2-Star Stocks Poised to Plunge: Sunesis Pharmaceuticals?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, drug developer Sunesis Pharmaceuticals (Nasdaq: SNSS  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Sunesis and see what CAPS investors are saying about the stock right now.

Sunesis facts

Headquarters (founded) South San Francisco, Calif. (1998)
Market Cap $296.3 million
Industry Biotechnology
Trailing-12-Month Revenue $2.5 million
Management CEO Daniel Swisher, Jr. (since 2004)
CFO Eric Bjerkholt (since 2004)
Return on Capital (average, past 3 years) (50.5%)
Cash/Debt $29.3 million/$9.6 million
Competitors AstraZeneca
Corden Pharma Switzerland LLC
Pfizer

Source: S&P Capital IQ; Motley Fool CAPS.

On CAPS, 23% of the 97 members who have rated Sunesis believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star zzlangerhans, touched on the stock's seemingly unsustainable valuation:

If Sunesis deserves a [$300M] market cap for postponed topline data in 2014 and [$29M] in cash, what would they have deserved if the trial had continued without a change in enrollment and topline data in 2013? [$600M]? The continued run-up in the share price makes no logical sense. It implies that prior to interim data the stock was priced for early termination of VALOR for futility.

If Sunesis stood alone as an apparent runaway stock, I'd be more concerned that I was missing critical information. But at this time, the sector seems to be chock-a-block with disproportionately capped companies that have long track records of failure. Eventually this bullish worm will turn and the true winners will be separated from the dart throwers.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2012, at 5:08 PM, CarolePaint wrote:

    I'm thinking you have NOT done your homework FOOL.

    About up and coming Vosaroxin by Sunesis Pharmaceuticals ( SNSS )

    Vosaroxin is a first-in-class anti-cancer quinolone derivative (AQD), a class of compounds that has not been used previously for the treatment of cancer. Vosaroxin both intercalates DNA and inhibits topoisomerase II, resulting in replication-dependent, site-selective DNA damage, G2 arrest and apoptosis. Both the U.S. Food and Drug Administration (FDA) and European Commission have granted orphan drug designation to vosaroxin for the treatment of acute myeloid leukemia. Additionally, vosaroxin has been granted fast track designation by the FDA for the potential treatment of relapsed or refractory acute myeloid leukemia in combination with cytarabine.

    About VALOR

    VALOR is a Phase 3, randomized, double-blind, placebo-controlled, pivotal trial in patients with first relapsed or refractory AML. The trial's target enrollment is 675 patients at more than 100 leading sites in the U.S., Canada, Europe, Australia and New Zealand. The VALOR trial is currently enrolling patients, who are randomized one to one to receive either vosaroxin on days one and four in combination with cytarabine daily for five days, or placebo in combination with cytarabine. The trial's primary endpoint is overall survival. For more information on the VALOR trial, please visit www.valortrial.com.

    About AML

    AML is a rapidly progressing cancer of the blood characterized by the uncontrolled proliferation of immature blast cells in the bone marrow. The American Cancer Society estimates there will be approximately 13,780 new cases of AML and 10,200 deaths from AML in the U.S. in 2012. Additionally, it is estimated that the prevalence of AML across major global markets (U.S., France, Germany, Italy, Spain, United Kingdom, and Japan) is over 50,000. AML is generally a disease of older adults, and the median age of a patient diagnosed with AML is about 67 years. AML patients with relapsed or refractory disease and newly diagnosed AML patients over 60 years of age with poor prognostic risk factors typically die within one year, resulting in an acute need for new treatment options for these patients.

    About Sunesis Pharmaceuticals

    Sunesis is a biopharmaceutical company focused on the development and commercialization of new oncology therapeutics for the treatment of solid and hematologic cancers. Sunesis has built a highly experienced cancer drug development organization committed to advancing its lead product candidate, vosaroxin, in multiple indications to improve the lives of people with cancer. For additional information on Sunesis, please visit http://www.sunesis.com.

  • Report this Comment On October 08, 2012, at 10:32 PM, Hope4GoodFuture wrote:

    Sorry, Mr. Pacampara has a good point and I am confused by the rise in stock price. I have been following this Company for some time and had high hopes for it. Each time the CEO described the trial (numerous presentations) he said that the Company feels the most likely outcome of the interim analysis is to continue the trial but without having to increase accrual. In other words, the recommendation to increase accrual means that vosaroxin does not work as well as the Company itself expected. That doesn't mean the drug will ultimately fail Phase III or that it won't have some market for some period of time; it just means its not nearly as good as the Company itself expected. The stock price skyrocketing after this announcement might mean that prior to this announcement the investing public thought the drug was a total dog and now thinks its not as bad as originally thought. This, to me, leaves the question wide open as to how long this drug, if approved, will be used as there are other drugs for this indication coming down the pike not too long afterwards. The movement of the stock price post announcement seems- on the surface- to be illogical. I would like to hear the logic of people who loaded up on the stock post announcement.

  • Report this Comment On November 21, 2012, at 5:52 PM, zzlangerhans wrote:

    CarolePaint, your "homework" seems to involve cutting and pasting from Sunesis press releases that you probably haven't even read. Unless you're still in elementary school, your homework gets an F.

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