Drug development programs got extended at two San Diego life sciences companies, while others had some good news on the fund-raising front. We wrap it all up for you here.

—Fate Therapeutics, a startup working to supply “industrialized” stem cells for the pharmaceutical industry without using embryos, said it raised $30 million in venture capital. That brings the total amount raised by the San Diego-based company to about $50 million since its inception two years ago.

—Cadence Pharmaceuticals (NASDAQ: CADX) said the FDA has delayed its review of the San Diego company’s intravenous pain reliever by three months, to Feb. 12. Cadence provided additional data to the FDA after an advisory panel raised concerns about liver damage from excessive doses of acetaminophen. But Cadence said it remains confident it will win FDA approval of its drug, which contains acetaminophen.

—Carlsbad, CA-based Isis Pharmaceuticals (NASDAQ: ISIS) and its Big Pharma partner, Genzyme (NASDAQ: GENZ), have extended the timeline for their much-anticipated cholesterol-lowering drug by nearly a year. The companies reported encouraging results from a clinical trial, but noted that four out of 34 patients saw their liver enzymes increase to three times normal, a sign of potential liver damage. The companies plan to tinker with the dose of the injectible drug in future trials.

—San Diego-based NextImage Medical, a developer of a Web-based system for scheduling and managing diagnostic imaging services, reporting raising $5 million in a venture round led by Chrysalis Ventures of Louisville, KY.

—San Diego-based Altair Therapeutics, a company developing inhalable drugs to block inflammatory proteins involved in asthma and other respiratory diseases, has closed on the second part of a Series A venture financing, bringing the total amount raises this year to $17 million.

—San Diego-based Cyntellect, which makes work stations used by biotechs for cell analysis, purification, and processing, raised $15.5 million so far in a secondary round that aims to raise a total of $18.6 million, according to a recent regulatory filing.

—GenVault, a Carlsbad, CA-based company that markets dry-storage technologies that allow scientists to store biological samples at room temperature, said it expects to break even by the end of next year. The startup has raised about $32 million so far.

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GenVault wants to bring biological samples in from the cold. For decades, the biological samples used to diagnose or study disease have been stored in freezers, which use a lot of electricity. GenVault markets dry-storage technologies that allow scientists to store samples—such as DNA from a blood test—at room temperature.

GenVault CEO David Wellis argues the company’s technologies free up lab space and are better for the environment. He says that one of GenVault’s desktop storage units can hold as many samples as an average-size lab freezer, which has the same carbon footprint as five automobiles. Freezers have another major drawback: a single power failure can destroy years of work.

Wellis says the time is right for his company. The use of genomic analysis for disease diagnosis, scientific research, and forensic criminal investigations is exploding, thanks in part to technical advances that enable the swift decoding of genes. All these genetic tests start with biological samples, such as blood, urine, or spit. The RAND Corp. recently estimated that more than 307 million tissue specimens are stored in the United States, with more than 20 million specimens added each year. That means more and more freezers are taking up lab space, and running up electricity bills.

GenVault, which is based about 26 miles north of San Diego, in Carlsbad, CA, estimates that sample transport and storage represents a $4.5 billion business opportunity. It is also an area in which innovation has been lacking. “All the technical development has occurred in sequencing and informatics,” says Wellis. “The management of samples has seen no innovation. It is a gaping hole.”

GenVault got started in late 2001 to fill that perceived hole. The venture-backed company has raised more than $32 million to date, and has numerous customers, including the national Centers for Disease Control and Prevention, Genome Québec, and Amgen. The company expects to soon announce a new diagnostic lab customer that expects to store 750,000 samples using GenVault’s technology. Wellis says GenVault, which has 40 employees, could breakeven by the end of next year.

The company markets two products. One is a chemically treated paper that preserves bits of whole samples, such as blood or spit; the other a salt-like mineral matrix that preserves purified DNA. Here is how GenVault says …Next Page »

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Some San Diego life sciences companies reported a burst of new financing, while embattled Sequenom told investors it’s trying to conserve its available cash. Here’s our rundown of the latest highlights:

—San Diego’s Trius Therapeutics, a venture-backed biotech developing a new antibiotic for treating acute and life-threatening bacterial infections, disclosed plans to raise as much as $86 million in an initial public stock offering. With additional funding, the company will proceed to Phase 3 clinical trials of torezolid, which Trius describes as a second-generation successor to linezolid, the Pfizer antibiotic known as Zyvox.

—Life Technologies (NASDAQ: [[ticker: LIFE]]), the Carlsbad, CA-based provider of biotech instruments and lab supplies, agreed to acquire Woburn, MA-based BioTrove, which has developed a high throughput gene expression and genotyping analysis system.

— SpectraScience, the San Diego medical device maker, has raised more than $4.3 million through a private placement that combines preferred shares and warrants. SpectraScience (OTCBB: [[ticker: SCIE]]) CEO Jim Hitchin told Bruce the offering closes a $5 million round the company began earlier this year.

—PaxVax, a San Diego startup backed by Seattle’s Ignition Capital, has raised $2 million of a planned $6 million investment round. The biotech founded in early 2007 is developing a new type of vaccine that is administered as oral tablets and avoids much of the requirements that conventional vaccines require.

—Sequenom, San Diego’s embattled diagnostics company, said it expects to end the year with $39 million in cash—but that’s not enough to get through 2010 without raising funds or slowing spending. In April, Sequenom (NASDAQ: [[ticker: SQNM]]) disclosed that it had “mishandled data” from a prenatal Down syndrome diagnostic test, indefinitely postponing that product launch.

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San Diego’s embattled Sequenom, which halted the debut of a new diagnostic product over mishandled data, is now considering steps to conserve cash. In an SEC document filed Monday, the life sciences tools company says it expects to end the year with $39 million in cash — too little to fund operations and capital expenditures at current levels through the end of 2010. There is “substantial doubt about our ability to continue as a going concern unless we adopt measures to conserve our cash and prolong our ability to operate,” Sequenom (NASDAQ: SQMN) says in its filing.

During a conference call, Sequenom’s interim CEO Harry Hixson said the company was in the process of developing a strategic and financial plan for 2010, and until the plan was completed, he could not estimate how long the $39 million would last. Last month, Sequenom named former Ligand Pharmaceuticals CFO Paul Meier as its interim CFO, effective today. Hixon says Sequenom also has put into place a cost control program to reduce unnecessary expenses and expects to reduce the number of programs it currently supports. He says some projects could be shelved, sold, out-licensed or partnered.

Bad news seems to keep coming from Sequenom, which stunned investors last April 29 with an announcement that the launch of the prenatal Down syndrome test would be delayed because scientific data had been mishandled. The company’s shares lost 76 percent of their value in trading the next day and have not recovered. The disclosure was a shock because just six days earlier – on April 23 – the company said the Down syndrome test was on track for a June launch. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. The company has not fully explained what happened.

Hixson stepped in as interim CEO in September after the board fired former CEO Harry Stylli following an internal investigation. R&D senior vice president Elizabeth Dragon was also fired. CFO Paul Hawran resigned, as did another officer who was later revealed to be Steven Owings. Three employees also were terminated. Each has denied wrongdoing.

The company had previously said that none of the departing officers had benefitted from selling shares, but Hixson, who is also Sequenom’s chairman, said yesterday that in fact one of the officers had sold some stock to make a down payment on a house. The Wall Street Journal identified that officer as Owings, formerly the Sequenom vice president who oversaw development of prenatal diagnostics. Owings made nearly $300,000 from a series of stock sales on March 24. Hixson said the sales were “properly and timely reported” to the SEC. In addition, two lower-level employees who were terminated in September also sold stock, Hixson said.

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The work leading to Brent Gaylord’s dissertation on using light-emitting polymers to detect bits of DNA was more far more than an academic exercise. His initial paper, and the intellectual property that was subsequently generated, directly lead to the creation of San Diego’s Sirigen.

Gaylord co-founded Sirigen six years ago to enter a business plan competition at UC Santa Barbara, where he earned his doctorate in materials science. Sirigen won the contest, and has been moving forward ever since. Today the venture-backed diagnostics technology startup has 15 employees and formal collaborations with five companies. Gaylord, the company’s chief scientific officer, says it is too soon to identify the collaborators but assures me that “they are names you’ve heard of.” The first product using Sirigen’s technology is expected to reach the marketplace sometime next year, he says.

Sirigen has no intention of producing its own line of complete diagnostic kits or detection devices. Instead the company is pursuing an “Intel Inside” strategy of getting its technology into diagnostic products made by others. Sirigen’s polymers use high-sensitivity fluorescence (HSF) to enhance the ability of conventional assays to detect specific antigens, proteins or bits of DNA. Gaylord says the technology can detect smaller quantities of target substances than conventional tests.

Also, the technology can offer improvements over conventional immunoassays—tests that commonly use an enzyme linked to an antibody to detect the presence of drugs or pathogens, such as the viruses that cause AIDS or hepatitis. Gaylord says existing immunoassays can detect just one target at a time, but an assay that alternatively incorporates Sirigen HSF technology can sense multiple targets with little loss in accuracy.

The result is faster, and potentially cheaper, testing.

Gaylord says the technology is generating interest because it has numerous applications, ranging from biological threat detection to drug discovery. With funding from the Army, for instance, Sirigen successfully demonstrated the ability of its technology to detect …Next Page »

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San Diego’s Novocell has received a disease team award totaling $20 million from the California Institute for Regenerative Medicine (CIRM) to fund work on its cell therapy for type 2 diabetes. The team includes scientists at the University of California, San Francisco, which will receive $2.8 million. Novocell’s research involves transforming embryonic stem cells into insulin-secreting beta cells that can be implanted into patients as an alternative to insulin injections. Novocell, a venture-backed company, told CIRM it would be ready to begin clinical trials in three years, but CIRM scientific reviewers said a more realistic estimate was four years.

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Xenomics, a New York-based developer of molecular diagnostic technologies, says it has filed a suit in New York state court alleging that San Diego’s Sequenom fraudulently misrepresented the status of its prenatal Down syndrome test. Xenomics alleges the fraud induced them to exclusively license valuable patent rights to Sequenom.

According to a licensing agreement announced last October, Xenomics granted Sequenom (NASDAQ: SQMN) a worldwide license to its patents for development of prenatal and diagnostic products in return for an upfront payment of $1 million and royalties on sales. Xenomics also granted Sequenom negotiation rights to use its patents in cancer-related products. Xenomics, which trades on the pink sheets under the symbol XNOM.PNK, says is seeking compensatory and punitive damages not to exceed $300 million, and the termination of the license between the companies. A Sequenom representative declined to comment on the litigation.

The suit adds to the mounting problems facing Sequenom, which stunned investors last April 29 with an announcement that the launch of the prenatal Down syndrome test would be delayed because scientific data had been mishandled. The company’s shares lost 76 percent of their value in trading the next day and have drifted downward since. The disclosure was a shock because just six days earlier – on April 23 – the company said the Down syndrome test was on track for a June launch. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. In addition, the SEC told Sequenom it wants information on another matter: Sequenom’s offer to acquire Exact Sciences in January 2009. Sequenom dropped a hostile bid for the Marlborough, MA-based company after Exact Sciences, acting to save itself, sold some assets to Genzyme. Sequenom has said it is cooperating with authorities.

Last month, Sequenom ousted CEO Harry Stylli and R&D senior vice president Elizabeth Dragon after an internal investigation. CFO Paul Hawran resigned, as did another officer who wasn’t identified. Three employees also were terminated. Each of the officers has denied wrongdoing. The company still has not given an accounting of what happened.

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San Diego’s life sciences news picked up a bit last week amid fresh signs of the area’s growing prominence in the laboratory tools and diagnostics sectors.

—Carlsbad, CA-based Helixis, a startup maker of genetic analysis technology from the Caltech labs of Nobel Laureate David Baltimore and Axel Scherer, raised $1.8 million from unidentified investors, according to a regulatory filing. The amount is in addition to the $5.5 million the company reported raising in July. Helixis is developing products that attempt to make real-time polymerase chain reaction (RT-PCR) technology more accessible to the average researcher.

—Enigma Diagnostics CEO John McKinley told Bruce the UK-based medical diagnostics startup plans to close its current U.S. office in San Francisco and make a new office in San Diego its U.S. headquarters. McKinley estimated Enigma would have 30 employees in San Diego—“the diagnostics center for the U.S.,” as he put it—by mid-2010. The company has developed a desktop-size instrument based on advances in PCR (polymerase chain reaction) technology, which McKinley says can identify certain pathogens in less than 45 minutes.

—Sequenom, the San Diego-based maker of laboratory tools and diagnostics, disclosed that it agreed to accept a $1 million payment from Ibis Biosciences, a unit of Abbott Laboratories, to settle a patent infringement lawsuit. As part of the deal, Sequenom (NASDAQ: [[ticker: SQNM]]) granted Ibis a non-exclusive license to three mass spectrometry-based patents. Sequenom, meanwhile, remains under investigation by the Justice Department and Securities and Exchange Commission for “mishandling” experimental data in a clinical trial of its prenatal test for Down syndrome.

—Senomyx (NASDAQ: [[ticker: SNMX]]), the San Diego company using biotechnology to develop proprietary flavor enhancers and blockers, said S6973, a compound it has been developing to enhance the intensity of sucrose, was designated as Generally Recognized As Safe (GRAS) under federal regulations that govern food additives. The GRAS designation allows the company to begin commercialization of the sweetness enhancer, which enables foodmakers to reduce sugar in foods and drinks by as much as 50 percent and still provide an equivalent sweet taste, according to Senomyx.

—San Diego-based Ligand Pharmaceuticals (NASDAQ: [[ticker: LGND]]) agreed to pay $3.2 million to acquire ailing Metabasis (NASDAQ: [[ticker: MBRX]]), a developer of treatments for diabetes and high cholesterol. Ligand committed $8 million to finance Metabasis’ drug development programs within the next 42 months.

—The Burnham Institute for Medical Research made two key hires to support its translational research efforts. Paul Laikind, the co-founder of Gensia Pharmaceuticals, Viagene, and Metabasis, became the institute’s senior vice president of business development and chief business officer to help cut deals with biotech and pharma companies. Michael R. Jackson, formerly senior vice president of drug discovery at Johnson & Johnson, is now Burnham’s first-ever vice president for drug discovery and development, charged with translating Burnham discoveries into drug candidates primed for clinical testing.

—San Diego’s Arena Pharmaceuticals (NASDAQ: [[ticker: ARNA]]) is talking up the safety profile of its experimental obesity drug as it prepares to compete against experimental treatments from San Diego-based Orexigen Therapeutics (NASDAQ: OREX) and Mountain View, CA-based Vivus (NASDAQ: VVUS), both of which produced greater weight loss in clinical trials. None of the drugs have yet been approved by the FDA. Arena CEO Jack Leif told Luke that the company’s drug, lorcaserin, improved diabetic and cardiovascular health markers in clinical trial subjects. He also challenged the notion that lorcaserin is a subpar obesity treatment. “This is not a wimpy weight-loss drug,” Leif said.

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From Australia comes word that San Diego-based Amylin Pharmaceuticals’ biggest drug, exenatide (Byetta), has been caught up in a controversy over a diabetes report co-sponsored by Amylin’s marketing partner, Eli Lilly & Co.

The study, compiled by researchers at the University of Canberra’s National Centre for Social and Economic Modelling (NATSEM), warned that 1.6 million Australians would be diagnosed with diabetes by 2050, according to an account in The Australian. Over the next 40 years, according to the study, people with type 2 diabetes would have 270,000 heart bypass operations, 250,000 strokes, and 750,000 cases of kidney complications.

Although the study mentioned exenatide, the generic name for Byetta, only in a footnote, it asserted that drugs in the same class as exenatide could produce greater health improvements for diabetic patients than exercise or existing drugs. And that seems to have sparked a bit of a controversy Down Under.

The newspaper reports that some experts were concerned that the report was part of a marketing push to win public subsidies for the medication. Australia’s Public Benefits Scheme recommended the drug for inclusion last year, but the federal government has yet to respond. This means exenatide is available only on private prescription at a relatively high cost. Consequently, it is not widely used.

NATSEM defended the integrity of the research, saying the projected increase in type 2 diabetes was a legitimate concern. Lilly was one of seven organizations to support the research. “As an independent research organization, the last thing we want to do is compromise our position, and for people to regard the position we are taking as biased towards the funding body,” NATSEM research director (health) Laurie Brown told the newspaper. The account came to my attention through the Pharmalot blog.

Lilly is responsible for developing and commercializing Amylin’s diabetes drug outside the U.S. The partnership agreement calls for Lilly to pay Amylin a royalty on non-U.S. sales after a one-time cumulative gross margin threshold amount is met. Amylin told investors in June that it expected to begin receiving royalty payments in 2010. Operating profits from exenatide sales in the U.S. are shared equally by the two companies. Amylin reported exenatide sales of $503.9 million for the first nine months of 2009, compared to $515.9 million during the same period a year earlier.

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Word that several San Diego companies successfully raised funds punctuated an otherwise light week for life sciences news here. A rundown of the highlights:

—Synthetic biology company Verdezyne received a $1.7 million Small Business Technology Transfer grant to develop mutant gene libraries for its computational and bioinformatics programs. The Carlsbad, CA startup, previously named CODA Genetics, is focused on biofuels and “industrial biotechnology,” but says its libraries also can be used in biotech.

—Cardium Therapeutics (AMX: CXM) said it completed a $6 million financing from the sale of stock and warrants to select investors, with proceeds of $5.5 million to the company. Cardium is focused on the acquisition and development of biomedical products and its portfolio includes companies developing products for tissue repair and cardiovascular indications.

—La Jolla Pharmaceuticals (NASDAQ: LJPC) scheduled an Oct. 30 shareholder vote on a plan for dissolution and liquidation. It estimates shareholders will receive between 2.8 cents and 4.5 cents a share.

—Illumina (NASDAQ: ILMN) and its Solexa subsidiary countersued Life Technologies (NASDAQ: LIFE) and its Applied Biosystems subsidiary as the legal battle between the two gene-sequencing powerhouses heated up. Illumina and Life have charged each other with patent infringement.

—A team of Scripps Research Institute scientists, including Sheng Ding, a scientific co-founder of Fate Therapeutics, discovered a new technique for reverting adult stem cells into an embryonic state. The research was sponsored by Fate and reported in Nature Methods.

—Wall Street might not be impressed, but Isis Pharmaceuticals (NASDAQ: ISIS) CEO Stanley Crooke tells Luke that he puts mipomersen, the Carlsbad, CA, biotech’s lead drug candidate, in the same category of successful drugs as cisplatinum chemotherapy for cancer and cimetidine (Tagamet) for heartburn.

—Ardea Biosciences (NASDAQ: RDEA) presented more data on its experimental gout drug at a medical meeting in Philadelphia. The company said it is pleased with RDEA 594’s safety profile. Ardea sees potential in the drug as an add-on to existing gout treatments, or an alternative for patients who can’t tolerate existing medicines.

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San Diego’s Ardea Biosciences (NASDAQ: RDEA) appears to have stubbed a toe in its development of RDEA 594 as a first-line treatment for gout. Data presented at a medical meeting in Philadelphia today showed the Ardea drug was no better at controlling gout than existing medications, including allopurinol, a cheap generic. During a conference call with investors today, CEO Barry Quart says Ardea’s chief focus is on developing RDEA 594 as an add-on or alternative for patients who do not respond adequately to existing drugs. Quart says the potential market for RDEA 594 remains quite large since 60 percent of gout patients do not fully improve on the mainstay drug allopurinol.

Ardea is testing its drug in combination with allopurinol and in combination with febuxostat, a newer drug marketed by Takeda under the name Uloric, Quart said. A mid-stage trial pitting RDEA 594/allopurinol against allopurinol alone in gout patients is now underway, with data expected by the end of the year. Development of the febuxostat/RDEA 594 combination is not as far along; an early-stage study is being conducted in 54 healthy volunteers to look at the safety of the drug combination. If results are good, Ardea will test the drug combination in people with gout. Quart said animal studies to date have supported the safety of the drug combinations.

Adrea still believes RDEA 594 may be useful as a standalone treatment for people who can’t tolerate or don’t benefit from allopurinol. However, developing RDEA 594 as a monotherapy is not a major focus, according to the company. “We have to be realistic,” said Ardea spokesman John Beck, noting the company has been shifting the focus of its development program for “the last couple quarters.”

Quart’s comments came as Ardea presented fresh data from clinical studies of RDEA 594 at the annual meeting of the American College of Rheumatology/ Association of Rheumatology Health Professionals. Data from a small trial of 21 gout patients shows …Next Page »

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In wake of last week’s Algae Biomass Summit, we thought now might be a good time to take stock of San Diego’s biofuels/biomass energy sector. After identifying a mini-cluster of eight algae technology companies last December, Bruce was surprised to discover that the nonprofit group Cleantech San Diego now counts 31 biomass and biofuel companies among the 640 cleantech companies in the San Diego area.

But the definition that Cleantech uses is all-inclusive. Its list of biofuel and biomass companies includes New Leaf Biofuel, a San Diego company that produces biofuels from restaurants’ recycled vegetable oil, and Menon & Associates, which has an $800,000 state grant to develop biodiesel from California agricultural waste. Another interesting local startup, SG Biofuels, is focused on developing biofuels from the Jatropha plant.

Companies that are focusing their technology development narrowly on algae—the subject of last week’s Algae Biomass Summit—account for only about a fourth of the total that Cleantech San Diego lists as biomass and biofuel companies. To those toiling in this nascent industry, however, the numbers nevertheless confirm that San Diego is emerging as a national hub for biofuels, and for algae-based fuels in particular.

There are several reasons behind San Diego’s emergence in the biomass energy and biofuels sector. The region’s prominence in biotechnology provides a rich pool of scientific know-how that biomass/biofuels companies can tap when they set up shop in San Diego. Another benefit – particularly to the algae segment – is the availability of flat, agricultural land in nearby Imperial County, an ideal location for algae production, says Rick Halperin, a consultant and former project manager of the Regional Algae Initiative.

What does the future hold for these companies? Not even true believers think all will survive. ExxonMobil’s $600 million investment in San Diego’s Synthetic Genomics created a sense of euphoria about the space, which sooner or later must give way to more realistic expectations about a risky but potentially game-changing technology. By many estimates, an affordable, algae-based fuel is at least 10 years away.

Steve Mayfield, a Scripps Research Institute expert in algae genetics and co-founder of San Diego’s Sapphire Energy, says a shakeout is inevitable. Some companies may disappear; others may redirect their technologies into other business lines, such as nutraceuticals.

Using Cleantech’s list, I winnowed the roster of companies that are focused on technology innovations in the algae biomass energy and biofuels sector to a list of companies with headquarters in the San Diego area:

Applied Sciences & Engineering: A developer of technology and tools to help algae grow.

Circle Biodiesel & Ethanol: Developer of a …Next Page »

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A quiet epilogue to last spring’s heated Amylin proxy battle was the lead story in an otherwise slow week for San Diego life sciences news.

—Eastbourne Capital, which won a partial victory in a proxy fight against Amylin Pharmaceuticals earlier this year, sold its entire stake in the San Diego diabetes company. The San Rafael, CA-investment firm owned 12.5 percent of Amylin (NASDAQ: [[ticker: AMLN]]) during the proxy contest. One of its three nominees, Kathleen Behrens, was elected to the Amylin board.

—San Diego ranked second last year to Cambridge, MA, in total venture capital investment in medical technology firms, according to a report from Ernst & Young. San Diego saw $151 million invested in 15 deals, compared to $169 million in nine deals for Cambridge. E&Y said 2008 was tough for medical device companies, in part because of the economy and concerns about health care reform. Southern California, which E&Y defines as San Diego and Orange County, has 82 venture-backed and 41 public medical technology companies, one of the highest concentrations in the country.

—Illumina (NASDAQ: ILMN) acquired worldwide rights to commercially develop Orchid Cellmark’s (NASDAQ: [[ticker: ORCH]]) single base nucleotide extension technology for forensics and diagnostics. Under the deal, Illumina paid Princeton, N.J.-based Orchid $850,000 up front and agreed to pay $150,000 in milestone payments.

—Avanir (NASDAQ: AVNR), which is located just across the San Diego border in Orange County, said its experimental drug for treating unprovoked emotional outbursts reached secondary endpoints in a clinical trial of people who had either multiple sclerosis or amyotrophic lateral sclerosis. Data presented at the annual meeting of the American Neurological Association in Baltimore showed that patients diagnosed with pseudobulbar affect experienced a statistically significant improvement in their mental states. Avanir previously announced that the drug dextromethorphan/quinidine, or DMQ, met the primary endpoint of reducing PBA symptoms—episodes of uncontrollable laughter or crying—by a clinically meaningful 30 percent. The drug could receive FDA approval during the second half of 2010.

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San Diego’s Illumina (NASDAQ: [[ticker: ILMN]]) has licensed worldwide rights to commercially develop Orchid Cellmark’s proprietary single base nucleotide extension technology for forensics and diagnostics. Princeton, N.J.-based Orchid (NASDAQ: ORCH) is one of the largest providers of forensic DNA testing services used by the criminal justice system. Orchid says Illumina agreed to pay $850,000 upfront and up to $150,000 in milestone payments. Although Orchid retains the right to use its patents, Illumina received exclusive rights to sublicense the technology. Orchid will receive royalties on any such deals.

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The life sciences news was relatively light over the last week, except perhaps for Sequenom, the medical diagnostics company that has yet to publicly disclose much about its misconduct in handling clinical trial data.

—Sequenom (NASDAQ: SQNM) disclosed that it met with the FBI and the U.S. Attorney’s Office in San Diego in connection with the company’s mishandling of data from a clinical trial for its Down syndrome prenatal test. This latest development came a week after a five-month internal investigation led the company to fire CEO (and San Diego Xconomist) Harry Stylli along with three others. The company said it is cooperating fully with government investigators and the dismissed employees had denied wrongdoing.

—Accumetrics reeled in another $16.5 million from existing investors, including Essex Woodlands Health Ventures and Kaiser Permanente Ventures. As Bruce reported, the company sees a multibillion-dollar market for its diagnostic device that calibrates the right dosage of anti-clotting drugs.

—Transdel Pharmaceuticals (OTC BB: TDLP) saw mixed results from a clinical trial of its topical pain reliever. The cream containing ketoprofen was better than a placebo among patients who used the cream as directed, but had no advantage among patients who applied the cream incorrectly, or failed to follow the study protocol. CEO Juliet Singh told Luke the trial was a success and that the FDA would consider the two sets of data.

—Marval Biosciences, San Diego’s latest virtual biomedical startup, raised $2.5 million in venture financing from DFJ Frontier in Los Angeles and DFJ Mercury in Houston, affiliates of the Silicon Valley firm Draper Fisher Jurvetson. The company is working on next-generation contrast agents for medical imaging.

—LifeModeler of San Clemente, CA had a cameo in one of the biggest science stories of the week. The company’s biomechanical visualization software was used to determine how Ardi, a 4.4-million-year-old hominid fossil, walked and moved. Orthopedic surgeons use the software to plan and practice joint-replacement surgeries,

—Gen-Probe (NASDAQ: GPRO), which uses nucleic acid testing of blood samples to diagnose human diseases, agreed to pay $60 million in cash to acquire Wisconsin-based Prodesse, which is developing sophisticated reagents that can rapidly identify certain types of respiratory viruses, intestinal bacteria, and other infectious microbes.

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The 2009 Algae Biomass Summit gets underway in San Diego today, offering the latest sign of the algae biofuels sector that has bloomed in San Diego in recent years. Cleantech San Diego president Lisa Bicker told reporters at a pre-summit news conference last night that more than 625 cleantech companies are now based in the region—including 30 local biomass energy and biofuel companies that the non-profit industry group lists on its website database. As biomasses go, that’s enough to make an impression on the more than 700 investors, entrepreneurs and other interested parties who are expected to attend the three-day conference, which is devoted to the science and economic potential of the nascent algae industry.

San Diego’s academic, business, and political leaders see algae-based technologies as the next big thing, a natural outgrowth of the region’s prominence in biotechnology and proximity to the ocean. Algae biomass companies who set up shop here can tap into a rich labor pool of scientists and biotechnology workers, and an entrepreneurial culture that nurtures life sciences startups. That observation—coupled with a belief in the potential of algae—led to the formation of the San Diego Center for Algae Biotechnology in April. As Bruce reported back then, local leaders gushed that San Diego was on its way to becoming a “Green Houston.”

Whether that scenario comes to pass has much to do with where algae biomass fuels are headed. Steve Mayfield, a Scripps Research Institute expert in algae genetics has predicted that algae-based fuels would be available in the next decade at the bargain price of $2 a gallon. A lot of technological and logistical problems must be worked out before his forecast becomes a reality, but such talk certainly signals the enormous enthusiasm in some quarters for the exciting potential of what is essentially pond scum.

Some leaders in the new industry have tried to turn down the volume—less by what they have said than by what they haven’t said. Sapphire Energy CEO Jason Pyle has been careful not to over-promise to avoid getting caught up in the hype. Sapphire is backed by Microsoft mogul Bill Gates and is very well-funded, making it one of the key companies to watch in the space.

Pyle recalled the lessons of the dot-com bubble in an interview with Bruce last autumn, just as the excitement about algae was beginning to really take off. More recently, Pyle told another reporter: “This isn’t the 1990s anymore. You can’t just get lucky, found a company and accidentally make a lot of money.”

OK,we’re a long way from 1990. But if you are reading this, it is Wednesday—the opening day of the Algae Biomass Summit. And here’s a list of some of the highlights to come at the event, which continues through Friday at the Marriott San Diego Hotel and Marina:

—Synthetic Genomics’ Paul Roessler (filling in for J. Craig Venter) today will discuss his company’s deal with ExxonMobil that was announced in July.

—DOE Assistant Secretary for Renewable Energy Jacque Beaudry-Losique is giving a keynote on Thursday which is expected to touch on the challenges and opportunities facing the industry.

—Also on Thursday, representatives of Boeing, Honeywell, FedEx, Novus International, Mars Symbioscience and Valero will provide their take on algae technology at an energy end-user panel. A panel on U.S. government algal biomass programs follows this event.

—Sapphire’s Pyle and Mark Allen of A2BE Carbon Capture co-chair an industry panel discussion Thursday afternoon.

—Tom Byrne of Byrne & Company chairs a venture capital and financing roundtable Friday morning.

(Xconomy San Diego Editor Bruce V. Bigelow contributed to this story)

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San Diego’s little Cibus Global is preparing to one day take on Monsanto, the Fortune 500 agri-industry colossus and leading producer of genetically engineered seed. The bioscience company last month formed a joint partnership with an agricultural products company based in Tel Aviv to spur development of new strains of crops. High on Cibus’ to-do list is the development of crops resistant to weed killers sold by its new Israeli partner, Makhteshim-Agan. This is the model pioneered by Monsanto, which developed a line of “Roundup Ready” crops that are genetically altered to resist its herbicide, Roundup.

Cibus, a private venture-backed company with just 34 employees, seems more than a bit outmatched by its would-be rival. Monsanto is a multibillion-dollar company whose Roundup Ready strains account for much of the corn, cotton and soy grown in the U.S. But as Bruce noted in his report, Cibus believes that its technology for producing new crop strains is less likely to raise the ire of activists who oppose the dissemination of genetically modified organisms, or GMOs. Cibus believes its technology—a sort of controlled evolution—will offer a marketing advantage in Europe, where concerns about GMOs have limited the acceptance of modified crops.

Cibus says its technology, dubbed Rapid Trait Development System, or RTDS, uses the natural DNA repair system in plant cells to trigger a genetic change linked to the desired trait. Cibus CEO Keith Walker tells me the company’s technology changes just one letter in a plant’s genetic code. These little mistakes randomly occur all the time in nature, Walker says; yet Cibus says its technology can control the process.

“The traits we introduce in a plant could …Next Page »

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One-time biotech darling Neurocrine Biosciences (NASDAQ: NBIX) says it is vacating one of two buildings at its headquarters campus to save $27 million a year. The company paid an immediate $4 million release fee to the landlord, and agreed to make certain rent payments and rent differential payments. Neurocrine has been struggling to regain its footing since 2006, when Pfizer pulled out a deal to develop a sleeping pill.

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In what is shaping up as the battle of San Diego’s biotechnology tools titans, Life Technologies (NASDAQ: LIFE) has filed a patent-infringement suit against rival Illumina, claiming that some of Illumina’s best-selling genetic-sequencing products violate Life Tech’s intellectual property.

The suit, filed in U.S. District Court in Delaware, claims that certain Illumina products, including the Genome Analyzer and the second-generation Genome Analyzer II, infringe upon three Life Tech patents. The suit seeks an unspecified amount in damages, and a permanent injunction restraining Illumina (NASDAQ: ILMN) from further infringement. If granted, the injunction would prevent Illumina from selling its equipment.

Telephone and e-mail messages to an Illumina spokesperson were not returned.

Illumina’s Genome Analyzer products are a mainstay of the company’s genetics analysis business, and are important to Illumina’s growth. The $50,000 whole-genome analysis that Illumina began offering to the public in June uses the Genome Analyzer. The company has stated that one of its corporate goals is to make the Genome Analyzer the industry standard for genetic analysis. Last year, the device accounted for the bulk of Illumina’s $64.8 million increase in instrument sales.

Life Technologies, formed last November through the merger of Invitrogen and Applied Biosystems, claims it is the leader in the genetic sequencing business. The Carlsbad, CA-based company had revenue of $3.1 billion in 2008, dwarfing Illumina’s 2008 revenue of $570 million.

Listed as plaintiffs along with Life Tech are patent owners Alexander Chetverin and Helena Chetverina, both of Russia; The Institute for Protein Research of the Russian Academy of Sciences; and William Hone of New York. According to the suit, the patents cover certain methods of amplifying and expressing nucleic acid, a building block of DNA. Applied Biosystems had an exclusive license to the patents, which issued in the late 1990s.

Illumina subsidiary Solexa is also named as a defendant.

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San Diego’s Quidel, which signaled it would report better-than-expected quarterly results on Sept. 10, isn’t the only San Diego biomedical company to get a boost from worries about swine flu. At least four other companies with flu-related products or research programs also have seen their share prices surge since June 11, when World Health Organization Director-General Margaret Chan declared the H1N1 swine flu pandemic had begun. So does swine flu present a real opportunity for these companies?

Whether the investor reaction is warranted depends in part on the severity and spread of the swine flu, which right now is far and away the predominant flu virus circulating in the United States, according to the weekly flu update issued by the national Centers of Disease Control and Prevention. With the official Oct. 4 start of the flu season less than three weeks away, here is a quick look at some San Diego companies with a stake in swine flu.

Quidel flu test

—I’ll start with a recap of recent news from Quidel (NASDAQ: QDEL). The diagnostic-test maker said last week the government has granted a special marketing clearance that allows Quidel to revise the packaging inserts for its QuickVue rapid flu test to say the test can detect the H1N1 swine flu strain. But Quidel also said its test can’t differentiate between influenza subtypes, and the company hasn’t established exactly how well QuickVue performs in detecting the specific H1N1 virus.

In the previous week, Quidel, which laid off 10 percent of employees earlier this year, said it has been working seven days a week since April to meet demand from doctors and hospitals for its rapid flu test. Quidel’s shares have leaped 25 percent since …Next Page »

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