Sunesis Pharmaceuticals, Inc. Annual Report 2014

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FY2014 Annual Report · Sunesis Pharmaceuticals, Inc.

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Letter to Stockholders

2015 Annual Meeting of Stockholders
Notice and Proxy Statement

2014 Annual Report on Form 10-K

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April 28, 2015

Dear Fellow Stockholders,

At Sunesis Pharmaceuticals, Inc. (Sunesis), our mission is to develop and commercialize new medicines

to treat patients with life-threatening illnesses. In 2014, we believe we made progress across all our programs.
Most importantly, in October 2014, we unblinded the Phase 3 VALOR trial and presented the results in a late
breaking session of the American Society of Hematology (ASH) Annual Meeting in December.

The goal of the VALOR trial was to assess, in a large, randomized, double-blind trial, the risk-benefit

profile of combining our lead product candidate vosaroxin with cytarabine for the treatment of relapsed and
refractory acute myeloid leukemia (AML).

AML is the most common of all adult leukemias, yet unlike other hematologic malignancies, it has seen

almost no progress in the introduction of new therapeutics over the last 40 years. AML is a very rapidly
progressing cancer of the blood characterized by the uncontrolled proliferation of immature blast cells in the
bone marrow. The median age at diagnosis of AML is 63 years and its incidence increases with age. Five-year
survival also dramatically decreases as age increases. Approximately 21,000 patients are expected to be
diagnosed with AML in the U.S. in 2015. Unfortunately most of these patients are either refractory to frontline
therapy or eventually relapse. Thus, there remains a critical need for new treatment options to address a disease
where standards of care have changed little over the last several decades.

We believe that the totality of the VALOR data demonstrates a compelling overall clinical benefit in

certain relapsed and refractory AML patient populations, particularly among the most difficult to treat patient
groups with refractory or early relapsed disease or with an age of 60 years or older.

Also at ASH, encouraging results were presented in an oral session from an ongoing Phase 1b/2 trial
sponsored by the MD Anderson Cancer Center of vosaroxin and cytarabine in previously untreated older patients
with AML and high risk MDS. Results from this novel combination of vosaroxin with a leading hypomethylating
agent showed good tolerability and a composite complete response rate of 76%, a meaningful outcome within the
current clinical landscape for the older frontline AML/MDS patient population.

The entirety of our clinical experience to date with vosaroxin suggest that it is an active therapy with
clinically important benefit and manageable toxicity and, if available, could make a substantial impact on the
treatment of a disease in which far too few treatment options exist. For this reason, we are moving forward with
active dialogue among regulators in Europe and the US.

In Europe, we have submitted a letter of intent describing our intention to file a marketing authorization
application (MAA) with the European Medicines Agency (EMA). The letter initiates the process leading to the
assignment of a Rapporteur and Co-Rapporteur, who are the two appointed members of the EMA’s Committee
for Human Medicinal Products. Our plan is to meet with the Rapporteurs mid-2015 to discuss our potential filing
and to submit the MAA application thereafter.

In the U.S., we are in dialogue with the FDA. We appreciate the FDA’s level of engagement to date and
their underlying commitment to address the unmet medical needs in AML. We look forward to gaining further
clarity on our regulatory direction in the U.S. around mid-2015, with the hope that we can proceed to a rolling
New Drug Application submission in the second half of the year.

In addition to our progress with vosaroxin, we also look forward to making headway with our pipeline of

company- and partner-directed novel kinase inhibitors, including moving our differentiated BTK inhibitor,
SNS-062, toward the clinic with the future filing of an Investigational New Drug (IND) application, and the
selection of a development candidate followed by IND-enabling studies in our PDK-1 program. In addition to our
proprietary programs, we have partnered with Millennium: The Takeda Oncology Company, to develop a
clinical-stage pan-RAF inhibitor MLN-2480, which offers significant opportunities in melanoma and other solid
tumor cancers. We hope to elucidate these opportunities further in 2015.

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We ended 2014 with approximately $43 million in cash which, based on our current operating plan,

provides us with the resources to fund operations through the first quarter of 2016, a period which includes the
potential submission of European and U.S. filings for initial regulatory approval of vosaroxin.

Sunesis has made important progress since the unblinding of the VALOR trial thanks to the hard work

and dedication of our talented employees, as well as the support of our many stakeholders, including the medical
community and our investors. We remain steadfast in our commitment to helping patients with cancer and in our
conviction that vosaroxin represents an important new treatment option for AML. We appreciate your continued
support for Sunesis and look forward to updating you on our progress throughout the coming year.

Sincerely,

Daniel N. Swisher, Jr.
Chief Executive Officer and President

This letter contains forward-looking statements, including statements related to Sunesis’ overall strategy,
the design, conduct, progress, timing and results of Sunesis’ clinical trials, the preliminary analysis, assessment
and conclusions of the results of the VALOR trial, the commercial potential of vosaroxin, and the sufficiency of
Sunesis’ cash resources. Words such as “believe,” “conviction,” “could,” “demonstrate,” “develop,”
“encourage,” “expect,” “goal,” “hope,” “intention,” “look forward,” “mission,” “plan,” “potential,”
“proceed,” “progress,” “suggest,” and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are based upon Sunesis’ current expectations. Forward-looking statements
involve risks and uncertainties. Sunesis’ actual results and the timing of events could differ materially from those
anticipated in such forward-looking statements as a result of these risks and uncertainties, which include,
without limitation, risks related to Sunesis’ need for substantial additional funding to complete the development
and commercialization of vosaroxin, risks related to Sunesis’ ability to raise the capital that it believes to be
accessible and is required to fully finance the development and commercialization of vosaroxin, the risk that
Sunesis’ development activities for vosaroxin could be otherwise halted or significantly delayed for various
reasons, the risk that Sunesis’ clinical studies for vosaroxin may not demonstrate safety or efficacy or lead to
regulatory approval, the risk that data to date and trends may not be predictive of future data or results, risks
related to the conduct of Sunesis’ clinical trials, and the risk that Sunesis’ clinical studies for vosaroxin may not
lead to regulatory approval. These and other risk factors are discussed under “Risk Factors” and elsewhere in
Sunesis’ Annual Report on Form 10-K for the year ended December 31, 2014 and Sunesis’ other filings with the
Securities and Exchange Commission. Sunesis expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in
Sunesis’ expectations with regard thereto or any change in events, conditions or circumstances on which any
such statements are based.

SUNESIS PHARMACEUTICALS, INC.
395 Oyster Point Boulevard, Suite 400
South San Francisco, CA 94080

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 8, 2015

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To the Stockholders of Sunesis Pharmaceuticals, Inc.:

The 2015 annual meeting of stockholders of Sunesis Pharmaceuticals, Inc. will be held on Monday,
June 8, 2015 at 10:00 a.m., local time, at our headquarters located at 395 Oyster Point Boulevard, Suite 400,
South San Francisco, California, 94080 for the following purposes:

To elect three directors nominated by the board of directors to serve until the 2018 annual meeting
of stockholders, as described in this proxy statement.

To approve, on an advisory basis, the compensation of the Sunesis named executive officers, as
disclosed in this proxy statement.

To ratify the selection of Ernst & Young LLP as the independent registered public accounting firm
of Sunesis for the year ending December 31, 2015.

To transact any other business that may properly come before the annual meeting or any
adjournment or postponement thereof.

These items of business are more fully described in this proxy statement. The record date for the annual
meeting is April 10, 2015. Only stockholders of record at the close of business on that date are entitled to notice
of and to vote at the annual meeting and any adjournment or postponement thereof.

Important notice regarding the availability of proxy materials for the annual meeting of

stockholders to be held on June 8, 2015 at 10:00 a.m., local time, at 395 Oyster Point Boulevard, Suite 400,
South San Francisco, California 94080. This proxy statement and our annual report for the fiscal year ended
December 31, 2014, including consolidated financial statements, are available to you at: www.proxyvote.com.

Please see the map at www.sunesis.com/site/contact_us.php for directions to our headquarters. We look

forward to seeing you at the annual meeting.

By Order of the board of directors,

Eric H. Bjerkholt
Executive Vice President, Corporate Development and
Finance, Chief Financial Officer and Corporate
Secretary

South San Francisco, California
April 28, 2015

You are cordially invited to attend the annual meeting in person. Whether or not you expect to attend the
annual meeting, please vote as promptly as possible in order to ensure your representation at the meeting.
You may vote your shares over the telephone or the Internet as instructed in these materials. If you received
a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card
by completing, signing, dating and mailing your proxy card or voting instruction card in the envelope
provided. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please
note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to
vote at the meeting, you must obtain a proxy issued in your name from that record holder.

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TABLE OF CONTENTS

INFORMATION CONCERNING SOLICITATION AND VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL NO. 1 ELECTION OF NOMINEES TO THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . .

PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL NO. 3 RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE . . . . . . .

CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . .

EXECUTIVE COMPENSATION AND RELATED INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . .

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . .

OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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SUNESIS PHARMACEUTICALS, INC.
395 Oyster Point Boulevard, Suite 400
South San Francisco, CA 94080

PROXY STATEMENT FOR THE 2015 ANNUAL MEETING OF STOCKHOLDERS

JUNE 8, 2015

INFORMATION CONCERNING SOLICITATION AND VOTING

General

We are furnishing these proxy materials to our stockholders in connection with the solicitation of proxies
by the board of directors of Sunesis Pharmaceuticals, Inc., which we sometimes refer to herein as the Company,
Sunesis or we, for our 2015 annual meeting of stockholders, or the Annual Meeting, to be held on June 8, 2015,
and any adjournment, continuation or postponement thereof, for the purposes set forth in the attached Notice of
Annual Meeting of Stockholders. Our principal executive office is located at 395 Oyster Point Boulevard, Suite
400, South San Francisco, California 94080.

These proxy materials, including a copy of our Annual Report on Form 10-K for the year ended

December 31, 2014, this proxy statement and the Notice of Internet Availability of Proxy Materials are first
being distributed and made available to stockholders on or about April 28, 2015. This proxy statement contains
important information for you to consider when deciding how to vote on the matters brought before the Annual
Meeting. Please read it carefully.

Pursuant to rules adopted by the U.S. Securities and Exchange Commission, or the SEC, we have elected

to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials, or the Notice, to our stockholders of record. If your shares are held in an account
at a brokerage firm, bank, dealer or other similar organization, the Notice or voting instructions are being
forwarded to you by that organization. The Notice is not a voting form; however, the Notice provides instructions
on how to vote by Internet, by telephone, or by requesting and returning a paper proxy card or by voting in
person at the Annual Meeting. All stockholders will have the ability to access the proxy materials on the website
referred to in the Notice or request to receive a printed set of the proxy materials. We are providing stockholders
who have previously requested to receive paper copies of our proxy materials with paper copies of our proxy
materials. We intend to mail the Notice and the full sets of proxy materials to the stockholders as described above
on or about April 28, 2015.

The Notice will also provide instructions on how you can elect to receive future proxy materials
electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will
receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting
site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until
you terminate such election. Choosing to receive future proxy materials electronically will allow us to provide
you with the information you need in a timelier manner, will save us the cost of printing and mailing documents
to you and will conserve natural resources.

If you receive more than one Notice or set of proxy materials, your shares may be registered in more than
one name or in different accounts. Please follow the voting instructions in the Notice or proxy materials to ensure
that all of your shares are voted.

Solicitation

The expenses of preparing, printing and distributing the materials used in the solicitation of proxies on
behalf of the board of directors will be borne by us. In addition to the solicitation of proxies by use of the mail,
we may utilize the services of certain of our officers and employees (who will receive no compensation in
addition to their regular salaries) to solicit proxies personally and by mail, telephone and electronic means from
brokerage houses and other stockholders. We have retained Broadridge Investor Communication Services, or
Broadridge, to aid in the distribution of proxies and the provision of telephone and Internet voting services,
which will be paid for by us. We may also reimburse brokerage firms, banks and other agents for the cost of
forwarding proxy materials to beneficial owners.

Voting Rights

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Our common stock is the only type of security entitled to vote at the Annual Meeting. Only stockholders
of record at the close of business on April 10, 2015 are entitled to notice of, and to vote on, each of the matters to
be voted upon at the Annual Meeting. On each matter to be voted upon, you have one vote for each share of
common stock you owned as of April 10, 2015. There are no statutory or contractual rights of appraisal or similar
remedies available to those stockholders who dissent from any matter to be acted on at the Annual Meeting.
Cumulative voting is not available.

If on April 10, 2015, your shares were registered directly in your name with our transfer agent, American
Stock Transfer & Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote
in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we
urge you to vote by proxy as instructed below to ensure your vote is counted.

If on April 10, 2015, your shares were held, not in your name, but rather in an account at a brokerage

firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name”
and the Notice or voting instructions are being forwarded to you by that organization. The organization holding
your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a
beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your
account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of
record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid
proxy from your broker or other agent.

Matters Submitted to a Vote of Stockholders, Voting Quorum, Abstentions and Voting Requirements

There are three matters scheduled for a vote at the Annual Meeting:

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Proposal No. 1: the election of three directors nominated by the board of directors to serve until
the 2018 annual meeting of stockholders;

Proposal No. 2: the advisory approval of the compensation of our named executive officers, as
disclosed in this proxy statement in accordance with SEC rules; and

Proposal No. 3: the ratification of the selection of Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31, 2015.

The board of directors knows of no other matters that will be presented for consideration at the Annual

Meeting.

In order to conduct any business at the Annual Meeting, a quorum must be present in person or
represented by valid proxy. A quorum will be present if stockholders holding at least a majority of the

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outstanding shares of the common stock entitled to vote at the Annual Meeting are present in person or
represented by proxy at the Annual Meeting. As of April 10, 2015, the record date for the Annual Meeting, there
were 70,617,432 shares of common stock outstanding and entitled to vote. Your shares will be counted towards
the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other
nominee holding your shares in “street name”) or if you vote in person at the Annual Meeting. If there is no
quorum, either the chairman of the Annual Meeting or the holders of a majority of shares entitled to vote and
present either in person or represented by proxy may adjourn the meeting to another date.

Votes will be counted by the inspector of elections appointed for the Annual Meeting. With respect to

Proposal No. 1, you may vote “For” all the nominees to the board of directors, “Withhold” your vote for all
nominees, or you may “Withhold” your vote for any nominee you specify. With respect to Proposal Nos. 2 and 3,
you may vote “For” or “Against” or abstain from voting. Abstentions will be counted towards the vote total with
respect to Proposal Nos. 2 and 3, and will have the same effect as “Against” votes. Broker non-votes, which are
discussed in greater detail below, will be counted for the purposes of establishing a quorum, but will not be
counted for any purpose in determining whether a proposal has been approved. An automated system
administered by Broadridge will tabulate all votes cast at the Annual Meeting.

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For Proposal No. 1, which relates to the election of directors, the three nominees receiving the most
“For” votes (from the holders of shares present in person or represented by proxy and entitled to vote
on the election of directors) will be elected. Only votes “For” or “Withheld” will affect the outcome.

To be approved, Proposal No. 2, which relates to the advisory approval of the compensation of our
named executive officers, as disclosed in this proxy statement in accordance with SEC rules, must
receive “For” votes from the holders of a majority of shares entitled to vote on this matter and
present either in person or represented by proxy. If you “Abstain” from voting, it will have the same
effect as an “Against” vote. Broker non-votes will have no effect.

To be approved, Proposal No. 3, which relates to the ratification of the selection of Ernst & Young
LLP as our independent registered public accounting firm for 2015, must receive “For” votes from
the holders of a majority of shares entitled to vote on this matter and present either in person or
represented by proxy. If you “Abstain” from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no effect; however, Proposal No. 3 is considered a routine matter,
and therefore no broker non-votes are expected to exist in connection with Proposal No. 3.

Voting Procedures and Options

The procedures for voting are fairly simple and are as follows:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the Annual Meeting, vote by proxy over the
telephone, vote by proxy via the Internet or vote by proxy using a proxy card that you may request. The envelope
you may be provided requires no postage if mailed in the United States. Whether or not you plan to attend the
Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual
Meeting and vote in person even if you have already voted by proxy.

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To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.

To vote using the proxy card that you may request, simply complete, sign and date the proxy card
and return it promptly in the envelope provided. If you return your signed proxy card to us before
the Annual Meeting, we will vote your shares as you direct.

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To vote over the telephone, dial toll-free 1-800-690-6903 using a touch-tone phone and follow the
recorded instructions. You will be asked to provide the control number from the Notice. Your
telephone vote must be received by 11:59 p.m., Eastern Time, on June 7, 2015 to be counted.

To vote via the Internet, go to www.proxyvote.com to complete an electronic proxy card. You will
be asked to provide the control number from the Notice. Your internet vote must be received by
11:59 p.m., Eastern Time, on June 7, 2015 to be counted.

We are providing stockholders who have previously requested to receive paper copies of the proxy

materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the
environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future
proxy materials electronically via email or the Internet. If you make this election, you will receive an email
message shortly after the proxy statement is released containing the Internet link to access our Notice, proxy
statement and annual report. The email will also include instructions for voting on the Internet.

In order to receive these materials electronically, follow the instructions to vote on the Internet at
www.proxyvote.com and, when prompted, indicate that you agree to access stockholder communications
electronically in the future. Your choice to receive proxy materials electronically will remain in effect until you
contact our Corporate Secretary and inform us otherwise. You may send an electronic message to
bjerkholt@sunesis.com or contact our Corporate Secretary by mail at 395 Oyster Point Boulevard, Suite 400,
South San Francisco, California 94080, Attention: Eric H. Bjerkholt, Executive Vice President, Corporate
Development and Finance, Chief Financial Officer and Corporate Secretary.

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Beneficial Owner: Shares Registered in the Name of a Bank, Broker or Other Nominee

If you are a beneficial owner whose stock is held in street name, you should have received a Notice

containing voting instructions from your bank, broker or other nominee, rather than from us. Simply follow the
voting instructions in such Notice regarding how to instruct your broker or other nominee holding the shares to
vote your shares. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank
or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact
your broker or bank to request a proxy form.

You may request a paper or email copy of the proxy materials at no charge via the Internet at
www.proxyvote.com, by calling 1-800-579-1639, or by sending a blank email to sendmaterial@proxyvote.com
with your control number by May 25, 2015. Beneficial owners will not otherwise receive a paper or email copy
of the proxy materials.

We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to
ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that
you must bear any costs associated with your Internet access, such as usage charges from Internet access
providers and telephone companies.

The Annual Meeting will be held on Monday, June 8, 2015 at 10:00 a.m. Pacific Time at our principal

executive offices located at 395 Oyster Point Boulevard, Suite 400, South San Francisco, California 94080.
Directions to the Annual Meeting may be found at www.sunesis.com/site/contact_us.php. For admission to the
Annual Meeting, stockholders may be asked to present proof of identification and a statement from their bank,
broker or other nominee reflecting their beneficial ownership of our common stock as of April 10, 2015 as well
as a proxy from the record holder to the stockholder.

Voting of Proxies

Stockholder of Record

If you are a stockholder of record and you return a signed proxy card to us or otherwise vote before the

Annual Meeting, we will vote your shares as you direct. All shares represented by valid proxies (and not revoked
before they are voted) will be voted at the Annual Meeting as follows, unless there are different instructions on
the proxy:

•

Proposal No. 1: “For” the election of the three directors nominated by the board of directors to
serve until the 2018 annual meeting of stockholders;

Proposal No. 2: “For” the advisory approval of the compensation of our named executive officers,
as disclosed in this proxy statement in accordance with SEC rules;

Proposal No. 3: “For” the ratification of the selection of Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31, 2015; and

At the proxyholder’s discretion, on such other matters, if any, that may come before the Annual
Meeting.

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Beneficial Owner

Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting
instructions to the broker or nominee holding the shares. If you are a beneficial owner of shares held in “street
name” and you do not provide the organization that holds your shares with specific instructions, under the rules
of various national and regional securities exchanges, the organization that holds your shares may generally vote
on routine matters but cannot vote on non-routine matters, as further described below. If the organization that
holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the
organization that holds your shares will inform our inspector of elections that it does not have the authority to
vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” When our
inspector of elections tabulates the votes for any particular matter, broker non-votes will be counted for purposes
of determining whether a quorum is present, but will not be counted toward the vote total for any proposal.

Under the rules and interpretations of the NASDAQ Stock Market LLC, or NASDAQ, “non-routine”

matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers,
stockholder proposals and elections of directors, even if not contested, and executive compensation, including the
advisory stockholder vote on executive compensation and on the frequency of stockholder votes on executive
compensation, and, accordingly, include Proposal Nos. 1 and 2. We encourage you to provide voting instructions
to the organization that holds your shares to ensure that your vote is counted on all proposals.

Revocability of Proxies

You may revoke your proxy at any time before it is voted at the Annual Meeting by:

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delivering written notice of revocation to our Corporate Secretary at Sunesis Pharmaceuticals,
Inc., 395 Oyster Point Boulevard, Suite 400, South San Francisco, California 94080, or in person
at the Annual Meeting;

submitting a later dated proxy; or

attending the Annual Meeting and voting in person.

Your most recent proxy card or telephone or Internet proxy is the one that is counted.

Your attendance at the Annual Meeting will not, by itself, constitute revocation of your proxy. If your
shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by
your broker or bank.

Internet Availability of Proxy Materials

This proxy statement, our Annual Report on Form 10-K for the year ended December 31, 2014 and a

letter to stockholders are available at https://materials.proxyvote.com/867328.

Results of the Annual Meeting

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Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will
be published in a current report on Form 8-K that we expect to file with the SEC within four business days after
the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business
days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days
after the final results are known to us, file an additional Form 8-K to publish the final results.

Availability of Our Independent Registered Public Accounting Firm

Representatives of Ernst & Young LLP, our independent registered public accounting firm, are expected
to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions. For additional information regarding the Audit Committee and
its activities with Ernst & Young LLP, see “Information About the Board of Directors and Corporate
Governance” and “Report of the Audit Committee of the Board of Directors.”

YOUR VOTE IS IMPORTANT. ACCORDINGLY, PLEASE VOTE BY PROXY
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON.

PROPOSAL NO. 1

ELECTION OF NOMINEES TO THE BOARD OF DIRECTORS

Our board of directors, or our Board, consists of nine members and is divided into three classes of
directors serving staggered three-year terms. Directors for each class are elected at the annual meeting of
stockholders held in the year in which the term for their class expires and hold office for a three-year term and
until their successors are duly elected and qualified, or their earlier death, resignation or removal. In accordance
with our amended and restated certificate of incorporation and bylaws, our Board may fill any vacancy on the
Board by appointment.

The three nominees for Class I director are Steve R. Carchedi, Helen S. Kim, and Dayton Misfeldt, each

of whom currently serves as a Class I director whose term expires at the Annual Meeting. If re-elected at the
Annual Meeting, each of these nominees would serve until our 2018 annual meeting of stockholders and until his
or her successor is elected and qualified, or, if sooner, until his or her death, resignation or removal. Each
nominee has indicated his or her willingness to continue to serve as a director if re-elected. Our management has
no reason to believe that any nominee will be unable to serve. In the event that any of the nominees should be
unavailable for election as a result of an unexpected occurrence, shares represented by executed proxies will be
voted for the election of a substitute nominee proposed by management.

Directors are elected by a plurality of the votes of the shares present in person or represented by proxy

and entitled to vote at the Annual Meeting. Proxies cannot be voted for more than three persons. The three
nominees nominated by the Board to serve as Class I directors must receive the most “For” votes (among votes
properly cast in person or by proxy) of nominees for the vacancies in such director class in order to be elected.
Shares represented by executed proxies will be voted, if authority to do so is not withheld, “For” the election of
the nominees named below. Only votes “For” or “Withheld” will affect the outcome.

The following table sets forth certain information as of March 15, 2015 with respect to our directors,

including the three persons nominated for election by our Board at the Annual Meeting.

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Name
James W. Young, Ph.D. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Daniel N. Swisher, Jr.
. . . . . . . . . . . . . . . . . . . . . . . . .
Steve R. Carchedi
Matthew K. Fust
. . . . . . . . . . . . . . . . . . . . . . . . . .
Steven B. Ketchum, Ph.D. . . . . . . . . . . . . . . . . . . .
Helen S. Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dayton Misfeldt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homer L. Pearce, Ph.D. . . . . . . . . . . . . . . . . . . . . .
David C. Stump, M.D. . . . . . . . . . . . . . . . . . . . . . .

Age
70
51
53
50
50
52
41
62
65

Director Since
2000
2004
2013
2005
2012
2009
2009
2006
2006

The principal occupations and positions of our directors, including the three persons nominated for

election by our Board at the Annual Meeting, for at least the past five years, are as follows:

Class I Nominees for Election to the Board of Directors for a Three-Year Term Expiring in 2018

Steve R. Carchedi has served as the Chief Executive Officer of Cornerstone Pharmaceuticals, Inc., a

clinical stage, oncology-focused pharmaceutical company, since October 2014. Mr. Carchedi previously served
as the President, Commercial Operations for Mallinckrodt Specialty Pharmaceuticals, the Pharmaceuticals
business of Covidien plc from 2012 to 2013. Having held key positions at several leading multinational
pharmaceutical companies, previously, he served as Chief Marketing Officer for General Electric (GE)

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Healthcare-MDx where he was responsible for leading worldwide marketing for GE’s Medical Diagnostics
business. Prior to joining GE Healthcare, Mr. Carchedi held senior commercial leadership positions at Endo
Pharmaceuticals, Enzon Pharmaceuticals and McNeil Specialty Pharmaceuticals, a subsidiary of Johnson &
Johnson, Eli Lilly & Company and Bristol Myers Squibb. Mr. Carchedi holds a Bachelor of Science in marketing
from the West Chester University and a Masters in Business Administration in marketing from Drexel
University. Mr. Carchedi also currently serves on the board of directors of Bionumerik Pharmaceuticals, Inc. The
Board has concluded that Mr. Carchedi should serve on our Board due to his experience in oncology drug
development and commercialization, which the Board believes are valuable as we continue our drug
development efforts.

Helen S. Kim currently serves as a strategic advisor to NGM Biopharmaceuticals, Inc., where she served

as the chief business officer from August 2009 to January 2012. Prior to joining NGM, Ms. Kim was the chief
executive officer of TRF Pharma, where she served from December 2008 to June 2009. Prior to her service at
TRF Pharma, Ms. Kim served as the president and chief executive officer of Kosan Biosciences, Inc. from
January 2008 to July 2008. From August 2003 to December 2007, Ms. Kim served as chief program officer of
the Gordon and Betty Moore Foundation and from 2002 to 2003 as chief business officer of Affymax, Inc. Prior
to her service at Affymax, Ms. Kim was senior vice president of corporate development of Onyx
Pharmaceuticals, Inc. from 1999 to 2002. Ms. Kim also served as the vice president of strategic marketing at
Chiron Corporation from 1989 to 1998. Ms. Kim previously served on the board of Immunocellular
Therapeutics, Ltd., a publicly traded biotechnology company, and currently serves on the board of West Coast
Clinical Trial Global, a privately held global contract research organization and ForSight VISION4, Inc., a
private eye care device company. Ms. Kim holds a B.S. in Chemical Engineering from Northwestern University
and an M.B.A. from the University of Chicago. The Board has concluded that Ms. Kim should serve on our
Board due to her corporate development, managerial and scientific expertise, which the Board believes makes her
an important resource for the Board as it assesses both tactical and strategic business decisions.

Dayton Misfeldt is an Investment Partner at Bay City Capital LLC, a venture capital firm, and focuses on
biopharmaceutical investment opportunities. Prior to joining Bay City Capital in May 2000, Mr. Misfeldt was a
Vice President at Roth Capital Partners where he worked as a sell-side analyst covering the biopharmaceutical
industry. Mr. Misfeldt has also worked as a Project Manager at LifeScience Economics. Mr. Misfeldt currently
serves on the board of directors of Interleukin Genetics, Inc., a genetic testing healthcare company. Mr. Misfeldt
received a B.A. in Economics from the University of California, San Diego. The Board has concluded that
Mr. Misfeldt should serve on our Board due to his financial expertise and strong understanding of the
biotechnology industry, which the Board believes makes him an important resource for the Board as it assesses
both financial and strategic decisions.

Class II Directors Continuing in Office Until the 2016 Annual Meeting

James W. Young, Ph.D. served as Executive Chairman of our Board from December 2003 to April 2009
and has served as non-executive Chairman of our Board since April 2009. From May 2000 to November 2003,
Dr. Young served as our Chief Executive Officer. In April 2006, he joined 5AM Ventures, a venture capital firm,
as a Venture Partner. From September 1995 to March 2000, Dr. Young served as Vice President of Research, as
Senior Vice President, Research and Development, and as Group Vice President at ALZA Corporation, a
pharmaceutical company. From September 1992 to August 1995, Dr. Young served as Senior Vice President for
Business Development and as President of the Pharmaceuticals Division of Affymax, N.V., a biopharmaceutical
company. From September 1987 to August 1992, he served as Senior Vice President for Business Development
and as Senior Vice President and General Manager of the Pharmaceuticals Division at Sepracor Inc., a
pharmaceutical company. Dr. Young also served as a director of Corixa Corporation, a biopharmaceutical
company, from 2000 to July 2005. Dr. Young holds a B.S. in Chemistry from Fordham University and a Ph.D. in
Organic Chemistry from Cornell University. The Board has concluded that Dr. Young should serve on our Board
due to his prior history as our Chief Executive Officer and his long tenure as Board Chairman, which brings
continuity to the Board and a depth of understanding. In addition, the Board believes that he brings operational

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and industry expertise due to his experience in management of other pharmaceutical and biopharmaceutical
companies, as well as leadership skills that are important to the Board.

Steven B. Ketchum, Ph.D. served as our Senior Vice President, Research and Development from June

2008 to February 2012. In February 2012, Dr. Ketchum accepted the position of President of Research and
Development, Senior Vice President at Amarin Corporation plc, a biopharmaceutical company, and concurrently
transitioned from his executive role to a member of our Board. From May 2005 to May 2008, Dr. Ketchum
served as Senior Vice President, Research & Development and Medical Affairs of Reliant Pharmaceuticals, Inc.,
a pharmaceutical company, which was acquired by GlaxoSmithKline in 2007. From June 2002 to April 2005,
Dr. Ketchum served as Senior Vice President, Operations and Regulatory Affairs for IntraBiotics
Pharmaceuticals, Inc. Dr. Ketchum also held positions at ALZA Corporation from November 1994 to May 2002,
most recently as Senior Director, Regulatory Affairs. Dr. Ketchum earned a Ph.D. in Pharmacology from
University College London (funded by the Sandoz Institute for Medical Research) and a B.S. in Biological
Sciences from Stanford University. The Board has concluded Dr. Ketchum should serve on our Board due to his
tenure at Sunesis and his scientific and regulatory expertise and industry background, which position him to
make an effective contribution to the Board, and which the Board believes to be particularly important as we
continue our drug development efforts and progress towards potential future regulatory filings.

Homer L. Pearce, Ph.D. served in various capacities at Eli Lilly & Company between 1979 and March

2006, including Vice President, Cancer Research and Clinical Investigation from 1994 to 2002 and Distinguished
Research Fellow, Cancer Research, Lilly Research Laboratories from 2002 to March 2006. Dr. Pearce is a
member of the American Association for Cancer Research, the American Chemical Society and the American
Association for the Advancement of Science. Dr. Pearce holds a B.S. from Texas A&M University and a Ph.D. in
Organic Chemistry from Harvard University. The Board has concluded that Dr. Pearce should serve on our
Board due to his scientific expertise and industry background, which are valuable as we continue our drug
development efforts.

Class III Directors Continuing in Office Until the 2017 Annual Meeting

Matthew K. Fust is a board member and advisor to life sciences companies. He retired as Executive Vice

President and Chief Financial Officer at Onyx Pharmaceuticals, Inc., a biopharmaceutical company, where he
served from January 2009 to October 2013. Prior to joining Onyx, Mr. Fust was Executive Vice President and
Chief Financial Officer at Jazz Pharmaceuticals, Inc., a pharmaceutical company, which he joined in May 2003.
From May 2002 to May 2003, Mr. Fust was Chief Financial Officer at Perlegen Sciences, Inc., a biotechnology
company. From June 1996 to January 2002, Mr. Fust was with ALZA Corporation, first as Controller and then as
Chief Financial Officer. In addition, Mr. Fust serves as a member of the board of directors of MacroGenics, Inc.,
a biopharmaceutical company, and Ultragenyx Pharmaceutical Inc., a biotechnology company, Dermira, Inc., a
biotechnology company and Atara Biotherapeutics, a biotechnology company. Mr. Fust holds a B.A. in
Accounting from the University of Minnesota and an M.B.A. from the Stanford Graduate School of Business.
The Board has concluded that Mr. Fust should serve on our Board due to his financial expertise, in particular
with its focus on the pharmaceutical and biopharmaceutical industries. This expertise makes him an important
resource for the Board in its oversight of our financial operations and related reporting.

David C. Stump, M.D. was most recently Executive Vice President, Research and Development at Human
Genome Sciences, Inc., a biopharmaceutical company, serving there from November 1999 until December 2012.
From December 2003 to May 2007, Dr. Stump served as Executive Vice President, Drug Development at Human
Genome Sciences and, from November 1999 to December 2003, as its Senior Vice President, Drug
Development. Prior to joining Human Genome Sciences, Dr. Stump held roles of increasing responsibility at
Genentech, Inc., a biopharmaceutical company, from 1989 to 1999, including Vice President, Clinical Research
and Genentech Fellow. Prior to joining Genentech, Dr. Stump was an Associate Professor of Medicine and
Biochemistry at the University of Vermont. Dr. Stump is a member of the board of directors of Dendreon
Corporation, a biotechnology company, and MacroGenics, Inc., a biopharmaceutical company, and a member of

the board of trustees of Earlham College. Dr. Stump holds an A.B. from Earlham College and an M.D. from
Indiana University and did his residency and fellowship training in internal medicine, hematology, oncology and
biochemistry at the University of Iowa. The Board has concluded that Dr. Stump should serve on our Board due
to his scientific and clinical expertise and industry background, which are valuable as we continue our drug
development efforts.

Daniel N. Swisher, Jr. has served as our Chief Executive Officer, or CEO, and a member of our Board
since January 2004 and also as our President since August 2005. From December 2001 to December 2003, he
served as our Chief Business Officer and Chief Financial Officer. From June 1992 to September 2001,
Mr. Swisher served in various management roles, including Senior Vice President of Sales and Marketing, for
ALZA Corporation. Mr. Swisher also serves as non-executive chairman of the board of directors of Cerus
Corporation, a biopharmaceutical company. Mr. Swisher holds a B.A. in History from Yale University and an
M.B.A. from the Stanford Graduate School of Business. The Board has concluded that Mr. Swisher should serve
on our Board due to his long tenure as our CEO, which brings continuity to the Board, his operational and
industry expertise through his previous managerial roles as well as his detailed understanding of our business.

There are no family relationships among any of our executive officers, directors or persons nominated to

become one of our directors.

THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE ELECTION OF THE DIRECTORS
COVERED BY PROPOSAL NO. 1.

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PROPOSAL NO. 2

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and

Section 14A of the Exchange Act, our stockholders are entitled to vote to approve, on an advisory basis, the
compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules.

This vote is not intended to address any specific item of compensation, but rather the overall

compensation of our named executive officers and the philosophy, policies and practices described in this proxy
statement. The compensation of our named executive officers subject to the vote is disclosed in the
Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosure contained
in this proxy statement. As discussed in those disclosures, we believe that our compensation policies and
decisions are focused on pay-for-performance principles and strongly aligned with our stockholder’s interests
and consistent with current market practices. Compensation of our named executive officers is designed to enable
us to attract and retain talented and experienced executives to lead us successfully in a competitive environment.

Accordingly, the Board is asking the stockholders to indicate their support for the compensation of our

named executive officers as described in this proxy statement by casting a non-binding advisory vote “FOR” the
following resolution:

“RESOLVED, that the compensation paid to our named executive officers, as disclosed pursuant

to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation
tables and narrative discussion is hereby APPROVED.”

Because the vote is advisory, it is not binding on the Board or the Company. Nevertheless, the views
expressed by the stockholders, whether through this vote or otherwise, are important to management and the
Board and, accordingly, the Board and the compensation committee of the Board intend to consider the results of
this vote in making determinations in the future regarding executive compensation arrangements.

Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in

person or represented by proxy and entitled to vote at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL NO. 2.

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PROPOSAL NO. 3

RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Audit Committee of the Board, or the Audit Committee, has selected Ernst & Young LLP, or
Ernst & Young, as our independent registered public accounting firm for the year ending December 31, 2015 and
has further directed that management submit the selection of Ernst & Young for ratification by the stockholders
at the Annual Meeting. Ernst & Young has audited our financial statements since our inception in 1998.
Representatives of Ernst & Young are expected to be present at our Annual Meeting, will have an opportunity to
make a statement if they so desire, and will be available to respond to appropriate questions.

Stockholder ratification of the selection of Ernst & Young as our independent registered public
accounting firm is not required by our bylaws or other governing documents. However, the Audit Committee is
submitting the selection of Ernst & Young to our stockholders for ratification as a matter of good corporate
governance. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to
retain Ernst & Young. Even if the selection is ratified, the Audit Committee in their discretion may direct the
appointment of a different independent registered public accounting firm at any time during the year if they
determine that such a change would be in the best interests of Sunesis and our stockholders.

Stockholders are requested in this Proposal No. 3 to ratify the selection of Ernst & Young as our
independent registered public accounting firm for the year ending December 31, 2015. The affirmative vote of
the holders of a majority of the shares present in person or represented by proxy and entitled to vote will be
required to ratify this Proposal No. 3. Abstentions will be counted towards the tabulation of votes cast on the
proposal and will have the same effect as “Against” votes. Broker non-votes are counted towards a quorum, but
are not counted for any purpose in determining whether this matter has been approved. However, Proposal No. 3
is considered a routine matter, and therefore no broker non-votes are expected to exist in connection with
Proposal No. 3.

THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSAL NO. 3.

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INFORMATION ABOUT THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Independence of the Members of the Board of Directors

The laws and rules governing public companies and the NASDAQ listing requirements obligate our
Board to affirmatively determine the independence of its members. The Board consults with our corporate
counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and
regulations regarding the definition of “independent,” including those set forth in NASDAQ listing requirements,
as in effect from time to time.

Consistent with these considerations, after a review of all relevant transactions or relationships between

each director, or any of their family members, and Sunesis, our senior management and our independent
registered public accounting firm, the Board has affirmatively determined that Ms. Kim, Drs. Young, Ketchum,
Pearce and Stump, and Messrs. Carchedi, Fust and Misfeldt—a majority of our Board—are independent directors
within the meaning of the applicable NASDAQ listing requirements.

In making its determination of independence, the Board considered the previous consulting relationships

with Drs. Pearce and Stump, the relationships of Mr. Misfeldt and Ms. Kim with certain of our principal
stockholders, Dr. Young’s position as our Executive Chairman until April 3, 2009 and compensation paid to
Dr. Young in connection with such employment, and Dr. Ketchum’s position as our Senior Vice President,
Research and Development until January 31, 2012 and compensation paid to Dr. Ketchum in connection with
such employment. In 2014, neither Dr. Pearce nor Dr. Stump received consulting fees pursuant to these previous
arrangements, nor are any fees outstanding, and neither Dr. Young nor Dr. Ketchum received any compensation
other than as described under “Director Compensation” below. Our Board does not believe that these stockholder
and former employment relationships or consulting arrangements interfere with these directors’ exercise of
independent judgment in carrying out their responsibilities as directors.

Board Leadership Structure

The Board is currently chaired by Dr. Young, Sunesis’ former Executive Chairman. Dr. Young, or the

Board Chairman, has authority, among other things, to call and preside over Board meetings, to set meeting
agendas and to determine materials to be distributed to the Board. Accordingly, the Board Chairman has
substantial ability to shape the work of the Board. We believe that separation of the positions of Board Chairman
and CEO reinforces the independence of the Board in its oversight of our business and affairs. In addition, we
believe that such separation creates an environment that is more conducive to objective evaluation and oversight
of management’s performance, increasing management accountability and improving the ability of the Board to
monitor whether management’s actions are in the best interests of Sunesis and its stockholders. As a result, we
believe that having a Board Chairman separate from the CEO can enhance the effectiveness of the Board as a
whole. In addition, Dr. Young’s previous position as Executive Chairman helps ensure that the Board and
management act with a common purpose. In our view, having a Board Chairman far removed from management
has the potential to give rise to divided leadership, which could interfere with good decision-making or weaken
our ability to develop and implement strategy. Instead, we believe that Dr. Young’s former management position
makes him best positioned to act as a bridge between management and the Board, facilitating the regular flow of
information and implementation of our strategic initiatives and business plans. We also believe that it is
advantageous to have a Board Chairman with extensive history and knowledge of Sunesis, as is the case with
Dr. Young.

Role of the Board in Risk Oversight

The Board has an active role in overseeing management of Sunesis’ risks, which it administers directly as

well as through various standing committees of the Board that address risks inherent in their respective areas of
oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, including

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information regarding our credit, liquidity and operations and the risks associated with each. Our primary risks
are currently associated with the development of vosaroxin, including our ability to raise additional capital to
complete the development and potential commercialization of vosaroxin. The Audit Committee of the Board has
the responsibility to consider and discuss our major financial risk exposures and the steps our management has
taken to monitor and control these exposures. However, due to the criticality of these risks, they are also
discussed to a great extent by the full Board at regularly scheduled meetings, or at ad hoc meetings with the full
Board or a subset thereof. The Board also monitors the various risks associated with the development of
vosaroxin, drawing on the experience and insight of the full membership thereof. The Audit Committee also
monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our
internal controls over financial reporting. The Nominating and Corporate Governance Committee of the Board,
or the Nominating Committee, monitors the effectiveness of our corporate governance guidelines, including
whether they are effective in preventing illegal or improper liability-creating conduct, and manages risks
associated with the independence of the Board and potential conflicts of interest. The Compensation Committee
of the Board, or the Compensation Committee, assesses and monitors whether any of our compensation policies
and programs has the potential to encourage excessive risk taking. While each committee is responsible for
evaluating certain risks and overseeing management of such risks, the entire Board is regularly informed through
committee reports about such risks.

Meetings of the Board of Directors

Our Board held seven meetings during 2014. Each Board member attended 75% or more of the aggregate

meetings of the Board and of the committees on which he or she served.

Executive Sessions

The independent directors meet in executive session without management directors, non-independent
directors or management present. These sessions take place prior to or following regularly scheduled Board
meetings. The directors met in such sessions seven times during 2014.

Information Regarding Committees of the Board of Directors

Our Board has three standing committees: the Audit Committee, the Compensation Committee and the
Nominating Committee. Each of these three standing committees has a written charter approved by our Board
that reflects the applicable standards and requirements adopted by the SEC and NASDAQ. A copy of each
charter can be found on our website, www.sunesis.com, under the section titled “Investors & Media” and under
the subsection “Corporate Governance.” Information contained in, or accessible through, our website is not a part
of this proxy statement. The following table provides membership and meeting information for 2014 for each of
the committees of the Board:

Name
Steve R. Carchedi . . . . . . . . . . . . . . . . . .
Matthew K. Fust . . . . . . . . . . . . . . . . . . .
Helen S. Kim . . . . . . . . . . . . . . . . . . . . .
Dayton Misfeldt . . . . . . . . . . . . . . . . . . .
Homer L. Pearce, Ph.D. . . . . . . . . . . . . .
David C. Stump, M.D. . . . . . . . . . . . . . .
Total Meetings in 2014 . . . . . . . . . . . . .

Audit

X*
X

X
5

Compensation
X
X

Nominating and
Corporate
Governance

X
X*

Committee Chairperson.

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Below is a description of each standing committee of the Board. The Board has determined that each
committee member meets the applicable NASDAQ rules and regulations regarding “independence” and is free of
any relationship that would impair his or her individual exercise of independent judgment with regard to Sunesis.
The standing committees regularly report to the Board on their actions and recommendations. The committees
periodically review their charters and assess their own performance. In addition, the Board, through the
Nominating Committee, conducts an annual review of the role, function, roster and operation of each of the
Board’s standing committees.

Audit Committee

The Audit Committee was established by our Board to oversee our corporate accounting and financial

reporting processes and audits of our financial statements. For this purpose, our Audit Committee is responsible
for, among other things:

•

overseeing the accounting and financial reporting processes of Sunesis and the audits of our
financial statements, including reviewing our disclosures under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” earnings press releases and earnings
guidance provided to analysts and ratings agencies;

assisting our Board in its oversight of the integrity of our financial statements;

determining and approving the initial engagement and retention of the independent registered
public accounting firm;

reviewing and approving the independent registered public accounting firm’s performance of any
proposed permissible audit and non-audit services and the fees for such services;

reviewing and approving or rejecting transactions between us and any related persons;

reviewing significant issues regarding accounting principles and financial statement presentations,
including any significant changes in our selection or application of accounting principles, policies
or practices;

conferring with management and the independent registered public accounting firm regarding our
policies and procedures regarding risk assessment and management;

establishing procedures, as required under applicable law, for the receipt, retention and treatment
of complaints received by us regarding accounting, internal accounting controls or auditing
matters and the confidential and anonymous submission by employees or agents of concerns
regarding questionable accounting or auditing matters;

reviewing with counsel, the independent registered public accounting firm and management, as
appropriate, any significant regulatory or other legal or accounting initiative or matter that may
have a material impact on our financial statements, compliance programs and policies; and

preparing the report required by the SEC rules to be included in our annual proxy statement.

The Audit Committee is chaired by Mr. Fust, and also includes Ms. Kim and Dr. Stump. The Board

reviews the NASDAQ definition of “independence” for Audit Committee members on an annual basis and has
determined that all members of our Audit Committee are independent (as independence is currently defined in
Rule 5605(c)(2)(A)(i) and (ii) of the NASDAQ listing requirements). The Board has also determined that
Mr. Fust qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board made

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a qualitative assessment of Mr. Fust’s level of knowledge and experience based on a number of factors, including
his formal education and experience as a chief financial officer for public reporting companies.

Report of the Audit Committee of the Board of Directors (1)

The Audit Committee oversees our accounting and financial reporting processes and the audits of our
financial statements on behalf of the Board. Management has the primary responsibility for establishing and
maintaining adequate internal control over financial reporting, preparing the financial statements, and
establishing and maintaining adequate controls over public reporting. Our independent registered public
accounting firm for 2014, Ernst & Young, had responsibility for conducting an audit of our annual financial
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States),
or PCAOB, and expressing an opinion on the conformity of those audited financial statements with U.S.
generally accepted accounting principles.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management

and with Ernst & Young our audited consolidated financial statements for the year ended December 31, 2014
included in our Annual Report on Form 10-K, including a discussion of the quality, not just the acceptability, of
the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the
financial statements.

The Audit Committee is responsible for evaluating, managing and approving the engagement of the

independent registered public accounting firm, including the scope, extent and procedures for the annual audit
and the compensation to be paid for these services, and all other matters the Audit Committee deems appropriate,
including ensuring the independent registered public accounting firm’s accountability to the Board and the Audit
Committee.

The Audit Committee has discussed with Ernst & Young the matters required to be discussed by Auditing

Standard No. 16, Communications with Audit Committees, as adopted by the PCAOB, which include, among
other items, matters related to the conduct of the audit of our financial statements. The Audit Committee has also
received the written disclosures and the letter from Ernst & Young required by applicable requirements of the
PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence, and
has discussed with Ernst & Young their independence.

Based on the review and discussions referred to above, the Audit Committee has recommended to the

Board that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the
year ended December 31, 2014.

Matthew K. Fust, Chairman
Helen S. Kim
David C. Stump, M.D.

(1)

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be
incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the
Securities Act, or the Exchange Act, other than our Annual Report on Form 10-K, whether made before
or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

Our Compensation Committee is responsible for, among other things:

•

fulfilling the Board’s role in overseeing our compensation plans, policies and programs, including
reviewing and approving corporate performance goals and objectives;

•

assisting our Board in discharging its responsibilities with respect to officer, employee, consultant
and director compensation, including making recommendations to our Board regarding non-
employee director compensation;

establishing corporate and individual performance objectives relevant to the compensation of our
executive officers and other senior management and evaluating their performance in light of these
stated objectives;

reviewing and discussing the disclosures contained in our Compensation Discussion and Analysis
report included in our annual proxy statement, if required;

assessing and monitoring whether any of our compensation policies and programs has the
potential to encourage excessive risk-taking;

preparing the report required by SEC rules to be included in our annual proxy statement, if
required; and

supervising the administration of our stock option plans, employee stock purchase plan and other
compensation and incentive programs and administering any plans and programs designed and
intended to provide compensation for our officers, including severance arrangements and change
of control protections.

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The Compensation Committee is chaired by Mr. Misfeldt, and also includes Messrs. Carchedi and Fust.

All members of our Compensation Committee are “independent” (as independence is currently defined in
Rule 5605(a)(2) of the NASDAQ listing requirements). Each member of the Compensation Committee is an
“outside” director as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended,
or the Code, and a “non-employee” director within the meaning of Rule 16b-3 of the rules promulgated under the
Exchange Act.

Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as

appropriate. In addition, under its charter, the Compensation Committee has the authority to obtain, at the
expense of the Company, advice and assistance from internal and external legal, accounting or other advisors and
other external resources that the Compensation Committee considers necessary or appropriate in the performance
of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any advisors
engaged for the purposes of advising the Compensation Committee. In particular, the Compensation Committee
has the sole authority to retain compensation consultants to assist in its evaluation of executive and director
compensation, including the authority to approve the consultant’s reasonable fees and other retention terms.
Under its charter, the Compensation Committee may select, or receive advice from, a compensation consultant,
legal counsel or other advisor to the Compensation Committee, other than in-house legal counsel and certain
other types of advisers, only after taking into consideration six factors, prescribed by the SEC and NASDAQ,
that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.

Nominating and Corporate Governance Committee

Our Nominating Committee is responsible for, among other things:

•

recommending to our Board the composition and operations of our Board;

identifying and evaluating individuals qualified to serve as members of our Board, and
recommending to our Board director nominees for the annual meeting of stockholders and to fill
vacancies;

•

overseeing all aspects of corporate governance on behalf of our Board, including making
recommendations regarding corporate governance issues and developing a set of corporate
governance guidelines applicable to us;

recommending to our Board the responsibilities of each Board committee, the composition and
operation of each Board committee, and director nominees for assignment to each Board
committee; and

overseeing our Board’s annual evaluation of its performance and the performance of our Board
committees.

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The Nominating Committee is chaired by Dr. Pearce and also includes Mr. Misfeldt, both of whom are
“independent” (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ listing requirements).

Director Nominations Process

The Nominating Committee is charged with monitoring the size and composition of our Board. In
addition, the Nominating Committee has primary responsibility for reviewing, evaluating and recommending to
the Board the slate of nominees for director to be elected by the stockholders at each annual meeting of
stockholders and, where applicable, to fill vacancies. In its exercise of these responsibilities, the Nominating
Committee considers the appropriate size and composition of our Board, taking into account that our Board as a
whole should have competency in the following areas:

•

industry knowledge;

accounting and finance;

business judgment;

management;

leadership;

business strategy;

corporate governance; and

risk management.

The Nominating Committee evaluates the types of backgrounds, skills, and attributes which are needed to

help strengthen our Board in light of the need for an appropriate balance of the above competencies. This
evaluation takes place in the context of the current composition of the Board, our operating requirements and the
interests of Sunesis and our stockholders.

The Nominating Committee identifies nominees for director by first evaluating the current directors

whose terms are about to expire, considering the above criteria and any potential conflicts of interest as well as
applicable independence and experience requirements. In the case of incumbent directors whose terms are about
to expire, the Nominating Committee considers the director’s demonstrated service and commitment to Sunesis,
as well as his or her willingness to continue in service on our Board. If any incumbent director whose term is
expiring does not wish to continue in service as a director, if the Nominating Committee decides not to nominate
a member for re-election, or if the Nominating Committee wishes to increase the size of the Board, it will

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identify the desired skills and experience of a new nominee as outlined above unless the Board determines not to
fill the vacancy.

In addition to evaluating core competencies, when considering candidates for director, the Nominating

Committee will consider whether such candidates have sufficient time to devote to the affairs of Sunesis as well
as each candidate’s reputation for integrity and commitment to rigorously represent the long-term interests of our
stockholders. Other considerations include any potential conflicts of interest as well as applicable independence
and experience requirements as set forth by applicable NASDAQ and SEC rules and regulations. In addition, the
Nominating Committee balances the value of continuity of service of incumbent Board members with that of
obtaining new perspectives. With respect to new candidates for the Board, the Nominating Committee will also
conduct any necessary or appropriate inquiries into the backgrounds and qualifications of such candidates. The
Nominating Committee also believes that the Board should be comprised of individuals whose backgrounds and
experience complement those of other Board members, and also considers whether a prospective nominee
promotes a diversity of talent, skill, expertise, background, perspective and experience, including with respect to
age, gender, ethnicity, place of residence and specialized experience. The Nominating Committee does not assign
specific weights to particular criteria and nominees are not required to possess any particular attribute.

The Nominating Committee also recommends to our Board the responsibilities and composition of the
Board’s committees and evaluates and recommends to the Board those directors to be appointed to the various
committees, including the directors recommended to serve as chairman of each committee. The evaluation of
such appointments takes into consideration, among other factors, applicable independence and experience
requirements as set forth by applicable NASDAQ and SEC rules and regulations and the membership criteria
specified in the relevant committee charter.

The Nominating Committee will consider director candidates recommended by our stockholders. The

Nominating Committee does not intend to alter the manner in which it evaluates candidates, including the criteria
set forth above, based on whether or not the candidate is recommended by a stockholder. The Nominating
Committee will consider stockholders’ nominations for directors only if written notice is timely received by our
Corporate Secretary at Sunesis Pharmaceuticals, Inc., 395 Oyster Point Boulevard, Suite 400, South San
Francisco, California 94080, and contains the information required for such nominations in accordance with our
bylaws. To be timely, notice must be received not less than 120 days prior to the first anniversary of the date on
which we first mailed a proxy statement to stockholders in connection with the preceding year’s annual meeting,
unless the date of the annual meeting has been changed by more than 30 days from the date of the prior year’s
meeting, in which case notice must be received not later than the later of the 120th day prior to such annual
meeting or the 10th day following the day on which public announcement of the date of such meeting is first
made. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s
business experience for at least the previous five years, complete biographical information, a description of the
proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a
beneficial or record holder of our stock and has been a holder for at least one year. Any such submission must be
accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director
if elected. The Nominating Committee did not receive any stockholder nominations during 2014.

Director Evaluations

On an annual basis, the Nominating Committee conducts an evaluation of the Board, the functioning of

the committees and each individual member of the Board as deemed appropriate and necessary.

Stockholder Communications with the Board of Directors

Our stockholders may communicate with the Board by writing to our Corporate Secretary at Sunesis

Pharmaceuticals, Inc., 395 Oyster Point Boulevard, Suite 400, South San Francisco, California 94080. Our
Corporate Secretary will review these communications and will determine whether they should be presented to

our Board. The purpose of this screening is to allow the Board to avoid having to consider irrelevant or
inappropriate communications. All communications directed to the Audit Committee in accordance with our
Complaint, Investigation and Whistleblower Policy that relate to questionable accounting or auditing matters
involving Sunesis will be promptly and directly forwarded to the chairman of the Audit Committee.

Annual Meeting Attendance

We have a corporate policy that encourages our directors to attend our annual stockholder meetings. In

2014, Mr. Swisher attended our annual meeting.

Corporate Governance Guidelines

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Our Board has documented our governance practices by adopting Corporate Governance Guidelines to

assure that the Board will have the necessary authority and practices in place to review and evaluate our business
operations as needed and to make decisions that are independent of our management. The guidelines are also
intended to align the interests of directors and management with those of our stockholders. The Corporate
Governance Guidelines clarify the role of the Board in reviewing, approving and monitoring fundamental
financial and business strategy and major corporate actions; ensuring processes are in place for maintaining the
integrity of Sunesis and its financial statements; assessing major risks presented to Sunesis and reviewing options
for their mitigation; and selecting, evaluating and compensating our CEO, Chairman and other officers of
Sunesis. The Corporate Governance Guidelines also set forth the practices our Board intends to follow with
respect to director qualification and selection, board composition and selection, board meetings and involvement
of senior management, board committee composition and selection, director access to management and
independent advisors, and non-employee director compensation and continuing education. The Corporate
Governance Guidelines were adopted by the Board to, among other things, reflect changes to the legal and
regulatory requirements, including the NASDAQ listing requirements and SEC rules, and evolving best practices
and other developments. Our Corporate Governance Guidelines can be found on our website, www.sunesis.com,
under the section titled “Investors & Media” and under the subsection “Corporate Governance.”

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more
than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. Executive
officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of
all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of reports furnished to us, we believe that

during the year ended December 31, 2014, our executive officers, directors and greater than 10% stockholders
complied with all Section 16(a) filing requirements.

Compensation Committee Interlocks and Insider Participation

During 2014, the Compensation Committee consisted of Messrs. Misfeldt, Carchedi and Fust. No
member of the Compensation Committee is an officer or employee of Sunesis, and none of our executive officers
serve as a director or member of a compensation committee of any entity that has one or more executive officers
serving as a member of our Board or Compensation Committee.

Director Compensation

Board and Committee Fees and Awards.

On the first day of the calendar quarter following the date of our annual meeting of stockholders and on
the three-month anniversary thereof for the subsequent three quarters, each non-employee director of our Board
(other than the Board Chairman) is entitled to receive a quarterly payment of $10,000 and the non-employee
Board Chairman is entitled to receive a quarterly payment of $15,000, each in connection with his or her services
as a director and Board Chairman, respectively. Additionally, on the same dates as above, the non-employee
director who serves as chairman of the Audit Committee, Compensation Committee or Nominating Committee is
entitled to receive a quarterly payment of $5,000, $3,750 and $1,875, respectively, for service as chairman. Each
non-employee director who serves as a committee member of the Audit Committee, Compensation Committee or
Nominating Committee is entitled to receive a quarterly payment of $2,500, $1,875 and $1,250, respectively, for
service as a member of each such committee.

Our CEO did not receive any additional compensation in 2014 for his service on our Board.

On June 30, 2014, each non-employee director of our Board received a grant of non-qualified stock
options to purchase 20,000 shares of our common stock under our 2011 Equity Incentive Plan, or the 2011 Plan.
Each of these options vests monthly over a two-year period.

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Director Compensation Table

The following table sets forth the compensation information for our non-employee directors for the year
ended December 31, 2014. The compensation received by Mr. Swisher, as a named executive officer, is set forth
in the “Executive Compensation and Related Information—Summary Compensation Table” in this proxy
statement.

Name
Steve R. Carchedi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matthew K. Fust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven B. Ketchum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Helen S. Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dayton Misfeldt
Homer L. Pearce, Ph.D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David C. Stump M.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James W. Young, Ph.D.

Fees Earned
Option
or Paid in
Awards
Cash
($)(2)(3)
($)(1)
$87,038
$47,500
87,038
67,500
87,038
40,000
50,000
87,038
60,000(4) 87,038
87,038
47,500
87,038
50,000
87,038
60,000

Total
($)
$134,538
154,538
127,038
137,038
147,038
134,538
137,038
147,038

(1)

(2)

Consists of fees earned for Board and committee meeting attendance as described above.

The dollar amounts in this column represent the aggregate grant date fair value of stock option awards
granted pursuant to the 2011 Plan in the year ended December 31, 2014. These amounts have been
calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification
Topic 718, or FASB ASC Topic 718. Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting conditions. For additional information on the
valuation assumptions, refer to Note 11, Stock-Based Compensation, of the Notes to Consolidated
Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2014, which
identifies assumptions made in the valuation of option awards in accordance with FASB ASC Topic 718.

(3)

On June 30, 2014, each non-employee director of our Board received a grant of non-qualified stock
options to purchase 20,000 shares of our common stock. The aggregate grant date fair value of each such
option award was $87,038. As of December 31, 2014, each non-employee director held stock options to
purchase the following aggregate number of shares of our common stock: Mr. Carchedi held options to
purchase 50,000 shares of our common stock; Mr. Fust held options to purchase 143,335 shares of our
common stock; Dr. Ketchum held options to purchase 225,570 shares of our common stock; Ms. Kim
held options to purchase 133,334 shares of our common stock; Mr. Misfeldt each held options to purchase
123,334 shares of our common stock; Drs. Pearce and Stump each held options to purchase 141,668
shares of our common stock; and Dr. Young held options to purchase 187,501 shares of our common
stock.

(4)

In 2014, Mr. Misfeldt’s director compensation was paid to Bay City Capital LLC, manager of the general
partner to Bay City Capital Fund V, L.P. and Bay City Capital Fund V Co-Investment Fund, L.P., as
described in the “Security Ownership of Certain Beneficial Owners and Management” section of this
proxy statement.

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CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS

Biographies of Our Executive Officers

Set forth below is information regarding each of our executive officers as of March 15, 2015.

Biographical information with regard to Mr. Swisher is presented under “Class III Directors Continuing in Office
Until the 2017 Annual Meeting” in this proxy statement.

Name
Daniel N. Swisher, Jr.
Eric H. Bjerkholt

. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .

Position

Age
51 CEO, President and Director
55 Executive Vice President, Corporate Development and

Finance and Chief Financial Officer

Adam R. Craig, Ph.D.

. . . . . . . . . . . . . . . .

49 Executive Vice President, Development and Chief Medical

Officer

The principal occupations and positions for at least the past five years of our executive officers, other than

Mr. Swisher, are as follows:

Eric H. Bjerkholt served as our Senior Vice President, Corporate Development and Finance and Chief

Financial Officer from February 2007 to January 2012, at which time he was promoted to Executive Vice
President, Corporate Development and Finance and Chief Financial Officer. From January 2004 to January 2007,
he served as our Senior Vice President and Chief Financial Officer. From January 2002 to January 2004,
Mr. Bjerkholt served as Senior Vice President and Chief Financial Officer at IntraBiotics Pharmaceuticals, Inc., a
pharmaceutical company focused on the development of antibacterial and antifungal drugs for the treatment of
serious infectious diseases. Mr. Bjerkholt was a co-founder of LifeSpring Nutrition, Inc., a privately held
nutraceutical company, and from May 1999 to March 2002 served at various times as its Chief Executive Officer,
President and Chief Financial Officer. From 1990 to 1997, Mr. Bjerkholt was an investment banker at J.P.
Morgan & Co. Mr. Bjerkholt is a member of the Board of Directors of StemCells, Inc., a biotechnology
company, Ambrx, Inc., a biopharmaceutical company and Corium International, Inc. Mr. Bjerkholt holds a Cand.
Oecon degree in Economics from the University of Oslo and an M.B.A. from Harvard Business School.

Adam R. Craig, Ph.D. has served as our Executive Vice President, Development and Chief Medical
Officer since March 2012. From September 2007 until December 2011, Dr. Craig served as Chief Medical
Officer of ChemGenex Pharmaceuticals Ltd., a biotechnology company focused on the development of novel
therapeutic agents for the treatment of cancer, and in similar roles following the acquisition of ChemGenex by
Cephalon, Inc. in July 2011, and the acquisition of Cephalon, Inc. by Teva Pharmaceutical Industries Ltd. in
October 2011. From December 2011 until joining the Company, Dr. Craig served as a consultant to Teva
Pharmaceutical Industries Ltd. Before joining ChemGenex, he was founding Chief Medical Officer at Innovive
Pharmaceuticals, Inc., a hematology-focused company. Prior to joining Innovive, Dr. Craig held positions of
increasing responsibility at ArQule Inc., Ilex Oncology Inc., and Antisoma plc. Dr. Craig received his medical
qualifications from London University, a Ph.D. in molecular medicine from the University of Leeds, and an
M.B.A. from the Open Business School in the United Kingdom. Dr. Craig is a member of the Royal College of
Pediatrics and Child Health Physicians (UK) and undertook post-graduate training in pediatrics and pediatric
oncology. He also currently serves as a member of the Commercialization Review Council for the Cancer
Prevention Research Institute of Texas, a fund for cancer research and prevention programs and services.

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EXECUTIVE COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

Background

This Compensation Discussion and Analysis explains our compensation philosophy, policies and
practices for the following executives, who are referred to in this Compensation Discussion and Analysis and in
the following tables as our “named executive officers” for the year ended December 31, 2014:

•

Daniel N. Swisher, Jr., Chief Executive Officer and President;

Eric H. Bjerkholt, Executive Vice President, Corporate Development and Finance, Chief Financial
Officer and Corporate Secretary; and

Adam R. Craig, Ph.D., Executive Vice President, Development and Chief Medical Officer.

Executive Summary

Our executive compensation program is designed to attract, reward and retain a talented, innovative and

entrepreneurial team of executives. To do so, we believe that the majority of the target compensation of our
named executive officers should be based on performance, both of the individual and of the business. We
structure our variable compensation programs to recognize both short-term and long-term contributions given the
importance of both near-term milestones and longer-term development cycles in our industry.

Response to 2014 Say-on-Pay Vote. At our annual meeting of stockholders in 2014, we conducted our
second advisory vote on the compensation of our named executive officers. We believe that it is important for
our stockholders to have an opportunity to vote on this proposal annually, which is consistent with the frequency
preferred by our stockholders. Our Board and Compensation Committee value the opinions of our stockholders.
At our Annual Meeting, we will conduct our third say-on-pay vote. We are committed to ongoing engagement
with our stockholders on executive compensation and corporate governance issues.

At our annual meeting of stockholders in 2014, approximately 99.6% of the votes cast on the say-on-pay
proposal supported the proposal. While this vote is advisory only, our Compensation Committee has considered
the results of the vote in the context of our overall compensation philosophy, policies and decisions. In addition,
at our annual meeting of stockholders in 2013, approximately 99.6% of the votes cast on the say-on-pay proposal
supported the proposal. Our Compensation Committee believes that the 2014 stockholder vote strongly endorsed
our compensation philosophy and the decisions we made for 2013. Our compensation philosophy and the
decisions made in 2014 were consistent with the decisions made in 2013.

Important Features of our Executive Compensation Program. The important features of our executive

compensation program include:

•

Our executive compensation is weighted toward performance-based compensation in the form of
(i) an incentive cash bonus opportunity that is based on achievement of strategic, operational and
financial goals selected annually by our Compensation Committee, and (ii) an equity
compensation opportunity in the form of stock options that provide incentives for our executives
to meet certain performance goals and increase the market value of our common stock over time.

The cash severance benefits that we offer to our executives do not exceed one times base salary.

We do not provide any tax gross ups, including under Sections 409A or 4999 of the Code to our
named executive officers.

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•

We do not provide any defined benefit pension plans or supplemental employee retirement plans
to any of our employees.

A portion of a bonus paid to any of our named executive officers may be paid in shares of fully-
vested common stock to both minimize the associated cash expense and align the named executive
officer’s incentives with our stockholders.

Our insider trading policy prohibits our employees, including our named executive officers,
directors and consultants, from hedging the economic interest in the Sunesis shares they hold.

Our Compensation Committee has retained an independent third-party consultant for guidance in
making compensation decisions.

Our Compensation Committee reviews market practices and makes internal comparisons among
our named executive officers when making compensation decisions.

We structure our executive compensation programs with the intent of minimizing the risk of
inappropriate risk-taking by our executives.

Objectives of Our Compensation Philosophy

We design our executive compensation philosophy to:

•

provide a competitive compensation package to attract, motivate and retain talented and
experienced individuals to manage and operate all aspects of our business with the requisite skills
for success;

motivate our executives to achieve corporate and individual objectives that promote the growth of
our business and move forward our product portfolio, as measured by objective goals;

align the interests of our executive officers with those of our stockholders; and

create a link between our performance and individual/team performance and compensation.

To meet these objectives, we provide base salary, performance-based annual cash incentives, long-term

equity incentive awards, broad-based employee benefits with limited perquisites and responsible severance
benefits. Our Compensation Committee does not have formal policies for allocating compensation between long-
term and currently paid-out compensation, between cash and non-cash compensation, or among different forms
of cash compensation and non-cash compensation, but rather, the Compensation Committee makes
determinations regarding the allocation of compensation based on the best interests of Sunesis with the goal of
encouraging and rewarding performance.

Role of the Compensation Committee

Our Compensation Committee is generally responsible for reviewing, modifying, approving and
otherwise overseeing the compensation policies and practices applicable to all of our employees, including the
administration of our equity plans and employee benefit plans. As part of this responsibility, the Compensation
Committee establishes, reviews and modifies the compensation structure for our CEO and other named executive
officers. However, the Compensation Committee may, at its discretion and in accordance with the philosophy of
making all information available to our Board, present executive compensation matters to the entire Board for its
review and approval.

As part of its deliberations, in any given year, the Compensation Committee may review and consider

materials such as our financial reports and projections, operational data, tax and accounting information that set
forth the total compensation that may become payable to executives in various hypothetical scenarios, executive
and director stock ownership information, our stock performance data, analyses of historical executive
compensation levels and current Company-wide compensation levels, and the recommendations of our CEO (for
named executive officers other than himself) and the Compensation Committee’s independent compensation
consultant.

Role of Management

Our Compensation Committee solicits and considers the performance evaluations and compensation

recommendations for our named executive officers submitted by our CEO. However, our Compensation
Committee retains the final authority to make all compensation decisions. None of our named executive officers,
including the CEO, participated directly in the final determinations that were made by the Compensation
Committee regarding the amount of any component of their own 2014 compensation package.

The Compensation Committee has worked with an independent compensation consultant to design and
develop recommended compensation programs for our named executive officers and other senior management,
to recommend changes to existing compensation programs, to recommend financial and other performance
targets to be achieved under those programs, to prepare analyses of financial data, to prepare peer data
comparisons and other briefing materials, and ultimately to implement the decisions of the Compensation
Committee.

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Use of Compensation Consultant

The Compensation Committee has the authority to hire and terminate its compensation consultant.

Sunesis pays the cost for the consultant’s services.

The Compensation Committee assesses the performance and independence of its consultants and of each

individual employee of the consulting firm who directly provides services to Sunesis. Since 2010, the
Compensation Committee has retained Radford, an Aon Hewitt Company, or Radford, as their independent
compensation consultants. The Compensation Committee selected Radford for their expertise in the life sciences
industry and recommendations of certain members of our Board who are affiliated with other clients of Radford.
The total fees paid to Radford for compensation consulting services during 2014 did not exceed 1% of Aon
Hewitt Company’s revenue. Before engaging Radford, the Compensation Committee requested information from
Radford about potential conflicts of interest, and in particular, considered the fact that Radford provides no other
services to Sunesis, that the individual representative of Radford who works directly with the Compensation
Committee has no other business relationships with the Board, management or Sunesis, and Radford’s own
policies on ethics and conflicts of interest. As a result, the Compensation Committee concluded that there were
no actual conflicts of interest with respect to Radford providing services to the Compensation Committee.

After taking into consideration the six factors prescribed by the SEC and NASDAQ as described above,
our Compensation Committee decided to continue its engagement of Radford as its independent compensation
consultant for our 2014 compensation decisions.

In connection with our 2014 compensation decisions, Radford provided the Compensation Committee

with the following services:

•

advised on the design and structure of our cash and equity incentive compensation program;

reviewed our compensation philosophy;

updated the Compensation Committee on emerging trends and best practices in the area of
executive compensation;

•

reviewed and provided recommendations on the composition of our 2014 peer group of
companies;

provided compensation data for similarly situated executive officers at our peer group; and

reviewed the compensation arrangements for all of our named executive officers, including the
design and structure of our annual cash incentive bonus plan and equity-based incentive
compensation program.

Radford attended meetings of the Compensation Committee at the request of the Compensation

Committee. The Chairman of the Compensation Committee also communicated separately with Radford.
Radford did not provide any services directly to management or to Sunesis. If and as requested by the
Compensation Committee, Radford gathers information from management necessary to perform its duties to the
Compensation Committee.

In the second half of 2013, in connection with our compensation decisions for 2014 service, Radford

conducted a high-level assessment of Sunesis’ cash and equity compensation versus the market using a custom
cut of their survey data for Sunesis’ peer companies. The Compensation Committee retained Radford again in
November 2014 to assist with our compensation decisions for 2015 service.

Use of Peer Data

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The Compensation Committee engages Radford to review and assess the appropriateness, and provide

recommendations on, the composition of a current peer group of companies and, after the Compensation
Committee approved a final list of peers, to provide compensation data for similarly situated executive officers at
this peer group. The Compensation Committee selected public companies: (i) in the biopharmaceuticals industry,
(ii) at similar stages of clinical development, and (iii) with generally comparable market capitalization and
number of employees. In selecting the final peer group, the Compensation Committee placed greater emphasis on
business stage and market capitalization with Sunesis at the 44th percentile for market capitalization against the
approved peer group. The stage of clinical development was considered a key factor to reflect the nature of the
skills and experience required to perform the roles of our business leaders. Prior to making compensation
decisions for 2014, the Compensation Committee reviewed the executive compensation environment relevant to
Sunesis, including market trends in the amount and type of compensation paid to executives. Based on this
review, which occurred in the second half of 2013, the Compensation Committee determined that the peer
companies selected for use in the 2013 compensation decisions were still applicable for 2014 compensation
decisions, and recommended no changes to the peer group. Although Astex Pharmaceuticals, Inc. and Trius
Therapeutics, Inc. were both acquired in 2013, Radford included these companies in the analysis because their
executive pay data remained current and relevant. The resulting 2014 peer group examined and approved
consisted of the following companies:

ACADIA Pharmaceuticals Inc.
Amicus Therapeutics, Inc.
ArQule, Inc.
Array Biopharma Inc.
Astex Pharmaceuticals, Inc.
AVEO Pharmaceuticals, Inc.
Clovis Oncology, Inc.

Rigel Pharmaceuticals, Inc.
Sangamo Biosciences, Inc.

Curis, Inc.
Cytokinetics, Incorporated
Dynavax Technologies Corporation Synta Pharmaceuticals Corp.
Keryx Biopharmaceuticals, Inc
Neurocrine Biosciences, Inc.
OncoGenex Pharmaceuticals, Inc.
Oncothyreon Inc.

Threshold Pharmaceuticals, Inc.
Trius Therapeutics, Inc.
XOMA Corporation
ZIOPHARM Oncology, Inc.

However, our Compensation Committee does not make decisions solely based on peer data. Our
Compensation Committee refers to peer data to help ensure that target compensation amounts do not materially
deviate from market practices (as reflected by the 25th percentile, median and 75th percentile of peer group data)
and that target amounts provide fair compensation given our performance. In particular, the Compensation

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Committee requested data from Radford at the 25th percentile, median and 75th percentile of the peer group for
base salary, target cash bonus, actual cash bonus, aggregate equity award value, total target compensation and
total actual compensation. In general, our philosophy was to pay base salaries and target cash compensation at
the 50th percentile, while providing equity incentives at the 60th percentile. However, individual compensation
decisions may deviate from the peer group data, as our Compensation Committee discussed the peer group data
and made the 2014 compensation decisions in the context of:

•

our executives’ responsibilities and tenure, as title is not always determinative of the
comparability of role from one organization to another;

the experiences, knowledge and business judgment of each of our executives;

the desire to maintain target pay opportunities and allocations between cash and equity at levels
that were consistent with historical pay levels for each of our executives, given the positive
response to our past say-on-pay proposal; and

corporate and individual performance, which includes setting target compensation opportunities
after taking into account, in a subjective fashion, performance in the prior year, as well as the
anticipated demands on the executive in the coming year.

Reasons for Providing, and Manner of Structuring, the Key Compensation Elements in 2014

Base Salary

We provide base salary as a fixed source of compensation for our executives for the services they provide

to us during the year and to balance the impact of having a significant portion of their compensation “at risk” in
the form of annual cash incentive bonuses and equity-based incentive compensation. Our Compensation
Committee recognizes the importance of a competitive base salary as an element of compensation that helps to
attract and retain our executive officers.

In February 2014, the Compensation Committee reviewed the base salaries for our executive officers. The

Compensation Committee considered each officer’s 2013 base salary level and the scope of each executive’s
responsibilities for 2014. The Compensation Committee also considered the recommendations of our CEO for
base salary increases for officers other than himself. The Compensation Committee set the 2014 base salaries of
each of the named executive officers as follows:

Name
Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013 Base
Salary ($)
475,000
380,000
410,000

2014 Base
Salary ($)
490,000
391,500
422,500

Percent
Increase
3.2%
3.0%
3.0%

The Compensation Committee believed it was appropriate to maintain salary levels competitive with the

peer group in order to attract and retain the quality of talent who can perform multiple roles in our lean
management team, that we need to successfully grow, achieve our challenging objectives, and differentiate
ourselves from those companies against which we compete for talent.

Annual Cash Incentive Bonus Program

2014 Bonus Program. In March 2014, the Board, upon the recommendation of the Compensation
Committee, approved our 2014 Bonus Program and allowed for the granting of performance-based compensation
opportunities. Our 2014 Bonus Program provided compensation opportunities to our named executive officers

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based on a combination of (a) the achievement of pre-established corporate performance goals derived from our
Board-approved operating plan for 2014 and (b) the individual performance of the named executive officer.

Target Bonus Levels. In March 2014, the Board, upon the recommendation of the Compensation
Committee, approved a target incentive bonus award for each executive. These levels were consistent with our
philosophy that a significant portion of each executive’s total target cash compensation should be performance-
based, and reflect the Compensation Committee’s review of internal pay equity. The respective target amounts
for 2014 for our named executive officers were:

Name
Daniel N. Swisher, Jr.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D.

Percent of 2014
Base Salary
55.0%
40.0%
40.0%

2014 Bonus Program Structure and Metrics. In March 2014, the Compensation Committee determined

that for participants to earn any bonus in 2014 under our 2014 Bonus Program, Sunesis must achieve certain
corporate objectives. The Compensation Committee, after considering analyses and recommendations from
management, would determine the degree to which the Sunesis corporate objectives had been met. If we did not
achieve any of our corporate objectives, the participants in our 2014 Bonus Program would earn no annual
incentive bonus under the plan. If we did achieve our corporate objectives, then our named executive officers
have the opportunity to earn a bonus partially based on corporate performance and partially based on individual
performance. To be eligible for a bonus for 2014, the employee must have remained employed by us through the
date the bonus was paid.

For 2014, the corporate performance factor was composed of financial, business, clinical trial and other

corporate milestones and goals. The Compensation Committee determines the level of achievement, if any, based
on the sum of the achievement levels of the following corporate objectives:

•

forty percent (40%) based on certain clinical trial program milestones, including, among other
things, unblinding of the VALOR trial;

forty percent (40%) based on certain financial, organizational, commercial readiness and business
achievements and metrics; and

twenty percent (20%) based on other corporate achievements.

Although achievement of our corporate objectives involved future performance and, therefore, was

subject to uncertainty at the time the objectives were set, the Compensation Committee believes it established
target objectives that were value-creating and achievable with an appropriate amount of dedication and hard work
and, therefore, it was more likely than not that each executive officer would earn a bonus under the annual
incentive bonus award program, consistent with our compensation philosophy. At the time the Compensation
Committee set our goals for 2014, the Compensation Committee believed that the 2014 Bonus Program goals
were achievable yet had the appropriate stretch to motivate employees to excel.

2014 Performance and Bonus Payouts. In February 2015, the Compensation Committee determined that

the corporate objectives were 75% achieved overall. The 2014 achievements considered by our Compensation
Committee in assessing the level of achievement included, among other factors:

•

top-line results from the VALOR trial;

development of a U.S. and European regulatory filing strategy and a U.S. commercialization plan;

•

strengthened financial resources and continued institutional investor support; and

development of additional product pipeline candidates.

In January 2015, our CEO shared his evaluations of the individual performance of each of our other

named executive officers with the Compensation Committee. In determining the individual performance
percentage for each named executive officer, the Compensation Committee considered the respective level of
contribution by our named executive officers toward our achievement of our corporate objectives, resulting in the
following assessments:

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Daniel N. Swisher, Jr.: The Compensation Committee determined an individual performance
percentage of one hundred percent (100%) for 2014 based on his leadership role in contributing to
our strong corporate results.

Eric H. Bjerkholt: The Compensation Committee determined an individual performance
percentage of one hundred percent (100%) for 2014 based on his role in financial strategy and
oversight, development of institutional investor support, and oversight of corporate planning.

Adam R. Craig, Ph.D.: The Compensation Committee determined an individual performance
percentage of one hundred percent (100%) for 2014 based on his role in the execution and readout
of the VALOR trial, including other key development and regulatory activities.

As a result, the named executive officers earned the following bonus amounts for 2014:

Name
Daniel N. Swisher, Jr.
. . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D.

Target
Bonus
Level
($)
269,500
156,600
169,000

Corporate
Performance
(%)
75%
75%
75%

Individual
Performance
(%)
100%
100%
100%

Cash
Bonus
Amount
($)
134,667
78,333
84,500

Stock
Award
Amount
($)
67,333
39,167
42,250

Actual
Bonus
Earned
($)(1)
202,000
117,500
126,750

(1)

In order to align our executive officers’ incentives with those of our stockholders, one-third of the 2014
bonus consisted of fully vested shares of our common stock under our 2011 Plan. The number of shares
subject to the award equaled the target grant value divided by the closing price of our common stock on
the date of grant.

Equity-Based Incentive Compensation

The Compensation Committee believes that properly structured equity compensation works to align the

long-term interests of stockholders and employees by creating a strong, direct link between employee
compensation and stock price appreciation. We have historically awarded equity in the form of options, which
have an exercise price equal to the fair market value of a share of our common stock on the date of grant, and
vest based on continued service over a specified period (typically, four years). As a result of the way we structure
our option awards, options provide a return to the executive only if such officer remains employed by us, and
then only if the market price of our common stock appreciates over the term of the option, which creates
alignment with our stockholders.

Equity-based awards granted to our named executive officers in 2014 were granted under our 2011 Plan.

The Compensation Committee determined an aggregate target award size for each executive, after considering
the overall equity holdings of similar executives at peer group companies and the recommendations of our CEO.
The Compensation Committee decided to allocate the target value in the form of stock options subject to a four-
year vesting schedule.

Stock Option Grants in 2014. In February 2014, the Compensation Committee approved the grant of a
new stock option to all employees, including each of our executive officers, effective February 28, 2014, that
would be subject to vesting based on continued service over four years in equal monthly installments. Each
option has an exercise price equal to the fair market value of a share of our common stock on the date of grant.
The option grants to our executive officers on this date were as follows:

Name(1)
Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares
300,000
125,000
140,000

In October 2014, the Compensation Committee approved the grant of a new stock option to all

employees, including each of our executive officers, effective October 31, 2014, that would be subject to vesting
based on continued service over four years in equal monthly installments. The October 2014 grants to our
employees, including our executive officers, were in addition to the February 2014 grants. Typically the
Compensation Committee considers annual refresh grants in the first quarter of each year, however, the
Compensation Committee decided to move consideration and approval of the option grants forward to further
enhance retention incentive following the reporting of top line results from the VALOR trial. Each option has an
exercise price equal to the fair market value of a share of our common stock on the date of grant. The option
grants to our executive officers on this date were as follows:

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Name
Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares
300,000
140,000
140,000

CEO Compensation Relative to Other Employees

Sunesis does not have a policy regarding the target ratio of total compensation of the CEO to that of the

other executive officers or salaried personnel, but the Compensation Committee does review compensation levels
to ensure that appropriate equity exists. The CEO participates in the same compensation programs and receives a
mix of compensation based on the same philosophy and factors as the other named executive officers.
Application of the same philosophy and factors to the CEO’s position results in overall compensation that is
greater than the compensation of the other named executive officers. The CEO’s compensation is commensurate
with greater responsibilities and decision-making authority, broader scope of duties encompassing the entirety of
the Company, when compared to the other named executive officers who are responsible for significant but
distinct areas within Sunesis, and overall responsibility for corporate strategy. The 2014 base salary of the CEO
was approximately 1.2 times the base salary of the next highest paid executive officer. The 2014 total direct
compensation for our CEO, which comprises base salary and target bonus, was approximately 1.3 times the
direct compensation of the next highest paid executive officer.

Equity Compensation Policies

We have a policy that prohibits our executive officers, directors and other members of management from

engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative
transactions with respect to our stock.

Employee Benefits

We provide broad based medical insurance, dental insurance, vision coverage, life insurance and

accidental death and dismemberment insurance benefits to our employees, including our named executive
officers. We also provide our employees, including our named executive officers, with the opportunity to

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participate in our 401(k) plan. Eligible employees may contribute up to sixty percent (60%) of their cash
compensation up to the current Internal Revenue Service limits in each calendar year, and we may match on a
dollar-for-dollar basis up to $2,500 of these contributions in each year. We believe these insurance and retirement
savings benefits are consistent with market practice and help to recruit and retain key talent at a minimal cost
to us.

Our executive officers generally do not receive any supplemental retirement benefits or perquisites,

except for limited perquisites provided on a case-by-case basis. In considering potential perquisites, the
Compensation Committee compares the cost to the value of providing these benefits. We have historically
provided only limited perquisites to our executive officers, with the policy that any perquisites provided serve
legitimate business purposes, including allowing our executives to focus more time on our business. We have
agreed to purchase and maintain a term life insurance policy for all employees, including each of our named
executive officers currently in the face amounts of two times each named executive officer’s base salary, up to
$400,000 each, plus an additional insurance policy of $50,000 each, which we also offer to all other employees.
The Compensation Committee decided that rather than pay each named executive officer this amount as
severance upon death from our general assets, it is more cost effective to provide for these payments through
insurance.

Deductibility of Executive Compensation; Code Section 162(m)

Section 162(m) of the Code limits the amount that a public company may deduct from federal income

taxes for remuneration paid to the chief executive officer and the three other most highly paid executive officers,
other than the chief financial officer, to $1.0 million per executive per year, unless certain requirements are met.
While our Compensation Committee is mindful of the benefit to us of the full deductibility of compensation, our
Compensation Committee believes that it should not be constrained by the requirements of Section 162(m) where
those requirements would impair flexibility in compensating our executive officers in a manner that can best
promote our corporate objectives. We intend to continue to compensate our executive officers in a manner
consistent with the best interests of Sunesis and our stockholders.

Accounting Considerations

The accounting impact of our executive compensation program is one of many factors that the

Compensation Committee considers in determining the size and structure of that program.

Compensation Recovery Policy

Amounts paid and awards granted under our 2014 Bonus Program and our 2011 Plan, and participation in

our 2011 Employee Stock Purchase Plan, are subject to recoupment in accordance with the Dodd-Frank Wall
Street Reform and Consumer Protection Act and any applicable regulations, and any clawback policy Sunesis
adopts or as is required by applicable law. In addition, as a public company subject to the provisions of
Section 304 of the Sarbanes-Oxley Act of 2002, if we are required as a result of misconduct to restate our
financial results due to our material noncompliance with any financial reporting requirements under the federal
securities laws, our chief executive officer and chief financial officer may be legally required to reimburse us for
any bonus or other incentive-based or equity-based compensation they receive. In addition, we will comply with
the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act once final regulations on
the subject have been adopted.

Risk Analysis of Our Compensation Plans

The Compensation Committee has reviewed and considered our compensation policies as generally
applicable to our employees and believes that our policies do not encourage excessive or unnecessary risk-taking,
and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on

Sunesis. We design our compensation policies and programs to encourage our employees to remain focused on
both our short and long-term goals. For example, while our cash bonus plans measure performance on an annual
basis, our equity awards typically vest over a number of years, which we believe encourages our employees to
focus on sustained stock price appreciation, thus limiting the potential value of excessive risk-taking.

Compensation Committee Report (1)

The Compensation Committee oversees the compensation programs of Sunesis on behalf of the Board. In

fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management
the Compensation Discussion and Analysis included in this proxy statement.

In reliance on the review and discussions referred to above, the Compensation Committee recommended

to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on
Form 10-K for the year ended December 31, 2014 and in this proxy statement.

Dayton Misfeldt, Chairman
Steve R. Carchedi
Matthew K. Fust

(1)

Summary Compensation Table

The following table sets forth information regarding the compensation for services performed during the

years ended December 31, 2014, 2013, and 2012 awarded to, paid to or earned by (i) our CEO, (ii) our Chief
Financial Officer, and (iii) our next most highly compensated executive officer, as determined by reference to
total compensation for the year ended December 31, 2014. Such individuals are referred to as our “named
executive officers,” or NEOs, for the year ended December 31, 2014. All compensation awarded to, earned by, or
paid to our NEOs are included in the table below for the years indicated.

Name and Principal Position

Year

Salary
($)(1)

Bonus
($)

Option
Awards
($)(2)

Non-Equity
Incentive Plan
Compensation
($)

All Other
Compensation
($)

Total
($)

Daniel N. Swisher, Jr.
CEO and President

. . . . . . . 2014 $488,094 $—
2013 469,875 —
2012 431,894 —

$1,736,160 $202,000(3)(4)
261,250(6)(7)
1,157,850
217,000(8)(9)
522,198

$3,466(5)
3,466(5)
3,130(10)

$2,429,720
1,892,441
1,174,222

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Eric H. Bjerkholt . . . . . . . . . . . 2014 390,062 —
Executive Vice President,
—
—

378,750
367,500

2013
2012

Corporate Development and
Finance, Chief Financial
Officer and Corporate
Secretary

Adam Craig, Ph.D.
Executive Vice President,
Development and Chief
Medical Officer

. . . . . . . . . 2014 420,938 —
—
—

408,750
338,333

2013
2012

741,762
385,950
153,588

117,500(3)(11)
152,000(6)
148,000(8)(13)

4,306(12)
3,466(5)
3,466(5)

1,253,630
920,166
672,554

810,208
482,438
737,220

126,750(3)(14)
164,000(6)
160,000(8)(15)

3,130(10)
3,130(10)
3,025(16)

1,361,026
1,058,318
1,238,578

(1)

Includes amounts earned but deferred at the election of the named executive officer, such as salary
deferrals under our 401(k) Plan established under Section 401(k) of the Code.

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(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

The dollar amounts in this column represent the aggregate grant date fair value of stock option awards
granted pursuant to our equity compensation plans for the respective fiscal year. These amounts have
been calculated in accordance with FASB ASC Topic 718. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional
information on the valuation assumptions, refer to Note 11, Stock-Based Compensation, of the Notes to
Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31,
2014, which identifies assumptions made in the valuation of option awards in accordance with FASB
ASC Topic 718.

Represents amounts earned under the 2014 Bonus Program for performance from January 1, 2014
through December 31, 2014. Amounts earned under the 2014 Bonus Program were paid out on March 13,
2015. See “Narrative to Summary Compensation Table—2014 Bonus Program.”

$67,333 of which was paid in the form of 30,330 fully vested shares our common stock based on the
closing price of $2.22 of our common stock on The NASDAQ Capital Market on February 27, 2015.

Consists of $966 in group life insurance premiums and $2,500 in matching 401(k) contributions.

Represents amounts earned under the 2013 Bonus Program for performance from January 1, 2013
through December 31, 2013. Amounts earned under the 2013 Bonus Program were paid out on
February 28, 2014. See “Narrative to Summary Compensation Table—2013 Bonus Program.”

$65,313 of which was paid in the form of 9,971 fully vested shares of our common stock based on the
closing price of $6.55 of our common stock on The NASDAQ Stock Market on February 28, 2014.

Represents amounts earned under the 2012 Bonus Program for performance from January 1, 2012
through December 31, 2012. Amounts earned under the 2012 Bonus Program were paid out on
February 28, 2013. See “Narrative to Summary Compensation Table—2012 Bonus Program.”

$108,500 of which was paid in the form of 20,785 fully vested shares of our common stock based on the
closing price of $5.22 of our common stock on The NASDAQ Stock Market on February 28, 2013.

(10)

Consists of $630 in group life insurance premiums and $2,500 in matching 401(k) contributions.

(11)

$39,167 of which was paid in the form of 17,642 fully vested shares our common stock based on the
closing price of $2.22 of our common stock on The NASDAQ Capital Market on February 27, 2015.

(12)

Consists of $1,806 in group life insurance premiums and $2,500 in matching 401(k) contributions.

(13)

(14)

(15)

$37,000 of which was paid in the form of 7,088 fully vested shares of our common stock based on the
closing price of $5.22 of our common stock on The NASDAQ Stock Market on February 28, 2013.

$42,250 of which was paid in the form of 19,031 fully vested shares our common stock based on the
closing price of $2.22 of our common stock on The NASDAQ Capital Market on February 27, 2015.

$40,000 of which was paid in the form of 7,662 fully vested shares of our common stock based on the
closing price of $5.22 of our common stock on The NASDAQ Stock Market on February 28, 2013.

(16)

Consists of $525 in group life insurance premiums and $2,500 in matching 401(k) contributions.

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Narrative to Summary Compensation Table

2012 Bonus Program

In March 2012, our Board approved the 2012 Bonus Program, which provided our executive officers and
other eligible employees the opportunity to earn cash bonuses based on the level of achievement from January 1,
2012 through December 31, 2012 by us of certain corporate objectives and by each participant of certain
individual performance objectives. A participant must have remained an employee through the payment date
under the 2012 Bonus Program to have earned a bonus.

The Board approved the corporate objectives and assigned a weighting to each objective. The
Compensation Committee set the individual objectives of our CEO, as well as the individual objectives of the
remaining executive officers based on the recommendations of the CEO. The individual objectives of non-
executive participants were set by each participant’s immediate supervisor.

Each eligible participant in the 2012 Bonus Program was eligible to receive a cash bonus in an amount up

to a specified percentage of such participant’s annual base salary earned in 2012, or the 2012 Bonus Targets.
Under the 2012 Bonus Program, the 2012 Bonus Targets ranged from 30.0% to 50.0% of a participant’s 2012
base salary for Vice President level employees and above. The 2012 Bonus Target and bonus target amount for
each of our NEOs was as follows:

Named Executive Officer
Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bonus Target Percentage Bonus Target Amount

50.0%
40.0
40.0

$217,000
148,000
160,000

In February 2013, the Compensation Committee approved the payment of bonuses to certain of our
employees, including our NEOs, pursuant to the 2012 Bonus Program. The bonus payment amounts approved by
the Board and Compensation Committee were based on their respective determinations of the degree to which
such corporate and individual objectives were achieved.

A portion of the bonuses awarded to our NEOs consisted of fully vested shares of our common stock
granted under our 2011 Plan. The number of shares of our common stock awarded to each of our NEOs were
determined based on the closing price of our common stock as quoted on The NASDAQ Stock Market on
February 28, 2013, rounded down to the nearest whole share. The portions of the bonus payment amounts paid in
cash and shares of our common stock for the year ended December 31, 2012 are reflected in the “Non-Equity
Incentive Plan Compensation” column of the “Summary Compensation Table.”

2013 Bonus Program

In March 2013, our Board approved the 2013 Bonus Program, which provided our executive officers and
other eligible employees the opportunity to earn bonuses based on the level of achievement from January 1, 2013
through December 31, 2013 by us of certain corporate objectives and by each participant of certain individual
performance objectives. A participant must have remained an employee through the payment date under the 2013
Bonus Program to have earned a bonus.

Each eligible participant in the 2013 Bonus Program was eligible to receive a bonus in an amount up to a

specified percentage of such participant’s annual base salary earned in 2013, or the 2013 Bonus Targets. Under
the 2013 Bonus Program, the 2013 Bonus Targets ranged from 30.0% to 55.0% of a participant’s 2013 base
salary for Vice President level employees and above. The 2013 Bonus Target and bonus target amount for each
of our NEOs was as follows:

Bonus Target Percentage Bonus Target Amount

55.0%
40.0
40.0

$261,250
152,000
164,000

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In February 2014, the Compensation Committee approved the payment of bonuses to certain of our
employees, including our NEOs, pursuant to the 2013 Bonus Program. The bonus payment amounts approved by
the Board and Compensation Committee were based on their respective determinations of the degree to which
such corporate and individual objectives were achieved.

A portion of the bonus awarded to our CEO consisted of fully vested shares of our common stock granted
under our 2011 Plan. The number of shares of our common stock awarded to our CEO was determined based on
the closing price of our common stock as quoted on The NASDAQ Stock Market on February 28, 2014, rounded
down to the nearest whole share. The portion of the bonus payment amount paid to our CEO in cash and shares
of our common stock for the year ended December 31, 2013 is reflected in the “Non-Equity Incentive Plan
Compensation” column of the “Summary Compensation Table.”

2014 Bonus Program

In March 2014, our Board approved the 2014 Bonus Program, which provided our executive officers and
other eligible employees the opportunity to earn bonuses based on the level of achievement from January 1, 2014
through December 31, 2014 by us of certain corporate objectives and by each participant of certain individual
performance objectives. A participant must have remained an employee through the payment date under the 2014
Bonus Program to have earned a bonus.

Each eligible participant in the 2014 Bonus Program was eligible to receive a bonus in an amount up to a

specified percentage of such participant’s annual base salary earned in 2014, or the 2014 Bonus Targets. Under
the 2014 Bonus Program, the 2014 Bonus Targets ranged from 30.0% to 55.0% of a participant’s 2014 base
salary for Vice President level employees and above. The 2014 Bonus Target and bonus target amount for each
of our NEOs was as follows:

Bonus Target Percentage Bonus Target Amount

55.0%
40.0
40.0

$269,500
156,600
169,000

In February 2015, the Compensation Committee approved the payment of bonuses to certain of our
employees, including our NEOs, pursuant to the 2014 Bonus Program. The bonus payment amounts approved by
the Board and Compensation Committee were based on their respective determinations of the degree to which
such corporate and individual objectives were achieved.

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A portion of the bonus awarded to our NEOs consisted of fully vested shares of our common stock
granted under our 2011 Plan. The number of shares of our common stock awarded to our NEOs was determined
based on the closing price of our common stock as quoted on The NASDAQ Stock Market on February 27, 2015,
rounded down to the nearest whole share. The portion of the bonus payment amount paid to our NEOs in cash
and shares of our common stock for the year ended December 31, 2014 is reflected in the “Non-Equity Incentive
Plan Compensation” column of the “Summary Compensation Table.”

Stock Option Grants in 2014

See “Outstanding Equity Awards Table at December 31, 2014” below for the terms of the stock options

held by our NEOs as of December 31, 2014, including the stock options granted to our NEOs in 2014.

Outstanding Equity Awards Table at December 31, 2014

The following information sets forth the outstanding stock options held by our NEOs as of December 31,

2014. As of December 31, 2014, none of our NEOs held unearned equity incentive awards or unvested stock
awards.

Name

Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO and President

Eric H. Bjerkholt
Executive Vice President, Corporate Development and

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance, Chief Financial Officer and Corporate Secretary

Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Vice President, Development and Chief Medical

Officer

Option Awards

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

Option
Exercise
Price
($)

39,167
20,000
25,834
110,000
616,861
301,041
137,500
62,500
12,500

20,000
10,000
15,000
11,250
75,000
393,750
78,451
45,833
26,041
5,833

425,000
57,291
29,166
5,833

—
—
—
—
93,750(1)
123,959(2)
162,500(3)
237,500(4)
287,500(5)

—
—
—
—
—
56,250(1)
36,459(2)
54,167(3)
98,959(4)
134,167(5)

175,000(6)
67,709(3)
110,834(4)
134,167(5)

31.50
29.10
15.54
2.94
2.09
1.74
5.22
6.55
1.70

31.50
29.10
15.54
8.64
2.94
2.09
1.74
5.22
6.55
1.70

1.74
5.22
6.55
1.70

Option
Expiration
Date

11/29/15
10/13/16
09/13/17
08/31/19
06/30/21
02/28/22
02/28/23
02/28/24
10/31/24

11/29/15
10/13/16
09/13/17
06/30/18
08/31/19
06/30/21
02/28/22
02/28/23
02/28/24
10/31/24

02/28/22
02/28/23
02/28/24
10/31/24

(1)

(2)

This stock option was granted on June 30, 2011 pursuant to our 2011 Plan and vests monthly during the
48-month period measured from the grant date, subject to the holder’s continued service with Sunesis.

This stock option was granted on February 29, 2012 pursuant to our 2011 Plan and vests monthly during
the 48-month period measured from the grant date, subject to the holder’s continued service with Sunesis.

(3)

(4)

(5)

(6)

This stock option was granted on February 28, 2013 pursuant to our 2011 Plan and vests monthly during
the 48-month period measured from the grant date, subject to the holder’s continued service with Sunesis.

This stock option was granted on February 28, 2014 pursuant to our 2011 Plan and vests monthly during
the 48-month period measured from the grant date, subject to the holder’s continued service with Sunesis.

This stock option was granted on October 31, 2014 pursuant to our 2011 Plan and vests monthly during
the 48-month period measured from the grant date, subject to the holder’s continued service with Sunesis.

This stock option was granted on February 29, 2012 pursuant to our 2011 Plan and vested as to 1/4th of
the shares on February 28, 2013, with the remaining shares vesting monthly over the following
36 months, subject to the holder’s continued service with Sunesis.

Option Exercises

The following table presents information concerning the aggregate number of shares for which options

were exercised during the year ended December 31, 2014 for our NEOs. As of December 31, 2014, the NEOs did
not have restricted stock awards.

Named Executive Officer
Daniel N. Swisher, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of Shares
Acquired on
Exercise
29,389
10,000
—

Value Realized on
Exercise(1)
$90,279
62,600
—

(1)

Represents the difference between the aggregate market price of the common stock acquired on the date
of exercise and the aggregate exercise price.

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Post-Termination Compensation

Executive Severance Benefits Agreements

We entered into executive severance benefits agreements with each of our NEOs to provide certain

benefits upon a termination of employment.

The Compensation Committee believes such agreements help us attract and retain employees in a

marketplace where such protections are commonly offered by our peer companies. We also believe that
severance protections offered upon terminations arising in connection with a change of control allow our
executives to assess a potential change of control objectively, without regard to the potential impact of the
transaction on their own job security. At the time we originally entered into the executive severance benefits
agreements with each of the NEOs, the Compensation Committee determined that the terms of such executive
severance benefits agreements reflected industry standard severance payments, benefits and equity acceleration.

Mr. Swisher. Under the executive severance benefits agreement with Mr. Swisher, if Mr. Swisher is

terminated without cause or he is constructively terminated, he is entitled to receive a payment equal to
12 months salary and continued health benefits for a maximum period of the first 12 months following
termination (which may be terminated earlier upon his coverage by a new employer), subject to the execution of
a general release in favor of Sunesis. Under Mr. Swisher’s executive severance benefits agreement, he will also
be eligible for certain option acceleration benefits, as described in more detail below.

Mr. Bjerkholt. Under the executive severance benefit agreement with Mr. Bjerkholt, if Mr. Bjerkholt is

terminated without cause or is constructively terminated, he is entitled to receive a payment equal to nine months

salary and continued health benefits for a maximum period of the first nine months following termination (which
may be terminated earlier upon his coverage by a new employer), subject to the execution of a general release in
favor of Sunesis. Under Mr. Bjerkholt’s executive severance benefits agreements, he will also be eligible for
certain option acceleration benefits, as described in more detail below.

Dr. Craig. Under the executive severance benefit agreement with Dr. Craig, if Dr. Craig is terminated

without cause or is constructively terminated, he is entitled to receive a payment equal to nine months salary and
continued health benefits for a maximum period of the first nine months following termination (which may be
terminated earlier upon his coverage by a new employer), subject to the execution of a general release in favor of
Sunesis. Under Dr. Craig’s executive severance benefits agreements, he will also be eligible for certain option
acceleration benefits, as described in more detail below.

Under the executive severance benefits agreements, with Messrs. Swisher and Bjerkholt and Dr. Craig, in
connection with a change of control of Sunesis, the vesting of 50.0% of each such executive officer’s outstanding
unvested option awards is automatically accelerated immediately prior to the effective date of such change of
control. In the event of a termination without cause or a constructive termination of any of these executives
officers (i) within 12 months following a change of control, 100% of such executive officer’s outstanding
unvested awards would automatically accelerate on the date of termination, or (ii) if prior to or more than
12 months following a change of control, the outstanding awards that would have vested over the 12 month
period following the date of termination would automatically accelerate for such executive officer.

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In general, a “change of control” under these executive severance benefits agreements, as amended,

includes an acquisition transaction in which a person or entity (with certain exceptions described in the
agreements) becomes the direct or indirect beneficial owner of more than 50.0% of our voting stock, as well as
the consummation of certain types of corporate transactions, such as a merger, consolidation, reorganization,
business combination or sale of all or substantially all of our assets, pursuant to which our stockholders own,
directly or indirectly, less than 50.0% of Sunesis or our successor, or if our stockholders approve a liquidation or
dissolution of Sunesis. However, a cash financing transaction will not constitute a change of control transaction
pursuant to the terms of the executive severance benefits agreements.

Each of the executive severance benefits agreements described above provides that, in the event that any

benefits provided in connection with a change of control (or a related termination of employment) would be
subject to the 20.0% excise tax imposed by Section 4999 of the Code, the executive officer will receive the
greater, on an after-tax basis (taking account of all federal, state and local taxes and excise taxes), of such
benefits or such lesser amount of benefits as would result in no portion of the benefits being subject to the excise
tax. An executive officer’s receipt of any severance benefits is subject to his execution of a release in favor of
Sunesis. Any benefits under the executive severance benefits agreement would terminate immediately if the
executive officer, at any time, violates any proprietary information or confidentiality obligation to us.

Retirement Savings

We encourage our executives and employees generally to plan for retirement compensation through
voluntary participation in our 401(k) Plan. All of our employees, including our executives, may participate in our
401(k) Plan by making pre-tax contributions from wages of up to 60.0% of their annual cash compensation, up to
the current Internal Revenue Service limits. All of our executives can participate in the 401(k) Plan on the same
terms as our employees. We believe this program is comparable with programs offered by our peer companies
and assists us in attracting and retaining our executives.

During the years ended December 31, 2014, 2013 and 2012, Messrs. Swisher and Bjerkholt and Dr. Craig

elected to defer a portion of their compensation under the 401(k) plan and, as a result, received corresponding
matching contributions from us.

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Change of Control Equity Incentive Plan Protections

Our 1998 Stock Plan, or 1998 Plan, and our 2001 Stock Plan, or 2001 Plan, both provide that in the event
of a proposed sale of all or substantially all of our assets or a merger of Sunesis with or into another corporation
in which we are not the surviving corporation, each outstanding award shall be assumed or an equivalent award
substituted by such successor corporation, unless the successor corporation does not agree to assume the award,
in which case, the award shall terminate upon the consummation of the merger or sale of assets.

Our 2005 Equity Incentive Award Plan, or 2005 Plan, and 2006 Employment Commencement Incentive
Plan, or 2006 Plan, provide that upon any change of control of Sunesis, our Board (or any committee delegated
authority by our Board) may, in its discretion, make adjustments it deems appropriate to reflect such change with
respect to (i) the aggregate number and type of awards that may be issued under the applicable plan, (ii) the terms
and conditions of any outstanding awards, and (iii) and the grant or exercise price of any outstanding awards. If
outstanding awards are not assumed by the surviving or successor entity and such successor entity does not
substitute substantially similar awards for those awards outstanding under the 2005 Plan and the 2006 Plan, such
outstanding awards shall become fully exercisable and/or payable as applicable and all forfeiture restrictions on
such outstanding awards shall lapse.

In addition, our 2005 Plan and 2006 Plan include change in control provisions, which may result in the
accelerated vesting of outstanding awards. In the event of a change in control of Sunesis, for example, if we are
acquired by merger or asset sale, each outstanding award under the 2005 Plan and 2006 Plan will accelerate and
immediately vest with respect to 50.0% of the unvested award, and if the remainder of the award is not to be
assumed by the successor corporation, the full amount of the award will automatically accelerate and become
immediately vested. Additionally, in the event the remainder of the award is assumed by the successor
corporation, any remaining unvested shares would accelerate and immediately vest in the event the optionee is
terminated without cause or resigns for good reason within 12 months following such change in control. Pursuant
to amendments to the 2005 Plan and 2006 Plan approved by our Board in March 2009, a cash financing will not
constitute a change of control. In order to make the treatment of outstanding options granted under the 1998 Plan
and 2001 Plan for then-current employees identical to the treatment of options granted under the 2005 Plan and
2006 Plan, all options outstanding under the 1998 Plan and 2001 Plan were amended to reflect identical change
in control provisions.

Our 2011 Plan provides that in the event of a change of control of Sunesis, all outstanding stock awards

under the 2011 Plan may be assumed, continued or substituted for by any surviving or acquiring entity (or its
parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or
substitute for outstanding stock awards, then, with respect to any such stock awards that are held by participants
whose continuous service with us or an affiliate has not terminated prior to the effective date of the change in
control, the vesting and exercisability of such stock awards will be accelerated in full contingent upon the
effectiveness of the change in control. In the event of a change in control in which the surviving or acquiring
entity (or its parent company) assumes, continues or substitutes outstanding stock awards and with respect to any
stock awards that are held by participants whose continuous service with us or an affiliate has not terminated
prior to the effective date of the change in control, if such participant’s continuous service terminates due to an
involuntary termination (not including death or disability) without cause or due to a voluntary resignation with
good reason in either case on or within 12 months after the effective time of such change in control, the vesting
and exercisability of such stock awards will be accelerated in full effective as of the date of the participant’s
termination of continuous service.

We believe that the terms of our equity incentive plans described above are consistent with industry

practice.

Summary of Estimated Amounts Payable Upon a Termination or Change of Control

The table below estimates the amounts payable upon (a) a termination without cause or constructive
termination, (b) a change of control, and (c) a termination without cause or constructive termination within
12 months following a change in control, each as of December 31, 2014 for our NEOs using $2.55, the closing
price of the stock on that date.

Name

Daniel N. Swisher, Jr.

Acceleration
of Vesting

Value of
Equity
Acceleration
($)(1)

Severance
Payments
($)(2)

Health
Benefits
($)(3)

Total ($)

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Termination without cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination without cause within 12 months of a change of

— 490,000
—

193,953

24,900

514,900
— 193,953

control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

387,907

490,000

24,900

902,807

Eric H. Bjerkholt

— 293,625
—

84,724

17,316

310,941
— 84,724

control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

169,449

293,625

17,316

480,390

Adam R. Craig, Ph.D.

— 316,875
—

127,896

18,675

335,550
— 127,896

control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255,792

316,875

18,675

591,342

(1)

(2)

(3)

In the event of a change of control, 50.0% of unvested equity awards will accelerate and become
immediately and fully vested immediately prior to the change of control. In the event of a termination
without cause or constructive termination, 100.0% of unvested equity awards will accelerate and become
immediately and fully vested immediately prior to the change of control.

In the event of a termination without cause, the amount represents nine months (twelve months in the case
of Mr. Swisher) of the executive officer’s base salary as of December 31, 2014. The amount indicated
does not include the payment of any accrued salary or vacation that may be due upon termination of
employment.

Represents nine months (twelve months in the case of Mr. Swisher) of payments of premiums for
continued health insurance coverage under COBRA, assuming in each case that the executive officer
timely elects to receive the benefits. We would continue to pay such premiums for nine months (twelve
months in the case of Mr. Swisher) unless the executive officer earlier (a) becomes eligible for
substantially equivalent health insurance coverage in connection with new employment or self-
employment or (b) loses eligibility for continuation coverage under COBRA.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Principal Accountant Fees and Services

In connection with the audit of our 2014 financial statements, we entered into an engagement agreement
with Ernst & Young, which sets forth the terms by which Ernst & Young will perform audit and interim services
for us. We have agreed to waive a jury trial in proceedings arising out of this agreement under certain
circumstances.

The following is a summary of the aggregate fees billed to us by Ernst & Young, our independent

registered public accounting firm, for the years ended December 31, 2014 and 2013 for each of the following
categories of professional services:

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Year Ended December 31,

Fee Category
Audit fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014
$618,219
—
—
—

2013
$505,000
—
—
—

Total fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$618,219

$505,000

(1)

Audit fees for 2014 and 2013 included the aggregate fees for professional services rendered for: (a) the
audit of our consolidated financial statements, (b) the review of our interim financial statements,
(c) provision of an opinion on management’s assessment of the effectiveness of our internal controls over
financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, and (d) the provision of
auditor comfort letters to Cantor Fitzgerald & Co. in relation to our controlled equity offering sales
agreements with Cantor.

All of the fees described above were pre-approved by the Audit Committee.

Pre-approval Policies

The Audit Committee has adopted a policy relating to the approval of all audit and non-audit services that
are to be performed by our independent registered public accounting firm. This policy generally provides that we
will not engage our independent registered public accounting firm to render audit or non-audit services unless the
service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to
pre-approval procedures established by the Audit Committee, including policies for delegating authority to a
member of the Audit Committee. Any service that is approved pursuant to a delegation of authority to a member
of the Audit Committee must be reported to the full Audit Committee at a subsequent meeting.

The Audit Committee has determined that the rendering of the services other than audit services by

Ernst & Young as described above is compatible with maintaining their independence.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Certain Related Party Transactions

Other than as described below, there were no other related party transactions during 2014 or 2013 with

our executive officers, directors and beneficial owners of five percent or more of our securities.

Related Person Transactions Policy and Procedure

It is our policy that any transaction with an executive officer, director, nominee for the election as a

director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate
family of any of the foregoing persons, must first be presented to the Audit Committee for review, consideration
and approval, to the extent required by SEC regulations. This policy is included in our Code of Business Conduct
and Ethics.

Executive Severance Benefits Agreements

We have entered into executive severance benefits agreements and related amendments with our
executive officers. See “Executive Compensation and Related Information” above for further discussion of these
arrangements.

Stock Option Grants

We have granted stock options to our executive officers and our non-employee directors. See “Executive

Compensation and Related Information” and “Information About the Board of Directors and Corporate
Governance—Director Compensation” above for further discussion of these awards.

Indemnification of Directors and Officers

We have entered into indemnity agreements with our executive officers and directors which provide,

among other things, that we will indemnify such executive officer or director, under the circumstances and to the
extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to
pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a
director, executive officer or other agent of Sunesis, and otherwise to the fullest extent permitted under Delaware
law and our bylaws. We also intend to execute these agreements with our future executive officers and directors.

There is no pending litigation or proceeding naming any of our directors or executive officers as to which

indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in
claims for indemnification by any director or executive officer.

Registration Rights

In June 2013, we entered into an agreement with certain investors terminating the existing registration

rights held by such investors and granting them replacement registration rights covering the common stock held
by them. We have filed a registration statement under the Securities Act registering the resale of shares of our
common stock held by these investors, including shares upon exercise of certain warrants.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 15, 2015, information regarding beneficial ownership of our

common stock by:

•

each person, or group of affiliated persons, known by us to beneficially own more than five
percent of our common stock;

each of our NEOs;

each director and nominee for director; and

all of our executive officers and directors as a group.

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Beneficial ownership is determined according to the rules of the SEC and generally means that a person
has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that
security, and includes options and warrants that are currently exercisable as of or within 60 days of March 15,
2015. Shares of common stock subject to stock options and warrants exercisable as of or within 60 days of
March 15, 2015 are deemed to be outstanding for computing the percentage ownership of the person holding
these options and warrants and the percentage ownership of any group of which the holder is a member, but are
not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, we believe the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as beneficially owned by them.

This table lists applicable percentage ownership based on 68,218,284 shares of common stock
outstanding as of March 15, 2015. Unless otherwise indicated, the address for each of the beneficial owners in
the table below is c/o Sunesis Pharmaceuticals, Inc., 395 Oyster Point Boulevard, Suite 400,
South San Francisco, California 94080.

Name of Beneficial Owner
5% Stockholders:
Growth Equity Opportunities Fund, LLC(3) . . . . . . . . . . . . . . . . . . . . . . . .
Entities affiliated with Bay City Capital(4) . . . . . . . . . . . . . . . . . . . . . . . . .
T. Rowe Price Associates, Inc.(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FMR LLC(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Named Executive Officers and Directors:
James W. Young, Ph.D.(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel N. Swisher, Jr.(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric H. Bjerkholt(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steve R. Carchedi(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adam R. Craig, Ph.D.(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matthew K. Fust(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven B. Ketchum, Ph.D.(13)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Helen S. Kim(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dayton Misfeldt(15)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homer L. Pearce, Ph.D.(16)
David C. Stump, M.D.(17)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All executive officers and directors as a group (12 persons) . . . . . . . . .

Beneficial Ownership(1)

Shares of
Common
Stock
Beneficially
Owned
(#)(2)

Percentage
of
Common
Stock
Beneficially
Owned (%)

6,325,164
6,259,517
5,670,000
5,083,834

218,883
1,836,593
899,676
35,833
636,989
130,001
302,853
120,000
6,369,517
128,334
128,334
10,807,013

9.1%
9.0%
8.3%
7.5%

*
2.6%
1.3%
*
*
*
*
*
9.1%
*
*
14.6%

* Represents beneficial ownership of less than one percent (1.0%) of the outstanding shares of our capital

stock.

(1)

(2)

(3)

(4)

(5)

(6)

(7)

This table is based upon information provided to us by our executive officers and directors and upon
information about principal stockholders known to us based on Schedules 13G and 13D filed with the
SEC and otherwise available.

Includes shares issuable pursuant to stock options and warrants exercisable within 60 days of March 15,
2015.

Consists of 4,659,333 shares of common stock and 1,665,831 shares of common stock issuable upon the
exercise of warrants outstanding owned by Growth Equity Opportunities Fund, LLC, or GEO. The sole
member of GEO is New Enterprise Associates 12, Limited Partnership, or NEA 12. NEA Partners 12,
Limited Partnership, or NEA Partners 12, is the sole general partner of NEA 12 and NEA 12 GP, LLC, or
NEA 12 GP, is the sole general partner of NEA Partners 12. M. James Barrett, Peter J. Barris, Forest
Baskett, Ryan D. Drant, Patrick J. Kerins, Krishna “Kittu” Kolluri and Scott D. Sandell are the individual
managers of NEA 12 GP. Each of the above named entities and persons, except GEO, disclaims
beneficial ownership of the securities except to the extent of their pecuniary interest therein, if any. The
address for GEO is 1954 Greenspring Drive, Suite 600, Timonium, Maryland 21093.

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Includes (i) 1,515 shares of our common stock held by Bay City Capital LLC, a Delaware limited liability
company, or BCC, (ii) 4,506,300 shares of common stock and 1,634,681 shares of common stock issuable
upon exercise of warrants outstanding held by Bay City Capital Fund V, L.P., or Fund V, and
(iii) 85,872 shares of common stock and 31,149 shares of common stock issuable upon exercise of
warrants outstanding held by Bay City Capital Fund V Co-Investment Fund, L.P., or Co-Investment
V. BCC is the manager of Bay City Capital Management V, LLC, a Delaware limited liability company,
or Management V. Management V is the general partner of Fund V and Co-Investment V and has sole
voting and dispositive power with respect to the securities held by Fund V and Co-Investment V. BCC is
also an advisor to Fund V and Co-Investment V. Dayton Misfeldt, a member of our Board, is a partner of
BCC. The address of the principal business and office of Bay City Capital and its affiliates is 750 Battery
Street, Suite 400, San Francisco, California 94111.

Consists of 5,670,000 shares of common stock owned by T. Rowe Price Associates, Inc., or T. Rowe
Price. T. Rowe Price has sole voting power with respect to 804,600 shares of common stock and sole
dispositive power with respect to 5,670,000 shares of common stock. These securities are owned by
various individual and institutional investors which T. Rowe Price Associates, Inc. serves as an
investment adviser with power to direct investments and/or sole power to vote the securities. For the
purposes of the reporting requirements of the Securities Exchange Act of 1934, T. Rowe Price Associates,
Inc. is deemed to be a beneficial owner of such securities; however, T. Rowe Price Associates, Inc.
expressly disclaims that it is, in fact, the beneficial owner of such securities. The principal address for
T. Rowe Price is 100 E. Pratt Street, Baltimore, Maryland 21202.

Consists of shares beneficially owned by investment advisors that are direct or indirect subsidiaries of
FMR LLC, including 4,253,594 shares of common stock owned by Select Biotechnology Portfolio, or
Select. The address of FMR LLC and Select is 245 Summer Street, Boston, Massachusetts 02210.

Includes 3,920 shares of our common stock held by family members of Dr. Young. Dr. Young disclaims
beneficial ownership of such shares, except to the extent of his pecuniary interest therein. Also includes
options held by Dr. Young to purchase 174,167 shares of common stock that are exercisable within
60 days of March 15, 2015.

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(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

Includes options held by Mr. Swisher to purchase 1,498,318 shares of our common stock that are
exercisable within 60 days of March 15, 2015. Also includes 129,136 shares of common stock and
33,315 shares of common stock issuable upon the exercise of warrants outstanding that are held in the
Swisher Revocable Trust for which Mr. Swisher is the trustee.

Includes options held by Mr. Bjerkholt to purchase 759,578 shares of our common stock exercisable
within 60 days of March 15, 2015. Also includes 73,529 shares of common stock and 16,656 shares of
common stock issuable upon the exercise of warrants outstanding that are held in the Bjerkholt/Hahn
Family Trust for which Mr. Bjerkholt is the trustee.

Consists of options held by Mr. Carchedi to purchase 35,833 shares of our common stock exercisable
within 60 days of March 15, 2015.

Includes options held by Dr. Craig to purchase 613,537 shares of our common stock exercisable within
60 days of March 15, 2015.

Consists of options held by Mr. Fust to purchase 130,001 shares of our common stock exercisable within
60 days of March 15, 2015.

Includes options held by Dr. Ketchum to purchase 212,236 shares of our common stock exercisable
within 60 days of March 15, 2015. Also includes 16,656 shares of common stock issuable upon the
exercise of warrants outstanding.

Consists of options held by Ms. Kim to purchase 120,000 shares of our common stock exercisable within
60 days of March 15, 2015.

Includes the shares of our common stock and shares of common stock issuable upon the exercise of
warrants outstanding detailed in Note (4) above held by the entities affiliated with BCC. Mr. Misfeldt is a
partner of BCC. BCC is the manager of Management V. Management V, the general partner of Fund V
and Co-Investment V, has sole voting and dispositive power with respect to the securities held by Fund V
and Co-Investment V. BCC, as the manager of Management V, is also an advisor to Fund V and Co-
Investment V. Also includes options held by Mr. Misfeldt to purchase 110,000 shares of our common
stock exercisable within 60 days of March 15, 2015. The address for Mr. Misfeldt is c/o Bay City Capital,
750 Battery Street, Suite 400, San Francisco, California 94111.

Consists of options held by Dr. Pearce to purchase 128,334 shares of our common stock exercisable
within 60 days of March 15, 2015.

Consists of options held by Dr. Stump to purchase 128,334 shares of our common stock exercisable
within 60 days of March 15, 2015.

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Stockholder Proposals for Inclusion in our 2016 Proxy Statement

OTHER INFORMATION

Our stockholders may submit proposals on matters appropriate for stockholder action at meetings of our

stockholders in accordance with Rule 14a-8 promulgated under the Exchange Act. For such proposals to be
included in our proxy materials relating to the 2016 annual meeting of stockholders, all applicable requirements
of Rule 14a-8 must be satisfied and such proposals must be received by us no later than December 25, 2015.
However, if our 2016 annual meeting of stockholders is not held between May 5, 2016 and July 4, 2016, then the
deadline will be a reasonable time prior to the time we begin to print and mail our proxy materials. Such
proposals should be submitted to our Corporate Secretary at Sunesis Pharmaceuticals, Inc., 395 Oyster Point
Boulevard, Suite 400, South San Francisco, California 94080.

Our bylaws establish an advance notice procedure with regard to certain matters, including stockholder

proposals, not included in our proxy statement, to be brought before an annual meeting of stockholders. In
general, notice must be received in writing by our Corporate Secretary at Sunesis Pharmaceuticals, Inc., 395
Oyster Point Boulevard, Suite 400, South San Francisco, California 94080 not less than 120 days before the one
year anniversary of the date on which we first mailed our proxy statement to stockholders in connection with the
previous year’s annual meeting of stockholders and must contain specified information concerning the matters to
be brought before such meeting and concerning the stockholder proposing such matters. Therefore, to be
presented at our 2016 annual meeting, such a proposal must be received by us on or before December 25, 2015.
If the date of the annual meeting is before May 9, 2016 or after July 8, 2016, our Corporate Secretary must
receive such notice no later than the close of business on the later of 120 calendar days in advance of such annual
meeting and 10 calendar days following the date on which public announcement of the date of such meeting is
first made. We also advise you to review our bylaws, which contain additional requirements about advance
notice of stockholder proposals and director nominations. The chairman of the 2016 annual meeting of
stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting
and, therefore, may not be considered at the meeting. In addition, if you do not also comply with the
requirements of Regulation 14A under the Exchange Act, our management will have discretionary authority to
vote all shares for which it has proxies in opposition to any such stockholder proposal or director nomination.

Householding of Proxy Materials

The SEC has adopted rules that permit companies and intermediaries (such as brokers) to satisfy the

delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by
delivering a single set of other proxy materials addressed to those stockholders. This process, which is commonly
referred to as “householding,” potentially means extra convenience for stockholders and cost savings for
companies.

This year, a number of brokers with account holders who are our stockholders will be “householding” our

proxy materials. A single set of proxy materials will be delivered to multiple stockholders sharing an address
unless contrary instructions have been received from the affected stockholders. Once you have received notice
from your broker that it will be “householding” communications to your address, “householding” will continue
until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to
participate in “householding” and would prefer to receive a separate set of proxy materials in the future, you
please notify your broker or write or call either (i) our Investor Relations Department at Sunesis
Pharmaceuticals, Inc., 395 Oyster Point Boulevard, Suite 400, South San Francisco, California 94080, Attention:
Eric H. Bjerkholt, Executive Vice President, Corporate Development and Finance, Chief Financial Officer and
Corporate Secretary, telephone: (650) 266-3500, or (ii) the transfer agent for our common stock, American Stock
Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York 11219, telephone: (877) 777-0800. You
will be removed from the householding program within 30 days of receipt of the revocation of your consent. If
you revoke your consent, we will promptly deliver to you a separate copy of the proxy materials. Stockholders
who currently receive multiple copies of the proxy materials at their addresses and would like to request
“householding” of their communications should contact their brokers.

INCORPORATION BY REFERENCE

The information required with respect to securities authorized for issuance under our equity compensation
plans by Item 10 of Schedule 14A is incorporated herein by reference to the section titled “Equity Compensation
Plan Information” in Part III, Item 12 of our Annual Report on Form 10-K for the year ended December 31,
2014.

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Other Matters at the Annual Meeting

OTHER MATTERS

The Board knows of no other matters to be submitted at the Annual Meeting. If any other matters
properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of proxy
to vote the shares they represent as the Board may recommend.

By Order of the Board of Directors,

Eric H. Bjerkholt
Executive Vice President, Corporate Development and Finance,
Chief Financial Officer and Corporate Secretary

April 28, 2015

A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED

DECEMBER 31, 2014, AS FILED WITH THE SEC, INCLUDING COPIES OF THE EXHIBITS TO
OUR ANNUAL REPORT ON FORM 10-K IF SPECIFICALLY REQUESTED, IS AVAILABLE
WITHOUT CHARGE, UPON WRITTEN REQUEST OF ANY STOCKHOLDER. PLEASE ADDRESS
ALL SUCH REQUESTS TO OUR INVESTOR RELATIONS DEPARTMENT AT SUNESIS
PHARMACEUTICALS, INC., 395 OYSTER POINT BOULEVARD, SUITE 400, SOUTH SAN
FRANCISCO, CALIFORNIA 94080, ATTENTION: ERIC H. BJERKHOLT, EXECUTIVE VICE
PRESIDENT, CORPORATE DEVELOPMENT AND FINANCE, CHIEF FINANCIAL OFFICER AND
CORPORATE SECRETARY BY TELEPHONE TO: (650) 266-3717, OR BY E-MAIL TO:
BJERKHOLT@SUNESIS.COM.

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[THIS PAGE INTENTIONALLY LEFT BLANK]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended December 31, 2014

OR
(cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-51531

SUNESIS PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

94-3295878
(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)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:
Common Stock, par value $0.0001 per share

Name of Each Exchange on Which Registered:
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:95)
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 period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (cid:95) No (cid:133)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (cid:95)

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 (cid:95) No (cid:133)

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer or a smaller reporting company. See

definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Non-accelerated filer

(cid:133)
(cid:133) (Do not check if a smaller reporting company)

Accelerated filer

Smaller reporting company

(cid:95)
(cid:133)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2.) Yes (cid:133) No (cid:95)
The aggregate market value of common stock held by non-affiliates of the registrant, based on the closing sales price for such stock on June 30, 2014,

as reported by The Nasdaq Stock Market, was $263,889,528. The calculation of the aggregate market value of voting and non-voting stock excludes
19,847,977 shares of the registrant’s common stock held by current executive officers, directors and stockholders that the registrant has concluded are
affiliates of the registrant. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or
cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.

The total number of shares outstanding of the registrant’s common stock, $0.0001 par value per share, as of February 27, 2015, was 67,739,771.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in
connection with the 2015 Annual Meeting of Stockholders of Sunesis Pharmaceuticals, Inc. (hereinafter referred to as “Proxy Statement”) are incorporated by
reference in Part III of this report. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the
conclusion of the registrant’s year ended December 31, 2014.

SUNESIS PHARMACEUTICALS, INC.

TABLE OF CONTENTS

ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.

PART I
Business ............................................................................................................................................................
Risk Factors ......................................................................................................................................................
Unresolved Staff Comments .............................................................................................................................
Properties ..........................................................................................................................................................
Legal Proceedings ............................................................................................................................................
Mine Safety Disclosures ...................................................................................................................................

PART II

ITEM 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.

ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.

ITEM 15.

Securities .....................................................................................................................................................
Selected Financial Data ....................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........................
Quantitative and Qualitative Disclosures About Market Risk ..........................................................................
Financial Statements and Supplementary Data ................................................................................................
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ..........................
Controls and Procedures ...................................................................................................................................
Other Information .............................................................................................................................................

PART III
Directors, Executive Officers and Corporate Governance ...............................................................................
Executive Compensation ..................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .........
Certain Relationships and Related Transactions, and Director Independence .................................................
Principal Accounting Fees and Services ..........................................................................................................

PART IV
Exhibits, Financial Statement Schedules ..........................................................................................................
Signatures .........................................................................................................................................................
Exhibit Index ....................................................................................................................................................

Page
No.

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, including the information we incorporate by reference, contains “forward-looking statements” within the meaning

of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the Private Securities Litigation Reform Act of 1995, 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 regulatory plans to file a marketing authorization application
with the European Medicines Agency, our preliminary analysis, assessment and conclusions of the results of the VALOR trail, and the
commercial potential of vosaroxin, 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,” “could,” “estimates,” “expects,” “intend,” “look forward,” “may,” “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

subsidiaries, except where it is made clear that the term refers only to the parent company.

ITEM 1.

BUSINESS

General

In October 2014, we announced the results of a Phase 3, multi-national, randomized, double-blind, placebo-controlled trial of

vosaroxin in combination with cytarabine in patients with relapsed or refractory AML, or the VALOR trial. The VALOR trial, which
enrolled 711 adult patients, was 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, and was conducted at 124 study
sites in the U.S., Canada, Europe, South Korea, Australia and New Zealand. Patients treated with vosaroxin achieved increased overall
survival compared to those treated with placebo (7.5 months vs 6.1 months, HR=0.87), the primary endpoint, but this difference did
not achieve statistical significance (p=0.06). The complete remission (CR) rate, the sole secondary efficacy endpoint in the trial, did
demonstrate a significant difference for the vosaroxin combination arm (30.1% vs 16.3%, p < 0.0001). Detailed results of the VALOR
trial were presented in the "Late Breaking Abstracts" session of the American Society of Hematology (ASH) Annual Meeting in
December 2014 and are summarized in the “Vosaroxin Clinical Trials in AML” section below.

Based on the results of the VALOR trial, we have submitted a letter of intent to the European Medicines Agency, or EMA,

describing our intention to file a marketing authorization application, or MAA, for marketing authorization of vosaroxin plus
cytarabine for the treatment of relapsed or refractory AML. We plan to meet with European regulatory authorities in preparation for an
MAA filing in the second half of 2015.We are also currently engaged in discussions with the U.S. Food and Drug Administration, or
FDA, to determine a potential regulatory path forward in the United States.

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In the second half of 2013, we announced the initiation of three Phase 1/2 investigator-sponsored trials of vosaroxin, either as a

standalone therapy or in combination with approved compounds, in various indications of AML and high-risk myelodysplastic
syndrome, or MDS. The trials are being conducted at the University of Texas MD Anderson Cancer Center, or MDACC, Weill
Cornell Medical College and New York-Presbyterian Hospital, and the Washington University School of Medicine.

In December 2014, updated results from the ongoing Phase 1b/2 MDACC-sponsored trial of vosaroxin in combination with
decitabine in older patients with previously untreated AML and high-risk MDS were presented at the ASH Annual Meeting. This trial
is expected to enroll up to a combined total of approximately 70 patients.

We own worldwide development and commercialization rights to vosaroxin. In 2009, vosaroxin received orphan drug
designation for the treatment of AML from the FDA and in 2012, the European Commission granted orphan drug designation to
vosaroxin for the treatment of AML, which may provide for 10 years of marketing exclusivity in all member countries of the
European Union following a product approval for this indication in Europe. In 2011, the FDA granted fast track designation to
vosaroxin for the potential treatment of relapsed or refractory AML in combination with cytarabine. We have been granted, or notified
of allowance of, a number of key patents for vosaroxin, details of which are provided in the “Intellectual Property” section below.

In January 2014, we announced the expansion of our oncology franchise through separate global licensing agreements for two

preclinical kinase inhibitor programs. The first agreement, with Biogen Idec MA, Inc., or Biogen Idec, is for global commercial rights
to SNS-062, a selective non-covalently binding oral inhibitor of Bruton’s tyrosine kinase, or BTK. BTK is a mediator of B-cell
receptor signaling that is integral to the pathogenesis of B-cell malignancies. With preclinical characteristics and activity distinct from
compounds in the same class, SNS-062 may hold potential as a differentiated treatment for B-cell malignancies and other blood
cancers. We are currently conducting IND-enabling studies for SNS-062, with a view to filing an IND application with the FDA.

The second agreement, with Millennium Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company

Limited, or Millennium, is for global commercial rights to several potential first-in-class, pre-clinical inhibitors of the novel target
phosphoinositide-dependent kinase-1, or PDK1. PDK1 is a key kinase and mediator of PI3K/AKT signaling, a pathway involved in
cell growth, differentiation, motility and survival. PDK1 inhibitors are expected to have unique effects on survival and invasion
signaling and to be broadly active in both hematologic and solid tumor malignancies. In 2014, we selected two PDK1 inhibitors, SNS-
229 and SNS-510, of which we plan to take at least one into IND-enabling absorption, distribution, metabolism and excretion, or
ADME, and safety studies in 2015.

Both BTK and PDK1 programs were originally developed under a research collaboration agreement between Biogen Idec and

Sunesis. In 2011, the PDK1 program was purchased by and exclusively licensed to Millennium along with the more advanced
program, MLN2480, a pan-RAF inhibitor currently in the maximum tolerated dose cohort expansion stage of a Millennium Phase 1,
multicenter dose escalation study. We currently expect SNS-062 and the PDK1 inhibitors will be developed exclusively by Sunesis.

Our Strategy

We plan to continue to build Sunesis into a leading biopharmaceutical company focused on the development and

commercialization of new oncology therapeutics for the treatment of solid and hematologic cancers by:

(cid:120)

pursuing regulatory approval for vosaroxin as a potential treatment for relapsed or refractory AML in Europe, the United
States, and other major markets;

building a commercial infrastructure in order to promote and market vosaroxin in the United States as a treatment for AML;

leveraging potential partners and distributors to commercialize vosaroxin in selective international markets;

establishing vosaroxin as the new standard of care for patients with relapsed or refractory AML;

exploring the broader potential of vosaroxin, beyond our pivotal indication, in different patient segments within AML and
MDS through investigator sponsored trials;

investing in additional clinical testing to evaluate vosaroxin for additional AML indications, MDS, other hematologic
malignancies and solid tumors;

leveraging our strong intellectual property protection over vosaroxin to capitalize on its full potential;

supporting our multi-kinase inhibitor programs with Millennium in oncology and Biogen Idec for immunology indications;

conducting IND-enabling studies for our BTK inhibitor, SNS-062, with a view to filing an IND application with the FDA;

taking at least one of the two selected development candidates from our PDK1 inhibitor program, SNS-229 and SNS-510,
into IND-enabling ADME and safety studies in 2015; and

continuing to expand and develop our oncology-focused pipeline through further licensing or collaboration arrangements
and research and development.

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Development Pipeline

The following chart summarizes our development pipeline:

Compound / Disease Indication

Trial

Preclinical

Phase 1

Phase 2

Ph.3/Pivotal

Reg.Filings

Vosaroxin

Relapsed/Refractory AML

Vosaroxin + IDAC

VALOR

Frontline AML and MDS

Vosaroxin + Decitabine

MD Anderson*

Hypomethylating Agent Failure MDS

Single Agent

Weill Cornell*

Intermediate or High-Risk MDS

Vosaroxin + Azacitidine

Washington University*

MLN2480**

Solid Tumors/Melanoma

Single Agent

Pan-RAF Inhibitor

SNS-062

B-Cell Malignancies

IND-enabling studies

BTK

SNS-229 / SNS-510

Hematology/Solid Tumors

Candidate identification

PDK1

- active trial

* investigator-sponsored trial

- planned/conditional phase

** compound being developed by Millennium

Vosaroxin

Background. Vosaroxin is an AQD—a class of compounds that has not been used previously for the treatment of cancer.

Preclinical data demonstrate that vosaroxin both intercalates DNA and inhibits topoisomerase II, an enzyme critical for cell
replication, resulting in replication-dependent, site-selective DNA damage, G2 arrest and apoptosis. We licensed worldwide
development and commercialization rights to vosaroxin from Sumitomo Dainippon Pharma Co., Ltd., or Sumitomo, in 2003.

Mechanism of Action. The molecular core of vosaroxin is structurally similar to quinolones and distinct from anthracyclines and

anthracenediones. Vosaroxin's anticancer activity results from apoptosis caused exclusively by DNA intercalation, inhibition of
topoisomerase II, and cell cycle inhibition in replicating cells.

Vosaroxin’s cytotoxic activity is established in diverse human tumors and clinical activity is observed in both solid and

hematologic malignancies. In preclinical studies, vosaroxin demonstrated broad antitumor activity and exhibited additive or
synergistic activity when combined with several therapeutic agents currently used in the treatment of cancer, including cytarabine.
Vosaroxin maintains activity in drug resistant tumor cell lines and human tumor models. Vosaroxin evades P-gp transporter-mediated
resistance, and its activity is p53 independent, reducing resistance to therapy. Vosaroxin has demonstrated anticancer activity in
patients who have failed other topoisomerase II inhibitor treatment.

Development Opportunity. Our goal is to establish vosaroxin in combination with cytarabine as the standard of care for patients

with relapsed or refractory AML. Additionally, we are exploring the broader potential of vosaroxin in different patient segments
within AML and MDS through investigator-sponsored trials. Based on the outcome of regulatory interactions related to our VALOR
trial, the results of investigator-sponsored trials, competitive concerns, our financial resources and various other factors, we may
further invest in the development and clinical testing of vosaroxin for related disease areas and indications such as other AML
populations, MDS, other hematologic malignancies and solid tumors.

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Vosaroxin Company-Sponsored Clinical Trials in AML

VALOR. In December 2010, we commenced enrollment of the VALOR trial, a Phase 3, randomized, double-blind, placebo-

controlled, pivotal clinical trial of vosaroxin in combination with cytarabine to evaluate overall survival in patients with relapsed or
refractory AML. The trial, which enrolled 711 adult patients, was conducted at 124 study sites in the U.S., Canada, Europe, South
Korea, Australia and New Zealand. Patients were stratified for age, geographic region and disease status and randomized one to one to
receive either vosaroxin and cytarabine or placebo and cytarabine. In October 2014, we announced the results from the VALOR trial,
and further detail was presented in the "Late Breaking Abstracts" session of the American Society of Hematology (ASH) Annual
Meeting in December 2014.

Patients treated with vosaroxin achieved increased overall survival compared to those treated with placebo (7.5 months vs 6.1

months, HR=0.87), the primary endpoint, but this difference did not achieve statistical significance (p=0.06). The complete remission
(CR) rate, the sole secondary efficacy endpoint in the trial, did demonstrate a significant difference for the vosaroxin combination arm
(30.1% vs 16.3%, p < 0.0001).

In a pre-planned analysis accounting for the stratification factors at randomization, a significant improvement in overall survival

was demonstrated (HR=0.83, p=0.02). The pre-planned analysis of all treatment strata included the following poor-prognosis patient
categories: over 60 years old (7.1 months vs 5.0 months, HR=0.75, p=0.003, n=451), refractory disease (6.7 months vs 5.0 months,
HR=0.87, p=0.23, n=301), and early relapsed disease (6.7 months vs 5.2 months, HR=0.77, p=0.04, n=256). Outcomes in patients
under 60 years old or with late relapsed disease were comparable between treatment arms, with no improvement in overall
survival. Across all strata, the CR and Composite CR (CR+CRp+CRi) rates were higher in the vosaroxin combination arm.

Given the complexity of interpreting the impact of transplantation therapy, a predefined analysis of overall survival censoring
for hematopoietic stem cell transplantation was planned. In this analysis, patients receiving the vosaroxin combination had a median
overall survival of 6.7 months versus 5.3 months for patients receiving placebo and cytarabine (HR=0.81, p=0.02).

Regarding drug safety, Grade 3 or higher non-hematologic adverse events that were more common in the vosaroxin combination

arm were gastrointestinal and infection-related toxicities, consistent with those observed in our previous clinical trials. The rate of
serious adverse events was 55.5% in the vosaroxin combination arm compared to 35.7% in the placebo and cytarabine arm. 30-day
and 60-day all-cause mortality were comparable between the trial arms (7.9% versus 6.6% and 19.7% versus 19.4%, for the vosaroxin
combination versus placebo and cytarabine, respectively).

Phase 2 Combination. The results from our completed Phase 1b/2 clinical trial of vosaroxin in combination with cytarabine in

patients with relapsed or refractory AML were published in the November 7, 2014 Ahead of Print issue of Haematologica. The article,
titled “A Phase 1b/2 study of combination vosaroxin and cytarabine in patients with relapsed or refractory acute myeloid leukemia,” is
available online at: http://www.haematologica.org/content/early/recent.

The Phase 1b/2 study assessed the safety and tolerability of vosaroxin in combination with cytarabine in patients with relapsed

or refractory AML. Escalating vosaroxin doses (10-minute infusion; 10-90 mg/m2 on days 1, 4) were given in combination with
cytarabine on one of two schedules: schedule A (24-hour continuous intravenous infusion, 400 mg/m2 per day on days 1-5) or
schedule B (2-hour intravenous infusion, 1 g/m2 per day on days 1-5). Following dose escalation, enrollment was expanded at the
maximum tolerated dose. The maximum tolerated dose for schedule A was vosaroxin 80 mg/m2 (dose-limiting toxicities: grade 3
bowel obstruction and stomatitis); the maximum tolerated dose was not reached for schedule B (recommended phase 2 dose: 90
mg/m2).

The median age in the study was 60 years, and patients had received as many as six prior cycles of therapy. Furthermore, most

patients (89%) had intermediate or unfavorable cytogenetic risk status. The most common treatment-emergent non-hematologic
adverse events of any grade were diarrhea, hypokalemia, nausea, and stomatitis. In the efficacy population, (all first relapsed or
primary refractory patients treated with vosaroxin 80-90 mg/m2; n=69), the CR and combined CR rates (CR or CR with incomplete
blood count recovery) were 25% and 28%, respectively. Thirty-day all-cause mortality was 2.5% among all patients treated at 80-90
mg/m2.

Phase 2 Single-Agent. The results from our completed Response Evaluation of Vosaroxin in Elderly AmL (REVEAL-1) trial, a

Phase 2 trial of single agent vosaroxin in previously untreated, poor-risk elderly AML patients who are unlikely to benefit from
standard induction chemotherapy, were published in the November 17, 2014 Online Version of Record of the British Journal of
Haematology. The article, titled "REVEAL-1, a phase 2 dose regimen optimization study of vosaroxin in older poor-risk patients with
previously untreated acute myeloid leukemia," is available online at: http://onlinelibrary.wiley.com/doi/10.1111/bjh.13214/abstract.

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The REVEAL-1 trial evaluated single-agent vosaroxin in patients (cid:149)60 years of age (n=113) with previously untreated
unfavorable prognosis AML. Dose regimen optimization was explored in sequential cohorts (A: 72 mg/m2 on days 1, 8, 15; B: 72
mg/m2 on days 1, 8; C: 72 mg/m2 or 90 mg/m2 on days 1, 4). The primary efficacy endpoint was combined complete remission rate
(CR plus CR with incomplete platelet recovery, or CRp). The median age in the study was 75 years and most patients (82%) had 2 or
more risk factors (age (cid:149) 70, antecedent hematologic disease, ECOG PS=2, or intermediate/unfavorable cytogenetics).

Common (>20%) grade (cid:149)3 adverse events were thrombocytopenia, febrile neutropenia, anemia, neutropenia, sepsis, pneumonia,

stomatitis, and hypokalemia. Overall CR and CR/CRp rates were 29% and 32%; median overall survival, or OS, was 7.0 months; 1-
year OS was 34%. Schedule C (72 mg/m2) had the most favorable balance of safety and efficacy, with faster hematologic recovery
(median 27 days) and lowest incidence of aggregate sepsis (24%) and 30-day (7%) and 60-day (17%) all-cause mortality. At this dose
and schedule, CR and CR/CRp rates were 31% and 35%, median OS was 7.7 months, and 1-year OS was 38%.

Phase 1 Single-Agent. Prior to 2009, we conducted a Phase 1 clinical trial to evaluate safety, pharmacokinetics, and preliminary
clinical activity of two dose schedules of vosaroxin in patients with relapsed or refractory acute leukemia. Anti-leukemic activity was
observed in both schedules, and the most common dose-limiting toxicity was stomatitis. The maximum tolerated dose was 72 mg/m2
for a once weekly for three weeks schedule and 40 mg/m2 for a twice weekly for two weeks schedule.

Vosaroxin Company-Sponsored Clinical Trials in Ovarian Cancer and Other Solid Tumors

In 2010, we completed a Phase 2 single-agent trial of vosaroxin in platinum-resistant ovarian cancer. Three dosing levels in two
treatment schedules were studied, and encouraging, durable anti-tumor activity was observed across all doses. For patients on dosing
levels of 48, 60 and 75 mg/m2, the overall response rate, or ORR, was 11%, 11% and 9%, respectively; disease control, defined as
stable disease for 12 weeks or more, was 46%, 46% and 51%, respectively; and the median progression-free survival, or PFS, was 83,
61 and 103 days, respectively. Based on clinical activity and tolerability, the 60 mg/m2 dose and schedule was selected for future
consideration. Overall, vosaroxin was generally well tolerated, with more than 10% of patients experiencing severe neutropenia,
febrile neutropenia, fatigue, and anemia.

Prior to 2009, we conducted two Phase 1 clinical trials to evaluate different dosing schedules of vosaroxin in patients with
advanced solid tumors. We also conducted two Phase 2 trials in non-small cell lung cancer and small cell lung cancer. Although
objective responses were observed in both lung cancer trials, it was determined that vosaroxin could be administered with greater dose
intensity given the low incidence of severe neutropenia and the trials were halted.

Vosaroxin Investigator Sponsored Clinical Trials

MD Anderson. In July 2013, we announced the initiation of an investigator-sponsored trial of vosaroxin in combination with

decitabine in older patients with previously untreated AML and high-risk MDS. The Phase 1/2 trial is being conducted at the
University of Texas MD Anderson Cancer Center under the direction of Naval Daver, M.D., Assistant Professor, and Farhad Ravandi,
M.D., Professor of Medicine and a principal investigator in the VALOR trial. The primary endpoints of the Phase 1 cohort of the study
are to determine the safety, maximum tolerated dose, or MTD, and dose limiting toxicity, or DLT, of vosaroxin in combination with
decitabine in patients with high-risk MDS or AML who are elderly and/or unable or unwilling to receive standard cytarabine plus
anthracycline based chemotherapy. The primary endpoint of the Phase 2 cohort of the study is to determine the efficacy of the
combination based on achievement of CR, and CR with incomplete blood count recovery, or CRi. Secondary endpoints include safety,
CR duration, leukemia-free survival, and overall survival. In October 2013, we announced the commencement of the Phase 2 portion
of the study. In December 2014, updated results from this study were presented at the ASH Annual Meeting. This trial is expected to
enroll up to a combined total of approximately 70 patients.

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Weill Cornell. In October 2013, we announced the initiation of a second investigator-sponsored trial of vosaroxin in adult
patients with previously treated intermediate-2 or high-risk MDS. The trial is being conducted at Weill Cornell Medical College and
New York-Presbyterian Hospital under the direction of Gail J. Roboz, M.D., Associate Professor of Medicine and Director of the
Leukemia Program. The Phase 1/2, open-label, dose escalating trial is expected to enroll up to 40 patients with MDS who have
previously failed treatment with hypomethylating agent-based therapy. Patient cohorts will initially receive escalating doses of
vosaroxin over each 28 day treatment cycle. Once the MTD is determined, an expanded evaluation of safety and hematologic response
or improvement rate at this dose level will be conducted in additional subjects, so that the total number of subjects exposed to this
dose level increases to up to 15 subjects. In addition to MTD and DLT, study endpoints include the rate of complete remission, partial
remission, hematologic improvement and blood transfusion requirements.

Washington University. In December 2013, we announced the initiation of a third investigator-sponsored trial of vosaroxin in
combination with azacitidine in patients with MDS. The trial is being conducted at the Washington University School of Medicine
under the direction of Meagan A. Jacoby, M.D., Ph.D., Instructor of Medicine, Division of Oncology. The Phase 1/2, open label, dose-
escalation trial will enroll up to approximately 40 patients with MDS who may have received up to three prior cycles of

hypomethylating agent-based therapy. Patients will receive vosaroxin (days one and four) and azacitidine (days one through seven) for
a maximum of six cycles. This dose escalation study is designed to enroll six patients per cohort in order to determine the MTD and
DLT of the combination. Other endpoints include best response, safety, tolerability, and event-free, progression-free, disease-free and
overall survival. Once the MTD is determined, up to an additional 20 patients will be enrolled, treated and evaluated at that dose level.

Cardiff University School of Medicine. In December 2011, we announced our participation in the randomized Phase 2/3 Less

Intensive 1 (LI-1) Study being conducted by the United Kingdom's National Cancer Research Institute (NCRI) Haematological
Oncology Study Group under the direction of Professor Alan K. Burnett, Head of Haematology, Department of Medical Genetics,
Haematology & Pathology at Cardiff University School of Medicine. The trial enrolled patients over the age of 60 with AML or high-
risk MDS and randomized them to one of a number of treatment regimens: Low Dose Ara-C (control); single-agent vosaroxin;
vosaroxin combined with Low Dose Ara-C; or to other experimental therapies considered for inclusion in the comparison. In 2013, at
the first interim analyses, the Data Monitoring and Ethics Committee recommended closure of the vosaroxin-containing trial arms as a
clinically relevant benefit was unlikely.

MLN 2480

Background. A pan-Raf inhibitor program was originally developed through a collaboration agreement between Sunesis and

Biogen Idec. In March 2011, Biogen Idec’s rights to this program were purchased by and exclusively licensed to Millennium. In
September 2011, Millennium initiated a Phase 1 clinical study of MLN2480, an oral, investigative drug selective for pan-Raf kinase
inhibition, in patients with relapsed or refractory solid tumors. The Phase 1, multicenter, open-label, dose escalation study was
designed to evaluate the safety, tolerability and MTD of MLN2480, and to be conducted in two stages: dose escalation and cohort
expansion. The dose escalation stage is complete and MTD was established, and MLN2480 is now in the cohort expansion stage of
this multicenter study. Four abstracts of preclinical and clinical data of MLN2480 were presented at the AACR-NCI-EORTC
International Conference on Molecular Targets and Cancer Therapeutics in November 2014.

Under the license agreement, we may in the future receive up to $57.5 million in pre-commercialization, event-based payments
related to the development by Millennium of the first two indications for each of the licensed products directed against the Raf target,
and royalty payments depending on related product sales, as further described below.

Mechanism of Action. The Raf kinases (A-Raf, B-Raf and C-Raf) are key regulators of cell proliferation and survival within the

mitogen-activated protein kinase (MAPK) pathway.

Development Opportunity. MLN2480 is a pan-Raf kinase inhibitor with a distinct molecular signature which has exhibited a

promising profile.

SNS-062

Background. SNS-062 is a non-covalently binding inhibitor of BTK. BTK mediates signaling through the B-cell receptor, or

BCR, which is critical for adhesion, migration, proliferation and survival of normal and malignant B-lineage lymphoid cells. BTK has
been well validated as a target for treatment of B-cell malignancies, with a BTK inhibitor approved for relapsed/refractory mantle cell
lymphoma, relapsed/refractory chronic lymphocytic leukemia, or CLL, CLL with 17p depletion and Waldenström’s
macroglobulinemia. We are currently conducting IND-enabling studies for SNS-062, with a view to filing an IND application with the
FDA. The rights to develop SNS-062 for oncology indications were in-licensed from Biogen Idec in December 2013, as described
below.

Mechanism of Action. SNS-062 has activity in BTK kinase assays and has shown efficacy in B-cell signaling assays and in vivo

models of B-cell function. The mechanism by which SNS-062 inhibits BTK is distinct from the mechanism of in-class BTK
compounds, as SNS-062 binds BTK non-covalently, which does not require interaction with Cysteine 481 in the kinase active domain.
In addition, SNS-062 has a distinct kinase inhibitory profile and a favorable pharmacokinetic profile compared to covalently binding
BTK inhibitors and this may translate into a distinct clinical benefit for patients.

Development Opportunity. SNS-062 has demonstrated a distinct binding site and favorable pharmacokinetic profile in

preclinical studies, and may provide differentiated opportunities for treatment of B-cell malignancies and other blood cancers.

SNS-229 and SNS-510

Background. In January 2014, we in-licensed a series of selective PDK1 inhibitors from Millennium that were discovered under

a research collaboration agreement between Biogen Idec and Sunesis, as described below. PDK1 is a key kinase and mediator of
PI3K/AKT signaling, a pathway involved in cell growth, differentiation, survival and migration. PDK1 inhibitors are expected to have

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unique effects on survival and invasion signaling and to be broadly active in both hematologic and solid tumor malignancies. We have
taken a series of PDK1 inhibitors with confirmed antitumor activity in vitro and in vivo into preclinical development, and in 2014, we
selected two PDK1 inhibitors, SNS-229 and SNS-510, of which we plan to take at least one into IND-enabling ADME and safety
studies in 2015.

Mechanism of Action. There are multiple PI3K pathway inhibitors in late stage development for use in CLL and solid tumor

indications, including breast cancer and pancreatic cancer. Because PDK1-dependent activation of AKT is critical for PI3K pathway
activation, we believe that PDK1 represents a key oncology target within the PI3K pathway. We believe Sunesis’ PDK1 inhibitors are
potential first-in-class compounds with demonstrated inhibition of AKT activity and a compelling in vitro and in vivo profile, that
have potential for single agent and broad-spectrum combination activity, thus providing a novel therapeutic opportunity for targeting
the PI3K signaling pathway in both solid and hematologic malignancies.

Development Opportunity. Inhibitors of PDK1 are expected to be able to provide similar clinical benefits to those observed with

PI3K inhibitors and have the potential to provide additional benefits through inhibition of PI3K independent cancer signaling
pathways, especially in cancer types in which PDK1 is overexpressed such as breast cancer and AML. We believe that Sunesis’ PDK1
inhibitors can be differentiated from PI3K and PDK1 inhibitors currently in research and development and that may provide novel
opportunities for treatment of solid and hematological malignancies.

License, Collaboration and Royalty Agreements

Inlicense Agreement with Sumitomo

In October 2003, we entered into an agreement with Sumitomo to acquire exclusive worldwide development and marketing

rights for vosaroxin. In January 2011, we made a $0.5 million milestone payment to Sumitomo as a result of the initiation of our
VALOR trial in December 2010. In the future we may be required to make additional milestone payments of up to $7.0 million in
aggregate to Sumitomo for (a) filing NDAs, in the U.S., Europe and Japan, and (b) for receiving regulatory approvals in these regions,
for cancer-related indications. If vosaroxin is approved for a non-cancer indication, an additional milestone payment will become
payable to Sumitomo.

The agreement also provides for royalty payments to Sumitomo at rates based on total annual net sales. Under the agreement,
we may reduce our royalty payments to Sumitomo if a third party markets a competitive product and we must pay royalties for third-
party intellectual property rights necessary to commercialize vosaroxin. Royalty obligations under the agreement continue on a
country-by-country and product-by-product basis until the later of the date on which no valid patent claims relating to a product exist
or 10 years from the date of the first sale of the product.

If we discontinue seeking regulatory approval and/or the sale of the product in a region, we are required to return its rights to the

product in that region to Sumitomo. The agreement may be terminated by either party for the other party’s uncured breach or
bankruptcy.

Licensing and Collaboration Agreements with Biogen Idec and Millennium

Overview

In August 2004, we entered into the original collaboration agreement with Biogen Idec to discover, develop and commercialize

small molecule inhibitors of the human protein Raf kinase, including family members Raf-1, A-Raf, B-Raf and C-Raf, collectively
Raf, and up to five additional targets that play a role in oncology and immunology indications such as BTK and PDK1, or the Biogen
Idec OCA.

In June 2008, the parties agreed to terminate the research term and related funding as of June 30, 2008. A total of $20.0 million

of research funding was received through that date. We received a total of $3.0 million in milestone payments for meeting certain
preclinical milestones through the Biogen Idec 1st ARCA date, as described below, including a $1.5 million event-based payment
received in cash in July 2009 for Biogen Idec’s selection of a Raf kinase inhibitor development candidate for the treatment of cancer.

In March 2011, as part of a series of agreements among Sunesis, Biogen Idec and Millennium, we entered into: (a) an amended
and restated collaboration agreement with Biogen Idec, or the Biogen Idec 1st ARCA; (b) a license agreement with Millennium, or the
Millennium Agreement; and (c) a termination and transition agreement among the Sunesis, Biogen Idec and Millennium, or the
Termination and Transition Agreement.

The Termination and Transition Agreement provided for (a) the termination of Biogen Idec’s exclusive rights under the Biogen
Idec OCA to all discovery programs under such agreement other than for small molecule inhibitors of the human protein BTK; (b) the

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permitted assignment to Millennium of all related Sunesis collaboration assets and rights to Raf kinase and the human protein PDK1;
and (c) the payment of $4.0 million to us from Millennium, which was recorded as revenue in March 2011.

Biogen Idec

The Biogen Idec 1st ARCA amended and restated the Biogen Idec OCA, to provide for the discovery, development and

commercialization of small molecule BTK inhibitors. Under this agreement, we no longer have research obligations, but licenses
granted to Biogen Idec with respect to the research collaboration under the Biogen Idec OCA (other than the licenses transferred to
Millennium under the Millennium Agreement) remain in effect.

In June 2012, we received an event-based payment of $1.5 million from Biogen Idec for its advancement of pre-clinical work in

connection with the Biogen Idec 1st ARCA. Under this agreement, we are eligible to receive up to an additional $58.5 million in pre-
commercialization, event-based payments related to the development by Biogen Idec of the first two indications for licensed products
against the BTK target. We are also eligible to receive royalty payments depending on related product sales, which may be increased
if we exercise our option to co-fund product candidates worldwide.

In December 2013, we entered into a second amended and restated collaboration agreement with Biogen Idec, or the Biogen

Idec 2nd ARCA, which amended and restated the Biogen Idec 1st ARCA, to provide us with an exclusive worldwide license to
develop, manufacture and commercialize SNS-062, a BTK inhibitor synthesized under the Biogen Idec 1st ARCA, solely for
oncology indications. Under the Biogen Idec 2nd ARCA, we may be required to make a $2.5 million milestone payment depending on
our development of SNS-062 and royalty payments depending on related product sales of SNS-062. Additionally, potential future
royalty payments to Sunesis were reduced to equal those amounts due to Biogen Idec for potential future sales of SNS-062. All other
of Sunesis’ rights contained in the Biogen Idec 1st ARCA remain unchanged.

Millennium

Under the Millennium Agreement, we granted exclusive licenses to products against two oncology targets originally developed

under the Biogen Idec OCA, Raf and PDK1, under substantially the same terms as under the Biogen Idec OCA.

In January 2014, we entered into an amended and restated license agreement with Millennium, or the Amended Millennium

Agreement, to provide us with an exclusive worldwide license to develop and commercialize preclinical inhibitors of PDK1. In
connection with execution of the Amended Millennium Agreement, we paid an upfront fee and may in the future be required to make
up to $9.2 million in pre-commercialization milestone payments depending on our development of PDK1 inhibitors and royalty
payments depending on related product sales.

With respect to the Raf target product rights that were originally licensed to Millennium under the Millennium Agreement, we

may in the future receive up to $57.5 million in pre-commercialization, event-based payments related to the development by
Millennium of the first two indications for each of the licensed products directed against the Raf target and royalty payments
depending on related product sales. The agreement also provides us with future co-development and co-promotion rights. Millennium
is currently conducting a Phase 1 clinical study of an oral investigative drug, MLN2480, which is licensed to them under the Amended
Millennium Agreement.

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Royalty Agreement with RPI

In March 2012, we entered into a Revenue Participation Agreement, or the Royalty Agreement, with RPI Finance Trust, or RPI,

an entity related to Royalty Pharma. In September 2012, as a result of the recommendation by the DSMB to increase the sample size
for the VALOR trial, RPI made a $25.0 million cash payment to us in exchange for a 6.75% royalty on any future net sales of
vosaroxin. In conjunction with the Royalty Agreement, we issued two five-year warrants to RPI, each to purchase 1,000,000 shares of
our common stock, at exercise prices of $3.48 and $4.64 per share, respectively. Of the $25.0 million, $21.9 million was recorded as
deferred revenue and is being amortized to revenue over the related performance period of the Royalty Agreement. The remaining
$3.1 million represents the fair value of the warrants. Both warrants were exercised in full in 2014.

Revenues

Over the past three years, we have generated revenue through the Royalty Agreement with RPI and the Biogen Idec 1st ARCA.
In 2014 and 2013, we recognized $5.7 million and $8.0 million of revenue, respectively, related to the Royalty Agreement with RPI.
In 2012, we recognized $2.3 million of revenue related to the Royalty Agreement with RPI and $1.5 million related to the Biogen Idec
1st ARCA, which represented 60% and 40% of 2012 revenues, respectively.

Manufacturing

We do not have internal manufacturing capabilities for the production of clinical or commercial quantities of vosaroxin. To date,

we have relied on, and we expect to continue to rely on, a limited number of third-party contract manufacturers for the production of
clinical and commercial quantities of the vosaroxin active pharmaceutical ingredient, or API, and the finished drug product
incorporating the API, or FDP. We do not have commercial supply agreements with any of these third parties, and our agreements
with these parties may include provisions that allow for termination at will by either party following a relatively short notice period.

We currently rely on two contract manufacturers for the vosaroxin API. We also currently rely on a single contract manufacturer

to formulate the vosaroxin API and fill and finish vials of the vosaroxin FDP. Because the vosaroxin API is classified as a cytotoxic
substance, the number of available manufacturers for the API and FDP is limited. We believe at least five contract manufacturers in
North America have suitable facilities to manufacture the vosaroxin API, and at least four have suitable facilities to manufacture the
vosaroxin FDP. A number of manufacturers outside of North America have suitable facilities, including one that currently
manufactures our vosaroxin API. If we are unable to obtain sufficient quantities of the vosaroxin API and FDP from our current
manufacturers, it may take time to engage alternative manufacturers, which could delay the development of and impair our ability to
commercialize vosaroxin.

To date, vosaroxin has been manufactured in quantities appropriate for preclinical studies and clinical trials, including the
manufacture of registration batches of API and FDP. Prior to commercial sale, we will need to perform process validation studies on
API and FDP batches. If the results of these process validation studies do not meet preset criteria, the regulatory approval or
commercial launch of vosaroxin may be delayed.

Competition

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, MDS and B-cell malignancies. 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 will

depend on, among other things:

(cid:120)

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;

the availability of reimbursement from government agencies and private insurance companies; and

acceptance of future products by physicians and other healthcare providers.

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Vosaroxin is a small molecule therapeutic that, if approved, will compete with other drugs and therapies currently used for
AML, such as nucleoside analogs, anthracyclines, hypomethylating agents, other inhibitors of topoisomerase II, and other novel
agents. Additionally, other compounds currently in development could become potential competitors of vosaroxin, if approved for
marketing. We expect competition with vosaroxin for the treatment of AML and other potential future indications to increase as
additional products are developed and approved for use in various patient populations.

Intellectual Property

We believe that patent protection is very important to our business and that our future success depends in part on our ability to

obtain patents protecting vosaroxin or future drug candidates, if any. Historically, we have patented a wide range of technology,
inventions and improvements related to our business, some of which we are no longer actively developing.

The vosaroxin composition-of-matter is covered by U.S. Patent No. 5,817,669 and its counterpart patents in 43 foreign
jurisdictions. This U.S. patent is due to expire in October 2015, and most of its foreign counterparts are due to expire in June 2015.
While it is possible that patent term restoration and/or supplemental patent certificates would be available for some of these or other
patents we own or control through licenses, we cannot guarantee that such additional protection will be obtained, and the expiration
dates described here do not include such term restoration.

We have been granted additional patents relating to vosaroxin compositions, and uses and manufacture of vosaroxin, in the U.S.:

(cid:120) U.S. Patent No. 7,989,468 claims methods of use of vosaroxin at clinically relevant dose ranges and schedules for the

treatment of leukemia, with expiry in 2026;

(cid:120) U.S. Patent Nos. 7,829,577 and 8,669,270 claim certain pharmaceutical compositions of vosaroxin, including the

formulation used in our VALOR trial, with expiry in 2025;

(cid:120) U.S. Patent No. 8,580,814 claims certain methods of use of vosaroxin at clinically relevant dose ranges to treat acute

myelogenous leukemia, with expiry in 2026;

(cid:120) U.S. Patent No. 8,822,493 claims certain methods of use of vosaroxin at clinically relevant dose ranges together with

therapeutically effective amounts of cytarabine to treat cancer, with expiry in 2024;

(cid:120) U.S. 8,124,773 B2 claims a hydrate of vosaroxin with expiry in 2028 and U.S. Patent No. 8,765,954 claims certain

compositions containing this hydrate of vosaroxin, with expiry in 2027;

(cid:120) U.S. Patent No. 8,497,282 claims a method of making vosaroxin, with expiry in 2031 and U.S. Patent No. 8,802,719 claims

certain intermediates useful in the making of vosaroxin, with expiry in 2029;

(cid:120) U.S. Patent Nos. 8,586,601 and 8,138,202 claim certain compositions containing vosaroxin, with expiry in 2030; and

(cid:120) U.S. Patent No. 7,968,565 claims a combination of vosaroxin and cytarabine, with expiry in 2026.

We have been granted additional patents relating to vosaroxin compositions, and uses and manufacture of vosaroxin, in Europe:

(cid:120) EPO Patent No. 1725233 B1, which has been validated in multiple European Patent Office, or EPO, member states, claims
certain pharmaceutical compositions of vosaroxin, including the formulation used in our VALOR trial, with expiry in 2025;
and

(cid:120) EP Patent No. 1729770 B1, which has been validated in multiple EPO member states, claims combinations of vosaroxin

and certain anticancer agents, including cytarabine, with expiry in 2025.

In addition to the listed US and European patents, we have been granted similar and related patents in certain other countries,
and patent applications are pending in these and other countries, including major markets, throughout the world. Other patents have
also been granted in the US and other countries claiming certain technology related to vosaroxin and other methods of use of
vosaroxin.

As of December 31, 2014, we own, co-own or have rights to approximately 171 granted U.S. and foreign patents, and
approximately 136 pending U.S. and foreign applications, pertaining to vosaroxin and compositions and uses thereof. When
appropriate, we intend to seek patent term restoration, orphan drug status and/or data exclusivity in the United States and their
equivalents in other relevant jurisdictions, to the maximum extent that the respective laws will permit at such time. In April 2012, the
European Commission granted orphan drug designation to vosaroxin for the treatment of AML, which may provide for 10 years of
marketing exclusivity in all member countries of the European Union following product approval for this indication in Europe. In
2009, the FDA granted orphan drug designation to vosaroxin for the treatment of AML.

Our ability to build and maintain our proprietary position for vosaroxin and any future drug candidates, if any, will depend on

our success in obtaining effective claims and enforcing granted claims. The patent positions of biopharmaceutical companies like ours
are generally uncertain and involve complex legal and factual questions for which some important legal principles remain unresolved.
No consistent policy regarding the breadth of patent claims has emerged to date in the United States. The patent situation outside the
United States is even more uncertain. We do not know whether any of our patent applications or those patent applications that we
license will result in the issuance of any patents. Even if patents are issued, they may not be sufficient to protect vosaroxin or future
drug candidates, if any. The patents we own or license and those that may be issued in the future may be opposed, challenged,
invalidated or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or
competitive advantages.

Patent applications filed before November 29, 2000 in the United States are maintained in secrecy until patents issue. Later-filed

U.S. applications and patent applications in most foreign countries generally are not published until at least 18 months after their

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earliest filing date. Scientific and patent publication often occurs long after the date of the scientific discoveries disclosed in those
publications. Accordingly, we cannot be certain that we were the first to invent the subject matter covered by any patent application or
that we were the first to file a patent application for any inventions.

Our commercial success depends on our ability to operate without infringing patents and proprietary rights of third parties. We
cannot determine with certainty whether patents or patent applications of other parties may materially affect our ability to conduct our
business. The existence of third party patent applications and patents could significantly reduce the coverage of patents owned by or
licensed to us and limit our ability to obtain meaningful patent protection. If patents containing competitive or conflicting claims are
issued to third parties and these claims are ultimately determined to be valid, we may be enjoined from pursuing research,
development or commercialization of vosaroxin or future drug candidates, if any, or be required to obtain licenses to such patents or to
develop or obtain alternative technology.

We may need to commence or defend litigation to enforce or to determine the scope and validity of any patents issued to us or to

determine the scope and validity of third party proprietary rights. Litigation would result in substantial costs, even if the eventual
outcome is favorable to us. An adverse outcome in litigation affecting proprietary rights we own or have licensed could present
significant risk of competition for vosaroxin or future drug candidates, if any, that we market or seek to develop. Any adverse outcome
in litigation affecting third party proprietary rights could subject us to significant liabilities to third parties and could require us to seek
licenses of the disputed rights from third parties or to cease using the technology if such licenses are unavailable.

We also rely on trade secrets to protect our technology, especially in situations or jurisdictions in which we believe patent
protection may not be appropriate or obtainable. However, trade secrets are difficult to maintain and do not protect technology against
independent developments made by third parties.

We seek to protect our proprietary information by requiring our employees, consultants, contractors and other advisers to
execute nondisclosure and assignment of invention agreements upon commencement of their employment or engagement. Agreements
with our employees also prevent them from bringing the proprietary rights of third parties to us. We also require confidentiality or
material transfer agreements from third parties that receive our confidential data or materials. There can be no assurance that these
agreements will provide meaningful protection, that these agreements will not be breached, that we will have an adequate remedy for
any such breach, or that our trade secrets will not otherwise become known or independently developed by a third party.

We seek to protect our company name and the names of our products and technologies by obtaining trademark registrations, as

well as common law rights in trademarks and service marks, in the United States and in other countries. There can be no assurance
that the trademarks or service marks we use or register will protect our company name or any products or technologies that we
develop and commercialize, that our trademarks, service marks, or trademark registrations will be enforceable against third parties, or
that our trademarks and service marks will not interfere with or infringe trademark rights of third parties. We may need to commence
litigation to enforce our trademarks and service marks or to determine the scope and validity of our or a third party’s trademark rights.
Litigation would result in substantial costs, even if the eventual outcome is favorable to us. An adverse outcome in litigation could
subject us to significant liabilities to third parties and require us to seek licenses of the disputed rights from third parties or to cease
using the trademarks or service marks if such licenses are unavailable.

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Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial
requirements upon the clinical development, manufacture, marketing and distribution of drugs. These agencies and other federal, state
and local entities regulate research and development activities and the testing, manufacture, quality control, safety, efficacy, labeling,
storage, recordkeeping, approval, advertising and promotion of vosaroxin and any future drug candidates we may develop, if any. The
application of these regulatory frameworks to the development, approval and commercialization of vosaroxin or our future drug
candidates, if any, will take a number of years to accomplish, if at all, and involve the expenditure of substantial resources.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, as amended, and implementing
regulations. The process required by the FDA before vosaroxin and any future drug candidates may be marketed in the United States
generally involves the following:

(cid:120)

completion of extensive preclinical laboratory tests, in vivo preclinical studies and formulation studies;

submission to the FDA of an IND application, which must become effective before clinical trials begin;

performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product candidate for
each proposed indication;

submission of an NDA to the FDA;

(cid:120)

satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product candidate is
produced to assess compliance with current Good Manufacturing Practice, or cGMP, regulations; and

(cid:120) FDA review and approval of the NDA, including proposed labeling (package insert information) and promotional materials,

prior to any commercial marketing, sale or shipment of the drug.

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any

approvals for vosaroxin or our future drug candidates, if any, will be granted on a timely basis, if at all.

Preclinical Testing and INDs

Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate
toxicity in animals. Laboratories that comply with the FDA Good Laboratory Practice regulations must conduct preclinical safety
tests. The results of preclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND
application to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-
day time period, raises concerns or questions about the conduct of the clinical trial, including concerns that human research subjects
will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns
before the clinical trial can begin. Our submission of an IND, or those submitted by Biogen Idec, Millennium, or our potential future
licensees or collaboration partners, if any, may not result in FDA authorization to commence a clinical trial.

Clinical Trials

Clinical trials involve the administration of an investigational drug to healthy volunteers or to patients under the supervision of a

qualified principal investigator. Clinical trials are conducted in accordance with the FDA’s Protection of Human Subjects regulations
and Good Clinical Practices, or GCP, under protocols that detail the objectives of the study, the parameters to be used to monitor
safety, and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND application.

In addition, each clinical study must be conducted under the auspices of an independent institutional review board, or IRB, at
each institution where the study will be conducted. Each IRB will consider, among other things, ethical factors, the safety of human
subjects and the possible liability of the institution. The FDA, an IRB or the sponsor may suspend a clinical trial at any time on
various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also
must satisfy extensive GCP requirements and regulations for informed consent.

Clinical trials are typically conducted in three sequential phases, which may overlap, sometimes followed by a fourth phase:

(cid:120) Phase 1 clinical trials are initially conducted in a limited population to test the drug candidate for safety (adverse effects),
dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as
cancer patients. In some cases, particularly in cancer trials, a sponsor may decide to conduct what is referred to as a
“Phase 1b” evaluation, which is a second safety-focused Phase 1 clinical trial typically designed to evaluate the impact of
the drug candidate in combination with currently approved drugs.

(cid:120) Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety
risks, to determine the efficacy of the drug candidate for specific targeted indications and to determine dose tolerance and
optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning
larger and more expensive Phase 3 clinical trials. In some cases, a sponsor may decide to conduct what is referred to as a
“Phase 2b” evaluation, which is a second, confirmatory Phase 2 clinical trial that could, if positive and accepted by the
FDA, serve as a pivotal clinical trial in the approval of a drug candidate.

(cid:120) Phase 3 clinical trials are commonly referred to as pivotal trials. When Phase 2 clinical trials demonstrate that a drug
candidate has potential activity in a disease or condition and has an acceptable safety profile, Phase 3 clinical trials are
undertaken to further evaluate clinical efficacy and to further test for safety in an expanded patient population at multiple,
geographically dispersed clinical trial sites.

(cid:120) Phase 4 (post-marketing) clinical trials may be required by the FDA in some cases. The FDA may conditionally approve an
NDA for a drug candidate on a sponsor’s agreement to conduct additional clinical trials to further assess the drug’s safety
and/or efficacy after NDA approval. Such post-approval trials are typically referred to as Phase 4 clinical trials.

New Drug Applications

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together

with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are
submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under federal law, the

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submission of most NDAs is additionally subject to a substantial application user fee under the Prescription Drug User Fee Act, or
PDUFA, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, which fees are typically
increased annually.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing
to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather
than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted
application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins
an in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs. Under these goals, the
FDA has committed to review most such applications for non-priority products within 10 months of filing, and most applications for
priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six
months of filing. The review process may be extended by the FDA for three additional months to consider certain information or
clarification regarding information already provided in the submission. The FDA may also refer applications for novel drugs or
products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and
other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound
by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA

will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP
requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving
an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data
submitted.

The testing and approval process requires substantial time, effort and financial resources, and each may take many years to

complete. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which
could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter
difficulties or unanticipated costs in our efforts to develop our product candidates and secure necessary governmental approvals,
which could delay or preclude us from marketing our products.

After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a

complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for
specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial
additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been
addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to
reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and
refuse to approve the NDA. Even if the FDA approves a product, it may limit the approved indications for use for the product, require
that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase
4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the
product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms,
including Risk Evaluation and Mitigation Strategies, or REMs, which can materially affect the potential market and profitability of the
product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance
programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and
additional labeling claims, are subject to further testing requirements and FDA review and approval.

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Orphan Drug Designation

The United States Orphan Drug Act promotes the development of products that demonstrate promise for the diagnosis and
treatment of diseases or conditions that affect fewer than 200,000 people in the United States. Upon receipt of orphan drug designation
from the FDA, the sponsor is eligible for tax credits of up to 50% for qualified clinical trial expenses, the ability to apply for annual
grant funding, waiver of PDUFA application fee, and upon approval, the potential for seven years of market exclusivity for the
orphan-designated product for the orphan-designated indication. In October 2009, the FDA granted orphan drug designation to
vosaroxin for treatment of AML.

In the European Union, orphan status is available for therapies addressing conditions that affect five or fewer out of 10,000

people, and provides for the potential for 10 years of marketing exclusivity in Europe for the orphan-designated product for the
orphan-designated indication. The marketing exclusivity period can be reduced to six years if, at the end of the fifth year, available
evidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity. In April 2012, the
European Commission granted orphan drug designation to vosaroxin for the treatment of AML.

Fast Track Designation

The FDA’s fast track program is intended to facilitate the development, and to expedite the review, of drugs that are intended
for the treatment of a serious or life-threatening condition for which there is no effective treatment and demonstrate the potential to
address unmet medical needs for the condition.

With fast track designation, the FDA may initiate review of sections of an NDA before the application is complete. This rolling
review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the
applicant pays applicable user fees. However, the time period specified in the PDUFA, which governs the time period goals the FDA
has committed to reviewing an application, does not begin until the complete application is submitted. Additionally, the fast track
designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the
clinical trial process.

In some cases, a fast track designated drug candidate may also qualify for priority review. Under FDA policies, a drug candidate
is eligible for priority review, or, under Prescription Drug User Fee Act V, review within eight months from the time a complete NDA
is submitted (a six-month review period begins at the conclusion of the 60-day filing review period that begins on the date of FDA
receipt of the submission), if the drug candidate provides a significant improvement compared to marketed drugs in the treatment,
diagnosis or prevention of a disease. A fast track designated drug candidate would ordinarily meet the FDA’s criteria for priority
review.

In February 2011, the FDA granted fast track designation to vosaroxin for the potential treatment of relapsed or refractory AML

in combination with cytarabine. We do not know whether vosaroxin or our future drug candidates, if any, will receive a priority
review designation or, if a priority designation is received, whether that review or approval will be faster than conventional FDA
procedures, or the ultimate impact, if any, of the fast track designation on the timing or likelihood of FDA approval of vosaroxin or
our future drug candidates, if any.

Satisfaction of FDA regulations and approval requirements or similar requirements of foreign regulatory agencies typically
takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the product or
disease. Typically, if a drug candidate is intended to treat a chronic disease, as is the case with vosaroxin, safety and efficacy data
must be gathered over an extended period of time. Government regulation may delay or prevent marketing of drug candidates for a
considerable period of time and impose costly procedures upon our activities. The FDA or any other regulatory agency may not grant
approvals for new indications for our drug candidates on a timely basis, or at all. Even if a drug candidate receives regulatory
approval, the approval may be significantly limited to specific disease states, patient populations and dosages. Further, even after
regulatory approval is obtained, later discovery of previously unknown problems with a drug may result in restrictions on the drug or
even complete withdrawal of the drug from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any of our
drug candidates would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future
U.S. or foreign governmental action.

Other Regulatory Requirements

Any drugs manufactured or distributed by us, Biogen Idec, Millennium, or our potential future licensees or collaboration
partners, if any, pursuant to FDA approvals are subject to continuing regulation by the FDA, including recordkeeping requirements
and reporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required to register
with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies
for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural and documentation
requirements upon us and our third-party manufacturers. Failure to comply with the statutory and regulatory requirements can subject
a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product,
injunctive action or possible civil penalties.

The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-

to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities
involving the Internet. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to
comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal
penalties. Physicians may prescribe legally available drugs for uses that are not described in the drug’s labeling and that differ from
those tested by us and approved by the FDA. Such off-label uses are common across medical specialties, including cancer therapy.
Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not
regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on
manufacturers’ communications regarding off-label use.

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Reimbursement

Sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be
covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers and
managed care organizations. These third-party payors have been increasingly challenging the prices charged for medical products and
services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of
drugs have been a focus in this effort. In particular, government entities have shown significant interest in implementing cost-
containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products.
Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing
controls and measures, could further limit our ability to achieve significant net sales and results. If these third-party payors do not
consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a
benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

Current and future legislative proposals to further reform healthcare or reduce healthcare costs may result in lower
reimbursement for our products. The cost containment measures that payors and providers are instituting and the effect of any
healthcare reform initiative implemented in the future could significantly reduce our revenues from the sale of our products.

For example, implementation of the Affordable Care Act has the potential to substantially change healthcare financing and

delivery by both governmental and private insurers, and significantly impact the pharmaceutical industry. The Affordable Care Act,
among other things, established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded
prescription drugs and biologic agents, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid
Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid
managed care organizations, and provided incentives to programs that increase the federal government’s comparative effectiveness
research. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August
2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on
Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted
deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several
government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect in
April 2013 and will remain in effect through 2024 unless additional congressional action is taken. Additionally, in January 2013,
President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments
to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three
to five years.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit
the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand
for our products or additional pricing pressure.

Healthcare Law and Regulation

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws restrict

our business activities, including certain marketing practices. These laws include, without limitation, anti-kickback laws,false claims
laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare
providers.

The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying,

soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or
order of any healthcare item, good, facility or service reimbursable under Medicare, Medicaid or other federal healthcare programs.
The term “remuneration” has been broadly interpreted to include anything of value. This statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the
other. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from
prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration
that are alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify
for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe
harbor does not make the conduct per se illegal under the federal healthcare program anti-kickback statute. Instead, the legality of the
arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts
have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to
induce referrals of federal healthcare covered business, the federal healthcare program anti-kickback statute has been violated.
Additionally, the intent standard under the federal healthcare program anti-kickback statute was amended by the Patient Protection and
Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable
Care Act, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to

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violate it in order to have committed a violation. In addition, the Affordable Care Act codified case law that a claim including items or
services resulting from a violation of the federal healthcare program anti-kickback statute constitutes a false or fraudulent claim for
purposes of the federal civil False Claims Act.

Federal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, prohibit any person or entity
from, among other things, knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or
knowingly making, or causing to be made, a false statement to have a false claim paid. Pharmaceutical and other healthcare companies
have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in
turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to
customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices,
including off-label promotion, may also violate false claims laws.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that

prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services. Like the federal healthcare program anti-kickback statute, the Affordable Care Act amended the
intent standard for certain healthcare fraud under HIPAA such that a person or entity no longer needs to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we
conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH,
and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually
identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business
associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with
providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to
make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil
actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated
with pursuing federal civil actions.

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Additionally, the federal Physician Payments Sunshine Act, created under the Affordable Care Act, and its implementing

regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under
Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain
payments or other transfers of value provided to physicians and teaching hospitals, or to entities or individuals at the request of, or
designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held
by physicians and their immediate family members.

The majority of states also have statutes or regulations similar to the aforementioned federal laws, some of which are broader in

scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of
the payor.

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to

us, we may be subject to penalties, potentially significant criminal and civil and/or administrative penalties, damages, fines,
disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational
harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of
which could adversely affect our ability to operate our business and our results of operations.

Foreign Regulation

In addition to regulations in the United States, we are subject to foreign regulations governing clinical trials and commercial

sales and distribution of vosaroxin or our future drug candidates, if any. Our VALOR trial enrolled patients in Europe, Canada, South
Korea, Australia and New Zealand. We may in the future initiate clinical trials in other countries throughout the world. Whether or not
we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign
countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, permission to conduct clinical research is granted by the Competent Authority of

each European Member State, or MS, and the applicable Ethics Committees, or EC, through the submission of a Clinical Trial

Application. An EC in the European Union serves the same function as an IRB in the United States. The review times vary by MS but
may not exceed 60 days. The EC has a maximum of 60 days to give its opinion on the acceptability of the Clinical Trial Application to
both the governing MS and the sponsor applicant. If the application is deemed acceptable, the MS informs the applicant (or does not
within the 60-day window inform the applicant of non-acceptance) and the company may proceed with the clinical trial.

To obtain a marketing authorization of a drug in the European Union, we must submit a marketing authorization application, or

MAA, under the centralized procedure for vosaroxin. The centralized procedure provides for the grant of a single marketing
authorization from the European Commission following a favorable opinion by the Committee for Medicinal Products for Human Use,
or the CHMP, of the EMA that is valid in all European Union member states, as well as Iceland, Liechtenstein and Norway. The
centralized procedure is compulsory for medicines produced by specified biotechnological processes, products designated as orphan
medicinal products, advanced therapy medicinal products and products with a new active substance indicated for the treatment of
specified diseases. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days,
excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by
the CHMP.

In the EEA, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development

of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions
affecting not more than five in 10,000 persons in the European Union and for which no satisfactory method of diagnosis, prevention,
or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted
for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic
condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the
necessary investment in developing the medicinal product. A European Union orphan drug designation entitles a party to financial
incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval.
This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the
product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan drug designation must be requested before
submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration
of, the regulatory review and approval process.

In the EEA, marketing authorization applications for new medicinal products not authorized have to include the results of
studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s
Pediatric Committee, or the PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric
indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to
implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in
adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or
appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is
intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing
treatments for pediatric patients. Once the marketing authorization is obtained in all Member States of the European Union and study
results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection
certificate extension. For orphan-designated medicinal products, the 10-year period of market exclusivity is extended to 12 years.

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Under the Canadian regulatory system, Health Canada is the regulatory body that governs the sale of drugs and their use in

clinical trials. Accordingly, any company that wishes to conduct a clinical trial in Canada must submit a clinical trial application to
Health Canada. Health Canada reviews the application and notifies the company within 30 days if the application is found to be
deficient. If the application is deemed acceptable, Health Canada will issue a no objection letter to the company within the 30-day
review period which means the company may proceed with its clinical trial(s).

In addition to regulations in the United States, the European Union and Canada, we will be subject to a variety of other foreign
regulations governing clinical trials and commercial distribution of our product candidates. Our ability to sell drugs will also depend
on the availability of reimbursement from government and private insurance companies.

Research and Development Expenses

We incurred $27.7 million, $28.9 million and $29.2 million of research and development expenses in 2014, 2013 and 2012,
respectively, primarily related to the development of vosaroxin. We expect to continue to incur significant development expenses
related to the development of vosaroxin.

Environment

We have made, and will continue to make, expenditures for environmental compliance and protection. We do not expect that

such expenditures will have a material effect on our capital expenditures or results of operations in the foreseeable future.

Employees

As of December 31, 2014, our workforce consisted of 39 full-time equivalent employees, of which 20 are engaged in research
and development and 19 are engaged in general and administrative, medical affairs and commercial planning functions. We have no
collective bargaining agreements with our employees, and we have not experienced any work stoppages.

Corporate Background

We were incorporated in Delaware in February 1998. Our offices are headquartered at 395 Oyster Point Boulevard, Suite 400,

South San Francisco, California 94080, and our telephone number is (650) 266-3500. Our website address is www.sunesis.com.
Information contained in, or accessible through, our website is not incorporated by reference into and does not form a part of this
report.

Available Information

Our website is located at www.sunesis.com. The contents of our website are not intended to be incorporated by reference into

this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission, or SEC,
and any references to our websites are intended to be inactive textual references only. The following filings are available through our
website after we file them with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, as well as any amendments to such reports and all other filings pursuant to Section 13(a) or 15 (d) of the Securities Act.
These filings are also available for download free of charge on our investor relations website. Additionally, copies of materials filed
by us with the SEC may be accessed at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or at
www.sec.gov. For information about the SEC’s Public Reference Room, contact 1-800-SEC-0330.

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 Annual Report on Form 10-K in weighing a decision 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 adversely affected. Additional risks not presently known to us or
that we currently believe are immaterial may also significantly impair our business operations. In addition, the trading price of our
common stock could decline due to the occurrence of any of these risks, and you may lose all or part of your investment. Please see
“Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business

We need to raise substantial additional funding to pursue our regulatory strategy for the potential commercialization of

QINPREZOTM (vosaroxin), and to continue the development of vosaroxin and our other programs.

We believe that with $43.0 million in cash and investments held as of December 31, 2014, we currently have the resources to

fund our operations through the first quarter of 2016.

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However, we will need to raise substantial additional capital to:

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complete the development, regulatory strategy and potential commercialization of vosaroxin in AML;

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:

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rate of progress and cost of our clinical trials;

need for additional or expanded clinical trials;

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

costs and timing of seeking and obtaining FDA, EMA, or other regulatory approvals;

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extent of our other development activities, including our other clinical programs and in-license agreements;

costs associated with building or accessing commercialization and additional manufacturing capabilities and supplies;

costs of acquiring or investing in businesses, product candidates and technologies, if any;

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

effect of competing technological and market developments; and

costs of supporting our arrangements with Biogen Idec, Millennium or any potential future licensees or partners.

Until we can generate a sufficient amount of licensing, 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, one or more possible
licenses, collaborations or other similar arrangements with respect to development and/or commercialization rights to vosaroxin or our
other development programs, 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 or preferred 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 any regulatory filings related to the VALOR trial, and/or limit or cease our operations.

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, 2014, 2013 and 2012 were $43.0 million, $34.6 million and $44.0 million, respectively. As of December 31, 2014, we
had an accumulated deficit of $522.7 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 we seek regulatory approvals for
vosaroxin, and as we prepare to 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 license and collaboration agreements. We currently have two
agreements, the Biogen Idec 2nd ARCA and the Amended Millennium Agreement, which each include certain pre-commercialization
event-based and royalty payments. We cannot predict whether we will receive any such payments under these agreements in the
foreseeable future, or at all.

We also do not anticipate that we will generate revenue from the sale of products until at least 2016, if at all. 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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The development of vosaroxin could be halted or significantly delayed for various reasons; our clinical trials for vosaroxin

may not lead to regulatory approval.

Vosaroxin is vulnerable to the risks of failure inherent in the drug development process. Our VALOR trial failed to meet its
primary endpoint, and we may not be able to obtain regulatory approval for commercialization in any of the United States, Europe, or
in other regions. We may 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, and the LI-1
trial, conducted by a co-operative group in Europe, was halted at an interim data analysis. 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 any future clinical trials with vosaroxin or any of our product candidates 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:

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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 could be substantially delayed or prevented by several factors, including:

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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;

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.

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. If we fail to
obtain sufficient quantities of these materials, the development and potential commercialization of vosaroxin could be halted or
significantly delayed.

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. The vosaroxin API is classified as a
cytotoxic substance, limiting the number of available manufacturers for both API and FDP.

We currently rely on two contract manufacturers for the vosaroxin API. 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 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. 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, stability programs 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 and FDP needs for the foreseeable future.

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Vosaroxin requires precise, high quality manufacturing. For example, in the past, we observed visible particles during stability

studies of two vosaroxin FDP lots which resulted from process impurities in the vosaroxin API that, when formulated into the
packaged vial of the vosaroxin FDP, resulted in the formation of these particles. We have since addressed this issue by the
implementation of a revised manufacturing process to control the impurities and thereby minimize particle formation, however, there
is no assurance that similar issues will not arise in the future as we prepare for regulatory approval and potential commercialization of
vosaroxin.

In addition to process impurities, the failure of our contract manufacturers 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.

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. We completed
enrollment of the VALOR trial in September 2013, but we may be required to enroll patients for additional clinical trials required by
the FDA or other regulatory authorities. 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.

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

agencies.

Prior to receiving approval to commercialize vosaroxin or future product candidates, if any, in the United States or

internationally, we must demonstrate with substantial evidence from well-controlled clinical trials, to the satisfaction of the FDA,
EMA 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 VALOR trial failed to meet its primary endpoint.
Even if we believe the preclinical or clinical data are promising, such data may not be sufficient to support approval by the FDA,
EMA and other regulatory authorities.

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual

duties or fail to 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 may expand our development capabilities in the future, 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 may expand our research and development

capabilities in the future 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

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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.

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:

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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,

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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:

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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;

the availability of reimbursement from government agencies and private insurance companies; and

acceptance of future products by physicians and other healthcare providers.

If approved, we expect competition for vosaroxin for the treatment of AML and other potential future indications 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.

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 or are subject to marketing exclusivity administered by regulatory
authorities.

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, valid, or enforceable 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
scope, validity and enforceability of patents can vary from country to country, and can change depending on changes in national and
international law, and as such, cannot be predicted with certainty. In addition, we do not know whether:

(cid:120) 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;

(cid:120) we, our licensors or our collaboration partners were the first to file patent applications for these inventions;

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

any of our, our licensors’ or our collaboration partners’ pending patent applications will result in issued patents;

any of our, our licensors’ or our collaboration partners’ patents will be valid or enforceable;

because of differences in patent laws of countries, any patent granted in one country or region will be granted in another, or,
if so, have the same or a different scope;

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;

(cid:120) we will develop additional proprietary technologies that are patentable; or

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any patents or other proprietary rights of third parties 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 or
collaborators, 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 secret protection against them and our business could be harmed.

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The initial composition-of-matter patents covering vosaroxin are due to expire in 2015. While we continue to seek additional

patent protection for vosaroxin and methods of its manufacture and use, 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 any patents that are granted.