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Why Cerulean Pharma Inc (CERU) Plunged Today

What:

Shares of Cerulean Pharma Inc (NASDAQ:CERU) are among today’s biggest losers, falling more than $0.30 per share and losing 27.32% of its value. Traders are selling because the company is winding down in preparation for its reverse merger with Dare Bioscience that it announced earlier this week. According to the reverse merger agreement, shareholders of Cerulean Pharma Inc (CERU) are expected to receive 30%-49% of the combined entity while Dare Bioscence shareholders will own 51%-70%, depending on certain conditions.

Cerulean Pharma Inc (NASDAQ:CERU) will let go 11 of its 19 workers in the near future to cut costs as well. Shareholders were initially optimistic on Cerulean Pharma Inc (NASDAQ:CERU) due to the company’s lead drug candidate that was a potential treatment for liver cancer. Unfortunately, the drug failed Phase 2 trials. Due to its winding down process, Cerulean Pharma Inc (CERU) has agreed to sell its technology platform and cancer drug candidates for a combined $7.5 million to fund operations. Specifically, Cerulean Pharma Inc agreed to part with CRLX 101, CRLX301 and the company’s Dynamic Tumor Targeting Platform.

Pressmaster/Shutterstock.com

Pressmaster/Shutterstock.com

What does Smart Money Sentiment Say?

Given that it’s a really small company, none of the 742 elite funds that we track were long the stock at the end of Q4.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

What Next:

We would be on the sidelines on this stock. Sentiment is a hard metric to gauge, and momentum/unexpected movement can still cause the stock to be very volatile.

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Disclosure: None