In early October, Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS) announced that its Phase 3 clinical trial of vosaroxin and cytarabine failed to meet the primary endpoint of the study, which ultimately had catastrophic results for the stock price. Vosaroxin and cytarabine were intended to treat patients with acute myeloid leukemia (AML). On that day, shares dropped 78% to close at $1.46.

Is it possible that the then-negative news has been given a reprieve?

Based on the results of this trial, Sunesis planned to commence a marketing authorization application with European Medicines Agency (EMA) and to meet with the U.S. FDA to figure out the proper regulatory path looking forward.

It might appear that most short sellers nailed the October 6 collapse in share prices from the failed trial, as the reading for the late September settlement date was 10.8 million shares short, the highest reading for the current 52-week period. The short interest for mid-October was 6.2 million. Over 41 million shares moved on October 6 when shares went from over $6 to under $1.50.

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After the negative Sunesis news broke in early October, analysts immediately abandoned ship. Roth Capital Partners cut the rating to Neutral from Buy, Cantor Fitzgerald cut the rating to Hold from Buy, UBS cut the rating to Sell from an already cautious Neutral rating and RBC Capital Markets cut its rating to Sector Perform from Outperform.

With close to a 40% gain on Monday, it is worth noting that it is very possible that a portion of the recovery leading up to this announcement was short covering.

On the most recent balance sheet, Sunesis counted cash, cash equivalents and marketable securities totaling $44.7 million at the end of September. That figure was $39.3 million from the end of December 2013.

The increase of $5.4 million in liquidity was primarily due to net proceeds of $44.7 million from the sale of common stock and warrants, and $1.8 million from the exercise of warrants, stock options and stock purchase rights, partially offset by $34.2 million of net cash used in operating activities and $6.9 million of principal payments against notes payable. At the end of September, outstanding debt totaled $11.6 million.

On Monday, Sunesis made an announcement that it would be making a presentation regarding its drug candidates vosaroxin and cytarabine. Shares have had more than just a very positive reaction to this announcement.

Shares were up over 40% at $2.33 with less than three hours left in regular trading. Sunesis’ stock has a consensus analyst target price of $1.96, which was the result of multiple analyst firms taking the company to the woodshed for its disappointing trial. The company has a 52-week trading range of $1.00 to $8.46.

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Daniel Swisher, Chief Executive Officer of Sunesis, said:

We are very pleased that VALOR, the largest randomized company-sponsored trial ever conducted in relapsed or refractory AML, has been accepted as a late-breaking presentation at ASH. Despite meaningful progress in other hematologic malignancies, relapsed refractory AML remains a disease where outcomes are unacceptably poor and drug therapy has changed little in the last forty years. We believe the results of VALOR demonstrate a clinically meaningful and important advancement in the treatment of this disease, and we appreciate the opportunity to share the full dataset with the medical community.

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