Sunesis Pharmaceuticals Inc (NASDAQ: SNSS) announced that the company is expecting to withdraw from its European Marketing Authorization Application (MAA) for vosaroxin, for the treatment for relapsed/refractory acute myeloid leukemia in patients who are over the age of 60. This catalyst prompted SNSS to plummet nearly 20% on the day, and here’s a look at SNSS on the hourly chart:
Sunesis’ decision to withdraw its EMAA was primarily due to the recent interactions with the European Medicine Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP). From these interactions the company deduced that the committee was likely to formally adopt a negative opinion in its evaluation of the application.
Now, the MAA is the European equivalent of a New Drug Application in the U.S. The drug sponsor makes this application to the CHMP, and the MAA procedure takes 7 months, Thereafter, the CHMP makes a decision to approve or reject the drug candidate. If the treatment receives MAA approval, the company is able market the drug in the entire European Union.
Since the company withdrew its application due to the CHMP’s unlikely positive opinion on the drug. That in mind, this adds some uncertainty to the company, as one previously potential revenue stream is taken out of the picture.
According to Daniel Swisher, President and Chief Executive Officer of Sunesis, “We are disappointed to not achieve approval for vosaroxin’s MAA given its reported efficacy in a patient population with such poor outcomes. Although we did not receive a definitive CHMP opinion, we believed that a positive opinion was unlikely.”
Swisher added, “Following our appearances before the committee’s Scientific Advisory Group Oncology Division and CHMP, we carefully considered feedback from our rapporteurs and input from retained regulatory experts to make our decision to notify EMA to withdraw vosaroxin’s MAA as our assessment concluded it was unlikely we could achieve a majority vote of CHMP members at this time or upon an immediate re-examination for our proposed indication based on VALOR data from a sub-group of a single pivotal trial that had missed reaching full statistical significance in its primary analysis.”
Prior to the stock’s significant drop today, it was significantly overvalued, when looking at some of its valuation ratios in relation to the industry average. The stock had a price-to-book ratio of 35.4, which was well above the industry average of 6.5. Additionally, it had a trailing 12-month price-to-sales ratio of 22.6, which was significantly above the industry average. Not only that, but the company hasn’t been generating any revenues.
When a company withdraws an application, such as a New Drug Application or the European Marketing Authorization Application, that’s a negative catalyst and is a red flag. This should automatically signal that shares could fall significantly, and if you’re already long the stock, you might want to consider selling out of the position.