8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 29, 2012

SUNESIS PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-51531	94-3295878
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
395 Oyster Point Boulevard, Suite 400 South San Francisco, California		94080
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (650) 266-3500

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On March 29, 2012, we entered into a Revenue Participation Agreement, or Agreement, with RPI Finance Trust, or RPI, an entity related to Royalty Pharma, under which RPI may acquire a revenue participation right, or Revenue Participation Right, for $25 million.

Under the Agreement, RPI will be obligated to purchase the Revenue Participation Right if, following the interim efficacy analysis of data from our current Phase 3 VALOR Trial, the independent data and safety monitoring board, or DSMB, recommends that we undertake a one-time 225 patient increase in sample size for the VALOR Trial, or terminate the VALOR Trial for efficacy, and we follow such recommendation.

If the DSMB recommends that we continue the VALOR Trial with the planned sample size of 450 patients, RPI will have the option to purchase the Revenue Participation Right following unblinding of the VALOR Trial. If, following the purchase of the Revenue Participation Right by RPI, we fail to make payments due RPI under the Agreement in a timely manner, RPI may require us to repurchase the Revenue Participation Right.

The applicable Revenue Participation Right payments are determined as follows: (a) if the DSMB recommends a stop for efficacy at the interim analysis, 3.6% of net sales; (b) if RPI exercises its option following continuation of the VALOR Trial as planned, 3.6% of net sales; or (c) if the DSMB recommends a one-time increase in enrollment of the VALOR Trial at the interim analysis, 6.75% of net sales. Revenue Participation Right payments will be made to RPI on a product-by-product and country-by-country basis world-wide through the later of: (i) the expiration of the last to expire of certain specifically identified patents, including any continuation, continuation-in-part, division, provisional or any substitute application or patent issuing therefrom or foreign counterpart thereof, that has the benefit of the same priority date as any specified patent, as well as any certificates, reissues, reexaminations, patent term extensions or adjustments (including any supplementary protection certificates) or other governmental actions which extend the expiration of any specified patent, (ii) 10 years from the date of first commercial sale of such product in such country; or (iii) the expiration of all applicable periods of data, market or other regulatory exclusivity in such country with respect to such product.

Also on March 29, 2012, in conjunction with the Agreement we issued two five-year warrants to RPI, or the Warrants, each to purchase 1,000,000 shares of our common stock, at exercise prices of $3.48 and $4.64 per share, respectively. RPI has the right to exercise the Warrants only if the DSMB recommends that we expand enrollment of the VALOR Trial, and we follow such recommendation. If the DSMB issues any other recommendation, the Warrants will terminate.

Under the Agreement, we also agreed to grant RPI a security interest in certain of our assets, including our intellectual property related to vosaroxin. The security interest will be granted at the time of purchase of the Revenue Participation Right, but the security interest may only be perfected following first product approval in any country or territory. The security interest will be released upon the satisfaction of certain conditions specified in the Agreement. In connection with the entry into the Agreement, we amended our Loan and Security Agreement with Oxford Finance LLC, Silicon Valley Bank and Horizon Technology Finance Corporation, or the Lenders, dated October 18, 2011, or the Loan Agreement, to permit the grant of the security interest to RPI. The amendment of the Loan Agreement also grants to the Lenders a security interest in the same assets in which RPI will be granted a security interest, which may also be perfected following first product approval in any country or territory, to secure our obligations under the Loan Agreement. The Lenders will retain a senior position to the RPI security interest for so long as any indebtedness under the Loan Agreement remains outstanding.

RPI may terminate the Agreement without purchasing the Revenue Participation Right if the interim analysis of the VALOR Trial is not completed by the end of 2012 or if the DSMB does not issue its recommendation by such date. In addition, the Agreement will terminate automatically if the DSMB recommends that we terminate the VALOR Trial for futility. If RPI purchases the Revenue Participation Right, the Agreement will automatically terminate after all payment obligations to RPI have been satisfied.

The foregoing description of the Agreement, the Warrants and the amendment of the Loan Agreement is not complete and is qualified in its entirety by reference to the full text of such agreements, copies of which will be filed with our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this Current Report on Form 8-K that relates to the issuance of the Warrants is hereby incorporated by reference into this Item 3.02.

Neither we nor RPI engaged any investment advisors with respect to the issuance of the Warrants, and no finders’ fees were paid to any party in connection therewith. The issuance of the Warrants was made in reliance on Rule 506 promulgated under the Securities Act of 1933, as amended, and was made without general solicitation or advertising. RPI represented that it is an accredited investor with access to information about us sufficient to evaluate the investment.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release, dated March 29, 2012, titled “Sunesis and Royalty Pharma Announce $25 Million Vosaroxin Royalty Agreement.”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SUNESIS PHARMACEUTICALS, INC.
Dated: April 2, 2012
	By:	/s/ Eric H. Bjerkholt
		Eric H. Bjerkholt
		Executive Vice President, Corporate Development and Finance, Chief Financial Officer and Corporate Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated March 29, 2012, titled “Sunesis and Royalty Pharma Announce $25 Million Vosaroxin Royalty Agreement.”

EX-99.1

Exhibit 99.1

        

Sunesis Contacts: David Pitts Argot Partners 212-600-1902 Eric Bjerkholt Sunesis Pharmaceuticals Inc. 650-266-3717 Royalty Pharma Contact: Investor Relations 212-883-0200 ir@royaltypharma.com

Sunesis and Royalty Pharma Announce $25 Million Vosaroxin Royalty Agreement

Design and Execution of VALOR Trial Enable Innovative Financing

SOUTH SAN FRANCISCO, Calif. and NEW YORK, March 29, 2012 – Sunesis Pharmaceuticals (NASDAQ:SNSS) and Royalty Pharma today announced that Royalty Pharma has agreed to pay Sunesis $25 million, under certain circumstances related to the successful development of Sunesis’ lead product candidate vosaroxin, to acquire a royalty on future worldwide net sales of vosaroxin.

Sunesis is evaluating vosaroxin in a pivotal Phase 3, randomized, double-blind, placebo-controlled trial, the VALOR trial, in patients with first relapsed or refractory acute myeloid leukemia (AML). The VALOR trial employs an adaptive trial design that permits a one-time increase in sample size at the interim analysis by its Data and Safety Monitoring Board (DSMB). At the interim analysis, expected in the third quarter of 2012, the DSMB will examine pre-specified efficacy and safety data sets and decide whether to stop the study early for efficacy or futility, continue the study as planned or implement a one-time sample size adjustment of 225 additional evaluable patients.

Under terms of the agreement, Royalty Pharma will invest $25 million immediately following VALOR’s interim analysis if: (a) the study stops early for efficacy, in exchange for a 3.6% participation payment on future net sales; or (b) the one-time sample size increase is being implemented, in exchange for a 6.75% participation payment on future net sales as well as two warrants. In the case when VALOR proceeds to its planned 450 patient enrollment, Royalty Pharma has the option to make a $25 million investment upon the unblinding of the study in exchange for a 3.6% participation payment on future net sales. The warrants issued to Royalty Pharma are exercisable if VALOR’s sample size is increased and are each to purchase 1,000,000 shares of Sunesis common stock at an exercise price of $3.48 and $4.64 per share, respectively. Sunesis currently holds all worldwide commercial rights to its vosaroxin product.

“Royalty Pharma has a strong track record of identifying significant commercial opportunities in the pharmaceutical sector. We believe this commitment by Royalty Pharma is a validation of vosaroxin’s potential in AML and reflects the significant upside of a positive VALOR trial,” stated Daniel Swisher, Chief Executive Officer of Sunesis.

“This innovative transaction will provide us with access to added capital that extends our runway beyond the unblinding of VALOR and enables our team to actively prepare for vosaroxin’s regulatory filings and US commercial launch. It will also allow us to selectively expand our development program and enhance our strategic flexibility on the timing and terms of vosaroxin partnering arrangements outside the US,” added Eric Bjerkholt, Executive Vice President, Corporate Development & Finance of Sunesis.

“Sunesis’ use of an adaptive trial design offers us an opportunity to invest in this promising biopharmaceutical product candidate on terms that are a win-win for both Sunesis and Royalty Pharma: Sunesis gains access to a flexible, novel financing structure and we are able to invest in vosaroxin at a time when we believe its likelihood of commercial success will be high,” said Pablo Legorreta, Chief Executive Officer of Royalty Pharma. “Based on our extensive due diligence, we are impressed with the Sunesis team, the robust preclinical and clinical dataset for vosaroxin, as well as the rigor of the VALOR trial design and implementation. We are pleased to be partnering with Sunesis in this transaction, and believe that this first-in-class compound has the potential to transform the treatment landscape for AML and potentially other cancers.”

About VALOR

VALOR is a Phase 3, randomized, double-blind, placebo-controlled, pivotal trial in patients with first relapsed or refractory AML. The trial is expected to enroll 450 evaluable patients at more than 110 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. Additionally, the VALOR trial employs an innovative, adaptive trial design that allows for a one-time sample size adjustment by the DSMB at the interim analysis to maintain adequate power across a broader range of survival outcomes. The trial’s primary endpoint is overall survival. For more information on the VALOR trial, please visit www.valortrial.com.

About Vosaroxin

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.

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 were 12,950 new cases of AML and approximately 9,050 deaths from AML in the U.S. in 2011. 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.

SUNESIS and the logos are trademarks of Sunesis Pharmaceuticals, Inc.

About Royalty Pharma

Royalty Pharma is the industry leader in acquiring royalty interests in marketed and late stage biopharmaceutical products, with royalty interests in 30 approved products (including Abbott’s Humira^®, Johnson and Johnson’s Remicade^®, Merck’s Januvia^®, Gilead’s Atripla^®, Truvada^®, and Emtriva^®, Pfizer’s Lyrica^®, Amgen’s Neupogen^® and Neulasta^®, and Genentech’s Rituxan^®) valued at over $6 billion. Royalty Pharma has a fifteen year history of providing value to holders of royalty interests, including its $400 million purchase of 80% of Memorial Sloan-Kettering Cancer Center’s Neupogen^®/Neulasta^® royalty, its $700 million acquisition of AstraZeneca’s Humira royalty, its $700 million purchase of a portion of Northwestern University’s Lyrica royalty, its $650 million purchase of New York University’s Remicade royalty, its joint $525 million acquisition with Gilead Sciences of Emory University’s emtricitabine royalty interest, and most recently its $609 million acquisition of Astellas Pharma’s patent estate and associated royalty stream relating to the use of dipeptidyl peptidase IV (DPP-IV) inhibitors for the treatment of type 2 diabetes.

More information on Royalty Pharma is available at www.royaltypharma.com.

Forward Looking Statements for Sunesis

This press release contains forward-looking statements, including statements related to the exclusivity period for vosaroxin in the United States and other geographies, the design, conduct and results of the VALOR trial, the occurrence and timing of the DSMB interim analysis and whether the conditions to the payment of the $25 million fee from Royalty Pharma will be satisfied in a timely manner. Words such as “will,” “provides,” “pending,” “expected” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon Sunesis’ current expectations. Forward-looking statements involve risks and uncertainties. Sunesis’ actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a results of these risks and uncertainties, which include, without limitation, risks related to Sunesis’ need for substantial additional funding to complete the development and commercialization of vosaroxin, risks related to Sunesis’ ability to raise the capital that it believes to be accessible and is required to finance the development and commercialization of vosaroxin, the risk that raising funds and providing related security interests in our assets through lending arrangements may restrict our operations or produce other adverse results, the risk that Sunesis’ development activities for vosaroxin could be otherwise halted or significantly delayed for various reasons, the risk that Sunesis’ clinical studies for vosaroxin may not demonstrate safety or efficacy or lead to regulatory approval, the risk that data to date and trends may not be predictive of future data or results, the risk that Sunesis’ nonclinical studies and clinical studies and manufacturing may not satisfy the requirements of the FDA or other regulatory agencies, risks related to the manufacturing of vosaroxin and supply of the active pharmaceutical ingredients required for the conduct of the VALOR trial, the risk of third party opposition to granted patents related to vosaroxin, and the risk that Sunesis’ proprietary rights may not adequately protect vosaroxin. These and other risk factors are discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 and Sunesis’ other filings with the Securities and Exchange Commission. Sunesis expressly disclaims any obligation or undertaking to release

publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.