,
which was being recognized as revenue over an initial three-year research term.
The Company is also entitled to receive annual license fees aggregating
approximately $1.0 million. Through March 31, 2008, the Company has
received approximately $1.0 million in annual license fees. In addition, the
Company may receive payments based on the achievement of development milestones
of up to $22.1 million. In addition, the Company is entitled to receive
royalty payments based on net sales for any products resulting from the
collaboration. Merck receives an exclusive worldwide license to any products
resulting from the collaboration.
In
connection with the above collaboration agreements, the Company recognized the
following revenues in the periods presented, which include the amortization of
upfront fees received, research funding, and milestones earned:
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Biogen Idec related party
|
|
$
|
1,765,683
|
|
$
|
2,037,099
|
|
J&J PRD
|
|
500,000
|
|
|
|
Merck
|
|
37,500
|
|
229,167
|
|
Total collaboration revenue
|
|
$
|
2,303,183
|
|
$
|
2,266,266
|
|
The
Company considers Biogen Idec to be a related party because Biogen Idec owned
approximately 8.5 percent of the Companys common stock as of March 31,
2008 and approximately 10 percent of the Companys common stock as of March 31,
2007.
4.
2007 Restructuring Plan
During August 2007,
the Company implemented a revised operating plan to focus its efforts on
generating definitive data from its lead programs while streamlining the
Companys operations and extending its financial resources. The restructuring
plan included an immediate reduction in the Companys workforce of
approximately twenty-five percent, or 35 employees, to 108 employees. All
employees were given severance payments, based on length of service at the
Company, and career transition assistance. Also in the third quarter of 2007,
the Company completed its consolidation of leased facilities, vacating one
property and relocating employees to its main location. The Company is
currently seeking a tenant to sublease the vacated property.
As a result of
the restructuring plan, in 2007 the Company recorded total restructuring
charges of $1.6 million for employee severance and related benefit costs,
including a non-cash portion related to stock-based compensation of
approximately $0.1 million and facilities exit costs, of which
$0.3 million was related to the impairment of leasehold improvements and
$0.3 million on the lease obligation on the vacated property. In the first
quarter of 2008, the Company recorded an additional $0.3 million of
restructuring charges on the lease obligation on the vacated property. The lease obligation charge is calculated
using discounted cash flow based on an estimated timeframe in which the space
can be subleased. Cash payments related to employee severance were all made by December 31,
2007.
10
The following
table summarizes the accrual balances and utilization by cost type for the
restructuring plan:
|
|
Employee
Severance and
Related
Benefits
|
|
Facilities
Related and
Other Costs
|
|
Total
|
|
Restructuring liability at
December 31, 2007
|
|
$
|
41,399
|
|
$
|
274,834
|
|
$
|
316,233
|
|
1
st
quarter charges (reversal)
|
|
(9,418
|
)
|
330,192
|
|
320,774
|
|
Cash payments
|
|
(227
|
)
|
(100,264
|
)
|
(100,491
|
)
|
Adjustments
|
|
(31,754
|
)
|
120,833
|
|
89,079
|
|
Restructuring liability at March 31,
2008
|
|
$
|
|
|
$
|
625,595
|
|
$
|
625,595
|
|
5.
Equipment
Financing and Debt Facility
In
June 2000, the Company entered into an equipment financing agreement with
General Electric Capital Corporation (GECC). Various credit lines have been
issued under the financing agreement since 2000. The Companys prior $2.6
million credit line expired in March 2008. A new $0.7 million credit line
is available through June 2008. As
of March 31, 2008, the Company had drawn an aggregate of $10.7 million
under various credit lines under the financing agreement. At March 31, 2008, the outstanding
balance was $2.1 million, which bears interest at rates ranging from 7.53
percent to 10.61 percent per annum and is due in 36 to 48 monthly payments. The
equipment loans are secured by the equipment financed. As of March 31, 2008, the Company was in
compliance with all covenants in the GECC agreement.
6
.
Contingencies
The Company is not currently involved in any
material legal proceedings. From time to time, we may become involved in legal
proceedings arising in the ordinary course of the Companys business.
7.
Stockholders
Equity
On
May 30, 2007, the Company completed a public offering of 4,750,000 shares
of its common stock at a public offering price of $4.43 per share. Net cash
proceeds from this offering were approximately $19.5 million after deducting
issuance cost of $1.5 million.
8.
Employee
Benefit Plans
Stock Option Plans
2005 Equity Incentive Award Plan
On
January 1, 2008, the 2005 Equity Incentive Award Plan (2005 Plan) was
increased by 1,082,352 shares pursuant to the 2005 Plans evergreen
provision. Options to purchase 10,000
shares of the Companys common stock were granted in the three months ended March 31,
2008 and, as of March 31, 2008, options to purchase an aggregate of
3,754,856 shares of the Companys common stock have been granted under the 2005
Plan.
As of March 31, 2008, the total number
of shares available for future grants under the 2005 Plan was 1,692,610.
2006 Employment Commencement Incentive Plan
On
January 1, 2008, the Companys Board of Directors approved an amendment to
the Companys 2006 Employment Commencement Incentive Plan (2006 Plan) to
increase the number of shares of common stock reserved for issuance under the
2006 Plan by an additional 125,000 shares.
No options were granted under the 2006 Plan in the three months ended March 31,
2008. As of March 31, 2008, the
total number of shares available for future grants under the 2006 Plan was
145,334.
2005 Employee Stock Purchase Plan
On
January 1, 2008, the share reserve under the Companys 2005 Employee Stock
Purchase Plan (ESPP) was increased by 100,000 shares pursuant to the ESPPs
evergreen provision. At March 31,
2008, there were 297,255 shares of common stock reserved for future issuance
under the ESPP. For the three months
ended March 31, 2008, no ESPP shares were issued.
11
A
summary of stock option transactions for all of the Companys stock option
plans since December 31, 2007 follows:
|
|
Number
of Shares
|
|
Weighted Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term (years)
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2007
|
|
5,099,847
|
|
$
|
3.83
|
|
|
|
|
|
Options granted
|
|
10,000
|
|
$
|
1.40
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
|
|
|
Options canceled/forfeited/expired
|
|
(107,749
|
)
|
$
|
4.89
|
|
|
|
|
|
Balance at March 31, 2008
|
|
5,002,098
|
|
$
|
3.80
|
|
7.6
|
|
$
|
14,012
|
|
Exercisable at March 31, 2008
|
|
2,659,448
|
|
$
|
3.82
|
|
6.4
|
|
$
|
12,512
|
|
The
following table summarizes outstanding and exercisable options for all of the
Companys stock option plans as of March 31, 2008:
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number
Outstanding
as of 3/31/08
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Weighted-
Average
Exercise
Price
|
|
Number
Exercisable
as of 3/31/08
|
|
Weighted-
Average
Exercise
Price
|
|
$0.43 -
$2.31
|
|
137,711
|
|
8.6
|
|
$
|
1.98
|
|
16,961
|
|
$
|
0.82
|
|
$2.55
|
|
1,275,164
|
|
4.6
|
|
$
|
2.55
|
|
1,265,579
|
|
$
|
2.55
|
|
$2.59
|
|
1,116,623
|
|
9.5
|
|
$
|
2.59
|
|
140,754
|
|
$
|
2.59
|
|
$2.62 -
$4.74
|
|
475,633
|
|
8.8
|
|
$
|
4.07
|
|
151,416
|
|
$
|
4.10
|
|
$4.85
|
|
622,752
|
|
8.5
|
|
$
|
4.85
|
|
232,000
|
|
$
|
4.85
|
|
$4.93 -
$5.16
|
|
109,174
|
|
8.4
|
|
$
|
5.03
|
|
47,265
|
|
$
|
5.04
|
|
$5.25
|
|
1,008,270
|
|
7.7
|
|
$
|
5.25
|
|
623,773
|
|
$
|
5.25
|
|
$5.50 -
$6.40
|
|
176,716
|
|
8.3
|
|
$
|
6.07
|
|
117,870
|
|
$
|
6.09
|
|
$7.15
|
|
22,400
|
|
8.0
|
|
$
|
7.15
|
|
11,200
|
|
$
|
7.15
|
|
$9.56
|
|
57,655
|
|
7.2
|
|
$
|
9.56
|
|
52,630
|
|
$
|
9.56
|
|
$0.43 -
$9.56
|
|
5,002,098
|
|
7.6
|
|
$
|
3.80
|
|
2,659,448
|
|
$
|
3.82
|
|
12
Employee Stock-Based Compensation
Employee
stock-based compensation expense related to all of the Companys share-based
awards, including stock options granted prior to the Companys initial public
offering (IPO), which continue to be accounted for under Accounting
Principles Board Opinion No. 25,
Accounting for Stock
Issued to Employees,
(APB 25),
is as follows for the periods presented:
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Research and development
|
|
$
|
270,178
|
|
$
|
364,893
|
|
General and administrative
|
|
383,726
|
|
481,691
|
|
Stock-based compensation
|
|
$
|
653,904
|
|
$
|
846,584
|
|
The
Company determines the fair value of share-based payment awards on the grant
date using the Black-Scholes option-pricing model (the Black-Scholes Model)
which is affected by the Companys stock price as well as assumptions regarding
a number of highly subjective variables. The total estimated grant date fair
value of stock options that were granted during the three months ended March 31,
2008 and 2007 was approximately none and $0.2 million, respectively. The
estimated fair value of shares vested during each of the three month periods
ended March 31, 2008 and 2007 were $0.6 million. At March 31, 2008,
total unrecognized estimated compensation cost related to non-vested stock
options granted prior to that date was $5.6 million and the cost is expected to
be recognized over a weighted average period of 3.3 years. No options were
exercised during the three months ended March 31, 2008. The total intrinsic value of stock options
exercised during the three months ended March 31, 2007 was approximately
$0.1 million. For the three months ended
March 31, 2007, the Company recorded cash received from the exercise of
stock options of approximately $0.1 million. As it is more likely than not that
all of the stock option related tax benefits will not be realized, the Company
did not record net tax benefits related to the options exercised in the three
months ended March 31, 2008 and 2007.
The
weighted-average estimated fair value of employee stock options granted during
the three months ended March 31, 2008 and 2007 was $0.85 and $2.68 per
share, respectively, using the Black-Scholes Model.
The
Company uses the Black-Scholes Model to value its stock options with the
following assumptions (annualized percentages):
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Volatility
|
|
71.6
|
%
|
68.5
|
%
|
Risk-free interest rate
|
|
2.7
|
%
|
4.7
|
%
|
Dividend yield
|
|
0
|
%
|
0
|
%
|
Expected term (years)
|
|
5.0
|
|
5.1
|
|
The
weighted-average estimated fair value of purchase rights under the ESPP for the
three months ended March 31, 2008 and 2007 was $1.36 and $2.03 per share,
respectively, using the Black-Scholes Model with the following assumptions
(annualized percentages):
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Volatility
|
|
68.5% - 71.6%
|
|
80.0%
|
|
Risk-free interest rate
|
|
3.2% - 5.1%
|
|
4.9% - 5.1%
|
|
Dividend yield
|
|
0%
|
|
0%
|
|
Expected term (years)
|
|
0.5 - 1.0
|
|
0.5 - 1.0
|
|
The
total estimated fair value of purchase rights outstanding under the ESPP that
vested during the three months ended March 31, 2008 and 2007 was
approximately none and $0.1 million, respectively.
The
Company has based its assumptions for volatility and expected term of employee
stock options on the information available with respect to its peer group in
the same industry. The expected term of the employees purchase rights under
the Companys ESPP is
13
equal to the purchase period. The risk-free interest rate assumption is
based upon observed interest rates appropriate for the expected life of the
Companys employee stock options and employees purchase rights. The Company
does not anticipate paying any cash dividends in the foreseeable future, and
therefore uses an expected dividend yield of zero in both models. Statement of Financial Accounting Standard No. 123
(revised 2004) (FAS 123R),
Share-Based Payment,
also
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. The forfeiture rate is estimated based on the Companys historical
option cancellation and forfeiture information. The Companys stock-based
compensation expense recognized under FAS 123R in its consolidated financial
statements reflects estimated forfeiture rates of 7.2% and 5.0% in the three
months ended March 31, 2008 and 2007, respectively. If factors change and
the Company employs different assumptions in the application of FAS 123R in
future periods, the compensation expense that the Company records under FAS
123R may differ significantly from what it has recorded in the current period.
Stock-Based Compensation for Options Granted Prior to the IPO
Prior
to the Companys IPO in September 2005, certain stock options were granted
with exercise prices that were below the reassessed fair value of the common
stock at the date of grant. In accordance with APB 25, deferred stock-based
compensation was recorded for the difference between the estimated fair value
of the common stock underlying the options and the exercise price of the
options. The deferred stock-based compensation is being amortized over the
related vesting terms of the options.
For the three months ended March 31, 2008 and 2007, the Company
recorded amortization of deferred stock-based compensation of $0.1 million and
$0.2 million, respectively.
As
of March 31, 2008, the expected future amortization expense for deferred
stock-based compensation is $0.1 million and is expected to be fully amortized
by December 31, 2008.
9. Fair Value Measurements
As of January 1, 2008, the Company adopted FASB Statement No. 157,
Fair Value Measurements
(SFAS 157). SFAS 157 established a framework for
measuring fair value based on GAAP and clarified the definition of fair value
within that framework. SFAS 157 does not require any new fair value
measurements in GAAP. SFAS 157 introduced, or reiterated, a number of key
concepts which form the foundation of the fair value measurement approach to be
utilized for financial reporting purposes. The fair value of the Companys
financial instruments reflect the amounts that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). SFAS 157 also established a
fair value hierarchy that prioritizes the use of inputs used in valuation techniques
into the following three levels:
Level 1quoted prices in active markets for identical assets and
liabilities.
Level 2observable inputs other than quoted prices in active markets
for identical assets and liabilities.
Level 3unobservable inputs.
The adoption of SFAS 157 did not have a
material effect on the Companys financial condition and results of operations,
but SFAS 157 introduced new disclosures about how the Company values certain
assets and liabilities, focusing on the inputs used to measure fair value,
particularly in instances where the measurement uses significant unobservable
(Level 3) inputs. The Companys financial instruments are valued using quoted
prices in active markets (Level 1) or based upon other observable inputs (Level
2). The following table sets forth the
fair value of the Companys financial assets that were measured on a recurring
basis during the three months ended March 31, 2008
(in
thousands)
.
|
|
Fair Value Measurements at Reporting Date Using
|
|
(in thousands)
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
|
Description
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
$
|
771
|
|
$
|
29,811
|
|
$
|
|
|
$
|
30,582
|
|
Total
|
|
$
|
771
|
|
$
|
29,811
|
|
$
|
|
|
$
|
30,582
|
|
As of the three months ended March 31, 2008,
the Companys marketable securities were classified within Level 1 or Level 2
of the fair value hierarchy. The type of
securities utilizing Level 1 inputs consisted of the Companys U.S. Government Agency. The Companys Level 2 valuations are based
upon quoted prices for similar instruments or securities that are under an
active market with pricing adjustments for yield and number of days to
maturity. The type of securities
utilizing Level 2 inputs consisted of the Companys Corporate Bonds and Commercial
Papers.
14
10.
Guarantees
and Indemnification
In November 2002, the
FASB issued Interpretation No. 45,
Guarantors
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others
(FIN 45). FIN 45 requires
that upon issuance of a guarantee, the guarantor must recognize a liability for
the fair value of the obligations it assumes under that guarantee.
As permitted under Delaware
law and in accordance with the Companys Bylaws, the Company indemnifies its
officers and directors for certain events or occurrences, subject to certain
limits, while the officer or director is or was serving at the Companys
request in such capacity. The indemnification agreements with the Companys
officers and directors terminate upon termination of their employment, but the
termination does not affect claims for indemnification relating to events
occurring prior to the effective date of termination. The maximum amount of
potential future indemnification is unlimited; however, the Companys officer
and director insurance policy reduces the Companys exposure and
may enable the Company to recover a portion of any future amounts paid.
The Company believes that the fair value of these indemnification agreements is
minimal. In addition, in the ordinary course of business the Company enters
into agreements, such as licensing agreements, clinical trial agreements and
certain services agreements, containing standard indemnifications provisions.
The Company believes that the likelihood of an adverse judgment related to such
indemnification provisions is remote. Accordingly, the Company has not recorded
any liabilities for any of these agreements as of March 31, 2008.
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion and analysis of our financial condition as of March 31,
2008 and results of operations for the three months ended March 31, 2008
and 2007 should be read together with our financial statements and related
notes included elsewhere in this report. This discussion and analysis contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, that involve risks, uncertainties and
assumptions. All statements other than statements of historical facts, are forward-looking
statements for purposes of these provisions, including any projections of
revenue, expenses or other financial items, any statement of the plans and
objectives of management for future operations, any statements concerning
proposed new clinical trials or licensing or collaborative arrangements, any
statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. In some cases,
forward-looking statements can be identified by the use of terminology such as anticipates,
believe, continue, estimates, expects, intend, look forward, may,
plans, potential, or will or the negative thereof or other comparable
terminology. Although we believe that the expectations reflected in the
forward-looking statements contained herein are reasonable, there can be no
assurance that such expectations or any of the forward-looking statements will
prove to be correct, and actual results could differ materially from those
projected or assumed in the forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including but not limited to those set forth under Risk Factors and
elsewhere in this report. We urge you not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report. All
forward-looking statements included in this report are based on information
available to us on the date of this report, and we assume no obligation to
update any forward-looking statements contained in this report.
In this report, Sunesis, the Company,
we, us, and our refer to Sunesis Pharmaceuticals, Inc. and its
wholly-owned subsidiary, except where it is made clear that the term means only
the parent company.
Overview
We are a clinical-stage biopharmaceutical company focused on the
discovery, development and commercialization of novel small molecule
therapeutics for use in oncology and other serious diseases. We have built our
product candidate portfolio through internal discovery and the in-licensing of
novel cancer therapeutics. We are advancing product candidates through in-house
research and development efforts and strategic collaborations with leading
pharmaceutical and biopharmaceutical companies and academic institutions.
From our incorporation in 1998 through 2001, our operations consisted primarily
of developing and refining our drug discovery technologies. Since 2002, we have
focused on the discovery and development of novel small molecule drugs. In August 2007,
we announced a reduction in our workforce and implemented a revised operating plan
to streamline our operations and extended our financial resources. Our
reorganization was completed by the end of 2007.
We are currently
advancing three proprietary oncology product candidates, SNS-595, SNS-032 and
SNS-314, through in-house research and development efforts. Our lead product
candidate, SNS-595, is a novel naphthyridine analog. With SNS-595, we are
currently conducting one Phase 2 single agent clinical trial in advanced
platinum-resistant ovarian cancer patients and one Phase 1b
15
combination clinical trial with cytarabine in patients with refractory
or relapsed acute myeloid leukemia (AML). A Phase 1 single agent study
in advanced acute leukemias is continuing to treat patients, but enrollment was
completed in 2007. In addition, we are planning to initiate a Phase 2
single agent trial in elderly patients with previously untreated AML in the
first half of this year.
Our second product candidate, SNS-032, is a potent and selective inhibitor
of cyclin-dependent kinases (CDKs) 2, 7 and 9. We currently are conducting a
Phase 1 clinical trial with SNS-032 in patients with relapsed or
refractory chronic lymphocytic leukemia (CLL) or multiple myeloma. We are
also developing SNS-314, a potent and selective inhibitor of the Aurora A, B
and C kinase enzymes. SNS-314 is being studied in a Phase 1
dose-escalating clinical trial in patients with advanced solid tumors.
We have worldwide development and commercialization rights to SNS-595,
SNS-032 (for diagnostic and therapeutic applications) and SNS-314. In the
future, we plan to enter into collaborations for one or more of these product
candidates in order to maximize the commercial potential of these programs.
We have developed proprietary methods of discovering drugs in pieces,
or fragments. Our initial fragment-based discovery approach was called Tethering
®
.
We have combined Tethering with other drug discovery tools, such as
structure-based design and medicinal chemistry, to discover and develop novel
therapeutics for major diseases. We have an ongoing strategic collaboration
with Biogen Idec, Inc. (Biogen Idec) to discover and develop small
molecules that inhibit certain oncology and immunology kinase targets. The
research phase of this collaboration, which involves active participation by
our personnel, expires in August 2008. The Tethering approach to drug
discovery formed the basis of our three other ongoing collaborations, one with
Johnson & Johnson Pharmaceutical Research & Development, L.L.C. (J&J
PRD) and two with Merck & Co., Inc. (Merck). In those
three collaborations, we are no longer receiving research funding, and our
personnel are not actively participating in continued development. We have
developed further enhancements to our fragment-based discovery platform that
are currently being used to discover new targeted agents and that could form
the basis of future discovery collaborations. As of March 31, 2008, we had
received an aggregate of approximately $83.4 million in cash from our
current and former collaboration partners in the form of stock purchase
proceeds and fees.
We also have an ongoing research collaboration with the Multiple
Myeloma Research Consortium (MMRC) to evaluate the nonclinical activity of
SNS-032 in multiple myeloma-relevant models and in primary disease tissue. This
collaboration is being performed by investigators at leading academic research
institutions including University Health Network (Princess Margaret Hospital),
Dana-Farber Cancer Institute, H. Lee Moffitt Cancer Center & Research
Institute, Mayo Clinic Cancer Center and Emory University. We believe that this
and our other research arrangements with investigators at academic institutions
help us to leverage and expand our internal research and development
capabilities.
In addition, we have licensed worldwide rights to all of our LFA-1
patents and related know-how to SARcode Corporation.
Since our inception, we have generated significant losses. As of March 31,
2008, we had an accumulated deficit of $288.6 million, including a deemed
dividend of $88.1 million recorded in conjunction with our IPO in September 2005.
We expect our significant net losses to continue for the foreseeable future, as
we continue our research activities and conduct development of, and seek
regulatory approvals for, our product candidates.
Critical
Accounting Policies and Significant Judgments and Estimates
This discussion and analysis
of our financial condition and results of operations is based on our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities and expenses and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as revenue and expenses during the reporting periods. We evaluate our
estimates and judgments on an ongoing basis. We base our estimates on
historical experience and on various other factors we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results could therefore differ
materially from those estimates under different assumptions or conditions.
An accounting policy is
deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain at the time the estimate is
made, and if different estimates that reasonably could have been used, or
changes in the accounting estimate that are reasonably likely to occur
periodically, could materially change the financial statements. We believe
there have been no significant changes during the three months ended March 31,
2008 to the items that we disclosed as our critical accounting policies and
estimates under Note 1 to our consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2007.
16
Recent
Accounting Pronouncements
In
February 2007, the Financial Accounting Standards Board (FASB) issued
SFAS No. 159,
The Fair Value Option for
Financial Assets and Financial Liabilities
(SFAS No. 159). SFAS No. 159 allows entities to choose,
at specified election dates, to measure eligible financial assets and
liabilities at fair value in situations in which they are not otherwise
required to be measured at fair value.
If a company elects the fair value option for an eligible item, changes
in that items fair value in subsequent reporting periods must be recognized in
current earnings. SFAS No. 159 also establishes presentation and
disclosure requirements designed to draw comparison between entities that elect
different measurement attributes for similar assets and liabilities. SFAS No. 159
is effective for fiscal years beginning after November 15, 2007. We chose not to elect the fair value option
for our financial assets and liabilities existing at January 1, 2008, and
did not elect the fair value option on financial assets and liabilities for
transactions occurring in the three months ended March 31, 2008.
Therefore, the adoption of SFAS No. 159 had no impact on our consolidated
financial statements.
In June 2007, the FASB ratified the Emerging Issues Task Force (EITF) 07-3,
Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities
(EITF 07-3). EITF 07-3 requires
nonrefundable advance payments for goods or services that will be used or
rendered for future research and development activities should be deferred and
capitalized. Such amounts should be recognized as an expense when the related
goods are delivered or services are performed. EITF 07-3 is effective for
fiscal years beginning after December 15, 2007. We adopted EITF 07-3
in the first quarter of 2008. The
adoption of EITF 07-3 did not have a material effect on our financial
position or results of operations.
In December 2007, the EITF reached a consensus on EITF 07-1,
Accounting for Collaborative Arrangements Related to
the Development and Commercialization of Intellectual Property
(EITF 07-1).
EITF 07-1 discusses the appropriate income statement presentation and
classification for the activities and payments between participants in
arrangements related to the development and commercialization of intellectual
property. The sufficiency of disclosure related to these arrangements is also
specified. EITF 07-1 is effective for fiscal years beginning after December 15,
2008. We will adopt EITF 07-1 in the first quarter of 2009 and currently
do not believe the adoption of EITF 07-1 will have a material impact on
our financial position or results of operations.
Results of
Operations
Three Months Ended March 31, 2008 and 2007
Collaboration Revenue.
Since inception, we have not generated any revenue from sales of
commercial products and do not expect to generate any product revenue for the
foreseeable future. To date, substantially all of our revenue has consisted of
collaboration revenue. As of April 30,
2008 we had four ongoing strategic collaborations, only one of which currently
involves research funding and active participation by our personnel. Each of these collaborations included a
technology access fee, research funding, milestone payments and royalties upon
sales of future products that may result from the collaboration. The table
below sets forth our revenue for the three months ended March 31, 2008 and
2007 from each of our current collaborations.
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
Biogen Idec related party
|
|
$
|
1,765,683
|
|
$
|
2,037,099
|
|
J&J PRD
|
|
500,000
|
|
|
|
Merck
|
|
37,500
|
|
229,167
|
|
Total collaboration revenue
|
|
$
|
2,303,183
|
|
$
|
2,266,266
|
|
The research phase, and
research funding, from the Biogen Idec collaboration expires in August 2008. The research phases from each of the other
collaborations are completed.
Collaboration revenue for
the three months ended March 31, 2008 was comparable to the same period in
2007 primarily due to the receipt of a milestone payment from J&J PRD in
the first quarter of 2008, offset by decreased collaboration revenue from both
Biogen Idec and Merck.
17
In the absence of any new
collaborations, we expect to have no research funding after August 2008,
in which case our overall collaboration revenue will be substantially lower in
future years, unless and until any products that may result from the
collaborations advance to a level where significant milestones will be payable
to us.
Research and Development Expense.
Most
of our operating expenses to date have been for research and development
activities. Research and development
expense primarily represents costs incurred:
·
|
|
in the
discovery and development of novel small-molecule therapeutics and the
advancement of product candidates towards clinical trials, including the
Phase 1 and Phase 2 clinical trial costs for SNS-595 and the
Phase 1 clinical trial costs for SNS-032 and SNS-314,
|
|
|
|
·
|
|
in the
development of our proprietary fragment-based Tethering drug discovery
approach and other novel fragment-based drug discovery methods,
|
|
|
|
·
|
|
in the
development of in-house research, preclinical study and development
capabilities,
|
|
|
|
·
|
|
in
connection with in-licensing activities, and
|
|
|
|
·
|
|
in the
conduct of activities we are required to perform in connection with our
strategic collaborations.
|
We expense all research and
development costs as they are incurred.
The table below sets forth
our research and development expense for the three months ended March 31,
2008 and 2007 for each of our product candidate programs:
|
|
Three months ended
March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(in thousands)
|
|
SNS-595
|
|
$
|
4,485
|
|
$
|
3,025
|
|
SNS-032
|
|
1,238
|
|
862
|
|
SNS-314
|
|
804
|
|
1,330
|
|
Discovery programs and new technologies
|
|
1,159
|
|
878
|
|
Other kinase inhibitors
|
|
1,037
|
|
3,185
|
|
Other programs
|
|
20
|
|
27
|
|
Total Expense
|
|
$
|
8,743
|
|
$
|
9,307
|
|
Research and development
expense decreased by $0.6 million, or 6 percent, to $8.7 million for the three
months ended March 31, 2008 from $9.3 million for the same period in 2007.
This decrease is primarily due to (i) a $0.5 million decrease in clinical
trial activity related to SNS-314 and (ii) a $2.2 million decrease in
expenses under our other kinase inhibitors program, partially offset by (iii) a
$1.5 million increase in SNS-595 expenses and a $0.3 million increase in SNS-032
expenses due to increased clinical trial activities, and (iv) a $0.3
million increase in expenses for discovery programs and new technologies due to
increased work on
our proprietary technologies and discovery programs
.
Under our Biogen Idec agreement, we have an
option on a target-by-target basis to co-fund post-Phase 1 development
costs for product candidates directed to up to two collaboration targets, which
may, at our option, include the Raf kinase target. If we exercise our option on
one or more product candidates, our research and development expense will
increase significantly. We expect that research and development expense related
to co-development activities that we might elect to co-fund would consist
primarily of manufacturing costs for the product candidate, clinical
trial-related costs, costs for consultants and contract research organizations,
employee and facilities costs and depreciation of equipment.
We have incurred and expect to continue to
incur substantial research and development expense to conduct clinical trials
on SNS-595, SNS-032 and SNS-314. Clinical trials are costly, and as we continue
to advance our product candidates through preclinical and clinical development,
we expect our related expenses to remain high. For example, we expect to spend
at least $10.0 million (i) to advance our SNS-595 program to
completion of the current Phase 2 clinical trial in ovarian cancer, the
current Phase 1b combination trial in AML and the planned Phase 2 AML
clinical trial in the untreated elderly, (ii) to advance our SNS-032
program to completion of our ongoing Phase 1 clinical trial, and (iii) to
complete the ongoing Phase 1 clinical trial for SNS-314. As of the date of
this report, due to the risks inherent in the clinical trial
18
process and
given the early state of development of our programs, we are unable to estimate
the additional substantial costs we will incur in any continued development of
our product candidates for potential commercialization.
In addition, while we are currently focused
on advancing SNS-595, SNS-032 and SNS-314 through clinical development, we
anticipate that we will make determinations as to which programs to pursue and
how much funding to direct to each program on an ongoing basis in response to
the scientific and clinical success of each product candidate, an assessment as
to the product candidates commercial potential and our overall financial
objectives. This will affect our research and development expense going
forward. We also cannot forecast which product candidates will be subject to
future collaborative or licensing arrangements, when such arrangements will be
secured, if at all, and to what degree such arrangements would affect our
development plans and capital requirements.
General and Administrative Expense.
Our general and administrative expense
consists primarily of salaries and other related costs for personnel in
finance, human resources, facilities management, legal, including intellectual
property management, and general administration, as well as non-cash
stock-based compensation. Other significant costs include facilities costs and
fees paid to outside legal advisors and auditors. General and administrative
expense for the three months ended March 31, 2008 was comparable to the
same period in 2007. While there was a
$0.2 million increase in professional service expenses resulting from increased
patent prosecution fees, audit, legal and tax preparation fees, this was offset
by a $0.2 million decrease in personnel expenses due to a decrease in the use
of temporary services.
Restructuring Charge.
For the three months ended March 31, 2008, we recorded an additional $0.3
million restructuring charge related to the Companys facilities costs on vacated
property. No such charges were recorded
in the three months ended March 31, 2007.
Interest Income.
Interest income decreased by $0.3 million to $0.5 million for the
three months ended March 31, 2008, from $0.8 million for the same period
in 2007 due to lower average balances of cash, cash equivalents and
marketable securities during 2008 as well as lower average interest rates
earned.
Interest Expense.
Interest expense remained relatively consistent at $59,000 for the
three months ended March 31, 2008 compared to $52,000 for the same period
in 2007.
Liquidity
and Capital Resources
Since our inception, we have
funded our operations primarily through the issuance of common and preferred
stock, research funding, technology access fees and milestone payments from our
collaboration partners, debt financings and research grants. As of March 31,
2008, we had cash, cash equivalents and marketable securities of
$36.8 million and an outstanding equipment financing of $2.1 million.
Cash Flows
Net cash used in operating
activities was $10.5 million and $9.5 million for the three months ended March 31,
2008 and 2007, respectively. Net cash used in operating activities for the
three months ended March 31, 2008 resulted primarily from our net loss of
$9.6 million and changes in operating assets and liabilities of $2.0 million,
partially offset by adjustment for non-cash items of $1.1 million primarily
from depreciation and amortization and stock-based compensation expense. Net cash used in operating activities for the
three months ended March 31, 2007 resulted primarily from our net loss of
$9.4 million and changes in operating assets and liabilities of $1.4 million,
partially offset by adjustment for non-cash items of $1.3 million primarily
from depreciation and amortization and stock-based compensation expense.
Net cash provided by
investing activities was $5.2 million for the three months ended March 31,
2008, compared to $14.4 million for the three months ended March 31, 2007.
The cash provided by investing activities during the three months ended March 31,
2008 was primarily attributable to net proceeds from the maturity of marketable
securities of $5.4 million, partially offset by capital expenditures of $0.2
million. Net cash provided by investing
activities during the three months ended March 31, 2007 was related to the
net proceeds from maturities of marketable securities of $14.9 million,
partially offset by the purchase of capital equipment totaling $0.5 million.
Net cash used in financing
activities was $0.3 million for the three months ended March 31, 2008, as
compared with $0.1 million in net cash provided by financing activities for the
three months ended March 31, 2007. Our financing activities for the three
months ended March 31, 2008 consist of equipment loan re-payments of $0.3
million. Our financing activities for the three months ended March 31,
2007 consist of the receipt of $0.1 million in proceeds from stock option
exercises and proceeds from equipment loan borrowing of $0.3 million, partially
offset by equipment loan re-payments of $0.3 million.
Credit and Loan Arrangements
In June 2000, we
entered into an equipment financing agreement with General Electric Capital
Corporation (GECC). Various credit lines have been issued under the financing
agreement since 2000. Our prior $2.6 million credit line expired in March 2008.
A new $0.7 million
19
credit line is available through June 2008. As of March 31, 2008, we had drawn an
aggregate of $10.7 million under various credit lines under the financing
agreement. At March 31, 2008, the
outstanding balance was $2.1 million, which bears interest at rates ranging
from 7.53 percent to 10.61 percent per annum and is due in 36 to 48 monthly
payments. The equipment loans are secured by the equipment financed. As of March 31, 2008, we were in
compliance with all covenants in the GECC agreement.
Operating Capital and Capital Expenditure Requirements
We expect to continue to
incur substantial operating losses in the future. We will not receive any
product revenue unless and until a product candidate has been approved by the
United States Food and Drug Administration (FDA) or similar regulatory agency
in other countries and has been successfully commercialized. As of March 31,
2008, our cash, cash equivalents and marketable securities totaled $36.8
million. We currently anticipate that our cash, cash equivalents, marketable
securities and available credit facilities, together with revenue generated
from our collaborations, will be sufficient to fund our operations through
approximately the middle of 2009. However, we will need to raise substantial
additional funds to continue our operations and bring future products to
market. We cannot be certain that any of our programs will be successful or
that we will be able to raise sufficient funds to complete the development and
commercialization of any of our product candidates currently in development,
should they succeed. Additionally, we plan to continue to evaluate in-licensing
and acquisition opportunities to gain access to new drugs or drug targets that
would fit with our strategy. Any such transaction would likely increase our
funding needs in the future.
Our future funding
requirements will depend on many factors, including but not limited to:
·
|
|
the rate of progress and
cost of our clinical trials, preclinical studies and other discovery and
research and development activities;
|
|
|
|
·
|
|
the costs associated with
establishing manufacturing and commercialization capabilities;
|
|
|
|
·
|
|
the costs of acquiring or
investing in businesses, product candidates and technologies;
|
|
|
|
·
|
|
the costs of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights;
|
|
|
|
·
|
|
the costs and timing of
seeking and obtaining FDA and other regulatory approvals;
|
|
|
|
·
|
|
the effect of competing
technological and market developments; and
|
|
|
|
·
|
|
the economic and other
terms and timing of any collaboration, licensing or other arrangements into
which we may enter.
|
Until we can generate a
sufficient amount of product revenue to finance our cash requirements, which we
may never do, we expect to finance future cash needs primarily through public
or private equity offerings, debt financings or strategic collaborations. We do
not know whether additional funding will be available on acceptable terms, or
at all. If we are not able to secure additional funding when needed, we may
have to delay, reduce the scope of or eliminate one or more of our clinical trials
or research and development programs or conduct additional workforce
reductions. In addition, we may have to partner one or more of our product
candidate programs at an earlier stage of development, which would lower the
economic value of those programs to us.
Off-Balance
Sheet Arrangements
Through the three months
ended March 31, 2008 and the year ended December 31, 2007, we do not
have any off-balance sheet arrangements or relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or variable interest entities, which are typically
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.
Item 3.
Quantitative
and Qualitative Disclosures About Market Risk
The primary objective of our investment
activities is to preserve our capital for the purpose of funding operations
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Our exposure to market rate risk for
changes in interest rates relates primarily to our investment portfolio. This
means that a change in prevailing interest rates may cause the principal amount
of the investments to fluctuate. By policy, we minimize risk by placing our
investments with high quality debt security issuers, limit the amount of credit
exposure to any one issuer, limit duration by restricting the term and hold
investments to maturity except under rare circumstances. To achieve these
objectives, our investment policy allows us to maintain a portfolio of cash
equivalents and short-term
20
investments in
a variety of securities, including commercial paper, money market funds and
corporate debt securities. Our investment policy prohibits investments in
derivative instruments. We did not hold derivative instruments as of March 31,
2008, and we have not held derivative instruments in the past. Through our
money managers, we maintain risk management control systems to monitor interest
rate risk. Our cash and cash equivalents as of March 31, 2008 included
liquid money market accounts. Our marketable securities as of March 31,
2008 included readily marketable debt securities. Due to the short-term nature
of these instruments, a 1% movement in market interest rates would not have a
significant impact on the total value of our portfolio as of March 31,
2008. For example, a
1
/
2
percentage point increase
in short-term interest rates would reduce the fair market value of our
portfolio of March 31, 2008 by approximately $36,000.
Item 4.
Controls
and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure
controls and procedures, as such term is defined in SEC Exchange Act Rule 13a-15(e),
that are designed to ensure that information required to be disclosed in our
Securities Exchange Act of 1934, as amended, reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and
forms and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Exchange
Act Rule 13a-15(b), we carried out an evaluation, under the supervision
and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period
covered by this Form 10-Q. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report on
Form 10-Q.
Changes in Internal Control over Financial Reporting
There have been no changes
in our internal control over financial reporting during the quarter ended March 31,
2008 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.
Legal
Proceedings
From time to time, we may be involved in
routine legal proceedings, as well as demands, claims and threatened
litigation, that arise in the normal course of our business. The ultimate
outcome of any litigation is uncertain and unfavorable outcomes could have a
negative impact on our results of operations and financial condition.
Regardless of outcome, litigation can have an adverse impact on us because of
the defense costs, diversion of management resources and other factors.
We are not currently involved in any material
legal proceedings.
Item 1A.
Risk
Factors
Investing in
our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and all information contained in
this report on Form 10-Q before you decide to purchase our common stock.
If any of the possible adverse events described below actually occurs, we may
be unable to conduct our business as currently planned and our financial
condition and operating results could be harmed. In addition, the trading price
of our common stock could decline due to the occurrence of any of these risks,
and you may lose all or part of your investment.
Please see the language
regarding forward-looking statements in Managements Discussion and Analysis of
Financial Condition and Results of Operations.
We have marked with an asterisk
(*) those risk factors below that reflect substantive changes from the risk
factors included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 17, 2008.
21
Risks Related to Our Business
If we are unable to raise additional
capital in the near term, we may not be able to continue to operate as a going
concern.
We are advancing multiple product candidates through discovery and
development. We will need to raise substantial additional capital to continue
our discovery, development and commercialization activities.
We will need to raise substantial additional capital in the near term to:
·
fund
clinical trials and seek regulatory approvals;
·
continue
our research and expand our development activities;
·
hire
additional development personnel;
·
maintain,
defend and expand the scope of our intellectual property portfolio;
·
implement
additional internal systems and infrastructure;
·
pursue
the development of additional product candidates; and
·
build
or access manufacturing and commercialization capabilities.
Our future funding requirements will depend on many factors, including
but not limited to:
·
the
rate of progress and cost of our clinical trials, preclinical studies and other
discovery and research and development activities;
·
the
economic and other terms and timing of any collaboration, licensing or other
arrangements into which we may enter;
·
the
costs associated with building or accessing manufacturing and commercialization
capabilities;
·
the
costs of acquiring or investing in businesses, product candidates and
technologies;
·
the
costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
·
the
costs and timing of seeking and obtaining FDA and other regulatory approvals;
and
·
the
effect of competing technological and market developments.
We currently anticipate that our cash, cash equivalents and marketable
securities, together with revenues generated from our collaborations and
available credit facilities, will be sufficient to fund our operations through
approximately the middle of 2009. Until we can generate a sufficient amount of
product revenue to finance our cash requirements, which we may never do, we
expect to finance future cash needs primarily through public or private equity
offerings, out-licensing development and/or commercialization rights to one or
more of our product candidates, debt financings or strategic collaborations. We
do not know whether additional funding will be available on acceptable terms,
or at all.
Over the next fifteen months we expect to continue to advance our
ongoing clinical trials of SNS-595 in ovarian cancer and acute myeloid leukemia
(AML), SNS-032 in chronic lymphocytic leukemia or multiple myeloma and
SNS-314 in solid tumors. If we are not able to secure additional funding when
needed, we may have to delay, reduce the scope of or eliminate one or more of
our clinical trials or research and development programs or conduct additional
workforce reductions. For example, in August 2007, we announced that we
reduced our workforce by approximately twenty-five percent and implemented a
revised operating plan to focus our efforts on generating definitive data from
our lead programs while streamlining our operations and extending our financial
resources.
In addition, if we out-license or partner one or more of our product
candidate programs prior to completion of a Phase 2 trial or at an earlier
stage of development, this will likely lower the long-term economic value of
such program or programs to our company. However, if we retain rights for a
longer period with an expectation of improving our economic upside, we will not
only incur substantial development expenditures, but also risk that our
clinical trials may not generate data sufficient to support an out-license or
partnering arrangement.
22
Conditions affecting the equity market may
make it more difficult and costly to raise additional capital.
Currently,
there is turmoil in the U.S. economy in part due to tightening credit markets.
Banks have tightened their lending standards, investors are balking at buying
new corporate bonds and economic growth appears to have begun to slow. Factors
contributing to a slowing economy appear to be reduced credit availability,
falling house prices and rising energy and food prices. If these factors affect
equity markets, our ability to raise capital may be adversely affected.
* We have incurred losses since inception
and anticipate that we will continue to incur losses for the foreseeable
future. We may not ever achieve or sustain profitability.
We are a clinical-stage biopharmaceutical company with a limited
operating history as a public company. We are not profitable and have incurred
losses in each year since our inception in 1998, including a net loss of $9.6
million for the three months ended March 31, 2008. Our net loss for the
years ended December 31, 2007, 2006 and 2005 was $38.8 million,
$31.2 million, and $27.5 million (excluding a preferred stock deemed
dividend of $88.1 million), respectively. As of March 31, 2008, we
had an accumulated deficit of $288.6 million, including the
$88.1 million preferred stock deemed dividend related to our initial
public offering in September 2005.
We do not currently have any products that have been approved for
marketing, and we continue to incur substantial research and development and
general and administrative expenses related to our operations. We expect to
continue to incur losses for the foreseeable future, and we expect these losses
to increase significantly, especially upon commencing Phase 3 clinical
trials, as we continue our research activities and conduct development of, and
seek regulatory approvals for, our product candidates, and commercialize any
approved drugs. Our losses, among other things, have caused and will continue
to cause our stockholders equity and working capital to decrease. To date, we
have derived substantially all of our revenue from collaboration agreements.
The research phases for all but one of our revenue-generating collaboration
agreements is completed, and the research phase of that agreement with Biogen
Idec, if not extended, will end in August 2008. We can offer no assurance
that we will enter into a new collaboration agreement in the near future that
will result in revenue for us. We also do not anticipate that we will generate
revenue from the sale of products for the foreseeable future. If our product
candidates or those of our collaborators fail in clinical trials or do not gain
regulatory approval, or if our future products do not achieve market
acceptance, we may never become profitable. Even if we achieve profitability in
the future, we may not be able to sustain profitability in subsequent periods.
If we fail to enter into new
strategic collaborations, we may have to reduce the scope of, or delay, our
internal product candidate development programs.
Our business model has been based in part upon entering into strategic
collaborations for discovery and/or the development of some of our product
candidates. The research phase of our strategic collaboration with Biogen Idec,
the only one for which we currently receive research funding, expires in August 2008
unless renewed. In the absence of additional sources of capital which may not
be available to us on acceptable terms, the development of our current or
future product candidates may be reduced in scope, delayed or terminated.
*
There is a high risk that our drug discovery and development activities
could be halted or significantly delayed for various reasons.
Our product candidates are in the early stages of drug discovery or
development and are prone to the risks of failure inherent in drug development.
We and our collaboration partners will need to conduct significant additional
preclinical studies and clinical trials before we or our collaboration partners
can demonstrate that our product candidates are safe and effective to the
satisfaction of the FDA and other regulatory authorities. In our industry, it
is unlikely that the limited number of compounds that we have identified as
potential product candidates will actually lead to successful product
development efforts. Failure can occur at any stage of the process, and
successful preclinical studies and early clinical trials do not ensure that
later clinical trials will be successful. We terminated two Phase 2 trials
of SNS-595 in small cell and non-small cell lung cancer. To date, SNS-032 and
SNS-314 have only been tested in humans in Phase 1 trials. None of our product
candidates with collaboration parties have been tested in humans. In addition,
product candidates in later stage trials may fail to show desired efficacy and
safety traits despite having progressed through initial clinical trials. A
number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after obtaining promising results in
earlier trials.
We do not know whether our ongoing clinical trials or any other future
clinical trials with any of our product candidates will be completed on
schedule, or at all, or whether our ongoing or planned clinical trials will
begin on time. The commencement of our planned clinical trials could be
substantially delayed or prevented by several factors, including:
·
limited
number of, and competition for, suitable patients with particular types of
cancer for enrollment in clinical trials;
·
delays
or failures in obtaining regulatory approval to commence a clinical trial;
·
delays
or failures in obtaining sufficient clinical materials.
·
delays
or failures in obtaining IRB approval to conduct a clinical trial at prospective
sites;
23
·
delays
or failures in reaching acceptable clinical trial agreement terms or clinical
trial protocols with prospective sites; or
The completion of our clinical trials could also be substantially
delayed or prevented by several factors, including:
·
slower
than expected rates of patient recruitment and enrollment;
·
failure
of patients to complete the clinical trial;
·
unforeseen
safety issues;
·
lack
of efficacy during clinical trials;
·
inability
or unwillingness of patients or clinical investigators to follow our clinical
trial protocols; and
·
inability
to monitor patients adequately during or after treatment.
For example, due to potential complications from treatment in our
Phase 1 clinical trial of SNS-032, we have provided patients enrolling in
this clinical trial with in-patient hospital care. In addition to increasing
costs to perform this clinical trial, we believe that this has resulted in
difficulty in recruiting patients. Additionally, our clinical trials may be
suspended or terminated at any time by the FDA, other regulatory authorities,
ourselves or, in some cases, our collaboration partners. Any failure to
complete, or significant delay in completing, clinical trials for our product
candidates could harm our financial results and the commercial prospects for
our product candidates.
Recently, we informed the FDA of a stability observation in our SNS-595
drug product. Specifically, visible
articles were observed in the finished product.
We have since identified an impurity in the active pharmaceutical ingredient
(API) for SNS-595 that appears to react with the plastic stoppers in the
packaged vial of the SNS-595 drug product, resulting in the formation of the
particles. Currently, we are
implementing plans to eliminate the particles by revising our manufacturing
process. It will take time to evaluate
whether or not this revised manufacturing process for SNS-595 drug product will
be successful in removing these particles.
We have proposed a short-term corrective action for this issue to the
FDA and they have given us nine months in which to report to them results from
our process optimization activities. If
during this time we are not successful in removing the particles from the
SNS-595 drug product or providing evidence of an improved process or approach
to FDA satisfaction, the FDA may place all of our current clinical trials
testing SNS-595 on clinical hold and we could not resume testing until this
issue was resolved to their satisfaction.
* Our clinical trials for our lead
product candidates, SNS-595, SNS-032 and SNS-314, may not demonstrate safety or
efficacy or lead to regulatory approval.
Our lead product candidates, SNS-595, SNS-032 and SNS-314, are small
molecule therapeutics being developed for the treatment of certain types of
cancer. Many cancer drugs promote cancer cell death by inhibiting cell
proliferation, and commonly have a narrow dose range between efficacy and
toxicity, commonly known as a therapeutic window. We may select a dose for
use in future clinical trials that may prove to be ineffective in treating
cancer. If our clinical trials result in unacceptable toxicity or lack of
efficacy, we may have to terminate further clinical trials. Even if we are able
to find a proper dose that balances the toxicity and efficacy of one or more of
our product candidates, we will be required to conduct extensive additional
clinical trials before we are able to seek the regulatory approvals needed to
market them. If clinical trials of SNS-595, SNS-032 and/or SNS-314 are halted,
or if they do not show that these product candidates are safe and effective in
the indications for which we are seeking regulatory approval, our future growth
would be limited and we may not have any other product candidates to develop.
Furthermore, our development strategy to date for SNS-032 and SNS-314
has been to first test the efficacy and toxicity of each product candidate as a
single agent. We may determine that one or both of these product candidates are
more effective and/or less toxic in combination with another approved cancer
drug. While we are currently conducting a Phase 1b clinical trial of
SNS-595, studying escalating doses of SNS-595 in combination with cytarabine in
acute leukemias, it is possible that when therapeutic levels of SNS-595 are
achieved the toxicity of the combined regimen may be not tolerated in patients.
Likewise, each of our product candidates may only receive FDA and foreign
approvals, if at all, in combination with another cancer drug.
In addition to the risks described above, we are aware of risks that
are specific to SNS-032. In previous Phase 1 clinical trials of SNS-032,
significant safety risks were observed in patients who were administered SNS-032
on either a one-hour or a 24-hour infusion once every three weeks. For example,
increases in certain phases of the cardiac cycle, known as the QT interval, or
the corrected QT interval, or QTc, on the electrocardiograms of patients were
observed in patients receiving the 24-hour infusion regimen. Increased QT
intervals may be associated with increased risk for cardiac rhythm
abnormalities, some of which can be serious, life-threatening events. In
addition, pronounced, rapidly reversible decreases in white blood cells were
observed following infusion under the one-hour infusion regimen, most likely
associated with higher peak drug levels in this regimen. Further, some patients
also experienced reversible liver toxicity, which limited the amount of drug that
24
could be administered to
those patients. Two of these planned clinical trials were discontinued prior to
completion and prior to determination of a maximum tolerated dose by the former
sponsor, BMS, we believe because of a change in priorities within BMS
portfolio. We will not receive regulatory approval for SNS-032 unless we are
able to deliver therapeutically active doses of SNS-032 while keeping
toxicities at acceptable levels. In a Phase 1 clinical trial of SNS-032 in
patients with advanced solid tumors, we delivered the drug on a daily basis in
a one-hour infusion for five consecutive days. However, this dose and regimen
did not allow us to achieve expected efficacious exposure without dose-limiting
toxicity, and therefore we decided not to advance SNS-032 at that time as a
single-agent therapeutic in that patient population.
In our ongoing Phase 1 clinical trial of SNS-032, we are aware
that SNS-032 has the potential to kill a large number of cancer cells rapidly
and all at once and the contents of those cells may be released into a patients
bloodstream. This may result in a higher risk of a severe complication called
tumor lysis syndrome. We have seen biochemical evidence of tumor lysis occurring
in some of our patients in our Phase 1 study.
When tumor lysis syndrome occurs, some chemicals in a patients blood,
such as potassium, uric acid and phosphate levels will rise, whereas some
others like calcium may decline. Tumor lysis syndrome, if severe enough, may
result in kidney failure and, without treatment, can be life-threatening. This
severe complication has a higher risk of occurring early in the course of
treatment and we are taking measures to prevent, monitor and treat this
complication, which may not be effective, when it occurs.
In addition, in clinical trials to date SNS-032 has demonstrated
variable pharmacokinetics (PK), which is the measure of the concentration of
drug in the bloodstream over time. The PK variability results in differences in
drug exposure between patients, and in some cases in the same patient, who are
administered the same dose of SNS-032. Dose levels in Phase 2 clinical
trials will be selected primarily based on safety criteria. Because of the
observed PK variability between and among patients, we believe that there is a
risk that some patients may receive sub-therapeutic exposure, limiting the
opportunity to show activity and efficacy for SNS-032. As with other product
candidates in the biotechnology industry at this stage of development, even if
we are able to find adequate doses and schedules from our planned Phase 2
clinical trials, we will be required to conduct extensive additional clinical
trials before we are able to seek regulatory approval to market SNS-032.
The failure to enroll patients for
clinical trials may cause delays in developing our product candidates.
We may encounter delays if we or our collaboration partners are unable
to enroll enough patients to complete clinical trials. Patient enrollment
depends on many factors, including, the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the trial. Moreover, when one product candidate is
evaluated in multiple clinical trials simultaneously, patient enrollment in
ongoing trials can be adversely effected by negative results from completed
trials. Our product candidates are focused in oncology, which can be a
difficult patient population to recruit.
The results of preclinical studies
and clinical trials may not satisfy the requirements of the FDA or other
regulatory agencies.
Prior to receiving approval to commercialize any of our product
candidates in the United States or abroad, we and our collaboration partners must
demonstrate with substantial evidence from well-controlled clinical trials, to
the satisfaction of the FDA and other regulatory authorities, that such product
candidates are safe and effective for their intended uses. The results from
preclinical studies and clinical trials can be interpreted in different ways.
Even if we and our collaboration partners believe the preclinical or clinical
data for our product candidates are promising, such data may not be sufficient
to support approval by the FDA and other regulatory authorities. Administering
any of our product candidates to humans may produce undesirable side effects,
which could interrupt, delay or halt clinical trials of our product candidates
and result in the FDA or other regulatory authorities denying approval of our
product candidates for any or all targeted indications.
Our approach to developing cancer
therapeutics by inhibiting CDKs, Aurora kinases and Raf kinases has not been
clinically validated and may not be successful.
We have programs to develop small molecule inhibitors of CDKs, Aurora
kinases and Raf kinases for the treatment of cancer. SNS-032 is an inhibitor of
CDKs 2, 7 and 9, and SNS-314 is an inhibitor of Aurora A, B and C
kinases. The therapeutic benefit of inhibiting CDKs, Aurora kinases and/or Raf
kinases in the treatment of human cancer has not been established definitively
in the clinic. There are also other CDKs and Aurora kinase inhibitors in early
clinical development, but they have yet to show therapeutic benefit or they target
other kinases in addition to CDKs and Aurora kinases and their activity may be
associated with inhibition of those other kinases. In addition, there are
conflicting scientific reports regarding the reliance or necessity of CDK2 in
the cell cycle. If CDK, Aurora kinase or Raf kinase inhibition is not an
effective treatment of human cancer, SNS-032, SNS-314 and any other drug
candidates from these kinase programs may have little or no commercial value.
We rely on third parties to
manufacture our product candidates, including SNS-595, SNS-032 and SNS-314, and
depend on a single supplier for the active pharmaceutical ingredients for
SNS-595 and SNS-032. There are a limited number of manufacturers that are
capable of manufacturing the active ingredient of SNS-595.
We do not currently own or operate manufacturing facilities and lack
the capability to manufacture any of our product candidates on a clinical or
commercial scale. As a result, we rely on third parties to manufacture both the
API and drug products for SNS-595, SNS-032 and
25
SNS-314. The APIs are
classified as toxic substances, limiting the available manufacturers. We
believe that there are at least five contract manufacturers in North America
with suitable capabilities for API manufacture, and at least four that can
manufacture our drug products. We currently have established relationships with
only one manufacturer for API for SNS-595 and two manufacturers for the
finished drug product. If our third-party manufacturer is unable or unwilling
to produce API for SNS-595, we will need to establish a contract with another
supplier. However, establishing a relationship with an alternative supplier
would likely delay our ability to produce SNS-595 API for six to nine months,
during which time we will rely on current inventory to supply our drug product
manufacturing activities. We expect to continue to depend on third-party
contract manufacturers for all our API and drug products in the foreseeable
future.
Our product candidates require precise, high quality manufacturing. A
contract manufacturer is subject to ongoing periodic unannounced inspection by
the FDA and corresponding state agencies to ensure strict compliance with current
Good Manufacturing Practice (cGMP), and other applicable government
regulations and corresponding foreign standards. Our contract manufacturers
failure to achieve and maintain high manufacturing standards in compliance with
cGMP regulations could result in manufacturing errors resulting in patient
injury or death, product recalls or withdrawals, delays or interruptions of
production or failures in product testing or delivery, delay or prevention of
filing or approval of marketing applications for our products, cost overruns or
other problems that could seriously harm our business.
To date, our product candidates have been manufactured in small
quantities for preclinical studies and clinical trials. Prior to one of our
product candidates being approved for commercial sale, we will need to
manufacture that product in larger quantities. Significant scale-up of
manufacturing will be accompanied by significant validation studies, which will
be reviewed by the FDA prior to approval. If we are unable to successfully
increase the manufacturing capacity for a product candidate, the regulatory
approval or commercial launch may be delayed or there may be a shortage in
commercial supply.
Any performance failure on the part of a contract manufacturer could
delay clinical development or regulatory approval of our product candidates or
commercialization of our future products, depriving us of potential product
revenue and resulting in additional losses. For example, because we rely on a
single supplier for the API for SNS-595 and SNS-032, the failure of such
supplier to have sufficient quantities of the API or to supply API on a timely
basis or at all would negatively affect us. In addition, our dependence on a
third party for manufacturing may adversely affect our future profit margins.
Our ability to replace an existing manufacturer may be difficult because the
number of potential manufacturers is limited and the FDA must approve any
replacement manufacturer before it can begin manufacturing our product
candidates for commercial sale. Such approval would require new testing and
compliance inspections. It may be difficult or impossible for us to identify
and engage a replacement manufacturer on acceptable terms in a timely manner,
or at all.
We expect to expand our clinical
development and marketing capabilities, and any difficulties hiring or
retaining key personnel or managing this growth could disrupt our operations.
We are highly dependent on the principal members of our management and
technical staff. We expect to expand our clinical development and marketing
capabilities by increasing expenditures in these areas, hiring additional
employees and expanding the scope of our current operations. Future growth will
require us to continue to implement and improve our managerial, operational and
financial systems, expand our facilities and continue to retain, recruit and
train additional qualified personnel, which may impose a strain on our
administrative and operational infrastructure. The competition for qualified
personnel in the biopharmaceutical field is intense. We are highly dependent on
our continued ability to attract, retain and motivate highly-qualified
management, clinical and scientific personnel. Due to our limited resources, we
may not be able to effectively manage the expansion of our operations or
recruit and train additional qualified personnel. If we are unable to retain
key personnel or manage our growth effectively, we may not be able to implement
our business plan.
If we are sued for infringing
intellectual property rights of third parties, litigation will be costly and
time consuming and could prevent us from developing or commercializing our
future products.
Our commercial success depends on not infringing the patents and other
proprietary rights of third parties and not breaching any collaboration or
other agreements we have entered into with regard to our technologies and
product candidates. Numerous third-party U.S.- and foreign-issued patents and
pending patent applications exist in the area of kinases, including CDKs and Aurora
and Raf kinases. Because patent applications can take several years to issue,
there may be pending applications that may result in issued patents that cover
our technologies or product candidates. For example, some pending patent
applications contain broad claims that could represent freedom to operate
limitations for some of our kinase programs should they be issued unchanged. In
addition, because pending patent applications are not required to be published
generally until at least 18 months after they are filed (or at all before
issuance in the case of U.S. patent applications filed before November 29,
2000) there may be claims contained therein that we are not even aware of. If a
third party asserts that we are using technology or compounds claimed in issued
and unexpired patents owned or controlled by the third party, we may need to
obtain a license, enter into litigation to challenge the validity of the
patents or incur the risk of litigation in the event that a third party asserts
that we infringe its patents.
If a third party asserts that we infringe its patents or other
proprietary rights, we could face a number of issues that could seriously harm
our competitive position, including:
26
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infringement
and other intellectual property claims, which would be costly and time
consuming to litigate, whether or not the claims have merit, and which could
delay the regulatory approval process and divert managements attention from
our business;
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·
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substantial
damages for past infringement, which we may have to pay if a court determines
that our product candidates or technologies infringe a third party patent or
other proprietary rights;
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·
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a
court prohibiting us from selling or licensing our product candidates or
technologies unless a third party licenses relevant patent or other
proprietary rights to us, which it is not required to do; and
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·
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if
a license is available from a third party, we may have to pay substantial
royalties or grant cross licenses to our patents or other proprietary rights.
|
If our competitors develop and
market products that are more effective, safer or less expensive than our
future products, our commercial opportunities will be negatively impacted.
The life sciences industry is highly competitive, and we face
significant competition from many pharmaceutical, biopharmaceutical and
biotechnology companies that are researching and marketing products designed to
address cancer and other serious diseases. We are developing small molecule
therapeutics that will compete with other drugs and therapies that currently
exist or are being developed. Many of our competitors have significantly
greater financial, manufacturing, marketing and drug development resources than
we do. Large pharmaceutical companies in particular have extensive experience
in clinical testing and in obtaining regulatory approvals for drugs. These
companies also have significantly greater research capabilities than we do. In
addition, many universities and private and public research institutes are
active in cancer, Alzheimers and inflammation research, some of which are in
direct competition with us.
Our product candidates will compete with a number of cancer
therapeutics that are currently marketed or in development that also target
proliferating cells but at different points of the cell cycle or with a
different mechanism of action. These drugs include irinotecan, doxorubicin,
taxanes and other cytotoxics and targeted therapies. To compete effectively with
these agents, our product candidates will need to demonstrate advantages that
lead to improved clinical efficacy as either a single agent or in combination
settings.
We believe that our ability to successfully compete will depend on,
among other things:
·
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our
ability to develop novel compounds with attractive pharmaceutical properties
and to secure, protect and maintain intellectual property rights based on our
innovations;
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the
efficacy, safety and reliability of our product candidates;
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the
speed at which we develop our product candidates;
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our
ability to design and successfully execute appropriate clinical trials;
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our
ability to maintain a good relationship with regulatory authorities;
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our
ability to obtain, and the timing and scope of, regulatory approvals;
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our
ability to manufacture and sell commercial quantities of future products to
the market; and
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acceptance
of future products by physicians and other healthcare providers.
|
Some of the current key competitors to SNS-595 in AML include Genzyme
Corporations clofarabine, MGI Pharmas decitabine and ViON Corporations
cloretazine, all of which could change the treatment paradigm of acute
leukemia. Each of these compounds is further along in clinical development than
is SNS-595. Liposomal doxorubicin and topotecan are current standards of care
in platinum-resistant ovarian cancer patients, and we are aware that several of
our competitors have initiated Phase 3 clinical trials for this indication.
Further, with respect to SNS-032, we believe that several companies,
including Aventis Pharmaceuticals, Inc., AstraZeneca International,
Cyclacel Pharmaceuticals, Inc., Pfizer Inc., F. Hoffman-La
Roche Ltd., Schering AG and others, are conducting clinical trials with
CDK inhibitors and others are developing other compounds that may compete with
SNS-032.
With respect to SNS-314, Merck and Vertex Pharmaceuticals Incorporated
are co-developing an Aurora kinase inhibitor and Cyclacel Pharmaceuticals, Inc.,
AstraZeneca International, Astex Therapeutics Limited, Millennium
Pharmaceuticals, Inc. and Rigel Pharmaceuticals, Inc. in conjunction
with Merck Serono International S.A., and others are also developing
Aurora kinase inhibitors. Several
27
other companies have Aurora
kinase programs for which they are close to filing an investigational new drug (IND)
with the FDA. Other molecules that may compete with SNS-314 may include other
naturally occurring cell-cycle inhibitor drugs.
If our competitors market products that are more effective, safer or
less expensive than our future products, if any, or that reach the market
sooner than our future products, if any, we may not achieve commercial success.
In addition, the biopharmaceutical industry is characterized by rapid
technological change. Because our research approach integrates many
technologies, it may be difficult for us to stay abreast of the rapid changes
in each technology. If we fail to stay at the forefront of technological
change, we may be unable to compete effectively. Technological advances or
products developed by our competitors may render our technologies or product
candidates obsolete.
Our proprietary fragment-based drug
discovery approaches are experimental and may not discover any therapeutic
compounds of commercial value.
The initial fragment-based proprietary drug discovery approach we
developed is called Tethering. Tethering is a process whereby a target
protein known to be involved in a disease process is engineered to facilitate
the binding of small drug fragments. Once a small fragment is identified, the
fragment is built out using the target proteins surface as a template to make
a new full-size therapeutic compound. We have developed further enhancements to
our fragment-based drug discovery platform that are currently being utilized to
discover new targeted agents. Our drug discovery approaches are unproven and
may not identify any therapeutic compounds of commercial value.
We rely on third parties to conduct
our clinical trials for SNS-595, SNS-032, and SNS-314. If these third parties
do not successfully carry out their contractual duties or meet expected
deadlines, we may be unable to obtain regulatory approval for or commercialize
our product candidates.
We do not have the ability to independently conduct clinical trials for
SNS-595, SNS-032, SNS-314 or any other product candidate. We rely on third
parties, such as contract research organizations, medical institutions,
clinical investigators and contract laboratories, to conduct the planned and
existing clinical trials of our product candidates. If the third parties
conducting our clinical trials do not perform their contractual duties or
obligations, do not meet expected deadlines or need to be replaced, or if the
quality or accuracy of the clinical data they obtain is compromised due to the
failure to adhere to our clinical trial protocols or for any other reason, we
may need to enter into new arrangements with alternative third parties and our
clinical trials may be extended, delayed or terminated or may need to be
repeated, and we may not be able to obtain regulatory approval for or
commercialize the product candidate being tested in such trials.
Our proprietary rights may not
adequately protect our technologies and product candidates.
Our commercial success will depend on our ability to obtain patents and
maintain adequate protection for our technologies and product candidates in the
United States and other countries. As of December 31, 2007, we owned,
co-owned or had rights to approximately 220 issued U.S. and foreign patents and
approximately 345 pending U.S. and foreign patent applications. We will be able
to protect our proprietary rights from unauthorized use by third parties only
to the extent that our proprietary technologies and future products are covered
by valid and enforceable patents or are effectively maintained as trade
secrets.
We apply for patents covering both our technologies and product
candidates, as we deem appropriate. However, we may fail to apply for patents
on important technologies or product candidates in a timely fashion, or at all.
Our existing patents and any future patents we obtain may not be sufficiently
broad to prevent others from practicing our technologies or from developing
competing products and technologies. In addition, we generally do not
exclusively control the patent prosecution of subject matter that we license to
and from others. Accordingly, we are unable to exercise the same degree of control
over this intellectual property as we would over our own. Moreover, the patent
positions of biopharmaceutical companies are highly uncertain and involve
complex legal and factual questions for which important legal principles remain
unresolved. As a result, the validity and enforceability of patents cannot be
predicted with certainty. In addition, we do not know whether:
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we,
our licensors or our collaboration partners were the first to make the
inventions covered by each of our issued patents and pending patent
applications;
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we,
our licensors or our collaboration partners were the first to file patent
applications for these inventions;
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others
will independently develop similar or alternative technologies or duplicate
any of our technologies;
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any
of our or our licensors pending patent applications will result in issued
patents;
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any
of our, our licensors or our collaboration partners patents will be valid
or enforceable;
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any
patents issued to us, our licensors or our collaboration partners will
provide us with any competitive advantages, or will be challenged by third
parties;
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28
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we
will develop additional proprietary technologies that are patentable; or
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the
patents of others will have an adverse effect on our business.
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We also rely on trade secrets to protect some of our technology,
especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to maintain. While we use
reasonable efforts to protect our trade secrets, our or our collaboration
partners employees, consultants, contractors or scientific and other advisors,
or those of our licensors, may unintentionally or willfully disclose our proprietary
information to competitors. Enforcement of claims that a third party has
illegally obtained and is using trade secrets is expensive, time consuming and
uncertain. In addition, foreign courts are sometimes less willing than U.S.
courts to protect trade secrets. If our competitors independently develop
equivalent knowledge, methods and know-how, we would not be able to assert our
trade secrets against them and our business could be harmed.
The composition of matter patents
covering SNS-595 are due to expire in 2015. Even if SNS-595 is approved by the
FDA, we may not be able to recover our development costs prior to the
expiration of these patents.
The composition of our lead product candidate, SNS-595, is covered by
U.S. patent 5,817,669 and its counterpart patents and patent applications in 43
foreign jurisdictions. U.S. patent 5,817,669 is due to expire in October 2015,
and most of its foreign counterparts are due to expire in June 2015. We do
not know whether patent term extensions and data exclusivity periods will be
available in the future. SNS-595 must undergo extensive clinical trials before
it can be approved by the FDA. We do not know when, if ever, SNS-595 will be
approved by the FDA. Even if SNS-595 is approved by the FDA in the future, we
may not have sufficient time to commercialize SNS-595 to enable us to recover
our development costs prior to the expiration of the U.S. and foreign patents
covering SNS-595. Our obligation to pay royalties to Dainippon, the company
from which we licensed SNS-595, may extend beyond the patent expiration, which
will further erode the profitability of this product.
The composition of matter patents
covering SNS-032 are due to expire in 2018 in the United States. Even if
SNS-032 is approved by the FDA, we may not be able to recover our development
costs prior to the expiration of these patents.
The composition of our product candidate SNS-032 is covered by U.S.
patent 6,515,004 and its counterpart patents and patent applications in 33
foreign jurisdictions. U.S. patent 6,515,004 is due to expire in October 2018,
and most of its foreign counterparts are due to expire in May 2021
(although some expire as early as November 2018). We do not know whether
patent term extensions and data exclusivity periods will be available in the
future. SNS-032 must undergo extensive clinical trials before it can be
approved by the FDA. We do not know when, if ever, SNS-032 will be approved by
the FDA. Even if SNS-032 is approved by the FDA in the future, we may not have
sufficient time to commercialize SNS-032 to enable us to recover our
development costs prior to the expiration of the U.S. and foreign patents
covering SNS-032. Our obligation to pay royalties to BMS, the company from
which we licensed SNS-032, may extend beyond the patent expiration, which will
further erode the profitability of this product.
The composition of matter patents
covering SNS-314 are due to expire in 2025 in the United States. Even if
SNS-314 is approved by the FDA, we may not be able to recover our development
costs prior to the expiration of these patents.
The composition of our product candidate SNS-314 is covered by a
pending U.S. patent application and its counterpart patents and patent
applications in 14 foreign jurisdictions. If a patent issues based on the
pending U.S. application, it would be due to expire on or about July 2025,
along with most of its foreign counterparts. We do not know whether patent term
extensions and data exclusivity periods will be available in the future.
SNS-314 must undergo extensive clinical trials before it can be approved by the
FDA. We do not know when, if ever, SNS-314 will be approved by the FDA. Even if
SNS-314 is approved by the FDA in the future, we may not have sufficient time
to commercialize SNS-314 to enable us to recover our development costs prior to
the expiration of any U.S. and foreign patents covering SNS-314.
Our workforce reduction announced in
August 2007 and any future workforce and expense reductions may have an
adverse impact on our internal programs, our ability to hire and retain key
personnel and may be distracting to management.
In August 2007, we announced a workforce reduction of 35 employees
in order to reduce expenses. In light of our continued need for funding and
expense control, we may be required to implement further workforce and expense
reductions in the future. Further workforce and expense reductions could result
in reduced progress on our internal programs. In addition, employees, whether
or not directly affected by a reduction, may seek future employment with our
business partners or competitors. Although our employees are required to sign a
confidentiality agreement at the time of hire, the confidential nature of
certain proprietary information may not be maintained in the course of any such
future employment. Further, we believe that our future success will depend in
large part upon our ability to attract and retain highly skilled personnel. We
may have difficulty retaining and attracting such personnel as a result of a
perceived risk of future workforce and expense reductions. In addition, the
implementation of expense reduction programs may result in the diversion of
efforts of our executive management team and other key employees, which could
adversely affect our business.
29
The commercial success of products
resulting from our collaborations, if any, depends in whole or in part on the
development and marketing efforts of our collaboration partners, over which we
have limited control. If our collaborations are unsuccessful, our potential to
generate future revenue from the sale of these products would be significantly
reduced.
Our dependence on collaboration arrangements subjects our company to a
number of risks. The commercial success of products resulting from our
collaborations, if any, depends, in whole or in part on our collaboration
partners ability to establish the safety and efficacy of our product
candidates, obtain and maintain regulatory approvals and achieve market
acceptance of a product once commercialized. Our collaboration partners may
elect to delay or terminate development of one or more product candidates,
independently develop products that compete with ours, or fail to commit
sufficient resources to the marketing and distribution of products developed
through their collaborations with us. In the event that one or more of our
collaboration partners fails to diligently develop or commercialize a product
candidate covered by one of our collaboration agreements, we may have the right
to terminate our partners rights to such product candidate but we will not
receive any future revenue from that product candidate unless we are able to
find another partner or commercialize the product candidate on our own, which is
likely to result in significant additional expense. Business combinations,
significant changes in business strategy, litigation and/or financial
difficulties may also adversely affect the willingness or ability of one or
more of our collaboration partners to complete their obligations under our
collaboration agreements. If our collaboration partners fail to perform in the
manner we expect, our potential to generate future revenue from the sale of
products resulting from our collaborations, would be significantly reduced.
If conflicts of interest arise
between our collaboration partners and us, any of them may act in their self
interest, which may be adverse to our interests.
If a conflict of interest arises between us and one or more of our
collaboration partners, they may act in their own self interest or otherwise in
a way that is not in the interest of our company or our stockholders. Some of
our collaboration partners are conducting, and future collaboration partners,
if any, may conduct, multiple product development efforts within the disease
area that is the subject of collaboration with our company. In some of our
collaborations, we have agreed not to conduct, independently or with any third
party, any research that is competitive with the research conducted under our
collaborations. Our collaboration partners, however, may develop, either alone
or with others, products in related fields that are competitive with the
product candidates that are the subject of these collaborations. Competing
products, either developed by our collaboration partners or to which our
collaboration partners have rights, may result in their withdrawal of support
for our product candidates.
If one or more of our collaboration partners were to breach or
terminate their collaboration agreements with us or otherwise fail to perform
their obligations thereunder in a timely manner, the preclinical or clinical
development or commercialization of the affected product candidates or research
programs could be delayed or terminated. We do not know whether our current or
any future collaboration partners will pursue alternative technologies or
develop alternative product candidates, either on their own or in collaboration
with others, including our competitors, as a means for developing treatments
for the diseases targeted by collaboration agreements with our company.
We may be subject to damages
resulting from claims that we or our employees have wrongfully used or
disclosed alleged trade secrets of our employees former employers.
Many of our employees were previously employed at universities or
biotechnology or pharmaceutical companies, including our competitors or
potential competitors. We may be subject to claims that we or our employees
have inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers. Litigation may be necessary
to defend against these claims. If we fail in defending such claims, in
addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. A loss of key research personnel or their work product
could hamper or prevent our ability to commercialize our product candidates,
which could severely harm our business. Even if we are successful in defending
against these claims, litigation could result in substantial costs and be a
distraction to management.
We currently have limited marketing
staff and no sales or distribution organization. If we are unable to develop a
sales and marketing and distribution capability on our own or through
collaborations with marketing partners, we will not be successful in
commercializing our future products.
We currently have no sales or distribution capabilities and limited
marketing staff. We intend to establish our own sales and marketing organization
with technical expertise and supporting distribution capabilities to
commercialize at least some of our future products, if any, which will be
expensive and time consuming. Any failure or delay in the development of our
internal sales, marketing and distribution capabilities would adversely impact
the commercialization of these products. With respect to other future products,
we plan to collaborate with third parties that have direct sales forces and
established distribution systems. To the extent that we enter into co-promotion
or other licensing arrangements, our product revenue is likely to be lower than
if we directly marketed or sold our products. In addition, any revenue we
receive will depend upon the efforts of third parties, which may not be
successful and are only partially within our control. If we are unable to enter
into such arrangements on acceptable terms or at all, we may not be able to
successfully commercialize these future products. If we are not successful in
commercializing our future products, either on our own or through
collaborations with one or more third parties, our future product revenue will
suffer and we may incur significant additional losses.
30
We depend on various scientific
consultants and advisors for the success and continuation of our research and
development efforts.
We work extensively with various scientific consultants and advisors.
The potential success of our drug discovery and development programs depends,
in part, on continued collaborations with certain of these consultants and
advisors. We rely on certain of these consultants and advisors for expertise in
our research, regulatory and clinical efforts. Our scientific consultants and
advisors are not our employees and may have commitments and obligations to
other entities that may limit their availability to us. We do not know if we
will be able to maintain such relationships or that such scientific consultants
and advisors will not enter into other arrangements with competitors, any of
which could have a detrimental impact on our research and development
objectives and our business.
Our facilities are located near
known earthquake fault zones, and the occurrence of an earthquake or other
catastrophic disaster could cause damage to our facilities and equipment, which
could require us to cease or curtail operations.
Our facilities are located in the San Francisco Bay Area near known
earthquake fault zones and are vulnerable to significant damage from
earthquakes. We are also vulnerable to damage from other types of disasters,
including fires, floods, power loss, communications failures and similar
events. We are in the process of designing and implementing a disaster relief
plan. However, even if such a plan were in place, if any disaster were to
occur, our ability to operate our business at our facilities may be seriously
or completely impaired and our research could be lost or destroyed. In
addition, the unique nature of our research activities and of much of our
equipment could make it difficult for us to recover from a disaster.
Compliance with changing regulation
of corporate governance and public disclosure may result in additional
expenses.
Changing laws, regulations and standards relating to corporate
governance and public disclosure may create uncertainty regarding compliance
matters. New or changed laws, regulations and standards are subject to varying
interpretations in many cases. As a result, their application in practice may
evolve over time. We are committed to maintaining high standards of corporate
governance and public disclosure. Complying with evolving interpretations of
new or changed legal requirements may cause us to incur higher costs as we
revise current practices, policies and procedures, and may divert management
time and attention from potential revenue-generating activities to compliance
matters. If our efforts to comply with new or changed laws, regulations and
standards differ from the activities intended by regulatory or governing bodies
due to ambiguities related to practice, our reputation may also be harmed.
Further, our board members, chief executive officer and chief financial officer
could face an increased risk of personal liability in connection with the
performance of their duties. As a result, we may have difficulty attracting and
retaining qualified board members and executive officers, which could harm our
business.
Global credit and financial market
conditions negatively impact the value of our current portfolio of cash
equivalents or short-term investments and our ability to meet our financing
objectives.
Our cash and cash equivalents are maintained in highly liquid
investments with remaining maturities of 90 days or less at the time of
purchase. Our marketable securities consist primarily of investments in readily
marketable debt securities with remaining maturities of more than 90 days
at the time of purchase. While as of the date of this filing, we are not aware
of any downgrades, material losses, or other significant deterioration in the
fair value of our cash equivalents or marketable securities since March 31,
2008, no assurance can be given that further deterioration in conditions of the
global credit and financial markets would not negatively impact our current
portfolio of cash equivalents or marketable securities or our ability to meet
our current liquidity needs.
Risks Related to Our Industry
The regulatory approval process is
expensive, time consuming and uncertain and may prevent us or our collaboration
partners from obtaining approvals for the commercialization of some or all of
our product candidates.
The research, testing, manufacturing, selling and marketing of product
candidates are subject to extensive regulation by the FDA and other regulatory
authorities in the United States and other countries, which regulations differ
from country to country. Neither we nor our collaboration partners are
permitted to market our product candidates in the United States until we
receive approval of an new drug application (NDA) from the FDA or in any
other country without the equivalent marketing approval from such country.
Neither we nor our collaboration partners have received marketing approval for
any of our product candidates. In addition, failure to comply with FDA and
other applicable U.S. and foreign regulatory requirements may subject us to
administrative or judicially imposed sanctions, including warning letters,
civil and criminal penalties, injunctions, product seizure or detention,
product recalls, total or partial suspension of production, and refusal to
approve pending NDAs, supplements to approved NDAs or their foreign
equivalents.
Regulatory approval of an NDA or NDA supplement or a foreign equivalent
is not guaranteed, and the approval process is expensive and may take several
years. Furthermore, the development process for oncology products may take
longer than in other therapeutic areas. Regulatory authorities have substantial
discretion in the drug approval process. Despite the time and expense exerted,
failure can occur at any stage, and we could encounter problems that cause us
to abandon clinical trials or to repeat or perform additional preclinical
studies and clinical
31
trials. The number of
preclinical studies and clinical trials that will be required for marketing
approval varies depending on the drug candidate, the disease or condition that
the drug candidate is designed to address, and the regulations applicable to
any particular drug candidate. The FDA or a foreign regulatory authority can
delay, limit or deny approval of a drug candidate for many reasons, including:
·
the
drug candidate may not be deemed safe or effective;
·
regulatory
officials may not find the data from preclinical studies and clinical trials
sufficient;
·
the
FDA or foreign regulatory authority might not approve our or our third-party
manufacturers processes or facilities; or
·
the
FDA or foreign regulatory authority may change its approval policies or adopt
new regulations.
We may be subject to costly claims
related to our clinical trials and may not be able to obtain adequate
insurance.
Because we conduct clinical trials in humans, we face the risk that the
use of our product candidates will result in adverse side effects. We cannot
predict the possible harms or side effects that may result from our clinical
trials. Although we have clinical trial liability insurance for up to
$10.0 million aggregate, our insurance may be insufficient to cover any
such events. We do not know whether we will be able to continue to obtain
clinical trial coverage on acceptable terms, or at all. We may not have
sufficient resources to pay for any liabilities resulting from a claim excluded
from, or beyond the limit of, our insurance coverage. There is also a risk that
third parties that we have agreed to indemnify could incur liability. Any
litigation arising from our clinical trials, even if we were ultimately
successful, would consume substantial amounts of our financial and managerial
resources and may create adverse publicity.
Even if we receive regulatory
approval to market our product candidates, the market may not be receptive to
our products.
Even if our product candidates obtain regulatory approval, resulting
products, if any, may not gain market acceptance among physicians, patients,
healthcare payors and/or the medical community. We believe that the degree of
market acceptance will depend on a number of factors, including:
·
timing
of market introduction of competitive products;
·
efficacy
of our product;
·
prevalence
and severity of any side effects;
·
potential
advantages or disadvantages over alternative treatments;
·
strength
of marketing and distribution support;
·
price
of our future products, both in absolute terms and relative to alternative
treatments; and
·
availability
of reimbursement from health maintenance organizations and other third-party
payors.
For example, the potential toxicity of single and repeated doses of
SNS-595 has been explored in a number of animal studies that suggest the
mechanism-based dose-limiting toxicities in humans receiving SNS-595 may be
similar to some of those observed in approved cytotoxic agents, including
reversible toxicity to bone marrow cells, the gastrointestinal system and other
systems with rapidly dividing cells. In our Phase 1 and Phase 2
clinical trials of SNS-595, we have witnessed the following side effects,
irrespective of causality, ranging from mild to more severe: lowered white
blood cell count that may lead to a serious or possibly life-threatening
infection, hair loss, mouth sores, fatigue, nausea with or without vomiting,
lowered platelet count, which may lead to an increase in bruising or bleeding,
lowered red blood cell count (anemia), weakness, tiredness, shortness of
breath, diarrhea and intestinal blockage. Our ongoing Phase 1 clinical
trials of SNS-032 and SNS-314 have a limited number of patients enrolled thus
far. We can not yet assess the extent and type of side effects and/or
unacceptable toxicities that these product candidates might exhibit in the
patient populations and dosing regimens being evaluated.
If our future products fail to achieve market acceptance, due to
unacceptable side effects or any other reasons, we may not be able to generate
significant revenue or to achieve or sustain profitability.
Even if we receive regulatory
approval for a product candidate, we will be subject to ongoing FDA and other
regulatory obligations and continued regulatory review, which may result in
significant additional expense and limit our ability to commercialize our
future products.
32
Any regulatory approvals that we or our collaboration partners receive
for our product candidates may also be subject to limitations on the indicated
uses for which the product may be marketed or contain requirements for
potentially costly post-marketing studies. In addition, even if approved, the
labeling, packaging, adverse event reporting, storage, advertising, promotion
and recordkeeping for any product will be subject to extensive and ongoing
regulatory requirements. The subsequent discovery of previously unknown
problems with a product, including adverse events of unanticipated severity or
frequency, may result in restrictions on the marketing of the product, and
could include withdrawal of the product from the market.
Regulatory policies may change and additional government regulations
may be enacted that could prevent or delay regulatory approval of our product
candidates. We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action,
either in the United States or abroad. If we are not able to maintain
regulatory compliance, we might not be permitted to market our future products
and we may not achieve or sustain profitability.
The coverage and reimbursement
status of newly approved drugs is uncertain, and failure to obtain adequate
coverage and reimbursement could limit our ability to market any future
products we may develop and decrease our ability to generate revenue.
There is significant uncertainty related to the third party coverage
and reimbursement of newly approved drugs both nationally and internationally.
The commercial success of our future products in both domestic and
international markets depends on whether third-party coverage and reimbursement
is available for the ordering of our future products by the medical profession
for use by their patients. Medicare, Medicaid, health maintenance organizations
and other third-party payors are increasingly attempting to manage healthcare
costs by limiting both coverage and the level of reimbursement of new drugs
and, as a result, they may not cover or provide adequate payment for our future
products. These payors may not view our future products as cost-effective, and
reimbursement may not be available to consumers or may not be sufficient to
allow our future products to be marketed on a competitive basis. Likewise, legislative
or regulatory efforts to control or reduce healthcare costs or reform
government healthcare programs could result in lower prices or rejection of our
future products. Changes in coverage and reimbursement policies or healthcare
cost containment initiatives that limit or restrict reimbursement for our
future products may reduce any future product revenue.
Failure to obtain regulatory
approval in foreign jurisdictions will prevent us from marketing our products
abroad.
We intend to market our future products in international markets. In
order to market our future products in Canada, the European Union and many
other foreign jurisdictions, we must obtain separate regulatory approvals. We
have had limited interactions with foreign regulatory authorities, and the
approval procedures vary among countries and can involve additional testing at
significant cost. The time required to obtain approval may differ from that
required to obtain FDA approval. Approval by the FDA does not ensure approval
by regulatory authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory authorities in
other foreign countries or by the FDA. The foreign regulatory approval process
may include all of the risks associated with obtaining FDA approval. We may not
obtain foreign regulatory approvals on a timely basis, if at all. We may not be
able to file for regulatory approvals and may not receive necessary approvals
to commercialize our products in any market.
Foreign governments often impose
strict price controls, which may adversely affect our future profitability.
We intend to seek approval to market our future products in both the
United States and foreign jurisdictions. If we obtain approval in one or more
foreign jurisdictions, we will be subject to rules and regulations in
those jurisdictions relating to our product. In some foreign countries,
particularly in the European Union, prescription drug pricing is subject to
governmental control. In these countries, pricing negotiations with
governmental authorities can take considerable time after the receipt of
marketing approval for a drug candidate. To obtain reimbursement or pricing
approval in some countries, we may be required to conduct a clinical trial that
compares the cost-effectiveness of our future product to other available
therapies. If reimbursement of our future products is unavailable or limited in
scope or amount, or if pricing is set at unsatisfactory levels, we may be
unable to achieve or sustain profitability.
We may incur significant costs
complying with environmental laws and regulations, and failure to comply with
these laws and regulations could expose us to significant liabilities.
We use hazardous chemicals and radioactive and biological materials in
our business and are subject to a variety of federal, state, regional and local
laws and regulations governing the use, generation, manufacture, storage,
handling and disposal of these materials. Although we believe our safety
procedures for handling and disposing of these materials and waste products
comply with these laws and regulations, we cannot eliminate the risk of
accidental injury or contamination from the use, storage, handling or disposal
of hazardous materials. In the event of contamination or injury, we could be
held liable for any resulting damages, and any liability could significantly
exceed our insurance coverage, which is limited to $0.1 million for
pollution cleanup, and we are uninsured for third-party contamination injury.
Risks Related to Our Common Stock
If we sell shares of our common
stock in future financings, stockholders may experience immediate dilution.
33
We may from time to time issue additional shares of common stock at a
discount from the current trading price of our common stock. As a result, our
stockholders would experience immediate dilution upon the purchase of any
shares of our common stock sold at such discount.
In addition, as opportunities present themselves in the future, we may
enter into financing or similar arrangements, including the issuance of debt
securities, preferred stock or common stock. If we issue additional common or
preferred stock or securities convertible into common stock, our stockholders could
experience dilution.
The price of our common stock may
continue to be volatile, and the value of an investment in our common stock may
decline.
We sold shares of common stock in our IPO in September 2005 at a
price of $7.00 per share, and through May 8, 2008, our stock has
subsequently traded as low as $1.00 per share. An active and liquid trading
market for our common stock may not develop or be sustained. Factors that could
cause volatility in the market price of our common stock include, but are not
limited to:
·
failure
to raise additional capital to carry through with our clinical development
plans;
·
results
from, and any delays in or discontinuance of, our clinical trial programs,
including our ongoing and planned clinical trials for SNS-595, SNS-032 and
SNS-314;
·
announcements
of FDA non-approval of our product candidates, including SNS-595, SNS-032 or
SNS-314, delays in filing regulatory documents with the FDA or other regulatory
agencies, or delays in the review process by the FDA or other foreign
regulatory agencies;
·
announcements
relating to our ongoing collaborations with Biogen Idec, Johnson &
Johnson PRD and Merck;
·
failure
or discontinuation of any of our research programs;
·
delays
in the commercialization of our future products;
·
market
conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors;
·
issuance
of new or changed securities analysts reports or recommendations;
·
actual
and anticipated fluctuations in our quarterly operating results;
·
developments
or disputes concerning our intellectual property or other proprietary rights;
·
introduction
of technological innovations or new products by us or our competitors;
·
issues
in manufacturing our product candidates or future products, if any;
·
market
acceptance of our future products, if any;
·
deviations
in our operating results from the estimates of analysts;
·
third-party
healthcare reimbursement policies;
·
FDA
or other U.S. or foreign regulatory actions affecting us or our industry;
·
litigation
or public concern about the safety of our product candidates or future
products, if any;
·
sales
of our common stock by our officers, directors or significant stockholders; and
·
additions
or departures of key personnel.
In addition, the stock markets in general, and the markets for
pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have
experienced extreme volatility that has often been unrelated to the operating
performance of the issuer. These broad market fluctuations may adversely affect
the trading price or liquidity of our common stock. In the past, when the
market price of a stock has been volatile, holders of that stock have sometimes
instituted securities class action litigation against the issuer. If any of our
stockholders were to bring such a lawsuit against us, we could incur
substantial costs defending the lawsuit and the attention of our management
would be diverted from the operation of our business.
34
Provisions of our charter documents
or Delaware law could delay or prevent an acquisition of our company, even if
the acquisition would be beneficial to our stockholders, and could make it more
difficult to change management.
Provisions of our amended and restated certificate of incorporation and
amended and restated bylaws may discourage, delay or prevent a merger,
acquisition or other change in control that stockholders may consider
favorable, including transactions in which stockholders might otherwise receive
a premium for their shares. In addition, these provisions may frustrate or
prevent any attempt by our stockholders to replace or remove our current
management by making it more difficult to replace or remove our board of
directors. These provisions include:
·
a
classified Board of Directors so that not all directors are elected at one
time;
·
a
prohibition on stockholder action through written consent;
·
limitations
on our stockholders ability to call special meetings of stockholders;
·
an
advance notice requirement for stockholder proposals and nominations; and
·
the
authority of our Board of Directors to issue preferred stock with such terms as
our Board of Directors may determine.
In addition, Delaware law prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested stockholder,
generally a person who, together with its affiliates, owns or within the last
three years has owned 15% of our voting stock, for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. Accordingly, Delaware law may discourage, delay or prevent a change in
control of our company.
Provisions in our charter documents and provisions of Delaware law
could limit the price that investors are willing to pay in the future for
shares of our common stock.
The ownership of our common stock is
highly concentrated, and your interests may conflict with the interests of our
existing stockholders.
Our executive officers and directors and their affiliates beneficially
owned approximately 42.0 percent of our outstanding common stock as of February 29,
2008. Accordingly, these stockholders, acting as a group, have significant influence
over the outcome of corporate actions requiring stockholder approval, including
the election of directors, any merger, consolidation or sale of all or
substantially all of our assets or any other significant corporate transaction.
These stockholders could delay or prevent a change of control of our company,
even if such a change of control would benefit our other stockholders. The
significant concentration of stock ownership may adversely affect the trading
price of our common stock due to investors perception that conflicts of
interest may exist or arise.
We have never paid dividends on our
capital stock and we do not anticipate paying any cash dividends in the
foreseeable future.
We have never declared or paid cash dividends on our capital stock. We
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We currently intend to retain all available funds and any
future earnings to fund the development and growth of our business. As a
result, capital appreciation, if any, of our common stock will be our
stockholders sole source of gain for the foreseeable future.
We are at risk of securities class
action litigation.
In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biotechnology companies have
experienced greater than average stock price volatility in recent years. If we
faced such litigation, it could result in substantial costs and a diversion of
managements attention and resources, which could harm our business.
Changes in financial accounting
standards related to share-based payments are expected to continue to have an
effect on our reported results.
On January 1, 2006, we adopted Statement of Financial Accounting
Standards No. FAS 123 (revised 2004) (FAS 123R),
Share-Based Payment
, which requires that
we record compensation expense in the statement of operations for share-based
payments, such as employee stock options, using the fair value method. The
adoption of this standard is expected to continue to have an effect on our
reported results of operations, although it will not affect our cash flows, and
could adversely impact our ability to provide accurate guidance on our future
reported financial results due to the variability of the factors used to
estimate the values of share-based payments. If factors change and we employ
different assumptions or different valuation methods in the application of FAS 123R
in future periods, the compensation expense
35
that we record under
FAS 123R may differ significantly from what we have recorded in the
current period, which could negatively affect our stock price and our stock
price volatility.
Item 2.
Unregistered
Sales of Equity Securities and Use of Proceeds
There were no repurchases of
securities or any sales of unregistered equity securities during the quarter
ended March 31, 2008.
Item 3.
Defaults
Upon Senior Securities
None.
Item 4.
Submission
of Matters to a Vote of Security Holders
None.
Item 5.
Other
Information
None.
Item 6.
Exhibits
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated
Certificate of Incorporation of the Registrant (Delaware) (incorporated by
reference to Exhibit 3.1 to the Companys Annual Report on
Form 10-K/A filed on May 23, 2007).
|
|
|
|
3.2
|
|
Amended and Restated
Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Companys Annual Report on Form 10K-A on Form S-1 filed on
May 23, 2007).
|
|
|
|
4.1
|
|
Reference is made to
Exhibit 3.1 and 3.2.
|
|
|
|
10.55*
|
|
Sunesis
Pharmaceuticals, Inc. 2008 Bonus Program (incorporated by reference to
Exhibit 10.55 to the Registrants Current Report on Form 8-K filed
on March 11, 2008).
|
|
|
|
31.1
|
|
Certification of Chief
Executive Officer as required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
31.2
|
|
Certification of Chief
Financial Officer as required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
32.1#
|
|
Certification of Chief
Executive Officer as required by Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
32.2#
|
|
Certification of Chief
Financial Officer as required by Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended.
|
*
|
Management
contract, compensating plan or arrangement.
|
|
|
#
|
In
accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC
Release Nos. 33-8238 and 34-47986, Final Rule; Managements Reports on
Internal Control over Financial Reporting and Certification of Disclosure in
Exchange Act Periodic Reports, the Certifications furnished in
Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q
and will not be filed for purposes of Section 18 of the Exchange Act.
Such certifications will not be deemed incorporated by reference into any
filing under the Securities Act or the Exchange Act, except to the extent
that the registrant specifically incorporates it by reference.
|
36
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
SUNESIS PHARMACEUTICALS, INC.
|
|
|
(Registrant)
|
|
|
|
Date: May 9, 2008
|
|
/S/
ERIC H. BJERKHOLT
|
|
|
Eric
H. Bjerkholt
Senior Vice President, Corporate Development and Finance,
Chief Financial Officer
|
Exhibit Index
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated
Certificate of Incorporation of the Registrant (Delaware) (incorporated by
reference to Exhibit 3.1 to the Companys Annual Report on
Form 10-K/A filed on May 23, 2007).
|
|
|
|
3.2
|
|
Amended and Restated
Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Companys Annual Report on Form 10K-A on Form S-1 filed on
May 23, 2007).
|
|
|
|
4.1
|
|
Reference is made to
Exhibit 3.1 and 3.2.
|
|
|
|
10.55*
|
|
Sunesis
Pharmaceuticals, Inc. 2008 Bonus Program (incorporated by reference to
the Registrants Current Report on Form 8-K filed on March 11,
2008).
|
|
|
|
31.1
|
|
Certification of Chief
Executive Officer as required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
31.2
|
|
Certification of Chief
Financial Officer as required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
32.1#
|
|
Certification of Chief
Executive Officer as required by Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended.
|
|
|
|
32.2#
|
|
Certification of Chief
Financial Officer as required by Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended.
|
*
|
Management
contract, compensating plan or arrangement.
|
|
|
#
|
In
accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC
Release Nos. 33-8238 and 34-47986, Final Rule; Managements Reports on
Internal Control over Financial Reporting and Certification of Disclosure in
Exchange Act Periodic Reports, the Certifications furnished in
Exhibits 32.1 and 32.2 hereto are deemed to accompany this
Form 10-Q and will not be filed for purposes of Section 18 of the
Exchange Act. Such certifications will not be deemed incorporated by
reference into any filing under the Securities Act or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference.
|
37
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