Investors left feeling blue as Cerulean admits defeat on cancer pipeline

Shares in Cerulean Pharma nosedived in after-hours trading yesterday after the company agreed to sell off its anticancer assets at a bargain basement price and merge with Daré Bioscience.

Cerulean has been under a cloud since its lead cancer candidate CRLX101 failed a Phase 2 trial last year that tested the drug in combination with Roche's Avastin (bevacizumab) in renal cell carcinoma patients, a form of kidney cancer.

CRLX101 is a nanoparticle-drug conjugate (NDC) designed to carry the anticancer compound camptothecin into tumor cells, and last year's setback was not its first. In 2013, it failed to show a benefit in lung cancer, and at the time said the future of the program lay in pairing its drug with other anticancer agents.

The setback prompted a big reduction in headcount at the Cambridge, Massachusetts-based company and forced a rethink of its strategy. Now, the results of that change in direction have been unveiled—along with another hefty staff cull—and it seems shareholders are unimpressed with the stock falling almost two thirds yesterday.

NASDAQ-listed Cerulean is selling off CRLX101 and docetaxel-based NDC CRLX301 to BlueLink Pharmaceuticals—a subsidiary of NewLink Genetics—for $1.5 million. It's also planning to divest the Dynamic Tumor Targeting platform that generated those two candidates to collaborator Novartis for $6 million, assuming it can get shareholder approval for the transaction.

That money and Cerulean's other assets will now be rolled into Daré Bioscience, which is developing a non-hormonal contraceptive ring designed to provide pregnancy protection for multiple weeks. So, at a stroke, investors who were backing a cancer startup will find themselves with shares in a reproductive health firm.

San Diego-based Daré's contraceptive ring, called Ovaprene, is made from silicone and serves as a barrier contraceptive while also releasing spermicidal non-drug agents over a four week period.

The new company will take on Cerulean's public status but operate under the Daré banner. It will be run by Daré's Chief Executive Sabrina Martucci Johnson, who said she was "thrilled to have the opportunity to grow our business as a public company."

Cerulean said it is planning to reduce its workforce by 11 people to just eight full-time equivalent employees, a process which should complete sometime in the second quarter.

The firm's president and CEO Christopher Guiffre said the combined company "will be well funded to advance Ovaprene through the completion of a post-coital proof of concept study that is expected to be a value inflection point and is expected to commence following closing of this transaction."