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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission file number: 000-51531





LOGO

SUNESIS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 94-3295878                             
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification Number)

395 Oyster Point Boulevard,
Suite 400

South San Francisco, California 94080

(Address of Principal Executive Offices including Zip Code)

(650) 266-3500

(Registrants Telephone Number, Including Area Code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act
Rule 12b-2).    Yes   ̈    No  x

The registrant had 46,027,474 shares of common stock, $0.0001 par value per share, outstanding as of April 30, 2011.









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SUNESIS PHARMACEUTICALS, INC.

TABLE OF CONTENTS



|                              |  |                                                                                                    |    |         |    | 
|----------------------------- |  | -------------------------------------------------------------------------------------------------- | -- | ------- | -- | 
|                              |  |                                                                                                    |    | PageNo. |   
|PART I. FINANCIAL INFORMATION |  |                                                                                                    | 3  |        
|                              |  |                                                                                                   
|Item 1.                       |  | Financial Statements:                                                                              |    |         | 3  | 
|                              |  |                                                                                                   
|                              |  | Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010                   |    |         | 3  | 
|                              |  |                                                                                                   
|                              |  | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 |    |         | 4  | 
|                              |  |                                                                                                   
|                              |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 |    |         | 5  | 
|                              |  |                                                                                                   
|                              |  | Notes to Condensed Consolidated Financial Statements                                               |    |         | 6  | 
|                              |  |                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |    |         | 12 | 
|                              |  |                                                                                                   
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                         |    |         | 16 | 
|                              |  |                                                                                                   
|Item 4.                       |  | Controls and Procedures                                                                            |    |         | 16 | 
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                    | 17 |        
|                              |  |                                                                                                   
|Item 1.                       |  | Legal Proceedings                                                                                  |    |         | 17 | 
|                              |  |                                                                                                   
|Item 1A.                      |  | Risk Factors                                                                                       |    |         | 17 | 
|                              |  |                                                                                                   
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                        |    |         | 30 | 
|                              |  |                                                                                                   
|Item 3.                       |  | Defaults Upon Senior Securities                                                                    |    |         | 30 | 
|                              |  |                                                                                                   
|Item 4.                       |  | (Removed and Reserved)                                                                             |    |         | 30 | 
|                              |  |                                                                                                   
|Item 5.                       |  | Other Information                                                                                  |    |         | 30 | 
|                              |  |                                                                                                   
|Item 6.                       |  | Exhibits                                                                                           |    |         | 30 | 
|                              |  |                                                                                                   
|                              |  | Signature                                                                                          |    |         | 31 | 



2



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

SUNESIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                           |  |               |          |   |                  |   |          |  
|------------------------------------------ |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                           |  | March 31,2011 |          |   | December 31,2010 |  
|                                           |  | (Unaudited)   |          |   | (1)              |  
|ASSETS                                     |  |               |          |   |                  |   |          |  
|Current assets:                            |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                  |  | $             | 9,914    |   |                  | $ | 14,223   |  
|Marketable securities                      |  |               | 39,002   |   |                  |   | 39,173   |  
|Accounts receivable                        |  |               | 4,000    |   |                  |   |         |  
|Prepaids and other current assets          |  |               | 1,595    |   |                  |   | 1,286    |  
|                                           |  |               |          |   |                  |   |          |  
|Total current assets                       |  |               | 54,511   |   |                  |   | 54,682   |  
|Property and equipment, net                |  |               | 106      |   |                  |   | 116      |  
|Deposits and other assets                  |  |               | 60       |   |                  |   | 60       |  
|                                           |  |               |          |   |                  |   |          |  
|Total assets                               |  | $             | 54,677   |   |                  | $ | 54,858   |  
|                                           |  |               |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |               |          |   |                  |   |          |  
|Current liabilities:                       |  |               |          |   |                  |   |          |  
|Accounts payable                           |  | $             | 616      |   |                  | $ | 416      |  
|Accrued clinical expense                   |  |               | 1,599    |   |                  |   | 1,574    |  
|Accrued compensation                       |  |               | 493      |   |                  |   | 1,013    |  
|Other accrued liabilities                  |  |               | 990      |   |                  |   | 1,406    |  
|Warrant liability                          |  |               | 4,539    |   |                  |   | 8,154    |  
|                                           |  |               |          |   |                  |   |          |  
|Total current liabilities                  |  |               | 8,237    |   |                  |   | 12,563   |  
|                                           |  |              
|Other liabilities                          |  |               | 40       |   |                  |   | 48       |  
|                                           |  |              
|Commitments                                |  |               |          |   |                  |   |          |  
|                                           |  |              
|Stockholders equity:                      |  |               |          |   |                  |   |          |  
|Common stock                               |  |               | 5        |   |                  |   | 5        |  
|Additional paid-in capital                 |  |               | 425,563  |   |                  |   | 423,262  |  
|Accumulated other comprehensive loss       |  |               | (3       | ) |                  |   | (15      | )
|Accumulated deficit                        |  |               | (379,165 | ) |                  |   | (381,005 | )
|                                           |  |               |          |   |                  |   |          |  
|Total stockholders equity                 |  |               | 46,400   |   |                  |   | 42,247   |  
|                                           |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity |  | $             | 54,677   |   |                  | $ | 54,858   |  
|                                           |  |               |          |   |                  |   |          |  



|(1) | The condensed consolidated balance sheet as of December 31, 2010 has been derived from the audited financial statements as of that date included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes
to condensed consolidated financial statements.



3



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SUNESIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)



|                                                             |  |                             |        |   |      |   |        |  
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                             |  | Three months endedMarch 31, |       
|                                                             |  | 2011                        |        |   | 2010 |  
|                                                             |  | (Unaudited)                 |       
|Revenue:                                                     |  |                             |        |   |      |   |        |  
|Collaboration revenue                                        |  | $                           |       |   |      | $ | 13     |  
|License and other revenue                                    |  |                             | 4,000  |   |      |   |       |  
|                                                             |  |                             |        |   |      |   |        |  
|Total revenues                                               |  |                             | 4,000  |   |      |   | 13     |  
|                                                             |  |                            
|Operating expenses:                                          |  |                             |        |   |      |   |        |  
|Research and development                                     |  |                             | 4,070  |   |      |   | 3,111  |  
|General and administrative                                   |  |                             | 2,014  |   |      |   | 1,554  |  
|                                                             |  |                             |        |   |      |   |        |  
|Total operating expenses                                     |  |                             | 6,084  |   |      |   | 4,665  |  
|                                                             |  |                             |        |   |      |   |        |  
|Loss from operations                                         |  |                             | (2,084 | ) |      |   | (4,652 | )
|                                                             |  |                            
|Other income, net                                            |  |                             | 3,924  |   |      |   | 4      |  
|                                                             |  |                             |        |   |      |   |        |  
|Net income (loss)                                            |  | $                           | 1,840  |   |      | $ | (4,648 | )
|                                                             |  |                             |        |   |      |   |        |  
|Net income (loss) per common share:                          |  |                             |        |   |      |   |        |  
|Basic                                                        |  | $                           | 0.04   |   |      | $ | (0.65  | )
|Diluted                                                      |  | $                           | 0.04   |   |      | $ | (0.65  | )
|Shares used in computing net income (loss) per common share: |  |                             |        |   |      |   |        |  
|Basic                                                        |  |                             | 45,894 |   |      |   | 7,142  |  
|Diluted                                                      |  |                             | 47,866 |   |      |   | 7,142  |  

See accompanying notes
to condensed consolidated financial statements.



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SUNESIS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                                            |  |                             |         |   |      |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                                            |  | Three months endedMarch 31, |        
|                                                                                                            |  | 2011                        |         |   | 2010 |  
|                                                                                                            |  | (Unaudited)                 |        
|Cash flows from operating activities                                                                        |  |                             |         |   |      |   |        |  
|Net income (loss)                                                                                           |  | $                           | 1,840   |   |      | $ | (4,648 | )
|Adjustments to reconcile income (loss) to net cash used in operating activities:                            |  |                             |         |   |      |   |        |  
|Stock-based compensation expense                                                                            |  |                             | 255     |   |      |   | 210    |  
|Depreciation and amortization                                                                               |  |                             | 23      |   |      |   | 48     |  
|Non-cash credit for revaluation of warrant liability                                                        |  |                             | (3,615  | ) |      |   |       |  
|Exchange gain on marketable securities                                                                      |  |                             | (144    | ) |      |   |       |  
|Other non-cash items                                                                                        |  |                             | (46     | ) |      |   | (1     | )
|Changes in operating assets and liabilities:                                                                |  |                             |         |   |      |   |        |  
|Accounts receivable                                                                                         |  |                             | (4,000  | ) |      |   |       |  
|Prepaids and other current assets                                                                           |  |                             | (309    | ) |      |   | 211    |  
|Accounts payable                                                                                            |  |                             | 200     |   |      |   | 314    |  
|Accrued clinical expense                                                                                    |  |                             | 25      |   |      |   | (56    | )
|Accrued compensation                                                                                        |  |                             | (520    | ) |      |   | 193    |  
|Other accrued liabilities                                                                                   |  |                             | (424    | ) |      |   | (5     | )
|Deferred revenue                                                                                            |  |                             |        |   |      |   | (13    | )
|                                                                                                            |  |                             |         |   |      |   |        |  
|Net cash used in operating activities                                                                       |  |                             | (6,715  | ) |      |   | (3,747 | )
|                                                                                                            |  |                             |         |   |      |   |        |  
|                                                                                                            |  |                            
|Cash flows from investing activities                                                                        |  |                             |         |   |      |   |        |  
|Purchases of property and equipment                                                                         |  |                             | (12     | ) |      |   | (8     | )
|Purchases of marketable securities                                                                          |  |                             | (16,529 | ) |      |   |       |  
|Proceeds from maturities of marketable securities                                                           |  |                             | 16,856  |   |      |   |       |  
|                                                                                                            |  |                             |         |   |      |   |        |  
|Net cash provided by (used in) investing activities                                                         |  |                             | 315     |   |      |   | (8     | )
|                                                                                                            |  |                             |         |   |      |   |        |  
|                                                                                                            |  |                            
|Cash flows from financing activities                                                                        |  |                             |         |   |      |   |        |  
|Proceeds from issuance of common stock through controlled equity offering facilities, net of issuance costs |  |                             | 2,091   |   |      |   | 14,161 |  
|Proceeds from exercise of stock options and from employee stock purchase plan                               |  |                             |        |   |      |   | 4      |  
|                                                                                                            |  |                             |         |   |      |   |        |  
|Net cash provided by financing activities                                                                   |  |                             | 2,091   |   |      |   | 14,165 |  
|                                                                                                            |  |                             |         |   |      |   |        |  
|Net increase (decrease) in cash and cash equivalents                                                        |  |                             | (4,309  | ) |      |   | 10,410 |  
|Cash and cash equivalents at beginning of period                                                            |  |                             | 14,223  |   |      |   | 4,259  |  
|                                                                                                            |  |                             |         |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                  |  | $                           | 9,914   |   |      | $ | 14,669 |  
|                                                                                                            |  |                             |         |   |      |   |        |  

See accompanying notes to condensed consolidated financial statements.



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SUNESIS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

(Unaudited)

1. Company Overview

Description of Business

Sunesis Pharmaceuticals, Inc. (the Company or Sunesis) was incorporated in the state of Delaware on February 10, 1998, and its facilities are located in South San
Francisco, California. Sunesis is a biopharmaceutical company focused on the development and commercialization of new oncology therapeutics for the treatment of solid and hematologic cancers. The Companys primary activities since incorporation
have been conducting research and development internally and through corporate collaborators, in-licensing and out-licensing pharmaceutical compounds and technology, conducting clinical trials and raising capital.

In December 2010, the Company commenced enrollment of a Phase 3, multi-national, randomized, double-blind, placebo-controlled, pivotal
clinical trial of vosaroxin in combination with cytarabine in patients with relapsed or refractory acute myeloid leukemia (the VALOR trial).

Significant Risks and Uncertainties

The Company has incurred
significant losses and negative cash flows from operations since its inception, and as of March 31, 2011, had cash, cash equivalents and marketable securities totaling $48.9 million and an accumulated deficit of $379.2 million.

Sunesis believes that it currently has the resources available and accessible to fund its operations until the planned
unblinding of the VALOR trial in 2013. To the extent that the costs of the VALOR trial exceed the Companys current estimates, unblinding does not occur within the currently anticipated timeframe or the Company is unable to raise sufficient
additional capital through its controlled equity offering facility with Cantor (see Note 7) or otherwise, the Company will need to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to development and/or
commercialization rights to vosaroxin, outlicense intellectual property rights to vosaroxin, sell assets, or a combination of the above.

The Company will need to raise substantial additional capital if it expands the number of patients included in the trial based on the pre-specified interim analysis of data from the trial by the Data and
Safety Monitoring Board. In addition, the Company will need to raise substantial additional capital to complete the development and potential commercialization of vosaroxin. The Company expects to finance its future cash needs primarily through
equity issuances, debt arrangements, a possible license, collaboration or other similar arrangement with respect to development and/or commercialization rights to vosaroxin, or a combination of the above.

Concentrations of Credit Risk

In accordance with its investment policy, the Company invests cash that is not currently being used for operational purposes. The policy allows for the purchase of low risk debt securities issued by the
United States and certain European governments and government agencies and very highly rated banks and corporations domiciled in the United States and certain European countries, subject to certain concentration limits. The policy limits maturities
of securities purchased to no longer than 18 months and the dollar-weighted average maturity of the portfolio to nine months. Management believes these guidelines ensure both the safety and liquidity of any investment portfolio the Company may
hold.

Financial instruments that potentially subject the Company to concentrations of credit risk generally consist of cash,
cash equivalents and marketable securities. The carrying amounts of cash equivalents and marketable securities generally approximate fair value due to their short-term nature. The Company is exposed to credit risk in the event of default by the
institutions holding its cash, cash equivalents and any marketable securities to the extent of the amounts recorded in the balance sheets.



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2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The financial statements include a
wholly owned subsidiary, Sunesis Europe Limited, a United Kingdom corporation. Management has determined that the Company operates as a single reportable segment. The financial statements include all adjustments (consisting only of normal recurring
adjustments) that management believes are necessary for a fair presentation of the periods presented. The balance sheet as of December 31, 2010 was derived from the audited financial statements as of that date. These interim financial results
are not necessarily indicative of results to be expected for the full year or any other period. These unaudited condensed consolidated financial statements and the notes accompanying them should be read in conjunction with the Companys Annual
Report on Form 10-K for the year ended December 31, 2010.

Reverse Stock Split

On February 14, 2011, the Company effected a one-for-six reverse split of its common stock (the Reverse Split), as
previously authorized and approved at the annual meeting of stockholders on June 2, 2010. As a result of the Reverse Split, every six shares of common stock were combined into one share of capital stock. The Reverse Split affected the shares of
Companys common stock: (a) outstanding immediately prior to the effective time of the Reverse Split, (b) available for issuance under the Companys equity incentive plans, and (c) issuable upon the exercise of outstanding
stock options and warrants. The accompanying condensed consolidated financial statements and notes thereto give retroactive effect to the Reverse Split for all periods presented.

Significant Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Companys condensed consolidated
financial statements and accompanying notes. Actual results could differ materially from these estimates. Significant estimates, assumptions and judgments made by management include those related to revenue recognition, clinical trial accounting,
stock-based compensation and the valuation of equity and related instruments.

Financial Instruments

In accordance with applicable GAAP, the fair value of the Companys financial instruments reflect the amounts that would be received
upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). A fair value hierarchy is also utilized to prioritize valuation inputs, as follows:



|          |  |                                                                     
|--------- |  | --------------------------------------------------------------------
|Level 1 - |  | quoted prices in active markets for identical assets and liabilities
|          | 
|Level 2 - |  | significant observable inputs other than Level 1 inputs             
|          | 
|Level 3 - |  | unobservable inputs                                                 

The Companys
Level 2 valuations are generally based upon quoted prices in active markets for similar securities, with prices adjusted for yield and number of days to maturity.

As part of the VALOR trial, payables are incurred for services that are originally denominated in foreign currencies, such as services performed outside of the United States by the
Companys primary contract research organization, by clinical study sites, and for the provision of drug supply to those sites. To manage the risk of future movements in foreign exchange rates that would affect such
payables, the Company may purchase certain European currencies or highly-rated investments denominated in those currencies, subject to similar criteria as for other investments defined in the Companys investment policy. There is no
guarantee that the related gains and losses will substantially offset each other, and the Company may be subject to significant exchange gains or losses as currencies fluctuate from quarter to quarter.

To date, the Company has purchased Euros and Euro-denominated obligations of foreign governments. These cash, cash
equivalent and short-term investment balances are recorded at their fair value based on the current exchange rate as of each balance sheet date. The resulting gains or losses offset exchange gains or losses on the related
payables, both of which are recorded in the Companys statements of operations.



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3. Income (Loss) per Common Share

Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares
outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period plus potentially dilutive common shares as determined using
the treasury stock method for options and warrants to purchase common stock.

The following table sets forth the computation
of basic and diluted net income (loss) per common share for the periods presented (in thousands, except per share amounts):



|                                                     |  |                             |        |  |      |   |        |  
|---------------------------------------------------- |  | --------------------------- | ------ |  | ---- | - | ------ | -
|                                                     |  | Three months endedMarch 31, |       
|                                                     |  | 2011                        |        |  | 2010 |  
|Numerator:                                           |  |                             |        |  |      |   |        |  
|Net income (loss)                                    |  | $                           | 1,840  |  |      | $ | (4,648 | )
|                                                     |  |                            
|Denominator:                                         |  |                             |        |  |      |   |        |  
|Weighted-average common shares outstanding - basic   |  |                             | 45,894 |  |      |   | 7,142  |  
|Dilutive effect of warrants                          |  |                             | 1,968  |  |      |   |       |  
|Dilutive effect of options                           |  |                             | 4      |  |      |   |       |  
|                                                     |  |                             |        |  |      |   |        |  
|Weighted-average common shares outstanding - diluted |  |                             | 47,866 |  |      |   | 7,142  |  
|                                                     |  |                             |        |  |      |   |        |  
|                                                     |  |                            
|Net income (loss) per common share:                  |  |                             |        |  |      |   |        |  
|Basic                                                |  | $                           | 0.04   |  |      | $ | (0.65  | )
|Diluted                                              |  | $                           | 0.04   |  |      | $ | (0.65  | )

The following table represents
the potential common shares for outstanding securities as of the related period end dates that were excluded from the computation of diluted net income (loss) per common share because their inclusion would have had an anti-dilutive effect (in
thousands):



|                                                     |  |                 |       |  |      |  |        | 
|---------------------------------------------------- |  | --------------- | ----- |  | ---- |  | ------ | 
|                                                     |  | As of March 31, |      
|                                                     |  | 2011            |       |  | 2010 | 
|Outstanding securities not included in calculations: |  |                 |       |  |      |  |        | 
|Convertible preferred stock, as-if converted         |  |                 |      |  |      |  | 7,246  | 
|Warrants to purchase common stock                    |  |                 | 4,055 |  |      |  | 6,010  | 
|Options to purchase common stock                     |  |                 | 1,042 |  |      |  | 1,056  | 
|                                                     |  |                 |       |  |      |  |        | 
|                                                     |  |                 | 5,097 |  |      |  | 14,312 | 
|                                                     |  |                 |       |  |      |  |        | 

4. Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income (loss) and unrealized gains or losses on marketable securities, and was as follows for the periods presented (in thousands):



|                                                           |  |                             |       |  |      |   |        |  
|---------------------------------------------------------- |  | --------------------------- | ----- |  | ---- | - | ------ | -
|                                                           |  | Three months endedMarch 31, |      
|                                                           |  | 2011                        |       |  | 2010 |  
|Net income (loss)                                          |  | $                           | 1,840 |  |      | $ | (4,648 | )
|Change in unrealized gain or loss on marketable securities |  |                             | 12    |  |      |   |       |  
|                                                           |  |                             |       |  |      |   |        |  
|Comprehensive income (loss)                                |  | $                           | 1,852 |  |      | $ | (4,648 | )
|                                                           |  |                             |       |  |      |   |        |  



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5. License Agreements

In August 2004, the Company entered into a collaboration agreement (the Original Biogen Idec Agreement) with Biogen Idec MA, Inc. (Biogen Idec) to discover, develop and
commercialize small molecule inhibitors of Raf kinase and up to five additional targets that play a role in oncology and immunology indications or in the regulation of the human immune system. In connection with the Companys June 2008
restructuring, the parties agreed to terminate the research term and related funding as of June 30, 2008.

On
March 31, 2011, as part of a series of agreements amongst Sunesis, Biogen Idec and Millennium Pharmaceuticals, Inc. (Millennium), Sunesis entered into (a) an amended and restated collaboration agreement with Biogen Idec
(Restated Biogen Idec Agreement), which amended and restated the Original Biogen Idec Agreement, and provides for the discovery, development and commercialization of small molecule inhibitors of a unique preclinical kinase inhibitor
program involved in immunology; (b) a license agreement with Millennium (the Millennium Agreement) under which Sunesis granted exclusive licenses to products against two oncology targets under the Original Biogen Idec Agreement,
consisting of Raf kinase and one other identified target, under substantially the same terms as under the Original Biogen Idec Agreement; and (c) a termination and transition agreement amongst Sunesis, Biogen Idec and Millennium (the
Termination and Transition Agreement) which provided, amongst other matters, for a $4.0 million, non-refundable, upfront payment from Millennium to the Company for the Millennium Agreement and termination of the Original Biogen Idec
Agreement.

Under the Restated Biogen Idec Agreement, Sunesis no longer has research obligations, but licenses granted to
Biogen Idec with respect to the research collaboration under the Original Biogen Idec Agreement (other than the licenses transferred to Millennium under the Millennium Agreement) remain in effect. The Company may in the future receive
pre-commercialization milestone payments totaling up to approximately $60.0 million related to the development of the first two indications for licensed products against the immunology target with respect to which Biogen Idec retains exclusive
rights under the Restated Biogen Idec Agreement. Sunesis is also eligible to receive royalty payments depending on product sales, which may be increased if the Company exercises its option to co-fund product candidates worldwide, but is subject to
reduction if Biogen Idec is required to in-license third party intellectual property related to certain technology jointly developed under the collaboration agreement in order to commercialize a licensed product.

Under the Millennium Agreement, Sunesis exclusively licensed to Millennium products against the Raf kinase target and one other
identified target, under substantially the same terms as under the Original Biogen Idec Agreement. The Company may in the future receive pre-commercialization milestone payments totaling up to approximately $60.0 million related to the development
of the first two indications for each of the licensed products directed against the two exclusively licensed targets. Sunesis is also eligible to receive royalty payments depending on product sales, which may be increased if the Company exercises
its option to co-fund product candidates worldwide, but is subject to reduction if Millennium is required to in-license third party intellectual property related to certain technology jointly developed under the collaboration agreement in order to
commercialize a licensed product.

The Termination and Transition Agreement provided for: (a) termination of Biogen
Idecs exclusive rights under the Original Biogen Idec Agreement to all discovery programs under such agreement other than a preclinical kinase inhibitor program involved in immunology, (b) the permitted assignment to transfer to
Millennium all Biogen Idec and Sunesis collaboration assets and rights to Raf kinase and one additional undisclosed kinase inhibitor program in oncology, and (c) the payment of $4.0 million upfront from Millennium to the Company. As the upfront
amount is non-refundable and the Company has no continuing performance obligations under this agreement, or either of the two other agreements entered into on the same date, the $4.0 million was recorded as revenue and a receivable as of
March 31, 2011. The amount was received on April 4, 2011.

6. Financial Instruments

Financial Assets

The following tables summarize the estimated fair value of the Companys financial assets measured on a recurring basis as of the dates indicated, which were comprised solely of available-for-sale
securities with remaining contractual maturities of one year or less (in thousands):



|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|-------------------------------------------- |  | ----------- | ------- |  | ------------- | - | ------ | -------------------- |  | - | --------------------- |  |  | ------------------- | --- | - |  | - | ------ | 
|March 31, 2011                               |  | Input Level |         |  | AmortizedCost |   |        | GrossUnrealizedGains |  |   | GrossUnrealizedLosses |  |  | Estimated FairValue |    
|Money market funds                           |  |             | Level 1 |  |               | $ | 7,623  |                      |  | $ |                      |  |  | $                   |    |   |  | $ | 7,623  | 
|Corporate debt obligations                   |  |             | Level 2 |  |               |   | 25,007 |                      |  |   | 5                     |  |  |                     | (7  | ) |  |   | 25,005 | 
|Commercial paper                             |  |             | Level 2 |  |               |   | 11,540 |                      |  |   | 7                     |  |  |                     |    |   |  |   | 11,547 | 
|Foreign government obligations               |  |             | Level 2 |  |               |   | 4,457  |                      |  |   |                      |  |  |                     | (7  | ) |  |   | 4,450  | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|Total available-for-sale securities          |  |             |         |  |               |   | 48,627 |                      |  |   | 12                    |  |  |                     | (14 | ) |  |   | 48,625 | 
|Less: amounts classified as cash equivalents |  |             |         |  |               |   | 9,623  |                      |  |   |                      |  |  |                     |    |   |  |   | 9,623  | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|Amounts classified as marketable securities  |  |             |         |  |               | $ | 39,004 |                      |  | $ | 12                    |  |  | $                   | (14 | ) |  | $ | 39,002 | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 



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|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|-------------------------------------------- |  | ----------- | ------- |  | ------------- | - | ------ | -------------------- |  | - | --------------------- |  |  | ------------------- | --- | - |  | - | ------ | 
|December 31, 2010                            |  | Input Level |         |  | AmortizedCost |   |        | GrossUnrealizedGains |  |   | GrossUnrealizedLosses |  |  | Estimated FairValue |    
|Money market funds                           |  |             | Level 1 |  |               | $ | 14,037 |                      |  | $ |                      |  |  | $                   |    |   |  | $ | 14,037 | 
|Corporate debt obligations                   |  |             | Level 2 |  |               |   | 20,114 |                      |  |   |                      |  |  |                     | (21 | ) |  |   | 20,093 | 
|Commercial paper                             |  |             | Level 2 |  |               |   | 16,986 |                      |  |   | 7                     |  |  |                     |    |   |  |   | 16,993 | 
|Foreign government obligations               |  |             | Level 2 |  |               |   | 2,087  |                      |  |   |                      |  |  |                     | (1  | ) |  |   | 2,086  | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|Total available-for-sale securities          |  |             |         |  |               |   | 53,224 |                      |  |   | 7                     |  |  |                     | (22 | ) |  |   | 53,209 | 
|Less: amounts classified as cash equivalents |  |             |         |  |               |   | 14,037 |                      |  |   |                      |  |  |                     |    |   |  |   | 14,037 | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 
|Amounts classified as marketable securities  |  |             |         |  |               | $ | 39,187 |                      |  | $ | 7                     |  |  | $                   | (22 | ) |  | $ | 39,172 | 
|                                             |  |             |         |  |               |   |        |                      |  |   |                       |  |  |                     |     |   |  |   |        | 

The following table summarizes the available-for-sale securities that were in an unrealized loss position as
of March 31, 2011, each having been in such a position for less than 12 months, and none deemed to be other-than-temporarily impaired (in thousands):



|                               |  |                       |     |   |                     |   |        | 
|------------------------------ |  | --------------------- | --- | - | ------------------- | - | ------ | 
|March 31, 2011                 |  | GrossUnrealizedLosses |     |   | Estimated FairValue |  
|Corporate debt obligations     |  | $                     | (7  | ) |                     | $ | 13,590 | 
|Foreign government obligations |  |                       | (7  | ) |                     |   | 4,450  | 
|                               |  |                       |     |   |                     |   |        | 
|Total                          |  | $                     | (14 | ) |                     | $ | 18,040 | 
|                               |  |                       |     |   |                     |   |        | 

No significant facts or circumstances have arisen to indicate that there has been any deterioration in the
creditworthiness of the issuers of these securities. The gross unrealized losses are not considered to be significant and have been for relatively short durations. The Company does not intend to sell these securities and it is not more likely than
not that they will need to be sold prior to the recovery of their amortized cost basis. There were no sales of available-for-sale securities in the three months ended March 31, 2011 and 2010.

Financial Liabilities

The following table summarizes the assumptions and estimated fair value of the Companys financial liabilities measured on a recurring basis as of the dates indicated, which were comprised solely of
a warrant liability issued in connection with an underwritten offering completed in October 2010:



|                                                                                |  |               |       |   |                  |   |       |  
|------------------------------------------------------------------------------- |  | ------------- | ----- | - | ---------------- | - | ----- | -
|                                                                                |  | March 31,2011 |       |   | December 31,2010 |  
|Fair market value of Companys common stock                                     |  | $             | 1.94  |   |                  | $ | 3.12  |  
|Exercise price                                                                  |  | $             | 2.52  |   |                  | $ | 2.52  |  
|Expected term (years)                                                           |  |               | 4.5   |   |                  |   | 4.8   |  
|Expected volatility                                                             |  |               | 90.7  | % |                  |   | 87.6  | %
|Risk-free interest rate                                                         |  |               | 2.0   | % |                  |   | 1.9   | %
|Expected dividend yield                                                         |  |               | 0.0   | % |                  |   | 0.0   | %
|Estimated fair value per share                                                  |  | $             | 1.23  |   |                  | $ | 2.22  |  
|Shares underlying outstanding warrants classified as liabilities (in thousands) |  |               | 3,679 |   |                  |   | 3,679 |  
|                                                                                |  |               |       |   |                  |   |       |  
|Total estimated fair value of outstanding warrants (in thousands)               |  | $             | 4,539 |   |                  | $ | 8,154 |  
|                                                                                |  |               |       |   |                  |   |       |  

The warrants have been classified as a derivative liability in the Companys balance sheet due to the
potential for the warrants to be settled in cash upon the occurrence of certain transactions specified in the warrant agreements. The warrants were initially recorded at their fair value of $4.5 million, which was estimated using the Black-Scholes
model. At each subsequent balance sheet date, the estimated fair value of the outstanding warrants is determined using the Black-Scholes model and recorded to the balance sheet, with the change in fair value recorded to other income (expense) in the
statement of operations.



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##### Table of Contents

The Black-Scholes model requires Level 3 inputs such as the expected term of the warrants,
share price volatility and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. The following table summarizes the changes in the fair value of the Companys Level 3 financial
liabilities for the periods indicated (in thousands):



|                                                                             |  |                  |        |  
|---------------------------------------------------------------------------- |  | ---------------- | ------ | -
|                                                                             |  | WarrantLiability |       
|Balance as of December 31, 2009                                              |  |                  |       |  
|Initial fair value of warrant liability                                      |  |                  | 4,490  |  
|Change in fair value of warrant liability included in other income (expense) |  |                  | 3,664  |  
|                                                                             |  |                  |        |  
|Balance as of December 31, 2010                                              |  | $                | 8,154  |  
|Change in fair value of warrant liability included in other income (expense) |  |                  | (3,615 | )
|                                                                             |  |                  |        |  
|Balance as of March 31, 2011                                                 |  | $                | 4,539  |  
|                                                                             |  |                  |        |  

7. Stockholders Equity

On April 29, 2010, the Company entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co., or Cantor, pursuant to which the Company could issue and sell shares of
its common stock having an aggregate offering price of up to $20.0 million from time to time through Cantor acting as agent and/or principal. The Company agreed to pay Cantor a commission of 3.0% of the gross proceeds from each sale. In the three
months ended March 31, 2011, the Company sold an aggregate of 0.6 million shares of common stock at an average price of approximately $2.90 per share for gross proceeds of $1.8 million and net proceeds of $1.7 million, after deducting
Cantors commission. Through March 31, 2011, the Company had sold an aggregate of 3.7 million shares of common stock under this facility at an average price of approximately $4.32 per share for gross proceeds of $16.0 million and net
proceeds of $15.4 million. As of March 31, 2011, $4.0 million of common stock remained available to be sold under the facility, subject to certain conditions as specified in the agreement.

8. Stock-Based Compensation

Employee stock-based compensation expense is calculated based on the grant-date fair value of awards ultimately expected to vest, reduced for estimated forfeitures, and is recorded on a straight-line
basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, based on historical option cancellation information, and revised in subsequent periods if actual forfeitures differ from those estimates. The following
table summarizes employee stock-based compensation expense related to the Companys stock-based awards for the periods indicated (in thousands):



|                                                |  |                             |     |  |      |   |     | 
|----------------------------------------------- |  | --------------------------- | --- |  | ---- | - | --- | 
|                                                |  | Three months endedMarch 31, |    
|                                                |  | 2011                        |     |  | 2010 |  
|Research and development                        |  | $                           | 84  |  |      | $ | 76  | 
|General and administrative                      |  |                             | 167 |  |      |   | 131 | 
|                                                |  |                             |     |  |      |   |     | 
|Total employee stock-based compensation expense |  | $                           | 251 |  |      | $ | 207 | 
|                                                |  |                             |     |  |      |   |     | 



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition as of March 31, 2011 and results of operations for the three
months ended March 31, 2011 and 2010 should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission, or
SEC, filings, including our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 29, 2011.

This discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, which involve risks, uncertainties and assumptions. All statements, other than statements of historical facts, are forward-looking statements for purposes of these provisions,
including without limitation any statements relating to our strategy, including our plans with respect to presenting clinical data and initiating clinical trials, our future research and development activities, including clinical testing and the
costs and timing thereof, sufficiency of our cash resources, our ability to raise additional funding when needed, any statements concerning anticipated regulatory activities or licensing or collaborative arrangements, our research and development
and other expenses, our operations and legal risks, and any statement of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as anticipates,
believe, continue, estimates, expects, intend, look forward, may, could, seeks, plans, potential, or will
or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the
forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including but not limited to those set forth under Risk Factors, and elsewhere in this report. We urge you not to place undue reliance on these forward-looking statements, which
speak only as of the date of this report. All forward-looking statements included in this report are based on information available to us on the date of this report, and we assume no obligation to update any forward-looking statements contained in
this report.

In this report, Sunesis, the Company, we, us, and
our refer to Sunesis Pharmaceuticals, Inc. and its wholly-owned subsidiary, except where it is made clear that the term means only the parent company.

Overview

We are a biopharmaceutical company focused on the development and
commercialization of new oncology therapeutics for the treatment of solid and hematologic cancers. Our efforts are currently focused on the development of vosaroxin for the treatment of acute myeloid leukemia, or AML. In December 2010, we
commenced enrollment of a Phase 3, multi-national, randomized, double-blind, placebo-controlled, pivotal trial of vosaroxin in combination with cytarabine in patients with relapsed or refractory AML, or the VALOR trial.

The VALOR trial is designed to evaluate the effect of vosaroxin in combination with cytarabine, a widely used chemotherapy in AML, on
overall survival as compared to placebo in combination with cytarabine. With an anticipated 450 evaluable patients, the trial is designed to have a 90% probability of detecting a 40% difference in overall survival. The trial includes a single
pre-specified interim analysis by the independent Data and Safety Monitoring Board, or DSMB, that may recommend a one-time sample size adjustment of 225 additional evaluable patients if deemed beneficial by the DSMB to maintain adequate power across
a range of clinically meaningful and statistically significant survival outcomes. In February 2011, the U.S. Food and Drug Administration, or FDA, granted fast track designation to vosaroxin for the potential treatment of relapsed or refractory AML
in combination with cytarabine.

We are also in the survival follow-up stage of two fully-enrolled clinical trials of
vosaroxin: (a) the Phase 2 portion of a Phase 1b/2 trial of vosaroxin in combination with cytarabine for the treatment of patients with first relapsed or primary refractory AML, and (b) a Phase 2 trial in previously untreated elderly
patients with AML, or REVEAL-1, which explored three different dose schedules. In addition, we completed a Phase 2 single agent trial of vosaroxin in platinum-resistant ovarian cancer patients in 2010, which explored three different dose cohorts.

We own worldwide development and commercialization rights to vosaroxin. In 2009, the FDA granted orphan drug designation to
vosaroxin for the treatment of AML. In July 2010, we announced that the European Patent Office, or EPO, had granted us a patent covering combinations of vosaroxin with cytarabine, which provides coverage to 2025 in 30 member states of the European
Patent Convention. In November 2010, we announced that the U.S. Patent and Trademark Office had granted us a patent covering pharmaceutical compositions of vosaroxin, including the formulation used in our VALOR trial, and in March 2011, we announced
that the EPO had granted us a similar patent, which we are proceeding to validate in multiple EPO member states. These patents also provide coverage to 2025, and related applications are pending in other major markets, including Japan, Australia and
Canada.



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On March 31, 2011, we entered into three agreements as part of a series of agreements
between Biogen Idec MA Inc., or Biogen Idec, Millennium Pharmaceuticals, Inc., or Millennium, and ourselves:



| |  |  | A license agreement with Millennium, or the Millennium Agreement, pursuant to which we granted Millennium exclusive licenses for the development of our
oral, selective pan-Raf kinase inhibitor and one additional undisclosed kinase inhibitor program in oncology that were previously a part of our August 2004 collaboration agreement with Biogen Idec, or the Original Biogen Idec Agreement. Under this
agreement, we may in the future receive up to approximately $60.0 million in pre-commercialization milestone payments related to the development of the first two indications for each of the licensed products directed against the two exclusively
licensed targets, and royalty payments depending on future product sales. The agreement also provides us with future co-development and co-promotion rights.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An amendment and restatement of the Original Biogen Idec Agreement, or the Restated Biogen Idec Agreement, to provide for the discovery, development
and commercialization of small molecule inhibitors of a unique preclinical kinase inhibitor program involved in immunology. Under this agreement, we continue to be eligible to receive up to approximately $60.0 million in pre-commercialization
milestone payments related to the development of the first two indications for licensed products against the specified immunology target, and royalty payments depending on future product sales. We also retain future co-development and co-promotion
rights.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A termination and transition agreement with Biogen Idec and Millennium which provides for the termination of Biogen Idecs exclusive rights under
the Original Biogen Idec Agreement to all discovery programs under such agreement other than a preclinical kinase inhibitor program involved in immunology, the permitted assignment of assets and rights to Millennium as provided in the Millennium
Agreement, and the payment of $4.0 million to us as consideration for the above, which was received in April 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recent Financial History

In April 2010, we entered into a controlled equity offering sales agreement with Cantor Fitzgerald & Co., or Cantor, pursuant to
which we may issue and sell shares of our common stock having an aggregate offering price of up to $20.0 million from time to time through Cantor acting as agent and/or principal. In the three months ended March 31, 2011, we sold an aggregate
of 0.6 million shares of common stock at an average price of approximately $2.90 per share for gross proceeds of $1.8 million and net proceeds of $1.7 million, after deducting Cantors commission. As of March 31, 2011, $4.0 million of
common stock remained available to be sold under the facility, subject to certain conditions as specified in the agreement.

In October 2010, we completed an underwritten offering, pursuant to which we issued an aggregate of 7.4 million shares of our common
stock and warrants to purchase 3.7 million shares of our common stock, for aggregate gross proceeds of $15.5 million, or the 2010 Offering. Net proceeds from the sale were $14.2 million, after deducting the underwriting discount and offering
expenses. The warrants are exercisable beginning six months after issuance at an exercise price of $2.52 per share, and expire five years from the date of issuance.

On February 14, 2011, we effected a one-for-six reverse split of our capital stock, or the Reverse Split. As a result of the Reverse Split, every six shares of our capital stock were combined into
one share of capital stock. The Reverse Split affected the shares of our common stock: (a) outstanding immediately prior to the effective time of the Reverse Split, (b) available for issuance under our equity incentive plans, and
(c) issuable upon the exercise of outstanding stock options and warrants. All share and per share amounts in this Quarterly Report on Form 10-Q have been adjusted to give retroactive effect to the Reverse Split.

We have incurred significant losses in each year since our inception. As of March 31, 2011, we had cash, cash equivalents and
marketable securities of $48.9 million and an accumulated deficit of $379.2 million. We expect to continue to incur significant losses for the foreseeable future, as we continue the development of, and seek regulatory approvals for vosaroxin.

Capital Requirements

While we believe that we currently have the resources available and accessible to fund our operations until the planned unblinding of the VALOR trial in 2013, we will need to raise substantial additional
capital to complete development and the potential commercialization of vosaroxin. To the extent that the costs of the VALOR trial exceed our current estimates, unblinding does not occur within the currently anticipated timeframe or we are unable to
raise sufficient additional capital through our controlled equity offering facility or otherwise, we will need to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to development and/or commercialization
rights to vosaroxin, outlicense intellectual property rights to vosaroxin, sell assets, or a combination of the above. We will also need to raise substantial additional capital if we expand the number of patients included in the trial based on the
pre-specified interim analysis of data from the trial by the DSMB.

We expect to finance our future cash needs primarily
through equity issuances, debt arrangements, a possible license, collaboration or other similar arrangement with respect to development and/or commercialization rights to vosaroxin, or a combination of the above. However, we do not know whether
additional funding will be available on acceptable terms, or at all. If we are unable to raise substantial additional funding on acceptable terms or at all, we will be forced to delay or reduce the scope of our vosaroxin development program,
potentially including the VALOR trial, and/or limit or cease our operations.



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Critical Accounting Policies and Significant Judgments and Estimates

There have been no significant changes during the three months ended March 31, 2011 to our critical accounting policies and
significant judgments and estimates as disclosed in our managements discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Results of Operations

Revenue

Total revenues were $4.0 million for the three months ended March 31, 2011 as compared to $13,000 for the same period in 2010. Revenue in the 2011 period related to the upfront payment of $4.0
million to us for the termination of the Original Biogen Idec Agreement and the permitted assignment of assets and rights to Millennium as provided in the Millennium Agreement, which occurred on March 31, 2011. The payment was received in April
2011.

We are entitled to receive milestone payments under each of the Restated Biogen Idec Agreement and the Millennium
Agreement upon the achievement of certain development milestones by Biogen Idec and Millennium, respectively, and royalty payments based on future sales of products, if any. Such payments may be increased if we exercise our option to co-fund product
candidates worldwide, but are subject to reduction if Biogen Idec or Millennium is required to in-license third party intellectual property related to certain technology jointly developed under the collaboration agreement in order to commercialize a
licensed product. We cannot predict whether we will receive any milestone or royalty payments from these agreements in the foreseeable future, if at all.

We have not generated any revenue from sales of commercial products and do not expect to generate any product revenue in the foreseeable future.

Research and Development Expense

Research and development expense consists primarily of clinical costs, which include payments for work performed by our contract research organization, clinical trial sites, labs and other clinical
service providers; drug-related costs, which include payments for drug manufacturing, packaging, storage and distribution; personnel costs for related permanent and temporary employees; and payments under license agreements. We expense all research
and development costs as they are incurred.

Research and development expense increased to $4.1 million the three months ended
March 31, 2011 as compared to $3.1 million for the same period in 2010. The increase in 2011 was primarily due to an increase in clinical expenses of $1.4 million as a result of the launch of the VALOR trial, partially offset by a reduction in
personnel costs of $0.3 million, primarily related to a reduction in temporary employee costs.

Payments to sites for both
start-up costs and patient treatment are expected to increase in 2011 as sites are activated and patients are enrolled in connection with the VALOR trial. Similarly, costs incurred by our contract research organization and other third party
contractors, including other clinical service providers and the contract manufacturers of vosaroxin, are expected to increase in 2011. As a result, we expect research and development expense to be significantly higher in 2011 as compared to 2010.

We are currently developing vosaroxin in AML. Based on results of translational research, clinical results, regulatory
and competitive concerns and our overall financial resources, we anticipate that we will make determinations as to which indications to pursue and patient populations to treat in the future, and how much funding to direct to each indication, which
will affect our research and development expense.

If we engage a development or commercialization partner for our vosaroxin
program, or if, in the future, we acquire additional product candidates, our research and development expenses could be significantly affected. We cannot predict whether future licensing or collaborative arrangements will be secured, if at all,
and to what degree such arrangements would affect our development plans and capital requirements.

Under the Restated Biogen
Idec Agreement and the Millennium Agreement, we have the right to participate in co-development and co-promotion activities for the related product candidates. If we were to exercise our option on one or more product candidates, our research and
development expense would increase significantly.

General and Administrative Expense

General and administrative expense consists primarily of personnel costs for the related employees, including non-cash stock-based
compensation; professional service costs, including fees paid to our outside legal advisors and independent registered public accounting firm; facilities expenses; and other administrative costs.

General and administrative expense was $2.0 million for the three months ended March 31, 2011
as compared to $1.6 million for the same period in 2010. The increase in 2011 was primarily due to higher legal and marketing costs, including legal costs related to the recently completed agreements with Biogen Idec and Millennium, and marketing
costs related to the VALOR trial.

Other Income, Net

Other income, net, was $3.9 million for the three months ended March 31, 2011 as compared to $4,000 for the same period in 2010. The
expense in the 2011 period was primarily comprised of a non-cash credit of $3.6 million for the revaluation of warrants issued in the 2010 Offering to their fair value as of March 31, 2011, and net foreign exchange gains of $0.3 million.



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Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through the issuance of common and preferred stock, the receipt of funds from our collaboration partners, and from research grants and debt
financings.

Our cash, cash equivalents and marketable securities totaled $48.9 million as of March 31, 2011, as
compared to $53.4 million as of December 31, 2010. The decrease of $4.5 million was primarily due to $6.7 million of net cash used in operating activities, partially offset by net proceeds of $2.1 million from sales of our common stock
through Cantor. In April 2011, we received a $4.0 million payment from Millennium, as described above.

In April 2010, we
entered into a controlled equity offering sales agreement with Cantor, pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $20.0 million from time to time through Cantor acting as agent
and/or principal. Cantor is entitled to a 3% commission rate of the gross sales price per share of any common stock sold through Cantor as agent under the sales agreement. In the three months ended March 31, 2011, we sold an aggregate of
0.6 million shares of common stock at an average price of approximately $2.90 per share for gross proceeds of $1.8 million and net proceeds of $1.7 million, after deducting Cantors commission. As of March 31, 2011, $4.0 million of
common stock remained available to be sold under the facility, subject to certain conditions as specified in the agreement.

Cash Flows

Net cash used in operating activities was $6.7 million for the three months ended March 31, 2011, as compared to $3.7 million for the same period in 2010. Net cash used in the 2011 period
resulted primarily from net income of $1.8 million, offset by changes in operating assets and liabilities of $5.0 million (including a $4.0 million increase in accounts receivable, and reductions of $0.5 million in accrued compensation and $0.4
million in other accrued liabilities) and net adjustments for non-cash items of $3.5 million (including a $3.6 million credit related to the 2010 Offering). Net cash used in the 2010 period resulted primarily from the net loss of $4.6 million,
partially offset by changes in operating assets and liabilities of $0.6 million and net adjustments for non-cash items of $0.3 million (primarily for stock-based compensation).

Net cash provided by investing activities was $0.3 million for the three months ended March 31, 2011, as compared to $8,000 used in
investing activities for the same period in 2010. Net cash provided in the 2011 period consisted primarily of net proceeds from marketable securities transactions.

Net cash provided by financing activities was $2.1 million for the three months ended March 31, 2011, as compared to $14.2 million for the same period in 2010. Net cash provided in the 2011 period
was from sales of our common stock through our current facility with Cantor. Net cash provided in the 2010 period was primarily from sales of our common stock through a previous facility with Cantor, which was entered into in January 2010 and was
fully utilized as of March 31, 2010.

Operating Capital Requirements

We expect to continue to incur substantial operating losses in the future. We will not receive any product revenue until a product
candidate has been approved by the FDA or similar regulatory agencies in other countries, and has been successfully commercialized, if at all. We need to raise substantial additional funding to complete the development and potential
commercialization of vosaroxin. Additionally, we may evaluate in-licensing and acquisition opportunities to gain access to new drugs or drug targets that would fit with our strategy. Any such transaction would likely increase our funding needs in
the future.

Our future funding requirements will depend on many factors, including but not limited to:



| |  |  | the rate of progress and cost of our clinical trials, including the VALOR trial in particular;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the need for additional or expanded clinical trials (including in particular potential expansion of the number of patients included in the VALOR trial
based on the pre-specified interim analysis of data from the trial by the DSMB);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and economic and other terms of any licensing, collaboration or other similar arrangement into which we may enter;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs and timing of seeking and obtaining FDA and other regulatory approvals;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the extent of our other development activities;
| | - |  | -----------------------------------------------



| |  |  | the costs associated with building or accessing commercialization and additional manufacturing capabilities and supplies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs of acquiring or investing in businesses, product candidates and technologies, if any;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
| | - |  | -------------------------------------------------------------------------------------------------------------------



15



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##### Table of Contents

| |  |  | the effect of competing technological and market developments; and
| | - |  | ------------------------------------------------------------------



| |  |  | the costs, if any, of supporting our arrangements with Biogen Idec and Millennium.
| | - |  | ----------------------------------------------------------------------------------

We believe that we currently have the resources available and accessible to fund our operations until the planned unblinding of the VALOR
trial in 2013. To the extent that the costs of the VALOR trial exceed our current estimates, unblinding does not occur within the currently anticipated timeframe or we are unable to raise sufficient additional capital through our controlled equity
offering facility or otherwise, we will need to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to development and/or commercialization rights to vosaroxin, outlicense intellectual property rights to
vosaroxin, sell assets, or a combination of the above.

We will need to raise substantial additional capital if we expand the
number of patients included in the VALOR trial based on the pre-specified interim analysis of data from the trial by the DSMB. In addition, we will need to raise substantial additional capital to complete the development and potential
commercialization of vosaroxin. We expect to finance our future cash needs primarily through equity issuances, debt arrangements, a possible license, collaboration or other similar arrangement with respect to development and/or commercialization
rights to vosaroxin, or a combination of the above.

Until we can generate a sufficient amount of collaboration or product
revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through the above means. However, we do not know whether additional funding will be available on acceptable terms, or at all.
Our failure to raise significant additional capital in the future would force us to delay or reduce the scope of our vosaroxin development program, potentially including the VALOR trial, and/or limit or cease our operations. Any one of the foregoing
would have a material adverse effect on our business, financial condition and results of operations.

Contractual Obligations

There were no material changes in our contractual obligations in the three months ended March 31, 2011 from those
disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010. Please see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital Resources
in our Form 10-K for a description of contractual obligations as of December 31, 2010.

Off-Balance Sheet Arrangements

Since our inception, we have not had any off-balance sheet arrangements or relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or variable interest entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

This item is not applicable to us as a smaller reporting company.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in SEC Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our reports under
the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period
covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2011
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



16



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

From
time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. The ultimate outcome of any litigation is uncertain and unfavorable outcomes could
have a negative impact on our results of operations and financial condition. Regardless of outcome, litigation can have an adverse impact on us because of the defense costs, diversion of management resources and other factors.

We believe there is no litigation pending that could, individually or in the aggregate, have a material adverse effect on our results of
operations or financial condition.



|Item 1A. | Risk Factors
|-------- | ------------

Investing
in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and all information contained in this Quarterly Report on Form 10-Q before you decide to purchase our common stock. If
any of the possible adverse events described below actually occurs, we may be unable to conduct our business as currently planned and our financial condition and operating results could be harmed. In addition, the trading price of our common stock
could further decline due to the occurrence of any of these risks, and you may lose all or part of your investment.

Please
see the language regarding forward-looking statements in Managements Discussion and Analysis of Financial Condition and Results of Operations.

We have marked with an asterisk (*) those risk factors below that reflect substantive changes from the risk factors included in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 29, 2011.

Risks Related to Our Business

We need to raise substantial additional funding to complete the development and potential commercialization of vosaroxin.

We believe that with $48.9 million in cash and investments as of March 31, 2011, we currently have the resources
available and accessible to fund our operations until the planned unblinding of the VALOR trial in 2013. To the extent that the costs of the VALOR trial exceed our current estimates, unblinding does not occur within the currently anticipated
timeframe or we are unable to raise sufficient additional capital through our controlled equity offering facility or otherwise, we will need to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to
development and/or commercialization rights to vosaroxin, outlicense intellectual property rights to vosaroxin, sell assets, or a combination of the above. We will need to raise substantial additional capital if we expand the number of patients
included in the trial based on the pre-specified interim analysis of data from the trial by the DSMB.

In addition, we will
need to raise substantial additional capital to:



| |  |  | complete the development and potential commercialization of vosaroxin;
| | - |  | ----------------------------------------------------------------------



| |  |  | fund additional clinical trials of vosaroxin and seek regulatory approvals;
| | - |  | ---------------------------------------------------------------------------



| |  |  | expand our development activities;
| | - |  | ----------------------------------



| |  |  | implement additional internal systems and infrastructure; and
| | - |  | -------------------------------------------------------------



| |  |  | build or access commercialization and additional manufacturing capabilities and supplies.
| | - |  | -----------------------------------------------------------------------------------------

Our future funding requirements and sources will depend on many factors, including but not limited to:



| |  |  | the rate of progress and cost of our clinical trials, including the VALOR trial in particular;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the need for additional or expanded clinical trials (including in particular potential expansion of the number of patients included in the VALOR trial
based on the pre-specified interim analysis of data from the trial by the DSMB);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and economic and other terms of any licensing, collaboration or other similar arrangement into which we may enter;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs and timing of seeking and obtaining FDA and other regulatory approvals;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the extent of our other development activities;
| | - |  | -----------------------------------------------



| |  |  | the costs associated with building or accessing commercialization and additional manufacturing capabilities and supplies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs of acquiring or investing in businesses, product candidates and technologies, if any;
| | - |  | -----------------------------------------------------------------------------------------------



17



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##### Table of Contents

| |  |  | the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of competing technological and market developments;
| | - |  | --------------------------------------------------------------



| |  |  | the costs, if any, of supporting our arrangements with Biogen Idec and Millennium.
| | - |  | ----------------------------------------------------------------------------------

Until we can generate a sufficient amount of licensing or collaboration or product revenue to finance our cash requirements, which we may
never do, we expect to finance future cash needs primarily through equity issuances, debt arrangements, a possible license, collaboration or other similar arrangement with respect to development and/or commercialization rights to vosaroxin, or a
combination of the above. Any issuance of convertible debt securities, preferred stock or common stock may be at a discount from the then-current trading price of our common stock. If we issue additional common or preferred stock or securities
convertible into common stock, our stockholders will experience additional dilution, which may be significant. Further, we do not know whether additional funding will be available on acceptable terms, or at all. If we are unable to raise substantial
additional funding on acceptable terms or at all, we will be forced to delay or reduce the scope of our vosaroxin development program, potentially including the VALOR trial, and/or limit or cease our operations.

We may not be able to raise necessary additional funding pursuant to our controlled equity offering facility with Cantor and, as a
result, may need to try to obtain additional capital through alternative financing options then available to us, if any, to fully finance the VALOR trial through to its unblinding and otherwise continue our operations.

On April 29, 2010, we entered into a controlled equity offering sales agreement with Cantor, pursuant to which we may issue and sell
shares of our common stock having an aggregate offering price of up to $20.0 million from time to time through Cantor acting as agent and/or principal. As of March 31, 2011, we had sold an aggregate of 3.7 million shares of common stock at
an average price of $4.32 per share for gross proceeds of $16.0 million. As of March 31, 2011, approximately $4.0 million of common stock was available to be sold under this facility, subject to certain conditions as specified in the agreement.
We may be limited under the terms of the facility in the number of shares of common stock we may issue and the resulting amount of capital that we could raise pursuant thereto. Any such limitation may be due to a number of factors, including as a
result of the termination of the facility due to a material breach of its terms by us or Cantors election to terminate the facility in its discretion. In addition, we may be subject to limitations on the number of shares of common stock we may
sell pursuant to the facility due to the eligibility requirements for use of a Form S-3 Registration Statement and other applicable legal restrictions. As a result, there is no assurance that the controlled equity offering facility will be available
when required or that we will be able to raise the necessary funding pursuant thereto in order to fully finance the VALOR trial until its planned unblinding and otherwise continue our operations. In such event, we will need to raise additional
capital through alternative financing options then available to us, if any.

We have incurred losses since inception and
anticipate that we will continue to incur losses for the foreseeable future. We may not ever achieve or sustain profitability.*

We are not profitable and have incurred losses in each year since our inception in 1998. Our net losses for the years ended December 31, 2010 and 2009 were $24.6 million and $40.2 million,
respectively. As of March 31, 2011, we had an accumulated deficit of $379.2 million. We do not currently have any products that have been approved for marketing, and we continue to incur substantial development and general and administrative
expenses related to our operations. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase significantly as the VALOR trial progresses, as we seek regulatory approvals for vosaroxin, and as we
commercialize vosaroxin, if approved. Our losses, among other things, have caused and will continue to cause our stockholders equity and working capital to decrease.

To date, we have derived substantially all of our revenue from research collaboration agreements with Biogen Idec, Merck & Co., Inc. and Johnson & Johnson Pharmaceutical
Research & Development LLC. On March 31, 2011, the only remaining collaboration agreement, which was with Biogen Idec, was amended and restated to provide for the discovery, development and commercialization of small molecule
inhibitors of a unique preclinical kinase inhibitor program involved in immunology. Concurrently, we entered into a license agreement with Millennium, under which we granted Millennium exclusive licenses for the development of our oral, selective
pan-Raf kinase inhibitor and one additional undisclosed kinase inhibitor program in oncology. While we are entitled to certain milestone and royalty payments under each of the Restated Biogen Idec Agreement and Millennium Agreement, we cannot
predict whether we will receive any such payments under these agreements in the foreseeable future, or at all. Additionally, the research phase of the Original Biogen Idec Agreement was terminated as of June 30, 2008; we do not have research
obligations under the Restated Biogen Idec Agreement and we do not anticipate receiving any research revenue under the Restated Biogen Idec Agreement in the future. Moreover, we do not expect to enter into any new collaboration agreement that will
result in research revenue for us. We also do not anticipate that we will generate revenue from the sale of products for the foreseeable future. In the absence of additional sources of capital, which may not be available to us on acceptable terms,
or at all, the development of vosaroxin or future product candidates, if any, may be reduced in scope, delayed or terminated. If our product candidates or those of our collaborators fail in clinical trials or do not gain regulatory approval, or if
our future products do not achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.



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##### Table of Contents

The development of vosaroxin could be halted or significantly delayed for various
reasons; our clinical trials for vosaroxin may not demonstrate safety or efficacy or lead to regulatory approval.

Vosaroxin is vulnerable to the risks of failure inherent in the drug development process. We need to conduct significant additional
preclinical studies and clinical trials before we can attempt to demonstrate that vosaroxin is safe and effective to the satisfaction of the FDA and other regulatory authorities. Failure can occur at any stage of the development process, and
successful preclinical studies and early clinical trials do not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after
obtaining promising results in earlier trials.

For example, we terminated two Phase 2 clinical trials of vosaroxin in small
cell and non-small cell lung cancer. If our clinical trials result in unacceptable toxicity or lack of efficacy, we may have to terminate them. If clinical trials are halted, or if they do not show that vosaroxin is safe and effective in the
indications for which we are seeking regulatory approval, our future growth will be limited and we may not have any other product candidates to develop.

We do not know whether our ongoing clinical trials or any other future clinical trials with vosaroxin or any of our product candidates, including the VALOR trial in particular, will be completed on
schedule, or at all, or whether our ongoing or planned clinical trials will begin or progress on the time schedule we anticipate. The commencement of future clinical trials could be substantially delayed or prevented by several factors, including:



| |  |  | delays or failures to raise additional funding;
| | - |  | -----------------------------------------------



| |  |  | results of meetings with the FDA and/or other regulatory bodies;
| | - |  | ----------------------------------------------------------------



| |  |  | a limited number of, and competition for, suitable patients with particular types of cancer for enrollment in our clinical trials;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays or failures in obtaining regulatory approval to commence a clinical trial;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | delays or failures in obtaining sufficient clinical materials;
| | - |  | --------------------------------------------------------------



| |  |  | delays or failures in obtaining approval from independent institutional review boards to conduct a clinical trial at prospective sites; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays or failures in reaching acceptable clinical trial agreement terms or clinical trial protocols with prospective sites.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

The completion of our clinical trials, including the VALOR trial, could be substantially delayed or
prevented by several factors, including:



| |  |  | delays or failures to raise additional funding;
| | - |  | -----------------------------------------------



| |  |  | slower than expected rates of patient recruitment and enrollment;
| | - |  | -----------------------------------------------------------------



| |  |  | failure of patients to complete the clinical trial;
| | - |  | ---------------------------------------------------



| |  |  | delays or failures in reaching the number of events pre-specified in the trial design;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the need to expand the clinical trial (including, in particular, potential expansion of the number of patients included in our VALOR trial based on the
pre-specified interim analysis of data by the DSMB);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays or failures in obtaining sufficient clinical materials, including vosaroxin, its matching placebo and cytarabine;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | unforeseen safety issues;
| | - |  | -------------------------



| |  |  | lack of efficacy during clinical trials;
| | - |  | ----------------------------------------



| |  |  | inability or unwillingness of patients or clinical investigators to follow our clinical trial protocols; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | inability to monitor patients adequately during or after treatment.
| | - |  | -------------------------------------------------------------------

Additionally, our clinical trials may be suspended or terminated at any time by the FDA, other regulatory authorities, or ourselves. Any
failure to complete or significant delay in completing clinical trials for our product candidates could harm our financial results and the commercial prospects for our product candidates.



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We rely on a limited number of third-party manufacturers that are capable of
manufacturing the vosaroxin active pharmaceutical ingredient, or API, and finished drug product, or FDP, to supply us with our vosaroxin API and FDP and the placebo used in the VALOR trial. If we fail to obtain sufficient quantities of these
materials, the VALOR trial and the development of vosaroxin could be halted or significantly delayed. In addition, we have previously identified product impurities in the vosaroxin API, and there is no assurance they will not occur in the future.

We do not currently own or operate manufacturing facilities and lack the capability to manufacture vosaroxin on a
clinical or commercial scale. As a result, we rely on third parties to manufacture vosaroxin API and FDP and the placebo product used in the VALOR trial. The vosaroxin API is classified as a cytotoxic substance, limiting the number of available
manufacturers.

We currently rely on two contract manufacturers for the vosaroxin API, which is manufactured through a
multi-step convergent synthesis in which two intermediates are manufactured in a parallel process and then combined and de-protected in the final two steps. We recently started working with the second vosaroxin API manufacturer, and, to date, only
limited quantities of vosaroxin FDP have been formulated from the vosaroxin API supplied by this second manufacturer. We also currently rely on a single contract manufacturer to formulate the vosaroxin API and fill and finish vials of the vosaroxin
FDP.

If our third-party vosaroxin API or FDP manufacturers are unable or unwilling to produce the vosaroxin API or FDP or
placebo we require, we would need to establish arrangements with one or more alternative suppliers. However, establishing a relationship with an alternative supplier would likely delay our ability to produce vosaroxin API or FDP for six to nine
months. Our ability to replace an existing manufacturer would also be difficult and time consuming because the number of potential manufacturers is limited and the FDA must approve any replacement manufacturer before it can be an approved commercial
supplier. Such approval would require new testing and compliance inspections. It may be difficult or impossible for us to identify and engage a replacement manufacturer on acceptable terms in a timely manner, or at all. We expect to continue to
depend on third-party contract manufacturers for all our vosaroxin API, FDP and placebo needs for the foreseeable future.

Vosaroxin requires precise, high quality manufacturing. We have observed visible particles during stability studies of two vosaroxin FDP
lots. We have since identified a process impurity in the vosaroxin API that, when formulated into the packaged vial of the vosaroxin FDP, can result in the formation of particles over time. As a response to these findings, we implemented, and
continue to monitor and adjust, a revised manufacturing process to seek to control the impurity and thereby prevent particle formation. Two lots of vosaroxin API manufactured using a revised manufacturing process were formulated into FDP lots that
have both completed up to 24 months of stability testing at room temperature without formation of particles. It will take time to evaluate whether or not our revised manufacturing process for vosaroxin API will be successful in stopping the
formation of particles in FDP lots over the longer term, and to evaluate whether or not such control of particle formation can also be reliably and consistently achieved in subsequent lots over the shorter or longer term. If our changes in
manufacturing process do not adequately control the formation of visible particles, we will need to discuss other possibilities with the FDA and/or other regulatory bodies, which could include a temporary clinical hold of the VALOR trial until the
issue has been resolved to their satisfaction.

In addition to process impurities, our contract manufacturers failure to
achieve and maintain high manufacturing standards in compliance with cGMP regulations could result in other manufacturing errors leading to patient injury or death, product recalls or withdrawals, delays or interruptions of production or failures in
product testing or delivery. Although contract manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other applicable government regulations and
corresponding foreign standards, any such performance failures on the part of a contract manufacturer could result in the delay or prevention of filing or approval of marketing applications for vosaroxin, cost overruns or other problems that could
seriously harm our business. This would deprive us of potential product revenue and result in additional losses.

To date,
vosaroxin has been manufactured in quantities appropriate for preclinical studies and clinical trials. New lots of API and FDP will need to be manufactured and released to support our VALOR trial and stability assessments required for regulatory
approval. There can be no assurance that we will be able to obtain a sufficient supply of vosaroxin API and FDP to supply our VALOR trial at the anticipated rate of enrollment or to continue the trial without interruption. Prior to being approved
for commercial sale, we will need to manufacture API and FDP in larger quantities. Any significant scale-up of manufacturing will be accompanied by process validation studies, which are required to be reviewed by the FDA prior to approval. If we are
unable to successfully increase the manufacturing capacity for vosaroxin, the regulatory approval or commercial launch may be delayed or there may be a shortage in commercial supply.

We rely on third-party distributors for the supply of cytarabine for our VALOR trial. Cytarabine is in short supply throughout the
world, and there is no guarantee we can procure sufficient quantities to supply our VALOR trial.

The cytarabine used
in our VALOR trial is procured from third-party distributors. Cytarabine is currently in short supply throughout the world. Additional procurement of cytarabine will be necessary to complete the VALOR trial. If we are unable to procure the necessary
supplies to support our VALOR trial in a timely manner, the trial will be delayed. Any significant delay could seriously harm our business.



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The failure to enroll patients for clinical trials may cause delays in developing
vosaroxin.

We may encounter delays if we are unable to enroll enough patients to complete clinical trials of
vosaroxin, including the VALOR trial. Patient enrollment depends on many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, the number and nature of competing treatments
and ongoing clinical trials of competing drugs for the same indication, and the eligibility criteria for the trial. Patients participating in our trials may elect to leave our trials and switch to alternative treatments that are available to them,
either commercially or on an expanded access basis, or in other clinical trials. Competing treatments include nucleoside analogs, anthracyclines and hypomethylating agents. Moreover, when one product candidate is evaluated in multiple clinical
trials simultaneously, patient enrollment in ongoing trials can be adversely affected by negative results from completed trials. In the VALOR trial, vosaroxin is being tested in patients with AML, which can be a difficult patient population to
recruit.

The results of preclinical studies and clinical trials may not satisfy the requirements of the FDA or other
regulatory agencies.

Prior to receiving approval to commercialize vosaroxin or future product candidates, if any, in
the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical trials, to the satisfaction of the FDA and other regulatory authorities, that such product candidates are safe and effective for their intended
uses. The results from preclinical studies and clinical trials can be interpreted in different ways, and the favorable results from previous trials of vosaroxin may not be experienced in the VALOR trial. Even if we believe the preclinical or
clinical data are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. In addition, although we believe that our discussions with the FDA support the potential approval of vosaroxin for the
treatment of AML based on positive results from the VALOR trial without the need to conduct additional clinical trials, the FDA has substantial discretion in the approval process and may not grant approval based on data from this trial.

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual
duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize vosaroxin.

We
rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories, to conduct our planned and existing clinical trials for vosaroxin. If the third parties conducting our clinical
trials do not perform their contractual duties or obligations, do not meet expected deadlines or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial
protocols or for any other reason, we may need to enter into new arrangements with alternative third parties and our clinical trials may be extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory
approval for or commercialize the product candidate being tested in such trials.

We expect to expand our development
capabilities, and any difficulties hiring or retaining key personnel or managing this growth could disrupt our operations.

We are highly dependent on the principal members of our development staff. We expect to expand our development capabilities by increasing expenditures in these areas, hiring additional employees and
potentially expanding the scope of our current operations. Future growth will require us to continue to implement and improve our managerial, operational and financial systems and continue to retain, recruit and train additional qualified personnel,
which may impose a strain on our administrative and operational infrastructure. The competition for qualified personnel in the biopharmaceutical field is intense. We are highly dependent on our continued ability to attract, retain and motivate
highly qualified management and specialized personnel required for clinical development. Due to our limited resources, we may not be able to effectively manage any expansion of our operations or recruit and train additional qualified personnel. If
we are unable to retain key personnel or manage our growth effectively, we may not be able to implement our business plan.

If we are sued for infringing intellectual property rights of third parties, litigation will be costly and time consuming and could
prevent us from developing or commercializing vosaroxin.

Our commercial success depends on not infringing the patents
and other proprietary rights of third parties and not breaching any collaboration or other agreements we have entered into with regard to our technologies and product candidates. If a third party asserts that we are using technology or compounds
claimed in issued and unexpired patents owned or controlled by the third party, we may need to obtain a license, enter into litigation to challenge the validity of the patents or incur the risk of litigation in the event that a third party asserts
that we infringe its patents.



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##### Table of Contents

If a third party asserts that we infringe its patents or other proprietary rights, we could
face a number of challenges that could seriously harm our competitive position, including:



| |  |  | infringement and other intellectual property claims, which would be costly and time consuming to litigate, whether or not the claims have merit, and
which could delay the regulatory approval process and divert managements attention from our business;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | substantial damages for past infringement, which we may have to pay if a court determines that vosaroxin or any future product candidates infringe a
third partys patent or other proprietary rights;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a court order prohibiting us from selling or licensing vosaroxin or any future product candidates unless a third party licenses relevant patent or
other proprietary rights to us, which it is not required to do; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if a license is available from a third party, we may have to pay substantial royalties or grant cross-licenses to our patents or other proprietary
rights.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

If our competitors develop and market products that are more effective, safer or less
expensive than vosaroxin, our commercial opportunities will be negatively impacted.

The life sciences industry is
highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching, developing and marketing products designed to address the treatment of cancer, including AML and
ovarian cancer. Many of our competitors have significantly greater financial, manufacturing, marketing and drug development resources than we do. Large pharmaceutical companies in particular have extensive experience in the clinical testing of,
obtaining regulatory approvals for, and marketing drugs.

We believe that our ability to successfully compete in the
marketplace with vosaroxin and any future product candidates, if any, will depend on, among other things:



| |  |  | our ability to develop novel compounds with attractive pharmaceutical properties and to secure, protect and maintain intellectual property rights based
on our innovations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the efficacy, safety and reliability of our product candidates;
| | - |  | ---------------------------------------------------------------



| |  |  | the speed at which we develop our product candidates;
| | - |  | -----------------------------------------------------



| |  |  | our ability to design and successfully execute appropriate clinical trials;
| | - |  | ---------------------------------------------------------------------------



| |  |  | our ability to maintain a good relationship with regulatory authorities;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ability to obtain, and the timing and scope of, regulatory approvals;
| | - |  | -------------------------------------------------------------------------



| |  |  | our ability to manufacture and sell commercial quantities of future products to the market; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | acceptance of future products by physicians and other healthcare providers.
| | - |  | ---------------------------------------------------------------------------

Vosaroxin is a small molecule therapeutic that will compete with other drugs and therapies that currently exist or are being developed.
There are a number of compounds in development for the treatment of AML, including Genzyme Corporations clofarabine and Celgene Corporations azacitidine. Each of these or other compounds could become potential competitors for
vosaroxin, if approved.

We expect competition for vosaroxin for the treatment of AML to increase as additional products are
developed and approved in various patient populations. If our competitors market products that are more effective, safer or less expensive than vosaroxin or our other future products, if any, or that reach the market sooner we may not achieve
commercial success or substantial market penetration. In addition, the biopharmaceutical industry is characterized by rapid change. Products developed by our competitors may render vosaroxin or any future product candidates obsolete.



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Our proprietary rights may not adequately protect vosaroxin or future product
candidates, if any.

Our commercial success will depend on our ability to obtain patents and maintain adequate
protection for vosaroxin and any future product candidates in the United States and other countries. We own, co-own or have rights to a significant number of issued U.S. and foreign patents and pending U.S. and foreign patent applications. We will
be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies and future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

We apply for patents covering both our technologies and product candidates, as we deem appropriate. However, we may fail to
apply for patents on important technologies or product candidates in a timely fashion, or at all. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from
developing competing products and technologies. In addition, we generally do not exclusively control the patent prosecution of subject matter that we license to or from others. Accordingly, in such cases we are unable to exercise the same degree of
control over this intellectual property as we would over our own. Moreover, the patent positions of biopharmaceutical companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain
unresolved. As a result, the validity and enforceability of patents cannot be predicted with certainty. In addition, we do not know whether:



| |  |  | we, our licensors or our collaboration partners were the first to make the inventions covered by each of our issued patents and pending patent
applications;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we, our licensors or our collaboration partners were the first to file patent applications for these inventions;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | others will independently develop similar or alternative technologies or duplicate any of our technologies;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | any of our or our licensors pending patent applications will result in issued patents;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | any of our, our licensors or our collaboration partners patents will be valid or enforceable;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | any patents issued to us, our licensors or our collaboration partners will provide us with any competitive advantages, or will be challenged by third
parties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we will develop additional proprietary technologies that are patentable; or
| | - |  | ---------------------------------------------------------------------------



| |  |  | the patents of others will have an adverse effect on our business.
| | - |  | ------------------------------------------------------------------

We also rely on trade secrets to protect some of our technology, especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our or our collaboration partners employees, consultants, contractors or scientific and other advisors, or those of our
licensors, may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition,
foreign courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them and our business
could be harmed.

The composition of matter patents covering vosaroxin are due to expire in 2015. Even if vosaroxin is
approved by the FDA and foreign equivalents thereof, we may not be able to recover our development costs prior to the expiration of these patents.

The vosaroxin composition of matter is covered by U.S. patent 5,817,669 and its counterpart patents in 43 foreign jurisdictions. U.S. patent 5,817,669 is due to expire in October 2015, and most of its
foreign counterparts are due to expire in June 2015. In July 2010, we announced that the European Patent Office, or EPO, had granted us a patent covering combinations of vosaroxin with cytarabine. The patent was validated and provides coverage for
such combination products in 30 member states of the European Patent Convention and is due to expire in 2025. In November 2010, we announced that the U.S. Patent and Trademark Office had granted us a patent covering certain pharmaceutical
compositions of vosaroxin, and in March 2011, we announced that the EPO had granted us a similar patent, which we are proceeding to validate in multiple EPO member states. These patents cover the formulation used in our VALOR trial and are due to
expire in 2025. We do not know whether patent term extensions and data exclusivity periods will be available in the future. Vosaroxin must undergo extensive clinical trials before it can be approved by the FDA. We do not know when, if ever,
vosaroxin will be approved by the FDA. Even if vosaroxin is approved by the FDA in the future, we may not have sufficient time to commercialize our vosaroxin product to enable us to recover our development costs prior to the expiration of the U.S.
and foreign patents covering vosaroxin. Our obligation to pay royalties to Dainippon, the company from which we licensed vosaroxin, may extend beyond the patent expiration, which would further erode the profitability of this product.



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Any future workforce and expense reductions may have an adverse impact on our internal
programs, our ability to hire and retain key personnel and may be distracting to management.

We have, in the past,
implemented a number of workforce reductions. Depending on our need for additional funding and expense control, we may be required to implement further workforce and expense reductions in the future. Further workforce and expense reductions could
result in reduced progress on our internal programs. In addition, employees, whether or not directly affected by a reduction, may seek future employment with our business partners or competitors. Although our employees are required to sign a
confidentiality agreement at the time of hire, the confidential nature of certain proprietary information may not be maintained in the course of any such future employment. Further, we believe that our future success will depend in large part upon
our ability to attract and retain highly skilled personnel. We may have difficulty retaining and attracting such personnel as a result of a perceived risk of future workforce and expense reductions. In addition, the implementation of expense
reduction programs may result in the diversion of efforts of our executive management team and other key employees, which could adversely affect our business.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees former employers.

Many of our employees were previously employed at biotechnology or pharmaceutical companies, including our competitors or potential
competitors. We may be subject to claims that we or our employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims.
If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or the work product of current or former personnel could hamper or prevent our
ability to commercialize vosaroxin, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We currently have limited marketing staff and no sales or distribution organization. If we are unable to develop a sales and
marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing vosaroxin.

We currently have no sales or distribution capabilities and limited marketing staff. We intend to establish our own sales and marketing organization with technical expertise and supporting distribution
capabilities to commercialize vosaroxin in North America, which will be expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization
of these products. We plan to collaborate with third parties that have direct sales forces and established distribution systems to commercialize vosaroxin. To the extent that we enter into co-promotion or other licensing arrangements, our product
revenue is likely to be lower than if we marketed or sold vosaroxin directly. In addition, any revenue we receive will depend upon the efforts of third parties, which may not be successful and are only partially within our control. If we are unable
to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize vosaroxin. If we are not successful in commercializing vosaroxin or our future product candidates, if any, either on our own or through
collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.

We depend on various consultants and advisors for the success and continuation of our development efforts.

We work extensively with various consultants and advisors, who provide advice and or services in various business and development functions, including clinical development, operations and strategy,
regulatory matters, accounting and finance. The potential success of our drug development programs depends, in part, on continued collaborations with certain of these consultants and advisors. Our consultants and advisors are not our employees and
may have commitments and obligations to other entities that may limit their availability to us. We do not know if we will be able to maintain such relationships or that such consultants and advisors will not enter into other arrangements with
competitors, any of which could have a detrimental impact on our development objectives and our business.

If conflicts
of interest arise between our current or future collaboration partners, if any, and us, any of them may act in their self-interest, which may be adverse to our interests.

If a conflict of interest arises between us and one or more of our current or potential future collaboration partners, if any, they may
act in their own self-interest or otherwise in a way that is not in the interest of our company or our stockholders. Biogen Idec or potential future collaboration partners, if any, are conducting or may conduct product development efforts within the
disease area that is the subject of collaboration with our company. In current or potential future collaborations, if any, we have agreed or may agree not to conduct, independently or with any third party, any research that is competitive with the
research conducted under our collaborations. Our collaboration partners, however, may develop, either alone or with others, products in related fields that are competitive with the product candidates that are the subject of these collaborations.
Competing products, either developed by our collaboration partners or to which our collaboration partners have rights, may result in their withdrawal of support for a product candidate covered by the collaboration agreement.

If one or more of our current or potential future collaboration partners, if any, were to breach or terminate their collaboration
agreements with us or otherwise fail to perform their obligations thereunder in a timely manner, the preclinical or clinical development or commercialization of the affected product candidates could be delayed or terminated. We do not know whether
our collaboration partners will pursue alternative technologies or develop alternative product candidates, either on their own or in collaboration with others, including our competitors, as a means for developing treatments for the diseases targeted
by collaboration agreements with our company.



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Compliance with changing regulation of corporate governance and public disclosure may
result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public
disclosure may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to
maintaining high standards of corporate governance and public disclosure. Complying with evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies and procedures, and
may divert management time and attention from potential revenue-generating activities to compliance matters. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, our reputation may also be harmed. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance
of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business.

We are exposed to risks related to foreign currency exchange rates.

Some of our costs and expenses are denominated in foreign currencies. Most of our foreign expenses are associated with activities related
to the VALOR trial that are occurring outside of the United States, and in particular in Western Europe. When the U.S. dollar weakens against the Euro or British pound, the U.S. dollar value of the foreign currency denominated expense increases, and
when the U.S. dollar strengthens against the Euro or British pound, the U.S. dollar value of the foreign currency denominated expense decreases. Consequently, changes in exchange rates, and in particular a weakening of the U.S. dollar, may adversely
affect our results of operations. We may purchase certain European currencies or highly-rated investments denominated in such currencies to manage the risk of future movements in foreign exchange rates that would affect such
payables in accordance with our investment policy. However, there is no guarantee that the related gains and losses will substantially offset each other, and we may be subject to significant exchange gains or losses as currencies fluctuate from
quarter to quarter.

Our facilities are located near known earthquake fault zones, and the occurrence of an earthquake
or other catastrophic disaster could cause damage to our facilities and equipment, which could require us to cease or curtail operations.

Our facilities are located in the San Francisco Bay Area near known earthquake fault zones and are vulnerable to significant damage from earthquakes. We are also vulnerable to damage from other types of
disasters, including fires, floods, power loss, communications failures and similar events. If any disaster were to occur, our ability to operate our business at our facilities may be seriously or completely impaired and our data could be lost or
destroyed.

Risks Related to Our Industry

The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approval for the commercialization of vosaroxin.

The research, testing, manufacturing, selling and marketing of product candidates are subject to extensive regulation by the FDA and
other regulatory authorities in the United States and other countries, which regulations differ from country to country. Neither we nor our collaboration partners are permitted to market our product candidates in the United States until we receive
approval of an NDA from the FDA, or in any other country without the equivalent marketing approval from such country. We have not received marketing approval for vosaroxin in any jurisdiction. None of our collaboration partners have had a product
resulting from our collaboration enter clinical trials. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including warning
letters, civil and criminal penalties, injunctions, product seizure or detention, product recalls, total or partial suspension of production, and refusal to approve pending NDAs, supplements to approved NDAs or their foreign equivalents.

Regulatory approval of an NDA or NDA supplement or a foreign equivalent is not guaranteed, and the approval process is expensive,
uncertain and may take several years. Furthermore, the development process for oncology products may take longer than in other therapeutic areas. Regulatory authorities have substantial discretion in the drug approval process. Despite the time and
expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon clinical trials or to repeat or perform additional preclinical studies and clinical trials. The number of preclinical studies and clinical
trials that will be required for marketing approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. In particular,
although we believe that our discussions with the FDA support the potential approval of vosaroxin for the treatment of AML based on positive results from the VALOR trial without the need to conduct additional clinical trials, the FDA has substantial
discretion in the approval process and may not grant approval based on data from this trial.

The FDA or a foreign regulatory
authority can delay, limit or deny approval of a drug candidate for many reasons, including:



| |  |  | the drug candidate may not be deemed safe or effective;
| | - |  | -------------------------------------------------------



| |  |  | regulatory officials may not find the data from preclinical studies and clinical trials sufficient;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the FDA or foreign regulatory authority might not approve our or our third-party manufacturers processes or facilities; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the FDA or foreign regulatory authority may change its approval policies or adopt new regulations.
| | - |  | --------------------------------------------------------------------------------------------------



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We may be subject to costly claims related to our clinical trials and may not be able
to obtain adequate insurance.

Because we conduct clinical trials in humans, we face the risk that the use of
vosaroxin or future product candidates, if any, will result in adverse side effects. We cannot predict the possible harms or side effects that may result from our clinical trials. Although we have clinical trial liability insurance for up to $10.0
million in aggregate, our insurance may be insufficient to cover any such events. We do not know whether we will be able to continue to obtain clinical trial coverage on acceptable terms, or at all. We may not have sufficient resources to pay for
any liabilities resulting from a claim excluded from, or beyond the limit of, our insurance coverage. There is also a risk that third parties that we have agreed to indemnify could incur liability. Any litigation arising from our clinical trials,
even if we were ultimately successful, would consume substantial amounts of our financial and managerial resources and may create adverse publicity.

Even if we receive regulatory approval to sell vosaroxin, the market may not be receptive to vosaroxin.

Even if vosaroxin obtains regulatory approval, it may not gain market acceptance among physicians, patients, healthcare payors and/or the medical community. We believe that the degree of market acceptance
will depend on a number of factors, including:



| |  |  | timing of market introduction of competitive products;
| | - |  | ------------------------------------------------------



| |  |  | efficacy of our product;
| | - |  | ------------------------



| |  |  | prevalence and severity of any side effects;
| | - |  | --------------------------------------------



| |  |  | potential advantages or disadvantages over alternative treatments;
| | - |  | ------------------------------------------------------------------



| |  |  | strength of marketing and distribution support;
| | - |  | -----------------------------------------------



| |  |  | price of vosaroxin, both in absolute terms and relative to alternative treatments; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | availability of reimbursement from health maintenance organizations and other third-party payors.
| | - |  | -------------------------------------------------------------------------------------------------

For example, the potential toxicity of single and repeated doses of vosaroxin has been explored in a number of animal studies that
suggest the dose-limiting toxicities in humans receiving vosaroxin may be similar to some of those observed with approved cytotoxic agents, including reversible toxicity to bone marrow cells, the gastrointestinal system and other systems with
rapidly dividing cells. In our Phase 1 and Phase 2 clinical trials of vosaroxin, we have witnessed the following side effects, irrespective of causality, ranging from mild to more severe: lowered white blood cell count that may lead to a serious or
possibly life-threatening infection, hair loss, mouth sores, fatigue, nausea with or without vomiting, lowered platelet count, which may lead to an increase in bruising or bleeding, lowered red blood cell count (anemia), weakness, tiredness,
shortness of breath, diarrhea and intestinal blockage.

If vosaroxin fails to achieve market acceptance, due to unacceptable
side effects or any other reasons, we may not be able to generate significant revenue or to achieve or sustain profitability.

Even if we receive regulatory approval for vosaroxin, we will be subject to ongoing FDA and other regulatory obligations and
continued regulatory review, which may result in significant additional expense and limit our ability to commercialize vosaroxin.

Any regulatory approvals that we or our potential future collaboration partners receive for vosaroxin or our future product candidates, if any, may also be subject to limitations on the indicated uses for
which the product may be marketed or contain requirements for potentially costly post-marketing trials. In addition, even if approved, the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for any
product will be subject to extensive and ongoing regulatory requirements. The subsequent discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, may result in restrictions on the
marketing of the product, and could include withdrawal of the product from the market.

Regulatory policies may change and
additional government regulations may be enacted that could prevent or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we might not be permitted to market vosaroxin or our future products and we may not achieve or sustain profitability.



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The coverage and reimbursement status of newly approved drugs is uncertain, and
failure to obtain adequate coverage and reimbursement could limit our ability to market vosaroxin and decrease our ability to generate revenue.

There is significant uncertainty related to the third party coverage and reimbursement of newly approved drugs both nationally and internationally. The commercial success of vosaroxin and our future
products, if any, in both domestic and international markets depends on whether third-party coverage and reimbursement is available for the ordering of our future products by the medical profession for use by their patients. Medicare, Medicaid,
health maintenance organizations and other third-party payors are increasingly attempting to manage healthcare costs by limiting both coverage and the level of reimbursement of new drugs and, as a result, they may not cover or provide adequate
payment for our future products. These payors may not view our future products as cost-effective, and reimbursement may not be available to consumers or may not be sufficient to allow our future products to be marketed on a competitive basis.
Likewise, legislative or regulatory efforts to control or reduce healthcare costs or reform government healthcare programs could result in lower prices or rejection of our future products. Changes in coverage and reimbursement policies or healthcare
cost containment initiatives that limit or restrict reimbursement for our future products may reduce any future product revenue.

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing vosaroxin abroad.

We intend to market vosaroxin in international markets. In order to market vosaroxin in the European Union, Canada and many other foreign jurisdictions, we must obtain separate regulatory approvals. We
have had limited interactions with foreign regulatory authorities, and the approval procedures vary among countries and can involve additional testing at significant cost. The time required to obtain approval may differ from that required to obtain
FDA approval. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.
The foreign regulatory approval processes may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may
not receive necessary approvals to commercialize vosaroxin or any other future products in any market.

Foreign
governments often impose strict price controls, which may adversely affect our future profitability.

We intend to
seek approval to market vosaroxin in both the United States and foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions, we will be subject to rules and regulations in those jurisdictions relating to vosaroxin. In some
foreign countries, particularly in the European Union, prescription drug pricing is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing
approval for a drug candidate. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of vosaroxin to other available therapies. If reimbursement of
vosaroxin is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.

We, through third-party contractors, use hazardous chemicals and radioactive and biological materials in our business
and are subject to a variety of federal, state, regional and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials. Although we believe our safety procedures for handling and
disposing of these materials and waste products comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of
contamination or injury, we could be held liable for any resulting damages, and any liability could significantly exceed our insurance coverage, which is limited for pollution cleanup and contamination.



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Risks Related to Our Common Stock

The price of our common stock may continue to be volatile, and the value of an investment in our common stock may decline.*

In the three months ended March 31, 2011, our common stock traded as low as $1.66 and as high as $3.21, and in
2010, traded as low as $1.75 and as high as $9.72. Factors that could cause continued volatility in the market price of our common stock include, but are not limited to:



| |  |  | our ability to raise additional capital to carry through with our clinical development plans and current and future operations and the terms of any
related financing arrangement;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | results from, and any delays in or discontinuance of, ongoing and planned clinical trials for vosaroxin;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | an expansion of the number of patients included in the VALOR trial based on the pre-specified interim analysis by the DSMB;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | announcements of FDA non-approval of vosaroxin, delays in filing regulatory documents with the FDA or other regulatory agencies, or delays in the
review process by the FDA or other foreign regulatory agencies;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | announcements relating to restructuring and other operational changes;
| | - |  | ----------------------------------------------------------------------



| |  |  | delays in the commercialization of vosaroxin or our future products, if any;
| | - |  | ----------------------------------------------------------------------------



| |  |  | market conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | issuance of new or changed securities analysts reports or recommendations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | developments or disputes concerning our intellectual property or other proprietary rights;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | clinical and regulatory developments with respect to potential competitive products;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | introduction of new products by our competitors;
| | - |  | ------------------------------------------------



| |  |  | issues in manufacturing vosaroxin drug substance or drug product, or future products, if any;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | market acceptance of vosaroxin or our future products, if any;
| | - |  | --------------------------------------------------------------



| |  |  | announcements relating to our arrangements with Biogen Idec and Millennium;
| | - |  | ---------------------------------------------------------------------------



| |  |  | actual and anticipated fluctuations in our quarterly operating results;
| | - |  | -----------------------------------------------------------------------



| |  |  | deviations in our operating results from the estimates of analysts;
| | - |  | -------------------------------------------------------------------



| |  |  | third-party healthcare reimbursement policies;
| | - |  | ----------------------------------------------



| |  |  | FDA or other U.S. or foreign regulatory actions affecting us or our industry;
| | - |  | -----------------------------------------------------------------------------



| |  |  | litigation or public concern about the safety of vosaroxin or future products, if any;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | failure to develop or sustain an active and liquid trading market for our common stock;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | sales of our common stock by our officers, directors or significant stockholders; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | additions or departures of key personnel.
| | - |  | -----------------------------------------

If we fail to maintain compliance with the continued listing requirements of The NASDAQ Capital Market, our common stock may be delisted and the price of our common stock and our ability to access
the capital markets could be negatively impacted.

Our common stock currently trades on The NASDAQ Capital Market
under the symbol SNSS. This market has continued listing standards that we must comply with in order to maintain the listing of our common stock. The continued listing standards include, among others, a minimum bid price requirement of
$1.00 per share and any of: (i) a minimum stockholders equity of $2.5 million; (ii) a market value of listed securities of at least $35.0 million; or (iii) net income from continuing operations of $500,000 in the most recently
completed fiscal year or in the two of the last three fiscal years. Our results of operations and fluctuating stock price directly impact our ability to satisfy these continued listing standards. In the event we are unable to maintain these
continued listing standards, our common stock may be subject to delisting from The NASDAQ Capital Market.



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From March 31, 2010 until the close of trading on March 1, 2011, we were not in
compliance with the minimum bid price requirement of $1.00 per share pursuant to NASDAQ Listing Rule 5550(a)(2). On February 14, 2011, we effected a one-for-six reverse split of our capital stock, or the Reverse Split, as previously authorized
and approved at our annual meeting of stockholders on June 2, 2010. As a result of the Reverse Split, every six shares of our capital stock were combined into one share of capital stock. On February 15, 2011, our common stock began trading
on The NASDAQ Capital Market on a post-Reverse Split basis, following which the bid price of our common stock closed at or above $1.00 for the 10 consecutive business days ended March 1, 2011. As a result, on March 2, 2011, we received a
letter from NASDAQ indicating that we had regained compliance with the rule as the closing bid price of our common stock had been at $1.00 per share or greater for 10 consecutive trading days. As a result, we are currently in full compliance with
the NASDAQ continued listing requirements.

As mentioned above, the price of our common stock can be volatile, and there can
be no assurance that we will continue to meet the minimum $1.00 bid price requirement or the other NASDAQ continued listing requirements in the future, and we may be subject to delisting as a result. If we are delisted, we would expect our common
stock to be traded in the over-the-counter market, which could adversely affect the liquidity of our common stock. Additionally, we could face significant material adverse consequences, including:



| |  |  | a limited availability of market quotations for our common stock;
| | - |  | -----------------------------------------------------------------



| |  |  | a reduced amount of analyst coverage for us;
| | - |  | --------------------------------------------



| |  |  | a decreased ability to issue additional securities or obtain additional financing in the future;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | reduced liquidity for our stockholders;
| | - |  | ---------------------------------------



| |  |  | potential loss of confidence by collaboration partners and employees; and
| | - |  | -------------------------------------------------------------------------



| |  |  | loss of institutional investor interest.
| | - |  | ----------------------------------------

Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more
difficult to change management.

Provisions of our amended and restated certificate of incorporation and amended and
restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders might otherwise consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.
In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:



| |  |  | a classified board of directors so that not all directors are elected at one time;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | a prohibition on stockholder action through written consent;
| | - |  | ------------------------------------------------------------



| |  |  | limitations on our stockholders ability to call special meetings of stockholders;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | an advance notice requirement for stockholder proposals and nominations; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested
stockholder, generally a person who, together with its affiliates, owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Delaware law may discourage, delay or prevent a change in control of our company.

Provisions in our charter documents and provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

The ownership of our capital stock is highly concentrated, and your interests may conflict with the interests of our existing
stockholders.

Our executive officers and directors and their affiliates beneficially owned approximately 34.3% of our
outstanding capital stock as of December 31, 2010, assuming the exercise in full of the outstanding warrants to purchase common stock held by these stockholders as of such date. Accordingly, these stockholders, acting as a group, could have
significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate
transaction. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors perception that conflicts of interest may exist or arise.



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We have never paid dividends on our capital stock and we do not anticipate paying any
cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We do
not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation,
if any, of our common stock will be our stockholders sole source of gain for the foreseeable future.

We are at
risk of securities class action litigation.

In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced greater than average stock price volatility in recent years. These broad market
fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the
issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | (Removed and Reserved)
|------- | ----------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------

A list of
exhibits filed with this report or incorporated herein by reference is found in the Exhibit Index immediately following the signature page of this report.



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SIGNATURE

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 thereunto duly authorized.



|                   |  |  |  |  |  |                                                                                                                            
|------------------ |  |  |  |  |  | ---------------------------------------------------------------------------------------------------------------------------
|                   |  |  |  |  |  | SUNESIS PHARMACEUTICALS, INC.                                                                                              
|                   |  |  |  |  |  | (Registrant)                                                                                                               
|                   |  |  | 
|Date: May 12, 2011 |  |  |  |  |  | /s/    ERIC H. BJERKHOLT                                                                                                   
|                   |  |  |  |  |  | Eric H. Bjerkholt Senior Vice President, Corporate Development and Finance, Chief Financial Officer
and Corporate Secretary



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EXHIBIT INDEX



|              |  |                                                                                                                                                     |  |                           |  |            |  |         |  |             |            |  |               |  |   | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ---------- |  | ------- |  | ----------- | ---------- |  | ------------- |  | - | 
|              |  |                                                                                                                                                     |  | Incorporated By Reference |  |            |  |        
|ExhibitNumber |  | Exhibit Description                                                                                                                                 |  | Form                      |  | File No.   |  | Exhibit |  | Filing Date |            |  | FiledHerewith | 
|3.1           |  | Amended and Restated Certificate of Incorporation of the Registrant                                                                                 |  | 10-K/A                    |  | 000-51531  |  | 3.1     |  |             | 5/23/2007  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.2           |  | Amended and Restated Bylaws of the Registrant                                                                                                       |  | 8-K                       |  | 000-51531  |  | 3.2     |  |             | 12/11/2007 |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.3           |  | Certificate of Designation of the Series A Preferred Stock of the Registrant                                                                        |  | 8-K                       |  | 000-51531  |  | 3.3     |  |             | 4/3/2009   |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.4           |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant                                                 |  | S-8                       |  | 333-160528 |  | 3.4     |  |             | 7/10/2009  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.5           |  | Certificate of Amendment to the Certificate of Designation of the Series A Preferred Stock of the Registrant                                        |  | 8-K                       |  | 000-51531  |  | 3.4     |  |             | 11/2/2009  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.6           |  | Certificate of Amendment to the Certificate of Designation of the Series A Preferred stock of the Registrant                                        |  | 8-K                       |  | 000-51531  |  | 3.5     |  |             | 1/21/2010  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|3.7           |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant                                                 |  | 8-K                       |  | 000-51531  |  | 3.1     |  |             | 2/14/2011  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|4.1           |  | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7 above.                                                                           |  |                           |  |            |  |         |  |             |            |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|4.2           |  | Specimen Common Stock certificate of the Registrant                                                                                                 |  | 10-K                      |  | 000-51531  |  | 4.2     |  |             | 3/29/2011  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|4.3           |  | Investor Rights Agreement, dated April 3, 2009, by and among the Registrant and the purchasers identified on the signature pages thereto            |  | 8-K                       |  | 000-51531  |  | 4.1     |  |             | 4/3/2009   |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.1*         |  | Sunesis Pharmaceuticals, Inc. 2011 Bonus Program                                                                                                    |  | 8-K                       |  | 000-51531  |  | 10.1    |  |             | 2/18/2011  |  |               |  |   | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.2          |  | Master Services Agreement, dated August 26, 2004, by and between the Registrant and Quintiles, Inc.                                                 |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.3          |  | First Amendment to Master Services Agreement, dated August 1, 2008, by and between the Registrant and Aptuit, Inc. (as assignee of Quintiles, Inc.) |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.4         |  | Amended and Restated Collaboration Agreement, dated March 31, 2011, by and between the Registrant and Biogen Idec MA Inc.                           |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.5         |  | License Agreement, dated March 31, 2011, by and between the Registrant and Millennium Pharmaceuticals, Inc.                                         |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|10.6         |  | Termination and Transition Agreement, dated March 31, 2011, by and between the Registrant, Biogen Idec MA Inc. and Millennium Pharmaceuticals, Inc. |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|31.1          |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act                                           |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|31.2          |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act                                           |  |                           |  |            |  |         |  |             |            |  |               |  | X | 
|              |  |                                                                                                                                                     |  |                           |  |           
|32.1#         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 13a-14(b) or 15d-14(b) of the Exchange Act                         |  |                           |  |            |  |         |  |             |            |  |               |  | X | 



|* | Management contract, compensatory plan or arrangement.
|- | ------------------------------------------------------

| | Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The omitted information has been filed separately with the Securities and
Exchange Commission.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|# | In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule; Managements Reports on Internal Control over
Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the Certification furnished in Exhibit 32.1 hereto is deemed to accompany this Form 10-K and will not be filed for purposes of Section 18 of the Exchange Act.
Such certification will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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