a two-in-three shot of getting what they wanted—Cerulean’s drug—and if they didn’t, they didn’t just sit quietly and get what was deemed the best supportive care. They talked to their doctors, found out what their other options were, and what they could do to get a hold of those options—even if it meant digging into their own pockets, spending their life savings, or borrowing money from relatives.
For Cerulean, that meant way more patients than expected dropped out of the comparator arm shortly after they were randomized, that those that didn’t got things like post-trial chemo that kept them alive longer, and that inflated the numbers. About 12 months of extended survival for these patients with best supportive care is “significantly better than any marketed product in lung cancer anywhere,” Guiffre says. “We knew that was an anomalous result.” Guiffre also concedes that survival for patients in the CRLX101 arm weren’t quite as good as Cerulean had hoped.
“If I could wrap [the outcome] around some mystery it’d be a good chapter in a fictional script,” he says. “But unfortunately it’s not fiction; it’s reality for us.”
Guiffre doesn’t pass the buck here. Although he wasn’t with Cerulean when the study was designed, he looked into the protocol when doing his due diligence, and says he—and all of the decision-makers at Cerulean—was persuaded by the argument put forth by the contract research organization Cerulean was working with. “We were all fooled,” he says.
Cerulean then had tough decisions to make. To pivot to a new direction, it needed more money and a longer runway. Cerulean trimmed more than half its workforce, cutting down to 17 employees. Management came up with a new strategic plan, and won board support for about $15 million in two bridge loans in late 2013 and early 2014 to carry out that plan. It was just enough time and cash to get to a potential IPO.
The plan: Guiffre says the silver lining from the failed lung cancer study was management’s belief that CRLX101 was active and “very well tolerated.” Its nanoparticle drug delivery technology had taken a potent yet highly toxic agent called camptothecin and made it safer to take—the drug generally caused low-grade side effects rather than severe ones, SEC filings show. Tolerable cancer drugs have a better chance of being combined with other ones, and combination therapy—attacking cancer from various angles—has become increasingly important in the battle against the disease. Perhaps Cerulean, if it could choose and test the best combinations for its technology, could survive that way and convince investors to buy in.
Bevacizumab, for example, starves tumors of oxygen. But that also creates “hypoxic” (low oxygen) conditions, and a type of hypoxia inducible factor (HIF) protein builds up that helps cancer cells survive and resist drugs. CRLX101 inhibits that protein, so perhaps it “protects [bevacizumab] from its own Achilles heel,” Guiffre says.
Cerulean then chose a clinical path—pairing CRLX101 with bevacizumab in two different trials in kidney and ovarian cancer—and hit the road in March 2014. With just 17 employees, many of them performing multiple roles (Guiffre was both CBO and CFO), it filed for an IPO.
“We said [to investors] look, mea culpa, [the lung cancer study] wasn’t a great trial, we’re owning up to that,” he recalls. “But we have a great drug, we have a supportive board, and we have a really strong management team that thinks we can do something with this. Are you interested or not?”
Many weren’t. Guiffre says several folks told him that Cerulean was trying to go public too early. Nonetheless, the company got just enough support to get to the Nasdaq. On April 10, 2014, it priced an offering at $7 per share, raising about $60 million.
That was well below its hopes of $11 to $13 apiece, and amidst a biotech IPO renaissance with sky-high valuations, no less. Juno, for instance, raised nearly 5 times that amount in its own IPO. But it was huge for Cerulean.
“I’m not happy about the valuation, but I’m very happy we did the deal,” Guiffre says.
Indeed, the lights are still on at Cerulean. Guiffre stepped in for Fetzer, who was wooed away by J. Craig Venter in October to lead La Jolla, CA-based Synthetic Genomics.
Guiffre was named full-time CEO in March. The company now has about $100 million in cash, and most recently raised about $40 million after its first glimpse of clinical data of CRLX101/bevacizumab in third and fourth-line kidney cancer in March showed real promise (albeit in a small, single-arm study). Cerulean has used that cash to staff back up. It now has more than 40 employees again, looking more like a company than the skeleton operation that pulled off an IPO last year.
That means Cerulean is all the way back to where it was a few years ago, awaiting its day of reckoning from a randomized trial.
“You learn from those lessons, [and] they actually opened up a whole new set of opportunities that are going really well right now,” Guiffre says. “So maybe we should be grateful for the whole experience.”
