Just came back from the Washington Biotechnology & Biomedical Association’s annual meeting in downtown Seattle, where 500-plus biotechies and distinguished guests (including more than a few local politicians) gathered for a quiche-and-berries breakfast and some keen networking.

The keynote speaker was Elias Zerhouni, the former director of the National Institutes of Health and now a senior fellow at the Bill & Melinda Gates Foundation. Just a few highlights from his talk here:

Zerhouni laid out the top five challenges in public health, as he sees it. Nothing too surprising, but a good way to frame the whole healthcare discussion:

1. The shift from acute to chronic conditions. (“This is a worldwide issue,” he emphasized. “This is the new global health horizon.”)

2. Aging population.

3. Health disparities.

4. Emerging and re-emerging infectious diseases. (Pandemics, for example.)

5. Emerging non-communicable diseases. (Things like obesity and depression, the latter of which the World Health Organization predicts will be the No. 1 cause of disability and dysfunction for people aged 25-44.)

As a world-class radiology researcher, Zerhouni also spoke to the scientific challenges the industry faces. He said the fundamental scientific barrier to doing “translational” research—that which leads to new products like drugs or devices—is the complexity of biological systems involved in diseases. “The explosion of data does not equate to explosion of knowledge,” he said. (This is a common theme across all fields of science and technology.)

On this front, Zerhouni stressed the importance of both external and internal sources of innovation. Meaning, the state of Washington should “find ways of bringing in collaboration on the translation or creation of knowledge.” He pointed out that “building relationships with the Asian Rim is probably your strategic advantage.”

For the politicians in the audience, Zerhouni noted, “Today when you get elected or not elected, the main driver is jobs, jobs, jobs.” He said his dream is that in a few years, biomarkers and healthcare stats will impact political campaigns, to the tune of, “In my district, Body Mass Index has dropped from X to Y.” (Luke previously reported on the issue of jobs being the driver of public support for biotech.)

The last issue Zerhouni addressed was a particularly interesting one: culture wars around science and technology. “Don’t be oblivious to the political, cultural, and moral aspects” of biotech and biomedical work, he said. “Be careful to not assume that everyone in the world believes what you do is holy and good.” Having dealt with the profound issues of evolution vs. creation in Washington DC—most notably in the context of stem cell policy—Zerhouni was sharing some hard-earned wisdom that everyone in the room could take home with them.

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Waltham, MA-based diagnostics firm On-Q-ity has found $21 million in a Series A round of venture capital, according to a story this morning in peHUB. The developer of cancer tests was formed through the combination of CELLective Diagnostics and The DNA Repair Company, both portfolio companies of Mohr Davidow Ventures that had been unable to raise Series B rounds of financing individually.

Investors in the first-round financing included Mohr Davidow, Bessemer Venture Partners, Physic Ventures and Northgate Capital, peHUB reports. On-Q-ity is developing tests for breast and thoracic cancer, and the firm plans to focus later on diagnostics for prostate cancer.

The firm is developing tests that enable doctors to personalize cancer treatments for individual patients, according to its website. Its technologies include DNA repair biomarkers that can show whether a patient is likely to form resistance against certain drugs as well as microfludics chips used to capture and identify tumor cells in the bloodstream. Together the two key technologies could provide the ability to diagnose cancer, predict response to therapies, and track the progress of treatments, the company says.

Mara Aspinall, a former president of the Genzyme Genetics unit of Cambridge, MA-based biotech powerhouse Genzyme (NASDAQ:GENZ), is president and CEO of On-Q-ity.

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Billerica, MA-based Aushon BioSystems, which provides microarray tools and services for biomarker analysis, has secured $6.5 million in new financing, the company announced. North Bridge Venture Partners was the sole source of the financing, which was used partly to support the Aushon’s recent acquisition of Thermo Fisher Scientific’s SearchLight Protein Array business and technology, the company said in a statement.

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Amgen had an epiphany of sorts a little more than four years ago. The world’s largest biotech company decided clinical trials had become too much of a crapshoot, and it needed to shake up its way of developing new drugs. This really isn’t unique to Amgen, it’s more like an industry emergency. Drug companies spent $44.5 billion on research and development last year, yet last year they managed to produce the fewest number of new medicines in 24 years, a big reason why companies are scrambling for a better way.

One of Amgen’s strategies is to gather samples from patients in early-stage clinical trials, and study them for biomarkers, or signature proteins, that can offer clues about whether the drug’s working (or not). Amgen now has a team of 240 people doing work in this area, which it calls medical sciences. Company scientists in Seattle with expertise in clinical immunology and computational biology are teaming up with molecular biology experts in Cambridge, MA, and people with other skills in the San Francisco Bay Area, as well as at headquarters in Thousand Oaks, CA.

Their job is to run a gauntlet of questions about drugs in the early phases of development, says Scott Patterson, Amgen’s executive director of medical sciences. Is the drug hitting its intended target on human cells? What affect is it really having on the biological pathway envisioned in the lab? Can the samples offer insight into the best possible dose? Perhaps most importantly, can the samples show Amgen how to stratify patients based on who’s likely to benefit from the drug, and who isn’t?

“This gives us greater confidence in our drugs as they move through the pipeline,” Patterson says. “You’ve got to have confidence to make the investments to take them through development.”

The biomarker analysis is being applied across the company’s pipeline, but the most visible example of how this is playing out for Amgen is with the colorectal cancer drug Vectibix. It was first approved in the U.S. in September 2006 and is designed to block the same protein on cells as ImClone Systems’ Erbitux, the pioneering colorectal cancer drug that was approved in February 2004.

Amgen paid a fortune—$2.2 billion—in 2006 to acquire Abgenix to get full control over Vectibix. Yet the drug has not emerged as the kind of $2 billion-a-year commercial success originally predicted by analysts. That’s partly because a study in March 2007 was halted when it showed Vectibix raised the risk of death in a clinical trial when used in tandem with Genentech’s Avastin, another colorectal cancer drug that works differently.

Instead of letting Vectibix fade into a treatment of last resort, Amgen went back to what it learned from tumor samples collected from earlier trials. When the company filtered patients based on whether they had a normal gene called KRAS, or a mutated form of the gene that amplifies tumor growth, they found a striking result. …Next Page »

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Until recently it seemed like the only thing big pharmaceutical companies wanted from the little guys was their drugs—as many of them as the pharmas could get their hands on. Things have changed, however, as yesterday’s deal between Cambridge, MA-based Aveo Pharmaceuticals and Eli Lilly demonstrates. Now, there is something else those pharmas desperately want from biotech—biomarkers, or molecular tests that drugmakers can use during development to understand exactly how their drug candidates work in people.

Aveo and some other local companies are finally starting to benefit from that trend. Eli Lilly, for instance, is paying Aveo an undisclosed amount to help the pharma figure out which patients respond best to a new cancer drug Lilly is developing.

At stake is millions of dollars in research money spent on drugs that stumble and fall before reaching the finish line. Failed drugs have cost big pharma dearly recently, and more than anything right now they’d like to staunch the bleeding. Companies like Aveo are concentrating on making better tools to sniff out biomarkers—proteins, metabolites, and other molecules in the body that give clues about whether a would-be drug is reaching its target, having the desired effect, or causing toxicity—early. Aveo’s particular strength is an ingenious new mouse model of cancer that provides a much better facsimile of human tumors that do conventional experimental systems, as David Stipp described in his profile of Aveo this summer.

Indeed, the lion’s share of biomarker work is going on in oncology, where new science has opened up a goldmine of new targets for drugs. Here, the FDA has made it pretty clear that if a company is going to claim it has a drug targeted at a specific molecule or mechanism, the agency wants to see data from biomarker tests showing how the drug affects that target. If the drug is only working in a specific subset of patients—or if it causes unacceptable side effects in a subset of patients—the FDA wants to the biomarker data on that phenomenon as well.

Aveo has so far been a big winner in this burgeoning market for biomakers, inking deals with Merck, OSI Pharmaceuticals, and Schering Plough as well. But it is not the only one cashing in; I’ve heard from many of my sources that they’re seeing a bump in the biomarker business. At a conference just a few weeks ago I was talking to Daniel W. Paterson, president and CEO of The DNA Repair Company (or DNAR), a low-profile Boston-based startup that Paterson says is already discussing deals with several pharmas around biomarkers for cancer drugs. “In oncology, companies have to have these markers,” he said. “It’s the first time I’ve been at a company where big pharma is calling us.”

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Talk about a colorful past. Spun out of a blood-collection business shortly after 9/11, SeraCare Life Sciences saw its fortunes skyrocket and then crash spectacularly. Now, just a few months after emerging from bankruptcy, things are a lot quieter. The biggest change at the company is a new “emphasis on quality and integrity” says CFO Greg Gould. Yes, it’s back to basics for the West Bridgewater, MA firm, which last year made startling headlines with an accounting scandal.

From the product standpoint, SeraCare’s business isn’t very eye-catching. It doesn’t make drugs or diagnostics, but it makes lots of their basic components. SeraCare staples include many biologically derived materials, such as DNA, RNA, and proteins from blood serum (hence the “Sera”). SeraCare also offers services, including biorepositories where annotated samples are stored so only authorized researchers can use them or the sensitive information linked to them.

Thus, it was somewhat surprising when the company started experiencing explosive financial growth around 2003 to 2005. The stock quadrupled in value, earning the company headlines such as “Boring Biotech, Sexy Stock” from Smartmoney.com.

It was too good to be true.

In March of 2006 SeraCare’s CEO and CFO were fired and two officers asked to resign after problems were identified in the company’s books. Soon it become clear the company was actually in deep financial trouble, and it filed for Chapter 11. Once all this started percolating, the SEC dropped SeraCare from the NASDAQ, and the company is currently traded on the pink sheets (SRLS.PK).

Looking back, SeraCare was a case study in warning signs. Independent research firm Audit Integrity had slapped a bunch of red flags on its financials: “In total the company has rated Aggressive or Very Aggressive for five consecutive quarters,” said an Audit Integrity report.

A key goal now is regaining the NASDAQ listing as quickly as possible, new CEO and President Susan Vogt recently told shareholders in a letter. Vogt was previously president of Millipore’s Biopharmaceutical Division.

Besides bringing in a new management team, a pivotal part of SeraCare’s reinvention involved leaving its Oceanside,CA, headquarters behind and consolidating on the East Coast, where the company has facilities in Massachusetts and Maryland. (SeraCare’s former management did a lot of shopping for East Coast facilities during that freak ‘boom’ period.) In January of 2008 the company headquarters will move once more, this time to Milford, MA, and a freshly built-out 60,000 square-foot research and manufacturing facility where all of the company’s 130 local employees will be based.

Other small but positive signs are emerging.

Earlier this month, the company got a nice nod from a longtime customer when the AIDS division of the National Institute of Allergy and Infectious Diseases (NIAID), one of the National Institutes of Health, awarded SeraCare a $23.7 million, seven-year contract to manage biological specimens. SeraCare will catalog, process, label, and store the samples, as well as provide some technical support and training to researchers using them for studies.

The grant is basically the renewal of a long standing contract; last year, NIAID extended the existing contract by just one more year. “They may have been nervous because the company was in bankruptcy and putting in new management,” Gould says. “This renewal was a real vote of confidence.”

So far SeraCare, which currently has a market cap of about $50 million, has revealed little about how its product line might change under the new management. One growth area will likely be biomarkers—a currently trendy field in which researchers are seeking out telltale molecules in the blood and other tissues that indicate, among other things, how drugs are working in particular patients. Pharmaceutical companies want to use biomarkers to make their laboratory and clinical trials more efficient, and diagnostic companies like to sell tests for those markers to the pharmas. SeraCare sells basics for such tests.

The biomarker business is “a good market to be in, and most people think we are the premier player within the niche market,” Gould says. And though he says he can’t provide details, Gould says, “We do have some initiatives around personalized medicine.” If personalized medicine pundits are right, biomarkers will increasingly be used beyond the laboratory as the basis of tests that doctors will use to guide prescribing.

SeraCare is probably not breaking out the champagne yet, but it’s got to be a huge relief for management to at least have the freedom to start thinking about more than bankruptcy restructuring. “I think most people would say that we are over the biggest hurdle by now,” Gould says.

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