Sunesis Pharmaceuticals Inc.- Self Offering

News from Christmas eve.

2:58 PM ET 12/24/09 | Dow Jones

Sunesis Pharmaceuticals Inc. (SNSS) registered to offer up to $50 million in a combination of securities to fund further development of the biopharmaceutical company’s lead product, voreloxin.

The company–which said in a Securities and Exchange Commission filing that it could offer common stock, warrants or units–plans to use proceeds to fund working-capital needs, capital expenditures and other general corporate purposes.

Sunesis is planning for a Phase III development for the compound. Voreloxin is an anti-cancer quinolone derivative–a class of compounds that hasn’t been used for cancer treatment.

Last month, the company, which was founded in 1998 as Mosaic Pharmaceuticals, said the Food and Drug Administration had granted voreloxin orphan-drug designation for the treatment of acute myeloid leukemia, or AML. Sunesis expects to launch a pivotal trial for AML next year, and it may seek a partnership to maximize commercial potential of the compound.

Last month, Sunesis reported its third-quarter loss narrowed on a 35% decline in operating expenses. Revenue also tumbled 97% to $12,500.

Shares were down 2.3%, or 3 cents, to $1.25 in after-hours trading. The stock has rebounded in recent months, but is still under the all-time high of more than $7 set in 2006.”

What’s going to happen next?

December 24, 2009- the security reached $1.28 and $1.24 in after hour trading.
December 28, 2009- it closed @ $1.15

What is to be understood from the above article: share dilution.

What I have learned from past experience with other security I took position in- namely CVM Cel-Sci Corp is that this is the kiss of death short term. CVM went through the same kind of scenario and currently is depressingly low, at below $1.(Update: on December 28, 2009 it closed at $0.93)

When they filled out the shelf offering, some people predicted the drop in share price and immediately brandished as being shorts. Others came up with the theory that something really, really good is just around the corner, just about to be announced and the company came up with the offering just in case. Guess what? The ‘shorts’ were right. Since the offering the security is in free fall.

Opinion from the SNSS message board:
“From what i have seen, it’s a shelf offering so the $50 million of shares have not been issued and there is nothing to say they will be either…at least not all of them.

Why is this somewhat positive? First, it increases SNSS’s leverage when negotiating a partnership. If companies think they are out of cash, they can either buy SNSS for cheap or make a deal with them that is not advantageous to them because SNSS would be viewed as desperate. Second, having money in the bank is always a good thing. The stock price is much higher than its been so why not raise additional capial? I rather they have working capital than none at all. Again, this is not a bad thing. The shorts are just trying to scare you and they aren’t very bright. I’m surprised how ignorant the shorts/bashers are here.”

As it can be seen, it follows the same path as CVM.

Holders of the SNSS should better brace themselves for a drop.
Even more proof: short interest increased a whooping 1168%!!!!

Short Interest (Shares Short)
Days To Cover (Short Interest Ratio)
Short Percent of Float
1.69 %
Short Interest – Prior
Short % Increase / Decrease
1168.22 %

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