The parade of Massachusetts biotech startups seeking to go public continued Monday, when Cerulean Pharma Inc. registered with regulators to raise up to $75 million to bankroll clinical trials of its nanoparticle cancer-fighting technology.
The Cambridge company’s regulatory filing followed a choppy week in biotech stock trading, reigniting a debate that has raged for much of the past year about whether the red-hot sector — a top performer throughout 2013 — is overvalued and heading for a sell-off.
Stock traders dumped biotech shares Thursday and Friday. Some analysts cited a warning by a Federal Reserve official and proposed federal budget provisions that could hurt the sector.
But the leading biotech stock index still broke even for the week and then ticked up on Monday. The index has soared 21.6 percent since the start of 2014, while the broad Dow Jones industrial average has traded down 1 percent.
Given the biotech industry’s surging stock prices, “I think a 5 or 10 percent correction is healthy to take a lot of the fast money and weak names out” of the market, an ISI Group investment analyst, Joe Ruggieri, said in a video report to investors.
But such a pullback could weaken demand for new biotechnology stock issues, which has risen in tandem with the industry’s overall stock market performance over the past 15 months.
A bumper crop of nine Bay State biotechnology companies went public last year, while five others have completed IPOs in 2014.
‘A massive sell-off is unlikely, but that a more modest correction is, in theory possible. . . . If a multi-day sell off were to occur, it’s unlikely to be dramatic.’
The most recent were Concert Pharmaceuticals Inc., of Lexington, which raised $84 million, and Flexion Therapeutics Inc. in Burlington, which raised $65 million. They joined Cambridge-based Eleven Biotherapeutics Inc. and Genocea Biosciences Inc., and Dicerna Pharmaceuticals Inc., of Watertown.
In papers filed with securities regulators, Cerulean said it has developed polymers that can be linked to cancer-fighting drugs, which in turn exploit “the leakiness of new blood vessels in tumors as an entry portal into tumor tissue.” That is how the anti-cancer payload can be released into tumor cells, the company said.
Cerulean’s lead drug candidate, called CRLX101, is in midstage clinical trials to treat relapsed ovarian cancer and relapsed renal cell carcinoma.
But the company had piled up an accumulated deficit of $98.4 million as of Dec. 31, according to its securities filing. Also, a study of its experimental drug last year failed to meet its target of prolonging survival in patients with non-small cell lung cancer.
Cerulean is backed by an investment consortium led by the Waltham venture capital firm Polaris Partners. A spokeswoman said Cerulean executives declined to discuss the company or its proposed offering, citing a pre-IPO “quiet period” imposed by securities regulators.
While it is always difficult to time the market, Wall Street sentiment appeared to at least temporarily sour on biotechs last week. One factor was a report that William Dudley, president of the Federal Reserve Bank of New York, suggested biotech stocks might be overvalued. Another was a provision in President Obama’s proposed federal budget that would shorten the time biotech companies are shielded from generic competition.
Mark Schoenebaum, another biotech analyst for ISI Group, took the new market volatility in stride.
“In general, my thoughts on the biotech sector have been that a massive sell-off is unlikely, but that a more modest correction is, in theory possible,” he wrote to investors last week. “If a multi-day sell off were to occur, it’s unlikely to be dramatic or sustained.”Robert Weisman
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