Jeffery Prough, CEO of Critical Signal Technologies, is taking an alternative approach to reforming the healthcare system. Instead of getting caught up in political debate, Prough is using his business to try to improve healthcare conditions.

Critical Signal, the Farmington Hills, MI-based company that Prough founded in 2006, is already one of the five largest developers of personal emergency response systems in the country. But Prough says he’s on a mission to expand the company’s reach still farther. ”It’s become my passion to, very simply put, let people age or deal with disease or chronic illness on their terms and typically in their own homes,” he says. His company aims to do that by using wireless monitoring and communications technologies to keep an eye on its clients and keep them linked with vital emergency and medical services.

Since launching Critical Signal, Prough says he’s taken an aggressive approach to growing the company, starting with the gamble he and four other investors took when they spent large sums up front to build their monitoring platform—which was larger and more advanced than that of most other companies at the time—with no customers lined up.

The risk paid off, the company continued to grow, and by 2009 it was even able acquire Link to Life, which Prough says was “a 30-year-old, long-standing, very large personal-response company” at the time.

Before launching Critical Signal, Prough got some experience in the field. While he was president and COO of Guardian Alarm Company he ran its telehealth subsidiary. That job made him increasingly concerned with “how poorly we treat older Americans.” Prough realized he was “a little more excited” about the prospects in telehealth than his colleagues at Guardian were so he decided to strike out on his own.

“You recognize how little we do for these folks,” he says. “I am emotionally tied to it because of personal experience and I am increasingly attached to it from the people we talk to every day.”

Those people are some of the 65,000 clients—up from zero in 2006—that now use Critical Signal’s products. Prough says the company’s core technology is … Next Page »

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Three months ago General Electric (NYSE: GE) announced a $200 million open innovation competition, with the goal of finding and financing breakthrough ideas that will help create a smarter, cleaner, more efficient, and more economically viable grid, and help accelerate the adoption of smart grid technologies. Since the “GE Ecomagination Challenge” was introduced on July 13, businesses, entrepreneurs, innovators, and students from around the world have submitted 3,809 ideas in three categories—eco homes/buildings, grid efficiency, and renewables.

GE has already dished out its first award in the competition, $50,000 to the idea that won the most user-generated votes—the Idaho-based Solar Roadways project. Next month the judging panel—which includes GE energy services digital energy vice president Bob Gilligan, senior vice president and director of GE global research Mark Little, and Wired Magazine editor in chief Chris Anderson—will select six more winners. Five will receive $100,000 awards, and one will be given the GE Scientific Merit Award, an opportunity to work with the company’s Global Research Center.

All candidates will be considered for potential future commercial relationships with GE, including equity investments and cooperative agreements beyond the competition itself—part of GE and its partners’ capital pledge to invest $200 million into promising smart grid ideas and startups around the world.

Though the competition is truly a global one, a large number of participants hale from the Pacific Northwest. In fact, Washington state comes in No. 11 in the list of states and provinces with the most entrants. Given that there’s so much innovation coming out of the region, especially in cleantech, we thought it might be fun to give you a sneak peak at the 31 NW ideas competing in the GE ecomagination Challenge. Take a look:

Eco Houses/Buildings

—Box Playhouse Telepresence—The Future of Meetings and Entertainment, Tim Lyons, Portland, OR

—Don’t forget the farmers, Nathan Hastings, Bend, OR

—The Green Microgym, Adam Boesel, Portland, OR

—Intelligent Adaptive Traffic Light, Glenn Godden, Lynnwood, WA

—Knowledge of Power, Alexandre Cross, Bellingham, WA

—Micro Fleets for Mega Cities, Melissa Brandao, Medford, OR

—Public Watch: Powering Down Government, Mike Green, Eugene, OR

—Selfocus Solar BBQ, Ab Mobasher, Portland, OR

—Two Birds with One Stone, Caleb Tallent, Tacoma, WA

Grid Efficiency

—E-C Swap, Steven Reynolds, Portland, OR

—Grid Scale Storage—Flow Battery, Craig Wilkins, Walla Walla, WA … Next Page »

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The former CEO and chairman of Molecular Insight Pharmaceuticals (NASDAQ:MIPI), David Barlow, resigned from the firm’s board of directors last week over differences with fellow directors, according to a press release from the Cambridge, MA-based company.

The exact nature of those differences is unclear, but Barlow alluded to “significant and sustained disagreements…regarding business philosophy, strategy and practice” in a resignation e-mail he sent to fellow directors last week. He also urged: “Given the Company’s strong product pipeline, technology base and cash position, as compared to biopharmaceutical industry standards, and the recently announced positive clinical results for Zemiva, the Board should reconsider its approach to enhancing shareholder value.”

A call this morning to Deborah Lorenz, Molecular’s head of investor relations, was not immediately returned.

Barlow was chairman and CEO of Molecular until September 2008, when the company’s board announced its decision to replace him with John Babich, who is now serving as chairman and interim CEO while the firm searches for a permanent chief executive. I spoke to interim CEO Babich last month about the mid-stage clinical success of Zemiva, Molecular’s experimental imaging agent for diagnosing cardiac ischemia.

Update: Deborah Lorenz returned a call at 11:45 am this morning, after this story was initially published. She declined to comment on Barlow’s resignation.

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Last night, the Oregon Entrepreneurs Network announced the winners of the 2008 Tom Holce Awards for entrepreneurship at its 15th annual awards ceremony. The award for individual achievement went to Doug Fieldhouse of Portland, OR-based Vesta, an electronic payment firm. The development-stage company of the year was Hillsboro, OR-based ClearEdge Power. The working-capital stage winner was Beaverton, OR-based security firm ID Experts. And the winner of the growth-stage category was optics firm nLIGHT of Vancouver, WA.

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You may remember a few weeks back, when Nanocomp Technologies of Concord, NH, announced that it was able to make what it called the world’s largest sheets of carbon nanotubes. Well, it seems like the folks at Slashdot weren’t the only ones intrigued by the technology. The Air Force has awarded the company a Small Business Innovation Grant to try and develop wires and cables made from carbon nanotubes. The Phase One grant is to study the feasibility of the concept. If it looks promising, further grants could follow.

Even in today’s high-tech world, the main method of transporting electricity through a machine is good old-fashioned copper wire. But despite its excellent conductivity, copper has its downside when you’re flying across continents or launching things into orbit—weight. Nanocomp says that a third of the weight of a 15-ton satellite comes from copper wire, while a Boeing 747 has more than 135 miles of wire weighing two tons. If wires and cables made of carbon nanotubes were to replace all that copper, they could weigh as little as one fifth as much. Lighter weight, in turn, translates into a significant savings in the amount of fuel needed to hurl these things through the air.

Most of the industrially produced carbon nanotubes today are only a few microns long, essentially coming out of the process as carbon nanotube powder. Nanocomp has come up with a way to grow the tubes to lengths of about a millimeter, a thousand times as long, which the company says are “significantly more conductive.” Nanocomp is able to put out nanotubes that overlap each other and form a mat, creating sheets that measure three by six feet and may be as large as 100 feet square by this summer.

Because of the way the carbon atoms link together, nanotubes are potentially as strong as steel but much lighter, and have desirable electrical properties. In announcing the grant, Nanocomp CEO Peter Antoinette said, “Our work can result in a true 21st century change in the game, creating electrically optimized carbon nanotube wires and cables, comparable to copper in terms of electrical conductivity but up to 80 percent lighter and more robust.”

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Change is in the air today, and I’m not just talking about the primary. (But hey, don’t forget to vote!) Three local firms are announcing shifts in top-level personnel.

Cambridge, MA-based Altus Pharmaceuticals (NASDAQ: ALTU) revealed that president, CEO, and board member Sheldon Berkle has resigned all three roles as of yesterday. The chair of the board, David D. Pendergast, is stepping in as “executive chairman” while Altus looks for a new president and CEO; Pendergast was formerly the CEO of Cambridge’s Transkaryotic Therapies and became the president for human genetics therapies at Shire Pharmaceuticals when the pharma acquired that firm in 2005.

Berkle has led Altus for the last two and a half years, and was at the helm during the biopharmaceutical firm’s January, 2006 IPO. Altus didn’t give a reason for Berkle’s resignation, but an AP report from this morning quotes an investor note from Cowen and Co. analyst Eric Schmidt as saying that “Altus’s track record as a public company has been poor and that management credibility has suffered as a result.” Shares of the firm were up nearly 10 percent ($0.53) in mid-afternoon trading, to $6.13, on the news of the resignation.

A little more than six months after his company went private in a $1.8 billion buyout deal with private equity firm Hellman & Friedman Capital Partners VI, Paul Lacy is announcing his plans to retire from Chelmsford, MA’s Kronos. Lacy has been at Kronos for 20 years, serving previously as executive vice president and chief financial and administrative officer, and (since 2005) as the company’s president. During those two decades, Kronos transformed from a maker of microprocessor-based time clocks to an enterprise software firm focused on various HR applications.

“It has been a distinct privilege to be part of Kronos’ evolution to one of the most respected and successful companies in the technology industry,” Lacy said in a statement. Kronos is already searching for Lacy’s replacement and expects to complete the transition by this June.

Finally, renewable energy firm Terra-Gen Power announced that power-industry veteran James Pagano will become its Chief Executive Officer. Terra-Gen is based in New York, NY—not exactly local, I know, but the firm is owned by affiliates of Boston-based energy-investment firm ArcLight Capital Partners. In December, Terra-Gen acquired 824 megawatts worth of interests in U.S. geothermal, wind, and solar generating plants from Caithness Energy, one of the companies for which Pagano previously worked.

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Call it the 27-year-old startup: ImmunoGen, one of biotech’s oldest companies, has yet to get a drug on the market more than a quarter century after its formation in 1981. This year may mark a long-awaited turning point for the Cambridge, MA-based company, though. If all goes well, compelling efficacy data will emerge from ongoing Phase 2 trials with ImmunoGen’s cancer drugs, paving the way for pivotal trials that could lead to the FDA-approved promised land. When I dropped by ImmunoGen (NASDAQ: IMGN) last week, CEO Mitch Sayare began by acknowledging that “I’m more optimistic than I’ve ever been” since taking the company’s helm in 1986. But he couldn’t resist adding a verbal version of knocking on wood: “My optimism is tempered by experience.”

He might have said bitter experience: Few cancer therapies have looked as good in theory—and have proved as frustrating in practice—as ImmunoGen’s. Spun out of Boston’s Dana-Farber Cancer Institute, the company has pioneered “immunoconjugates”—two-part medicines consisting of monoclonal antibodies, the guided missiles of biology, chemically attached to highly toxic molecules designed to amplify tumor-killing power. Such drugs can target cancer cells with poisons that are far more potent than traditional chemotherapeutics, in principle enabling tiny doses with relatively minor side effects to knock out tumors.

Unfortunately, for years the approach worked just well enough to lure ImmunoGen down a tortuous dead end. The company spent most of its early life trying to demonstrate efficacy with conjugates employing a form of ricin, a toxin derived from castor beans that’s said to be 12,000 times as deadly as rattlesnake venom. Monoclonals studded with ricin-derived molecules duly “killed targeted cells in patients,” says Sayare. “But what defeated us was ricin’s immunogenicity”—after one or two doses, patients developed immune responses to the ricin-ferrying drugs that cleared them from the blood before they could do any good. “You can’t treat cancer with an agent that you can use only once,” he adds, “because even if you can kill 99 percent-plus of cancer cells with the first dose, there will still be billions left.” ImmunoGen shelved its ricin conjugates in the mid-1990s after more than a decade of work on them.

Such key-project failures have been known to kill small biotechs. Indeed, “there were times in the late ’90s when we came very close to the big pit,” recalls Sayare. “We looked down and were able to walk away.” Pulling ImmunoGen back from the brink … Next Page »

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Malorye wrote back in November that the future of BiDil, the controversial heart-failure drug approved specifically for African Americans, was resting on a new marketing plan from manufacturer NitroMed (NASDAQ: NTMD). Looks like that plan has failed. The Lexington, MA-based firm announced yesterday after the market’s close that it was slashing its staff from 90 to 20 and discontinuing promotional efforts for the drug (although it will continue to make BiDil available to patients). NitroMed is continuing development of a once-daily version of the drug, but doesn’t plan to file for approval of that product until 2010.

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Novartis (NYSE: NVS) today unveiled a plan to cut some 2,500 job but—despite an ominously worded reference to to the Novartis Institutes for BioMedical Research, which employs 1,300 people in Cambridge, MA—there will be no Massachusetts jobs lost. This according to the Boston Business Journal‘s Mark Hollmer, who writes that some 300 additional Novartis jobs in the state are safe as well.

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If there’s one thing we’ve learned since launching Xconomy back in June, it’s that our readers and sources rock—often in a couple of different senses of the word. Which is to say that not only have we been overwhelmed by the technical smarts, business savvy, and plain old neighborliness of the people we’ve met over the last six months or so, we’ve also been intrigued by the fact that so many of them are leading double lives as musicians. If you’re one of them, now’s your chance to rule the Boston-area tech scene, musically speaking.

Here’s the deal: We’ve rented out the Middle East for the evening of Tuesday, January 22, for Xconomy’s Battle of the Tech Bands. The event is open to all bands (amateur and pro alike) with at least one member who works at a New England, technology, life sciences, or tech-investment firm. You’ll get to show off for your friends; meet fellow entrepreneurs, investors, scientists, programmers, and engineers in an environment that’s, shall we say, less formal than the typical networking cocktail hour; and, oh yeah, possibly take home some serious prizes. The audience will pick its favorite band, and so will the editors—and there could be some wildcard categories in there as well.

For more details about how to join the battle, check this out. (Don’t delay—the deadline for entering is midnight on New Year’s Eve.) And should your musical abilities happen to range from minimal to non-existent, no worries. There will still be great food to eat, free (up to a point) drinks to drink, fascinating people to meet—and of course some rockin bands to cheer on. Bring your cell phone to vote for your favorite one. Tickets are on sale now.

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Last week Wade offered some fantastic tips on how to recruit employees in the midst of what’s shaping up to be a major staffing crunch at local information-technology firms. And it got me thinking about something that Xconomist Bill Aulet told me a few weeks ago during a power lunch at Aceituna, over near the Genzyme HQ. We were discussing Xconomy’s own plans for a couple new hires, and Bill chimed in with some telling insights on what firms, especially startups where each new employee is critical, should look for—and avoid.

Bill spoke to some truths we all know—and he was quick to note that these weren’t just his, but “came from working with others and thinking about this here at MIT.” But he had a nice way of framing things that beautifully put in perspective the challenge of figuring out if a candidate is the right fit for a company. He grabbed a napkin and sketched out a rectangle divided into four quadrants, with “values” (meaning how well the candidate’s values align with the company’s) on the X axis and “contribution” (essentially, how productive the person is) on the Y axis. Like this:

Now, a couple things are obvious. A home run is an employee in the upper right—the high contributor whose values align perfectly with those of the company. Just as clear is the lower left—you don’t want that person. If you make a mistake and a new hire falls in this category, it’s an easy workforce-reduction decision. But what was really interesting to me was Bill’s take on the remaining two quadrants.

Let’s start with the lower right, the low contributor who believes in the company and shares its values. I was expecting a tough, cut-bait attitude on this—but Bill explained that such employees can indeed be valuable, if they don’t cost too much and if you can take the effort to channel them into productive work at which they can do well. His essential message: don’t give up on them right away.

Now to the upper left. A talented, high-contributing person who might well be in it mainly for themselves and in any case whose values are not the company’s values. Bill’s message here was adamant—don’t hire them, and if you do, get rid of them and fast. “This person is like poison,” he said, or words to that effect.

Here’s the dilemma, though, says Bill. This brand of high contributor can seem great. “People are closing sales and doing all kinds of things,” he says. The problem is, they have a bad attitude. They might cut corners the company doesn’t want to cut. They might not be forthright. Maybe they undermine company decisions. Whatever the specifics, it means big trouble. As Bill puts it, “That is the most dangerous person, because you think you need them—they have a stranglehold.”

You have to move quickly to shed this type of person, he says. “The deeper they grow roots in the organization, the more disruptive, the more devastating, to take them out. And if they’re there for a while people tend to think their values are the values of the organization—and everything else atrophies.”

All in all, Bill says, it’s the sort of decision that can make or break a company. “The moment you cut corners on values at the top is the day they become meaningless and you have lost your potential ethical compass. Your chances of being a high-performance organization are nil.”

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Woman-led businesses in Massachusetts are outpacing state and national growth averages, and are less concentrated in lifestyle or retail sectors than their national counterparts, according to a report unveiled today by Babson College and the nonprofit Commonwealth Institute. Indeed, female-helmed firms are particularly well represented in tech and life sciences industries.

The report is based on data from the sixth year of an annual survey of firms with female chief executives. “Woman-run companies have consistently outpaced the local and national growth rates for the six years of our study despite the economic conditions,” said study co-author I. Elaine Allen, Associate Professor of Statistics & Entrepreneurship at Babson College, in a press release. In 2006, over 60 percent of the firms grew by more than five percent; the average for all firms in Massachusetts was 3.3 percent, and the national average was 3.1 percent. Still, woman-led firms comprise just 2.7 percent of Massachusetts’ total.

Another point highlighted in the study is that Massachusetts’ women-led companies buck the national trend of focusing mainly in retail and real estate. Rather, they are most heavily represented in professional services (38 percent), high tech (9.8 percent), construction (8.5 percent), travel and leisure (7.8 percent), and health care, pharmaceuticals, and medical products (7.2 percent). Indeed, two of the top 5 women-run Massachusetts firms are in technology industries:

The full list of the top 100 woman-led businesses is here.

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One of the most controversial drugs ever made could disappear if a new marketing plan can’t save it.

Widely known as the “race-based” medicine, BiDil (isosorbide dinitrate and hydralazine hydrochloride) was launched in July 2005 by Lexington, MA-based NitroMed (NASDAQ: NTMD) for treatment of heart failure in black patients. The wording of that approval caused quite a fuss, as people debated the up- and down-sides of prescribing drugs based on skin color.

But despite having lots of free publicity and remarkable clinical trial results, the pill has made a dismal showing. NitroMed did not come close to its original 2006 guidance of $20 million in sales. Instead, it earned a paltry $12 million or so from BiDil last year, and its doing only slightly better now. Things are so bad, NitroMed’s stock is currently hovering just above the dreaded $1 mark. The company has ditched all R&D, except work on a once-daily version of BiDil, and last year it completely retooled its marketing plan to try and rescue the drug.

Ironically, NitroMed says part of the problem was that BiDil was approved faster than anticipated. Pressed to start marketing before they were fully prepared, management turned to a contract sales force. “That is not ideal,” says Gerald Bruce, senior vice president of commercial operations. NitroMed was also slow to get the drug onto key formularies, making it too expensive for many patients.

Bruce came on in early 2006 to lead the new charge. A pharma veteran who has worked at Bristol Myers Squibb and Johnson & Johnson, Bruce says, “Our focus now is on growth. We will meet our targets and go from there.” There are promising signs. The company has finally gotten the drug onto enough formularies that about 80 percent of patients should have affordable access, per a company press release. Management also dumped the contract sales team for “A small but experienced internal specialty sales force focused on key hospitals and the high-prescribing doctors,” says Bruce.

But will that be enough to save the drug? One odd thing about BiDil’s predicament is that no one has ever disputed that it works. It makes such a huge difference, decreasing the rate of death among heart failure patients’ by about a half, that the Phase III trial (called A-HeFT) was stopped early so all patients could be switched to the new drug.

What riled people about BiDil was that, for one thing, it is a combination of two generic pills. So why can’t doctors just prescribe the two cheap pills instead of BiDil? NitroMed argued that there was an advantage to BiDil, and the company recently served up published clinical data that show that BiDil releases the two drugs into the system at a different rate and concentration. “This shows you can’t just substitute the generic components and get the same effect as the fixed dose combination,” says Welton O’Neal, vice president of Medical Affairs at NitroMed.

Then, there’s the race issue.

Some people charged the company with exploiting a tragic racial health disparity to make quick money. Heart failure is one of the many diseases that kill blacks at a much higher rate than whites. NitroMed was able to speed BiDil to market because its components are already approved, and there was earlier data on the combination’s effects. In fact, a careful review of that data pointed to a new use for the drug: In a mixed race trial, the combination showed no benefits overall. Blacks, however, seemed to do better on the drug.

NitroMed decided to pick up that data and run with it, all the way to FDA, which gave them approval to conduct A-HeFT — the first ever black-only trial for heart failure. The company also rallied many minority organizations, including the Association of Black Cardiologists, which co-sponsored A-HeFT. Within just a few years after that crucial first FDA meeting, BiDil was approved for use in “self-identified” blacks.

Support from minority groups didn’t spare NitroMed the barbs, however. Critics charged that race-based medicine would deepen the racial divide and that the company should have spent the time and money to find a better marker of who would benefit from the drug than self-determined race. “I realize it’s all they have now, but I’m just concerned that skin color is not a good enough measure of who responds,” says Stephen B. Liggett a professor at the University of Maryland, School of Medicine. African Americans are really a diverse population, he argues, and “Race-based medicine is a very tiny step, and one that could give the wrong message.”

Liggett and others are pioneering the use of new genetic markers to more accurately guide prescribing. NitroMed has done a little looking for such markers itself, but the genetics underlying response to the drug are still murky. In fact, it’s not even clear yet exactly why the combination works, let alone who responds best to it.

In the end though, the debate about race is probably not the root of BiDil’s woes. “Those issues are raised at academic conferences, but the medical community is driven by data and what the FDA says,” says Ken Bate, who became NitroMed’s new CEO in early 2007. “That’s not something our sales people confront with any frequency whatsoever.” Among the factors that could be impairing BiDil’s market uptake are side effects. Although the company calls these effects manageable, the drug does cause more headaches and dizziness than traditional therapy.

NitroMed also knows that “BiDil is promotionally sensitive,” says Bruce. If the company gets its message out to doctors, prescriptions should go up, he says, “Because the number-one driver physicians focus on is mortality benefit.”

That message should now be getting to the right people. But if the drug still misses the mark, it’s unlikely NitroMed will get many more chances to rescue it. And marketing muscle alone doesn’t make a product, as Pfizer and Nektar recently learned with their multi-billion dollar bomb Exubera, the inhaled insulin.

Unless NitroMed can snag a partner for the drug, BiDil’s fortunes—and those of NitroMed—will rise or fall along with the trajectory of the next few month’s sales figures. “I expect to see some impact [of the new program] at the end of this quarter,” says Bruce.

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First, the good news: salaries and bonuses for key employees of privately held firms in life sciences and information technology went up virtually across the board in the past year. Now, the not-so-good news: New England high-tech executives are in the middle of the pack (or lower) in compensation when compared to their peers around the country.

These are a couple of the conclusions that leap out—well, in some cases you have to dig them out—of the 2007 Compensation and Entrepreneurship Report in Life Sciences and a similarly named study in Information Technology that were officially released today. The annual studies were conducted by the J. Robert Scott executive search agency, law firm WilmerHale, and Ernst & Young, in conjunction with academics at Harvard Business School. I looked at the full, 84- and 72-page versions of the studies that are distributed primarily for participants. Released today for general consumption were scaled-down versions of the reports, but there’s a lot more in even the condensed versions than we can cover here.

The studies, based on surveys of some 1,000 key employees in life sciences and 1,200 in IT, looked at privately held companies by such parameters as financing round, revenue size, industry segment, and geography. They covered a variety of key jobs (13 in life sciences, 10 in IT), from CEO to head of human resources. Data about founder-execs was stripped out of the general survey and put into a separate section of the report, largely because founder compensation runs all over the map and it’s hard to draw conclusions from it (although, not surprisingly, founders get more equity—read on). All told, the survey covered 166 life-sciences and medical-device firms, and 244 information technology companies (just over half them were software firms). Roughly half the companies in each bucket had completed two or fewer rounds of financing—and a clear majority had fewer than 40 employees.

I’ve made lists below of CEO compensation by industry category and geography. But here are some basic observations. For starters, if you are a life sciences/medical devices CEO, you’re in a good place, compared to your IT counterparts. The average non-founder life sciences/medical devices CEO is earning a 2007 base salary of $281,000, a 3.9 percent increase from the 2006 average of $270,000. In IT, by contrast, the average CEO base salary is $227,000, up from 217K the year before.

Bonuses, of course, form a key part of the mix—and here, the IT execs have the potential to do a bit better. … Next Page »

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With a fast-tracked drug in one hand and too little money in the other, Cambridge, MA-based Molecular Insight Pharmaceuticals (NASDAQ: MIPI) recently settled on a bond financing to get one last big cash infusion before that final dash to market. The company has been around since 1997 and is working on about half a dozen targeted radiation-based imaging agents and cancer drugs. Three of those are in trials now, and the goal is to get one to market by 2009.

Management calculated Molecular Insight would need $100 million more to reach that milestone. At the end of last week, it priced $150 million in bonds with a syndicate of institutional investors. “We had several options, but we didn’t want to have to go back to the market again before we launched,” says CEO David Barlow, “Now, we have enough money to last even beyond our first product launch.” The bonds are due in 2012.

Molecular Insight specializes in hitching radioactive particles to small-molecule drugs that are highly targeted to specific cell types. The drugs are basically vehicles to transport the radiation. The company is developing these “hot” drugs both as imaging agents that light up the target cells when viewed with a special camera and as super-precise radiation treatments for cancer. The latter application fills an important niche because “once a tumor has spread, you can’t do external beam radiation,” Barlow says.

Molecular Insight’s lead drug candidate, Azedra, is a new twist on an old treatment that combines a molecule called MIBG (metaiodobenzylguanidine) with radioactive iodine. Azedra is different because, thanks to the company’s proprietary labeling technology, it contains less unnecessary “cold” or non-radioactive drug. According to Barlow, that means it delivers a bigger payload with fewer side effects.

MIBG homes in directly on neuroendocrine tumors—a rare form of cancer that secretes hormones—where it delivers its radioactive payload. The old MIBG/iodine treatment has long been approved in Europe, but no one has ever tried to sell it in the U.S., probably because it addresses such a small market and because the patent is old. A small amount of the treatment was formerly available here for compassionate use, Barlow says, but even that source dried up 2005, leaving U.S. patients with no access at all. Not surprisingly, Azedra has been given fast track status by the FDA. And because there are relatively few patients with neuroendocrine tumors it has also been given orphan status which means, among other things, that the clinical trials of the drug may involve as few as a dozen subjects.

So why bother to develop an old drug (or at least a new version of one) for a rare disease?

Well, Genzyme and others have shown there is money to be made in orphan diseases. Patients with advanced neuroendocrine cancer have no existing treatment options (which means Molecular Insight has a clear market opportunity), and the firm has plans to test the drug in other cancers too. Barlow says it is also protected from competition should anyone finally decide to market the old version of the drug here in the U.S., because Molecular Insight’s labeling technique is covered by newer patents and because Azedra should, he says, outperform the older drug.

The drug is only in Phase 1 U.S. trials now, but is scheduled to move quickly. “Our charge is just to show [Azedra] has the same performance as the approved drug,” says John Babich, president, chief scientific officer, and one of the company’s founders. Given that it’s fast tracked, if the drug truly works better than the old version it should be reasonable to get it approved by 2009.

But the real payoff will be if Molecular Insight can build momentum for its entire pipeline of radiolabeled small molecules. Cancer is probably the most crowded market out there for new drugs right now, but a couple of recently approved radioactive antibodies, Bexxar (GlaxoSmithKline) and Zevalin (Biogen Idec), have shown the targeted radioactivity approach can be remarkably effective. Those drugs only treat blood-born cancers, however, and Babich thinks that in most other cancers, small molecules will work better than the much larger antibodies.

“To get into solid tumors, drugs have to find their way out of circulation into the tissue, and the vasculature creates pressures that push large molecules back,” Babich explains. “Using an antibody is like trying to launch a Hobie Cat into the wind. Meanwhile, we’re just throwing a football into it.”

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I just got back from MassOpps—a life sciences PowerPointapalooza put on by the Massachusetts Biotechnology Council—and boy my brain is tired. In conference rooms at the Logan Airport Hilton, more than 40 companies (startups and public firms both) made their pitches to the gathered venture capitalists, investment bankers, potential partners, and hangers-on. Concurrent sessions, so you couldn’t see them all even if you had the bandwidth to do so.

Winning the prize for most evidently pleased with his firm (among the pitches I caught) was Bind Biosciences CEO Glenn Batchelder, making what was purportedly the company’s first public presentation. For a hitherto stealth-ish operation, Bind has gotten a remarkable amount of press since its founding in 2006 (and personally, I’d consider an interview with the Wall Street Journal to be pretty public). Still, it was fun to hear the story straight from Batchelder, a veteran of Acceleron Pharma and Millennium Pharmaceuticals.

Batchelder said that when he first talked to Bind co-founder Robert Langer, the MIT professor and human startup machine, Langer told him, “‘It’s gonna be huge.’” Says Batchelder: “For people who know Bob, that’s his trademark—but he’s right.”

Bind’s big idea is to make exquisitely targeted drugs using tiny polymer nanoparticles as delivery vehicles. (The firm’s name comes from BioIntegrated NanoDelivery.) It’s not a new idea, but the key to being able to actually pull it off, Batchelder said, is the firm’s ability to generate huge libraries of particles with different combinations of all the key parameters that affect how well the particle evades the immune system, finds its target, and delivers its drug payload. So rather than trying to predict the right combination of particle size, charge, molecular weight, and number of targeting molecules, the company can just pluck the best particle out of its library for any given application.

And the potential applications are many, according to Batchelder’s talk. The particles can be covered with a number of different types of targeting agents to help them home in on a number of different parts of the body. And they can carry a number of different drugs, from traditional small-molecule treatments to the newest DNA- and RNA-based treatments. (Batchelder hinted awfully strongly that he thinks Bind’s technology could be the answer to the drug-delivery problem that many see as one of the biggest obstacles standing between RNAi and commercialization.)

The first application Bind is pursing on its own is a particle for targeting chemotherapy agents to cancer cells; Batchelder said he expects the company will begin clinical trials of the technology in the middle of 2009. The startup has also forged a partnership with an unnamed pharmaceutical firm to develop particles that bind to distressed vascular tissue.

That partnership is just one of the non-dilutive sources of capital that Bind has been able to tap in its short existence. Others include grants from the National Cancer Center and the National Institute of Standards and Technology. On the venture capital side, Bind closed a $2.5 million Series A round in January led by Flagship Ventures and Polaris Venture Partners, and will complete a $16 million B round in a few weeks, Batchelder said.

In other news from the conference, topping my list of most likely to file for an IPO (again, among the firms whose presentations I attended) was Cambridge, MA’s Genstruct. The firm specializes in crazy-complicated modeling of biological systems that it uses to help partners such as GlaxoSmithKline and Pfizer understand how their drug candidates affect the body in order to, among other things, predict a drug’s efficacy and side effects before shelling out for clinical trials. Genstruct President and CEO Keith Elliston laid out a pretty impressive trajectory for the firm: founded in 2002, $6.5 million Series A round in 2003, cash flow break-even in 2006. (And no, I didn’t skip another round or two in there.) Anybody want to lay bets about 2008?

Finally, and I only mention this because I’m weirdly obsessed with schwag, the prize for most clever conference schwag. This one goes to Charles River Laboratories for their offering of a small calculator-like device, capable of translating English words into French, German, Spanish, Italian, and Dutch, and emblazoned with the slogan “Translating your compounds into wonder drugs.” Keurig gedaan, op de markt brengend team.

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It was finally good news for Watertown-based Acusphere (NASDAQ: ACUS) this week, as the company reported positive clinical trial results for its lead product, called Imagify, at the American Heart Association (AHA) annual meeting.

But the burning question is whether that news comes in time. Acusphere is 14 years old and running out of cash. And the company suffered a series of minor setbacks over the past year which, taken together, have cast doubts over whether it can actually get its first product to market.

Imagify, Acusphere’s management argues, is potentially a breakthrough product targeting a $2 billion market. If approved, it would be the first contrast agent that can be used with ultrasound to see how blood flows through the heart. Currently, doctors use nuclear stress testing to get this crucial information, and that involves radioactive tracers tracked via special cameras. In Acusphere’s test, which the company calls an “Imagify stress echo,” the camera would be replaced with an ultrasound machine, and the radioactive tracer would be replaced with an injectable suspension of gas-filled polymer microspheres.

About 10 million nuclear stress tests are done each year to look for narrowing of the vessels in the heart. The Phase 3 trial results just released at AHA show that in a head-to-head comparison, Acusphere’s test was just as accurate as the nuclear one. Those studies involved several hundred patients and 28 medical centers. Since using Imagify has other advantages, that data could be enough to help it unseat the nuclear test.

Compared to the nuclear stress test, “[Imagify stress echo] will be cheaper, does not involve radiation, and is quicker,” says Roxy Senior, Director of Echocardiology at Northwick Park Hospital and the Imperial College of Medicine, in London. “Frankly, I can’t see any disadvantages to using it,” he says. “With ultrasound, not only do you get the data in real time, but now you can also assess perfusion and heart function with one test.”

But Acusphere seems to be beset with minor problems. Over the last few weeks, the company has been scrambling to get the word out that Imagify is not like some other microsphere-based ultrasound agents just slapped with a safety warning after several patients reportedly died while, or after, receiving them. Acusphere’s management issued a release explaining that no deaths have been seen to date in trials of Imagify, and that their product is “structurally different from commercially available ultrasound contrast agents; it has a different encapsulation material and a different gas.”

The company’s CFO also left in June, and was just replaced. Meanwhile, the firm needs to get its manufacturing facilities in order so that it can file with the FDA for approval of Imagify. All that is taking longer than anticipated, and that filing has already been pushed back once—from late 2007 to early 2008. And then there’s the money question. In its Q2 financial statement in August, Acusphere reported having roughly $83 million in assets, about $52 million of that as cash. (Third-quarter financials are to be released tomorrow.) But company CEO Sherri Oberg told the Boston Business Journal last month the money will only get it to the middle of next year. Delays are particularly costly now, and in September management announced it was putting plans for new products on hold while it focused on finding a partner to market Imagify.

Without that partner, it’s not clear how the product could be launched.

It’s a classic quandary for a young drug company. “We don’t have a sales force, because we don’t have a product yet,” says Mona Haynes, Acusphere’s vice president of marketing and sales. Meanwhile, the money is flowing out rather than in. “It is important that we get a partner so we can continue raising funding,” she says. “Introducing a product is expensive.”

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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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I’m interested in how one takes inventions to scale. Obviously, that is what Boston Scientific was all about. How do you get a disruptive idea, in particular, into the marketplace? In my opinion, people frequently take the wrong approach.

Disruptive ideas are very threatening to the establishment, or whoever owned that marketspace before. They may be products or technology like the iPOD (catheter surgery in the case of BSC), or they can be processes or services like Amazon or eBay. Or they can be social ideas like a bike path into the city. They can lead to dramatic changes in the field to which the idea applies. That can mean different people will use and control it. And it will be used differently with a different infrastructure and in different locations. There will be economic implications with winners and losers. And the idea will influence many others indirectly.

So how do you overcome the resistance of the establishment (surgeons in the case of BSC, but it could be academia, professional societies, big companies, the government, etc.)? Hire PR? Most of the PR and advertising guys are great if the idea is accepted, lousy if the idea is not accepted. Your goal is to get it accepted. And that to me is the fun part of business. New ideas grow best with viral approaches and that’s all about relationships and reputation.

Don’t go after the biggest idea first.
A disruptive technology can have many applications. If you get funding for it, the funders will want to go after the biggest application first in order to justify the investment. That’s a dumb thing to do, because new ideas and technologies evolve. They grow like a plant as more and more is learned. And there will be lots of problems early on. If you go for the biggest application first, you will create unmeetable expectations which will arm the establishment with more arguments to destroy you. And even mini-failures will be hard to recover from. Pick an application that is smaller and you can more easily find, or create, champions who will become disciples. Their expectations will be more modest. They will be more forgiving when things don’t go right. Over time they will become your unpaid sales force and your R&D department. You won’t just be creating a product and customers, you will be creating a movement.

And you’ve got to be patient. It took us (BSC) over 20 years to help get the Less Invasive Surgery business going. The ATM for banks took well over a decade to catch on. You can not only be too early for the market because your technology isn’t finished, but too early for the market because customers aren’t ready for it—which means the establishment is going to pull every trick in the book to dismiss you.

At BSC, we took our disruptive catheter technologies and went for smaller niche markets. These smaller markets (for example pediatric cardiology) allowed us to experiment. Our customers developed new applications. They suggested modifications. They came up with great accessories to extend the use and improve the results of the procedures for which the products were designed. I used to even make “care packages” for some inventor docs that would contain special wires, tubing, molds, heat guns, shrink tubing, etc, so they could make prototypes themselves. They loved it. We had friends for life, and gained a few good product ideas as well.

There are lots of other examples of technologies that have enormous applications, where it was, or is, important to debug them first. By doing so, you will not only be learning more about the technology, but also the marketing and communication strategies that you may want to follow if in fact it does become super big. By going after smaller markets first, you can evolve, define, and develop more IP. You can do an awful lot of things that will increase the likelihood of a successful attack on the big market when you get there.

Build in-depth knowledge and trust it in hard times.
If it really is a new idea, you will not only be developing the product(s), you will be developing the language and the science behind it—the ontology and taxonomy for talking about it. It’s hard, but when you get there you will have created that market—and you will own it.

The marketing and funding folk will be pushing hard for you to get some big name scientific and other advisors on the masthead for credibility purposes. Yes, a few may be valuable, but remember, these are people who are already famous. They have nothing to gain (except money, of course, and that can sometimes be a bad motivator) and everything to lose. Finding the unknown younger scientist, engineer, or physician who has the capabilities and desire is much more important. They have everything to gain and nothing to lose. I’ll put my bet on the motivated entrepreneurial type every time. I have a checklist of attributes that we used to pick physicians. Ask me if you’re interested. [Editor's note: John was getting so many requests for the list that we posted it here.]

Focus.
Traditional business experts will always say you’ve got to focus in order to apply your limited resources effectively. But if you’re dealing with a truly new idea, that may be the wrong thing to do because you don’t yet know where the best spot to focus is. You’ve got to be able to say, ‘It doesn’t look like it from the outside, but in fact we are focusing. We are taking little pieces of many markets and leveraging the daylights out of it, in order to create a new market.’ If your customers are your partners, and they should be, they can help you make the right decisions.

Always build your credibility and reputation.
Who do you trust more; someone who is selling you something which you’ve never heard of before, or someone who is selling something familiar from a well-known company? Everything else being equal, with most people, the affiliation with the well-known brand and organization is a reputational asset. So it’s critical to earn the respect and trust of both your customers and the community members, including competitors, of the field you will be working with.

General Georges Doriot, founder of American Research and Development and considered one of the fathers of venture capital, was a charmer and had an enormous Rolodex. He told me that it was his most valuable asset. He was a generous person, a mentor to many and always doing favors for people. But that generosity had an enlightened self-interest to it. The Rolodex represented his relationships and the personal credibility and reputation that went along with it. That was his most important investment.

I think people sometimes get so caught up in the competition of financial results that they forget that the thing that’s going to give them the best likelihood of success in the future is the relationship metrics.

This is all common sense, of course, and pretty obvious. But it’s amazing how often we forget the obvious.

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As the stock market opens today, home-grown Internet-backbone company Akamai will join the S&P 500, taking the slot previously held by joint-replacement manufacturer Biomet. Joining the bellwether index is quite an achievement, especially in Akamai’s case. The company was an original dotcom high-flyer that suffered some staggering blows before making it to this point. We thought it would be fun to ping the firm and a few of its founders for their thoughts—and to see how this came about. Was there a long lobbying campaign? Gala parties? Tears of joy?

It’s July, so it was hard to track people down. The first three contacts (including two founders) we called or e-mailed were out of town. We did find someone in investor relations, who laughed and told us: “The CEO sent around an e-mail announcing it, that it’s a great thing. But no parties.”

When we finally did get an official response to our query, we learned that the company didn’t even know the S&P move was afoot. Here’s the full response:

“It’s a great honor to be added to the S&P 500, especially for a company that once worried about whether it might be de-listed after the dot-com bubble burst and at the height of the tech recession when many of our clients were going bankrupt. Being selected for the S&P 500 was also a surprise to us. We found out about it by reading a press release on the wires, and in typical Akamai fashion we didn’t stop for a party. Instead, we just went back to work focused on making the Internet a more reliable and secure place for our clients.”

Well, if they won’t toast themselves, we will. Well done, Akamai.

———————

9:57 am: I’m updating this post because I just got a call from Jonathan Seelig, one of Akamai’s founders. Jonathan is managing director of Globespan Capital Partners in Boston. He, too, was taken by surprise by the news—learning of it from someone he knew who was sitting a few rows behind him on a plane out of Los Angeles. “I looked at him with a total blank stare,” Seelig says. “I had no idea.”

That being said, the Akamai co-founder is very pleased. “It’s clearly a great achievement. It’s great to get recognized in that way,” he says. “It validates that the market is valuing the company we built, and that the company will continue to be important in the industry in the longer term. It’s something I certainly am very proud of.” Seelig also says that the core original vision of building intelligence and technology around the Internet to better harness its power continues to be a very powerful business model.

He is not surprised, though, at the low-key response inside Akamai: the reaction of public markets has never been the firm’s focus. When the company went public in October 1999, the investment bankers brought in cake and champagne to celebrate. Seelig and others watched the stock on a screen for a while, he relates. “We had a piece of cake and went back to whatever meetings we were in.”

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