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Sunesis Takes a Run Through the Feuerstein-Ratain Rule

BOSTON ( TheStreet) -- Scott R. asks me to give  Sunesis Pharmaceuticals (SNSS - Get Report) another run through the Feuerstein-Ratain Rule.

What does the Feuerstein-Ratain Rule suggest in terms of predicting failure (or not) for Sunesis' phase III study? I know you addressed this question in the spring when Sunesis' market cap was lower and "iffier."  If I look back now, those four months from, say, September, you can see a several month stock spike in the history that would have, I think, gotten the stock above the $300 million market cap threshold. But Sunesis' market cap didn't stay there, so I wonder about your interpretation today. Thanks.

Sunesis' phase III "VALOR" study of vosaroxin in relapsed/refractory acute myeloid leukemia didn't fare well when I last ran it through the Feuerstein-Ratain Rule in May. Sunesis' market cap of $290 million predicted failure for the vosaroxin study, although I only had a rough guess for when the company was expected to announce results.

Today, we can more accurately predict the timing of top-line results from the VALOR study. On Aug. 5, Sunesis disclosed for the first time that the 562nd death had been recorded, triggering the analysis of the survival results. Sunesis wouldn't say exactly when the 562nd patient died but let's assume it occurred within a couple of weeks of the Aug. 5 announcement. Let's also assume Sunesis needs about eight weeks to analyze the vosaroxin results.

That makes the announcement of the vosaroxin VALOR study results likely in the Sept 15-30 timeframe. To be clear, Sunesis isn't being any more specific than "second half 2014" but it's reasonably likely we see the study results later this month.

On May 15 (four months back from Sept. 15) Sunesis' market cap was $283 million. On May 30, Sunesis' market cap was $309 million. 

Under this scenario, the F-R Rule predicts failure for the phase III VALOR study of vosaroxin in relapsed/refractory AML. 

Sunesis' odds improve if the vosaroxin study results are announced in October.  The average market cap for Sunesis in June (four months back) was $355 million, which puts the company outside the F-R Rule "failure zone" but only just barely. I'd argue a market cap less than $400 million and no partner doesn't exactly suggest much investor confidence in vosaroxin, especially given the tremendous value inflation we've seen across the biotech sector this year. 

[As previously stated, the F-R Rule does a much better job predicting cancer drug clinical trial failure than it does predicting positive results.]

Analysts covering Sunesis also seem to be on the fence about the looming vosaroxin AML study results. Recent research notes previewing the study are wishy-washy for the most part, predicting success but with low odds. "We believe the benefit of vosaroxin in VALOR is likely to be modest, and it is difficult to get a high level of confidence around the final outcome," writes Credit Suisse's Jason Kantor. UBS analyst Andrew Peters has a $14 price target on Sunesis, which "assumes a 60% POS [probability of success] for VALOR, suggesting the market is overly cautious on data."

One of the overhanging concerns about Sunesis for investors is that the VALOR study might be so hugely over-powered from a statistical standpoint to allow a small improvement in survival favoring vosaroxin over the control to be statistically significant but clinically meaningless. Traders might not care about this debate since Sunesis shares will likely move higher on any press release announcing vosaroxin achieved the study's primary endpoint. Whether or not the actual data are good enough for FDA approval or compelling enough for doctors to use the drug in AML patients could be a debate kicked down the road. 

One last note: On Friday, Sunesis executives, directors and some significant shareholders disclosed sales of company stock.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.


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