Mail Stop 3-9 January 19, 2005
Daniel Swisher
Chief Executive Officer
Sunesis Pharmaceuticals, Inc.
341 Oyster Point Boulevard
South San Francisco, California 94080
Re: Sunesis Pharmaceuticals, Inc.
Registration Statement on Form S-1
Filed December 23, 2005
File Number 333-121646
Dear Mr. Swisher:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Please note that we will send you our comments on your pending
request for confidential treatment by separate letter. All
confidential treatment issues must be resolved before we will
consider a request for acceleration of the registration statement.
2. Please provide us proofs of all graphic, visual or photographic
information you will provide in the printed prospectus prior to
its
use, for example in a preliminary prospectus. Please note we may
have comments regarding this material.
3. Please note that when you file a pre-effective amendment
containing pricing-related information, we may have additional
comments. As you are likely aware, you must file this amendment
prior to circulating the prospectus.
4. Please note that when you file a pre-effective amendment that
includes your price range, it must be bone fide. We interpret this
to
mean that your range may not exceed $2 if you price below $20 and
10%
if you price above $20.
5. Please file as promptly as possible all exhibits required by
the
Exhibit Table provided in Item 601(a) of Regulation S-K.
6. Please note that where we provide examples to illustrate what
we
mean by our comments, they are examples and not exhaustive lists.
If
our comments are applicable to portions of the filing that we have
not cited as examples, make the appropriate changes in accordance
with our comments.
7. In your response letter, please state our comment and then
explain
each change that has been made in response to a comment. In
addition, you should also reference each page number in which
disclosure has been revised in response to a comment so that we
can
easily place your revised disclosure in its proper context.
8. Throughout the registration statement, you cite various
estimates,
statistics and other figures. Where you cite your own estimates,
please explain how you arrived at those estimates, disclose any
third-party sources you relied upon, and provide us with any
copies
of those sources. Copies delivered should be marked to highlight
the
relevant information. For all other figures, please identify your
sources and provide copies of these sources to us. Set forth below
is
an illustrative and not an exhaustive list of statements that
should
be supported:
* "sales of gleevec are expected to increase from $1.1
billion...$2.5billion," p.44
* "Examples of TNF inhibitors include...$1.3 billion and $600
million," p. 48.
Cover page
9. Please delete the term "Joint Book-Running Managers" from your
cover page.
Prospectus Summary, page 1
Overview, p. 1
10. Please explain the term "tethering" the first time it is used.
Our Programs, p. 1
SNS 595 Program, p.1
11. Please explain technical terms and phrases such as
"cytotoxic,"
"cell-cycle inhibitor," "novel mechanism of action," "myelocytic,"
"kinase" and "fragment-based technologies" using simple language
that
investors can understand. These terms should be explained the
first
time they are used.
12. Please disclose the rights you have acquired from Dainippon
are
through a license agreement.
Risks Related to our Business, page 3
13. Please revise to disclose that you have not generated any
operating revenues and you expect to incur losses for the
foreseeable
future.
The Offering, page 4
14. You have disclosed that none of the information contained in
your
prospectus was adjusted for the effect of the reverse stock split
to
be effected prior to the completion of the offering. Please note
that if the number of common shares outstanding increases as a
result
of a stock dividend or stock split or decreases as a result of a
reverse stock split, the computations of basic and diluted EPS is
to
be adjusted retroactively for all periods presented to reflect
that
change in capital structure, and the per-share computations for
those
and any prior-period financial statements presented shall be based
on
the new number of shares. If per-share computations reflect such
changes in the number of shares, that fact shall be disclosed.
Please refer to ARB No. 43, Chapter 7B, "Capital Accounts--Stock
Dividends and Stock Split-Ups" and please revise your presentation
and disclosures throughout the filing.
Risk Factors, p. 7
General
15. When disclosing a risk factor, you should customize it with
specific reasons why you may be exposed to a particular risk so as
to
make the disclosure more meaningful. As one example only, the
disclosure in "If our competitors develop and market products...,"
you should expand and customize the risk factor to disclose
whether
SNS-595 suffers from any disadvantages as compared with
irinotecan,
doxorubicin and the other competitive products you have listed,
with
a particular emphasis on the factors listed in the bullet points.
For example, if any competitive products are in later-stage
clinical
trials (or approved), you should disclose this fact explicitly
rather
than relying upon a generic bullet point relating to speed of
development.
Please review all of your risk factors to ensure that your
disclosure
is customized for the Company and is as specific as possible. In
your response letter, please identify all places where revisions
are
made in response to this comment.
"There is a high risk that our drug discovery and development
activities will not result in commercial products," page 7
16. If you have experienced any of the situations described in
your
bullet point list, please revise to describe the situation you
experienced and the consequences. It may be necessary to include
such discussion as a separate risk factor discussion.
"If we fail to maintain our existing, or enter into new, strategic
collaborations...," p. 11
"We rely on third parties to conduct our clinical trials...," p.
12
17. Other than the third party manufacturer and single supplier
for
SNS-595 that you reference in subsequent risk factors, please
identify collaboration agreements upon which you are heavily
dependent. Additionally, describe the subject of the agreement.
Please also describe any disadvantages that your company has in
negotiating collaboration agreements, if any.
18. To the extent that you are substantially dependent on any
third
party for services, (other than the third party manufacturer and
single supplier for SNS-595 that you reference in subsequent risk
factors), please describe the material terms of your agreements
with
them in your Business section and file your contracts with them as
exhibits to the registration statement. If you are not
substantially
dependent on any of third parties, disclose the approximate number
of
parties performing these services and discuss the obstacles you
would
encounter if you were required to replace any party.
19. Please discuss the extent to which the third parties upon whom
you rely have failed in the past to perform as you expected them
to.
"If Conflicts of interest arise...," p. 11
20. Please disclose the types of facts or circumstances that might
lead a collaborator to breach or fail to perform under any
agreement
with the Company.
21. If you are aware of any of your collaborators that are
developing
product candidates that would compete with the candidates that you
are developing under the agreement.
"We rely on a third party to manufacture our product
candidates...,"
p. 12
22. In light of your dependence on this third party manufacturer,
you
should name the manufacturer explicitly, describe the material
terms
of the contract in the business section and file your agreement
with
the manufacturer as an exhibit to the registration statement. If
you
believe you are not required to file the agreement, provide us
with a
supplemental analysis supporting your determination. The analysis
should discuss the availability of alternative sources.
"Our proprietary rights may not adequately...," p.13
"If we are sued for infringing...," p. 15
"We may be subject to damages resulting from claims...," p. 15
23. Please describe any problems you have had in the past with the
risks you have posed in this section. Describe any claims that
you
have infringed on the intellectual property of others, that
employees
have disclosed trade secrets of employers, and your failures to
protect intellectual property rights, among other issues.
"We expect to significantly expand our clinical research...,"p.
15
24. To the extent that you have experienced problems attracting
and
retaining key personnel in the recent past, please revise to
describe
these problems. Additionally, if any key employee has plans to
retire or leave your company in the near future, please revise the
discussion to disclose this information.
"Evolving regulation of corporate governance and public disclosure
may result in additional expenses and continuing uncertainty,"
page
16
25. This risk factor is generic as it applies to all companies in
all
industries. Please either revise to tailor the risk factor to
your
business and your operations or delete it.
"Even if we receive regulatory approval to market our product
candidates, the market may not be receptive to our products," page
17
26. If there are any known side effects to any of your product
candidates, please revise to disclose them.
"Foreign governments often impose strict price controls...," p.18
27. If applicable, you should include in your discussion of this
risk
factor (or in a new risk factor), the fact that regulatory
approval
in the US may not necessarily mean that you will gain approval in
foreign jurisdictions.
"We may be subject to costly claims...," p. 18
"We may incur significant costs complying with environmental
laws...," p. 18
28. Please disclose the amount and limits for the insurance you
carry
for these respective types of claims.
Use of Proceeds, p. 24
29. You have allocated $40 million to clinical and preclinical
development of programs. Please revise your disclosure to include
more information about this amount, including a breakdown of
proceeds
by program as you have identified them in the prospectus summary
and
in the business section. Please also disclose how far the
allocated
proceeds will take each program or product in the development
process.
Capitalization, page 24
30. Within the capitalization table, please revise to include the
current portion of long-term debt.
Management`s Discussion and Analysis of the Company, p. 29
General
31. Please disclose your accumulated losses as of December 31,
2004.
32. We note the Company has not provided meaningful estimates of
the
ultimate cost to bring your product candidates to market. Please
consider including at least minimum amounts that you anticipate
incurring by project/product candidate and the timing of incurring
those minimum amounts. Please also address in your disclosure the
following:
* The nature, timing and the efforts necessary to complete the
project;
* The anticipated completion dates;
* The risks and uncertainties associated with completing
development
on schedule, and the consequences to operations, financial
position
and liquidity if the project is not completed timely; and finally
* The period in which material net cash inflows from significant
projects are expected to commence.
33. Please note that if you will make or receive any payment that
is
material and probable, you must disclose that payment in the MD&A
and
that information will not be the proper subject of a confidential
treatment request. If there are no such payments, advise us of
this
fact in your response letter.
Stock Based Compensation, page 33
34. In order for us to fully understand the equity fair market
valuations reflected in your financial statements, please provide
an
itemized chronological schedule covering all equity instruments
issued since January 1, 2004 through the date of your response.
Please provide the following information separately for each
equity
issuance:
* The date of the transaction,
* The number of options granted or shares issued,
* The exercise price or per share amount paid,
* Management`s fair market value per share estimate and how the
estimate was made,
* An explanation of how the fair value of the convertible
preferred
stock and common stock relate, given the one-for-one conversion
ratio,
* The identity of the recipient, indicating if the recipient was a
related party,
* Nature and terms of concurrent transactions; and,
* The amount of any compensation or interest expense element.
Please note that because the initial filing did not include an
estimated offering price we are deferring evaluation of common
stock
related compensation until you specify the estimated offering
price.
Research and Development, page 34 and page 43.
35. We acknowledge your discussion research and development
activities. In addition to your current disclosures please
include
the following information for each of your major research and
development projects:
* The costs incurred during each period presented and to date on
the
project;
* The nature and estimated costs of the efforts necessary to
complete
the project;
* The risks and uncertainties associated with completing
development
on schedule, and the consequences to operations, financial
position
and liquidity if the project is not completed timely; and finally
* The period in which material net cash inflows from significant
projects are expected to commence.
To the extent that information requested above is not known or
estimable, disclose that fact and the reason why it is not known.
Please refer to the Division of Corporation Finance "Current
Issues
and Rulemaking Projects Quarterly Update" under section VIII -
Industry Specific Issues - Accounting and Disclosure by Companies
Engaged in Research and Development Activities. You can find it
at
the following website address:
http://www.sec.gov/divisions/corpfin/cfcrq032001.htm.
Business, p. 41
SNS 595 Program, p.45
36. Where you discuss the results of clinical trials, in addition
to
including qualifications making it explicitly clear that clinical
trials have not been completed and later stage trials may
contradict
your conclusions regarding safety or efficacy. You should also
provide further disclosure about your results, including a brief
statistical analysis your results. As one example only, on page
46,
you state that SNS-595 showed 99% to 100% inhibition of growth.
Please disclose the p-values associated with these results and
explain what the p-values mean. If the results are not
statistically
significant, you should indicate this fact in the disclosure.
37. Please explain what you mean by "PK."
Strategic Collaborations, page 50
38. Please revise the descriptions of your collaboration
agreements
to quantify the amounts paid to date, the aggregate amounts
payable
in the future and the aggregate potential milestone payments. As
royalty payments are based on a percentage and are unknown,
disclosing the existence of royalty provisions is sufficient.
39. Some of the agreements state that the other party will have an
exclusive license to your portion of the collaboration
intellectual
property. In these instances, please revise to clearly state that
you will not have commercialization rights.
Intellectual Property, page 55
40. We note your statement that you have 60 issued U.S. and
foreign
patents. However, the only patent(s) you have discussed are the
patents related to SNS-595. Please revise to describe the subject
of
all your material patents and disclose when these patents expire.
If
multiple patents apply to the same technology or product
candidate,
it may be helpful to discuss them together. If some of the
patents
are not material, disclose this information.
Certain Relationships and Related Party Transactions page 77
41. We note your disclosure of such transactions in the
prospectus.
Please include the amounts of the related party items on the face
of
the financial statements and the related disclosures in your
footnotes. Please refer to SFAS No. 57, Rule 4-08(k) and Article
5
of Regulation S-X.
Principal Stockholders, p. 79
42. Please identify the natural person(s) who are the beneficial
owners of the shares held by Abingworth, Biogen, Mayfield, and
Venrock.
Underwriting, p. 93
43. Please advise us if you are planning to conduct a directed
share
offering. If you are, please provide us with any material you
intend
to sell to potential purchasers such as a "friends and family"
letter. Tell us when you intend to send them to these potential
purchasers. Tell us whether the sale will be handled by you
directly
or by the underwriting syndicate. Tell us the procedures your or
the
underwriter will employ in making the offering and how you will
assure that this offer will meet the requirements of Section 5 of
the
Securities Act and Rule 134. We may have further comments.
44. You have indicated that the underwriters have arrangements to
host or access your preliminary prospectus on the Internet.
Please
identify any third parties that will host the prospect on their
website along with the internet address for each such underwriter.
Please also describe the material terms of the agreement that
allows
for such electronic hosting and provide us with a copy of any
written
agreement. You should also provide us with copies of all
information
concerning your company or the offering that appears on the third
party web site. We may have further comments.
45. Please advise us if the lead underwriters or other members of
the
syndicate may deliver a prospectus electronically or otherwise
offer
and/or sell securities electronically. If they do so, please tell
us
the procedures they will use and how they intend to comply with
the
requirements of Section 5 of the Securities Act of 1933,
particularly
with regard to how offers and final confirmations will be made and
how and when purchasers will fund their purchases. Provide us
copies
of all electronic communications including the proposed web pages.
46. Tell us and briefly disclose in the prospectus whether you
intend
to use any forms of prospectus other than print, such as CD- ROM-
s,
videos, etc. and provide all such prospectuses for our
examination.
Please refer to SEC Releases No. 33-7233 and No. 33-7289. We may
have
additional comments.
47. Tell us whether any of the lead underwriters or any other
broker-
dealers who may participate in the syndicate are e-brokers. If
so,
tell us the procedures they will use in their selling effort and
how
they intend to comply with the requirements of Section 5 of the
Securities Act of 1933, particularly with regard to how offers and
final confirmations will be made and how and when purchasers will
fund their purchases. Provide us copies of all electronic
communications including the proposed web pages.
Part II
Item 15. Recent Sales of Unregistered Securities, page II-2
48. Please revise to identify the purchasers or classes of
purchasers
in your private offerings. Please note that "single investor" and
"single purchaser" are not acceptable classes.
Financial Statements
Note 1, Recent Accounting Pronouncements page F-14
49. We note your disclosure of the impact of the adoption of FASB
statement 123 as amended will have on your financial statements.
We
believe that your disclosure could be enhanced by a quantification
of
the impact that the adoption of the standard is expected to have
on
the financial statements; if impact not known or not estimable, a
statement to that effect should be made. In addition, please
include
a disclosure of the potential impact of other significant matters
that might result from the adoption of the standard. Please refer
to
SAB 103 Topic 11M.
Note 5, Collaborative Research Agreements page F-18
50. Please revise your disclosure to indicate in general the
milestone events that will trigger the payments under these
agreements and the aggregate amount of the milestone payments.
Note 10, Convertible preferred stock page F-23
51. We note that you completed a private placement of convertible
preferred stock securities during 2004. Convertible securities
issued within a reasonable period prior to the filing of an
initial
registration statement, which have a conversion price below the
initial offering price, are presumed to contain an embedded
beneficial conversion feature. Since you have not disclosed an
estimated offering price, or price range, we are deferring a final
evaluation of this issue until the estimated offering price is
specified and expect to have further comment in this regard when
the
amendment containing that information is filed.
As appropriate, please amend your filing in response to
these
comments. You may wish to provide us with marked copies of the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please file your cover letter on
EDGAR under the form type label CORRESP. Please understand that we
may have additional comments after reviewing your amendment and
responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
******
You may contact Ibolya Ignat at (202) 824-5528 or James
Atkinson, at (202) 942-2826if you have questions regarding
comments
on the financial statements and related matters. Please contact
Zafar
Hasan at (202) 942-7381 or me at (202) 942-1840 with any other
questions.
Sincerely,
Jeffrey Riedler
Assistant Director
cc: William Davisson
Latham & Watkins LLP
135 Commonwealth Drive
Menlo Park, CA 94025
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