Veracyte has been gaining momentum the past few months with a new molecular diagnostic for thyroid cancer, and today it’s taking another step ahead by forming an alliance with Genzyme, the maker of a common drug for treating the disease.

South San Francisco-based Veracyte said today that it has formed a global co-promotion deal with Genzyme, the Cambridge, MA-based unit of Sanofi, in which the bigger company will start marketing Veracyte’s Afirma test. Financial terms of the deal aren’t being disclosed.

Veracyte, which was featured here in November, has been selling a gene expression test over the past year to help doctors determine when a lump in the thyroid gland is benign, or potentially malignant. Almost 500,000 suspicious thyroid lumps get biopsied in pathology labs every year, and about 20 to 30 percent of those tests offer “inconclusive” results. Fearing the worst, many of those patients go on to have surgery to remove their thyroid glands at a cost of about $12,000 to $16,000 apiece, plus a lifetime of thyroid hormone medications.

Veracyte’s proposition to doctors is that by doing a standard fine-needle biopsy test, and paying $3,500 for Veracyte to perform its Afirma gene expression analysis, they can rule out malignancies early in the game. That is supposed to cut down on unnecessary surgeries, and save insurers some money. Earlier this month, a Medicare contractor that covers 40 million people said it has agreed to cover the test.

Genzyme has long had interest in the thyroid cancer field, through its marketing of thyrotropin alfa (Thyrogen). “Together, our products offer patients and physicians a powerful personalized medicine solution for the diagnosis and treatment of thyroid cancer, addressing an unmet need in the community and improving patient outcomes,” said Genzyme’s head of rare diseases, Rogerio Vivaldi, in a statement.

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Since he set out last year to revamp the way the FDA reviews medical devices, Jeff Shuren of the FDA’s Center for Devices and Radiological Health (CDRH) has often met with industry leaders to hear their feedback and ideas for how to improve medical device regulation. Last week, he met with industry leaders in San Francisco, and this week he’s in Southern California.

Shuren’s schedule in San Diego yesterday included a stop at Nuvasive (NASDAQ: NUVA), a pioneer in innovative spinal surgery products, which must have been an interesting meeting. Last week, Nuvasive CEO Alex Lukianov told an audience in San Francisco that FDA regulatory delays in reviewing Nuvasive products are costing the company an estimated $70 million a year.

Shuren, who has overseen the FDA center for just over two years, also met with local reporters, and provided an overview of the steps he’s taken to make the regulatory review of new medical devices more predictable, transparent, and efficient. The way the industry has been talking, though, it sounds like Shuren has taken only the first steps on what must be a 1,000-mile journey.

Eight out of 10 biomedical CEOs say they “agree or strongly agree” that the FDA regulatory approval process has slowed the growth of their organizations, according to a new survey from PwC [PricewaterhouseCoopers], BayBio, and the San Diego-based California Healthcare Institute (CHI). BayBio and CHI released some early results of the annual survey at an event timed to coincide with the JP Morgan Healthcare Conference, the biggest annual gathering of life science investors and executives.

Frustration throughout the life sciences industry has been mounting, but Joe Panetta, who heads San Diego’s Biocom industry group, sounded a more conciliatory theme as he sat next to Shuren during the media briefing. “Both industry and the FDA agree that we need to provide safe and effective products for patients and physicians,” Panetta said. “We’re definitely partners in that initiative, and it doesn’t do anyone any good to keep beating up on each other.”

The FDA’s Shuren is “trying to take specific actions to improve the decision-making process at the FDA, and also the decision-making culture,” says Ross Jaffe of Versant Ventures, who was among the Bay Area VCs who met with Shuren last week at a dinner organized by CHI. “To his credit, he’s willing to … Next Page »

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How to sense and make sense of subtler factors that govern our behaviors, the choices we make as individuals and as part of groups. The point here is that there are some obvious physically measurable; things like body weight, miles driven, CO2 let out, around which we can develop diagnostics and policies. But these measurables are often the consequence of choices that are less tangible, like body image, the urge to stand out or blend in and so on.

I think we can sense these things as well by measuring brain activity or signs of mood changes in written communications. So as we get better at analyzing and archiving vast amounts of data we will find ourselves extending the frontiers of what we can gather. Many disciplines outside of the hard sciences will advance because of their ability to finally measure more things. So I would emphasize data analysis and also new ways of thinking of sensing.

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There was a whole lot of life sciences news over the past week. Here’s my roundup.

—Carlsbad-based Life Technologies (NASDAQ: LIFE) said it’s taking orders for a benchtop genome sequencer that can to decode an individual’s DNA within 24 hours and at a cost of roughly $1,000. The company priced its new Ion Proton Sequencer at $100,000 to $150,000, which also represents a dramatic reduction compared with the cost of existing DNA sequencers, and might even entice some practicing physicians to buy into the idea of personalized medicine. A cross-town rival, San Diego-based Illumina, also introduced an improved version of its gene-sequencing machine capable of same-day service, although Forbes’ Matthew Herper says Illumina’s HiSeq 2500 is priced at $740,000.

—A $1 million gift to the Tech Coast Angels from the family of slain TCA member and life sciences investor John G. Watson has enabled the angel group to establish a nonprofit foundation to support entrepreneurism in the San Diego region. A financial adviser, who awaits sentencing following his conviction two months ago, murdered Watson in his La Jolla town home. Watson’s sister, Gillian Ison, told the TCA, “John loved investing, innovation, and the entrepreneurial spirit that he discovered when he arrived in San Diego. We believe that a foundation supporting entrepreneurism is the best way to honor his memory and his life.”

—San Diego’s AnaptysBio said it has established strategic alliances with Novartis and an undisclosed pharmaceutical company. The company plans to use its proprietary technology to discover and develop new therapeutic antibodies with multiple cancer-related therapeutic targets. AnaptysBio said the two deals provide global rights to develop and commercialize a limited number of antibodies against each cancer target that AnaptysBio generates.

—In his BioBeat column, Luke previewed the five myths likely to make the rounds at this week’s JP Morgan Healthcare Conference in San Francisco. You could say that Luke inoculated readers from excessive optimism by writing, “Hope and hype are a couple essential ingredients in this business, and every year both are on display at this conference. Sometimes the wishful thinking can congeal into conventional wisdom.” Is that good, or what?

— Wylie Vale, a Salk Institute scientist, renowned expert on brain hormones, and founder of San Diego’s Neurocrine Biosciences (NASDAQ: NBIX), died on Jan. 3 while vacationing in … Next Page »

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Biotech pilgrims are gathering today for the biggest industry frenzy of the year, the JP Morgan Healthcare Conference. This confab in San Francisco’s Union Square is the singular place each year where essentially all industry mover/shakers—and many wannabes—gather for a marathon week of investment scouting, dealmaking, publicity seeking, job-hunting, and schmoozing.

I’ve been going to this conference for at least seven or eight years (but who’s counting?) and look forward to meeting lots of interesting people and digging up all kinds of news every year. It’s the best time to meet industry players face-to-face, and hear about the latest trends at work, in an action-packed few days. Most everybody here is brimming with optimism—or least putting on their best game face—about how they’re going to make new drugs, devices, or diagnostics that will leap tall buildings with a single bound in the coming 12 months.

Some of these dreams will be fulfilled, but the odds aren’t good. Hope and hype are a couple essential ingredients in this business, and every year both are on display at this conference. Sometimes the wishful thinking can congeal into conventional wisdom. So with that, I thought I’d try to anticipate a few popular myths you can expect to hear circulated, in order to debunk them. Here goes:

1. “The biotech IPO market will pick up.” Every year this line gets repeated, and every year it’s nothing more than wishful thinking. All you need to know about IPOs is that Groupon raised more money in its initial offering last year than the entire class of 2011 biotech industry IPOs. Facebook is on the docket this year, and it will dominate the news. Many biotechs that went public last year were weak, and didn’t perform well for investors, which only serves to dampen enthusiasm. And most importantly, it’s always good to remember who will be spreading the positive word about the IPO market, and consider the sources. It’s the investment bankers, lawyers, and consultants who stand to put a lot of money in their pockets from fees every time one of these transactions occurs. Just because they want it to happen, doesn’t mean it will.

2. “Amgen will make a mondo acquisition.” The biotech industry’s biggest company was sitting on a massive stockpile of $17.6 billion in cash and investments at the end of September. Common sense says that Amgen has got to do something with the cash other than collect interest. Shareholders might like getting dividends or seeing share buybacks to lift the stock price, but this won’t excite anybody for long. The company is getting a new CEO, Robert Bradway, who might be interested in putting his own stamp on the company once he takes over in May from Kevin Sharer, who had a lackluster record in the acquisition department. And Amgen might be feeling the need to compete in the acquisition arms race, especially since Gilead Sciences (NASDAQ: GILD) scooped up Pharmasset for $11 billion.

It may sound logical, but this all feels like wishful thinking to me on the part of bankers with vested interests. Amgen will think long and hard before it attempts to do any monster acquisition, especially after seeing the organizational indigestion mega-mergers have caused in Big Pharmaland (see Pfizer/Wyeth, Merck/Schering-Plough, and Roche/Genentech). My hunch is that Amgen may buy a company in the $1 billion ballpark, but it will not pull the trigger on a really audacious mega-merger in 2012.

3. “The FDA is going to be more supportive of innovation.” I’m not sure how many people are really going to go out on a limb and take the FDA at its word that it wants to be more supportive of medical innovation. But a small group of high-powered VCs and industry advocates have pushed for this for a long time, and commissioner Margaret Hamburg has been making more noises about how the agency’s mission is to ensure the safety and efficacy of new drugs, while also helping stimulate biomedical innovation. Just like anything in politics, though, talk is cheap and the record is … Next Page »

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Yesterday, we ran the first half of the Seattle life sciences year in review, which focused on biopharmaceutical companies and global health organizations. Today’s rundown will cover the medical device, diagnostic, and health IT side of the local life sciences cluster.

Medical devices may not fare so well in a glamour contest, but this year the Seattle device community had more success stories, more acquisitions, upheaval, and even a couple of controversies. SonoSite was the biggest acquisition of the year, and although terms weren’t disclosed, it was almost surely followed by Pacific Bioscience Laboratories (the maker of the Clarisonic skin brush you see prominently displayed at Nordstrom). Calistoga Pharmaceuticals, you had a great year, but your deal is probably the third-biggest of the year in Seattle biotech. Sorry.

For the highlights from Seattle med-tech, diagnostics, and various Bio-IT operations, read on:

Sonosite (NASDAQ: SONO): The maker of portable ultrasound machines has been relatively stable, and modestly profitable as an independent company for some time, so I was surprised to see it get acquired for $995 million earlier this month by Japan-based Fujifilm. Shareholders can’t complain, given the price represents a 50 percent premium over SonoSite’s prior closing stock price. This is the biggest deal of the year in local life science, by a long shot.

NanoString Technologies. This was a big year for NanoString. The company, a spinoff from the Institute for Systems Biology, developed a second-generation version of its digital nCounter instrument, which measures the extent to which multiple genes are turned on or off in a biological sample. This was part of a bold plan to turn this scientific instrument into a diagnostic tool. By the end of the year, NanoString had raised another $20 million from GE, former Genzyme CEO Henri Termeer, and others, and it presented some important data that suggests it could compete with Redwood City, CA-based Genomic Health (NASDAQ: GHDX) in the breast cancer diagnostic market.

Clarisonic. Terms weren’t disclosed, but this could be the second-biggest acquisition of the year in Seattle’s life sciences community (although this company is hard to really categorize). Pacific Bioscience Labs, the maker of the Clarisonic skin brush, was acquired by cosmetics giant L’Oreal last month. The Clarisonic surpassed the $100 million sales mark in 2010, was highly profitable, and growing by leaps and bounds. My best guess is that Clarisonic sold for about $500 million. It’s the second home run for the same entrepreneurial team who developed the Sonicare toothbrush.

Geospiza. The Seattle-based developer of software … Next Page »

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Cambridge, MA-based Metamark Genetics said today it had entered into a research agreement with Janssen Biotech, a unit of New Brunswick, NJ-based Johnson & Johnson (NYSE: JNJ). Metamark, which was founded in 2007 on science from the Dana-Farber Cancer Institute, is developing prognostic tests based on genes discovered to play a role in how tumors progress and spread.

Metamark and Janssen will work together to validate some of those gene targets. Once targets are chosen for further pursuit, Janssen will be responsible for the development and commercialization of therapies meant to inhibit those genes.

Under the agreement, Metamark will receive an undisclosed up-front payment and will be eligible for up to $365 million in milestone payments.

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San Francisco-based biotech industry maven Steve Burrill said today his investment firm has raised $313 million for a new life sciences fund.

The Burrill Capital Fund IV started operations on December 1 with $313 million to make a wide variety of early and late-stage investments in companies working on drugs, diagnostics, and medical devices, as well as healthcare delivery technologies, wellness, and digital health. Burrill said in a statement that the financing represents the first close for the fund, which he hopes will reach a final goal of raising $500 million by June.

Burrill has had his hits and misses, like any venture investor in biotech, but he’s enjoyed one huge home run with Princeton, NJ-based Pharmasset (NASDAQ: VRUS). The hepatitis C drug developer agreed to be acquired by Gilead Sciences (NADSAQ: GILD) last month for $11 billion—a record-setting sum for a biotech company still in the late stages of product development. Burrill personally served as chairman of Pharmasset until January, and his firm had a 5.7 percent ownership stake in Pharmasset, according to the most recent proxy statement.

Back in the summer, before the Pharmasset deal was announced, Burrill told MedCity News that he expected the new life sciences fund to reach a $350 million fundraising goal by the end of August. At the time, he told the online publication that $200 million of the fund came from Rusnano, a Russian owned-company.

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Portable ultrasound maker SonoSite is being acquired by Japan’s Fujifilm for just under $1 billion. SonoSite will remain based in Bothell, WA, under its current leadership team, the companies said in a joint announcement.

The $995 million price represents a cash offer to purchase all SonoSite (NASDAQ: SONO) shares for $54 each, a 50 percent premium on the average closing stock price for the past three months. The price also includes payments in connection with SonoSite’s convertible debt. The companies’ boards have already approved the deal.

In the announcement, SonoSite President and CEO Kevin Goodwin said joining Fujifilm “will enable us to significantly accelerate our international business and product development efforts, and respond to the fast-evolving needs of physicians around the world.”

SonoSite was itself an acquirer last year, paying $71 million for Toronto-based Visualsonics, whose initial market was in preclinical biology labs. At the time of the deal, SonoSite said the ultrasound market for preclinical research was estimated to be worth $350 million with projected double digit annual growth rates.

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Cambridge, MA-based ImmusanT, a new biotech working on therapies targeting celiac disease, announced today that it has wrapped up $20 million in Series A financing from New York-based Vatera Healthcare Partners.

The money will go to development of ImmusanT’s vaccine and diagnostic and monitoring tool for patients with celiac disease, a condition that is normally treated by instructing patients to avoid the protein gluten, which is found in wheat, barley, and rye. The vaccine, Nexvax2, contains three proprietary peptides that are designed to create an immune response in patients and make them tolerant to the toxic effects of gluten. ImmusanT scientific founder and chief scientific officer Bob Anderson discovered the three peptides. The company’s hope is that patients would ultimately able to eat foods that contain gluten.

ImmusanT said it has tested the safety, tolerability, and bioactivity of the vaccine in a Phase 1 clinical study. It is also developing a test for diagnosing individuals with celiac disease, determining who is likely to respond to the Nexvax2 vaccine, and monitoring patients who are on the treatment.

Vatera Healthcare Partners was started in 2007 by Michael Jaharis, founder of Kos Pharmaceuticals (acquired by Abbott Laboratories in 2006) and Key Pharmaceuticals (merged with Schering-Plough in 1986).

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Seattle-based NanoString Technologies has made a big bet that the future of the company depends on turning its genetic analysis research tool into a diagnostic workhorse. Today, it presented some hard data that suggests it is on its way.

The company reported today that its instrument, called nCounter, was able to predict whether or not women with early-stage breast cancer were likely to have a recurrence in the future, by looking at an array of 50 genes known as the PAM50 signature. The information went beyond the usual 21-gene analysis done by Redwood City, CA-based Genomic Health (NASDAQ: GHDX). While some women get clear information today from Genomic Health about when they are at “low” or “high” risk of recurrence, doctors and patients often are confused about how aggressive they should be with chemotherapies when the results put patients into the “intermediate” risk group. NanoString’s tool could prove valuable because it classified fewer patients in the “intermediate” risk category.

The findings for the NanoString study were presented today in front of several thousand people at a plenary session of the San Antonio Breast Cancer Symposium.

NanoString CEO Brad Gray

“This is one of the single most important events in NanoString’s history, along with the launch of our first commercial system,” says Brad Gray, NanoString’s CEO, when reached by phone at the conference. “It really validates we can develop diagnostics on the nCounter, and that our first product is likely to be a significant one.”

NanoString, a spinoff from the Institute for Systems Biology in Seattle, introduced the first commercial version of its tool in the summer of 2008, for research purposes only. The technology provides scientists with a digital readout on the extent to which genes are dialed on or off in a sample—what’s known as gene expression analysis. The tool has gained popularity the past couple years with academic customers, especially those at The Broad Institute of MIT and Harvard, because of its ability to help spot patterns in complex diseases like cancer where 50 or 100 genes might be perturbed instead of just one.

But the research market has its limits, and NanoString has been thinking big about the diagnostic potential for the nCounter. In October, the company introduced a second-generation product that’s supposed to have 50 percent higher bandwidth (known as throughput in the genetics business); more flexible software for analyzing the data from the instrument; and hardware that is manufactured in line with more rigorous, consistent diagnostic industry standards. Last month, the company raised $20 million in venture capital from a syndicate that includes GE Healthcare and former Genzyme CEO Henri Termeer, to help pursue its diagnostic opportunity.

NanoString’s vision is to challenge Genomic Health directly, with a different kind of business model, Gray says. While Genomic Health runs its sophisticated 21-gene analysis at a centralized lab that doctors ship samples to, NanoString envisions selling instruments to labs around the world so … Next Page »

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How can a company charge $3,500 per patient for some new gee-whiz diagnostic test, and then go around claiming it will save the healthcare system money?

Lots of companies hem and haw when asked to prove their medical innovations save the system money, but South San Francisco-based Veracyte is putting cost-effectiveness front and center in its business plan. Its future essentially depends on it.

The company, backed by a prominent crew of investors like Kleiner Perkins Caufield & Byers, TPG Biotech, Versant Ventures, and Domain Associates, has started to make headway with this idea. Since January, Veracyte has been commercializing a gene expression test that’s supposed to help doctors determine when a lump in the thyroid gland is benign, or potentially malignant.

Thyroid cancer rarely kills people—each year, 48,000 get diagnosed and only about 1,700 die from it, according to the American Cancer Society. But diagnosis is tricky, as almost 500,000 suspicious thyroid lumps get biopsied in pathology labs every year, and about 20 to 30 percent of those tests offer “inconclusive” results. About 125,000 patients, fearing the worst, go on to have surgery to remove their thyroid glands at a cost of about $12,000 to $16,000 apiece, plus a lifetime of thyroid hormone medications, not to mention the inevitable complications from surgery. Veracyte’s big idea is that by charging $3,500 for its Afirma gene expression test, it can help doctors rule out malignancy early in the game, and help cut down on unnecessary surgeries.

So far this year, Veracyte said it has performed its gene expression test on about 1,000 of these iffy thyroid tissue samples.

“Anytime you can take a sample in doctor’s office, and provide information to make more informed treatment decisions that can take cost out of the system, we think that’s a good place to be,” says Veracyte co-founder and CEO Bonnie Anderson.

Most medical technology companies start out with an invention and look to find ways to best apply it, but Veracyte started in 2008 the other way around. It began, Anderson says, by looking for highly inefficient areas of healthcare that were ripe for disruption with a new medical technology. The company decided to start with thyroid cancer, as it has been growing in the U.S., and physicians have struggled with its diagnosis.

Veracyte CEO Bonnie Anderson

Getting the test to work right was a technical puzzle. Veracyte explored various technologies—whole genome sequencing, DNA copy number variation screening, and microRNA testing—before settling on gene expression as the basic technology platform likely to give a cost-effective answer.

There were lots of issues to consider. The critical sample to study is what’s known as a fine-needle aspirate, in which a doctor sticks a needle into the thyroid bump in three or four different places to extract cells for analysis under a microscope. Doctors use ultrasound imaging to make sure they are getting cells from inside the thyroid nodule, and not some other tissue. Sometimes different doctors in different places get different types of samples, and sometimes you get a little blood in there that confuses the issue on the microscope slide, Anderson says.

Veracyte sought to control … Next Page »

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Chest pain is one of the big reasons people go to the ER or to see their primary care doc. Often when people get there, it’s hard to tell who has serious heart disease or something less serious. Now Palo Alto, CA-based CardioDx is presenting study results that say its new blood test, in certain situations, can help doctors tell the difference.

CardioDx said today that its test, called Corus CAD, was more effective than standard imaging techniques in a study of 537 patients. The study found that the gene expression test, which relies on a blood sample, was better than standard myocardial perfusion imaging (MPI) at ruling out the patients who don’t have coronary artery disease. The results, from a study called Compass, are being presented today at the American Heart Association’s scientific sessions in Orlando, FL.

The company is hoping that studies like this one will help convince doctors to start sending in samples into its lab for a new kind of gene expression test, in hopes of avoiding other expensive and invasive procedures that end up being a waste. And there’s a huge amount of waste in cardiology that doctors, patients, and insurers would like to reduce. Of 400,000 people studied who underwent elective angiographic procedures, almost two-thirds (62 percent) were found to have no coronary artery blockage, according to a separate analysis published last year in the New England Journal of Medicine. The CardioDx test won’t be able to eliminate all the unnecessary procedures, but it should be able to reduce them significantly when used in combination with other diagnostic tools.

“We now have a blood test for coronary artery disease, which we never had before,” said Gregory Thomas, a professor of medicine at UC Irvine, who’s presenting the results today in Orlando. “It’s not perfect, but it can provide a very powerful opportunity for physicians to evaluate patients who may have heart disease.”

Gregory Thomas

CardioDx is backed by a cast of big name investors, who are betting that this test will work its way into mainstream medical diagnosis, and that insurers will figure it’s worth the $1,195 price tag. CardioDx raised $60 million last May, and has raised cash from the likes of J.P. Morgan, Kleiner Perkins Caufield & Byers, Mohr Davidow Ventures, TPG Biotech, Intel Capital, Pappas Ventures, and GE Capital, among others. At the time of the May investment, CardioDx said its test had been used for 13,000 patients, and a company spokeswoman now says that figure has grown to 20,000.

The potential market for a new coronary diagnostic like this is huge—an estimated 9.2 million people underwent the standard MPI tests in 2005, CardioDx says. Those tests typically cost about $800, and take about three hours to yield results, Thomas says.

Today’s test results, for sure, will go toward helping the company make its case for broader adoption. Patients in the study were considered stable, but had symptoms suggesting they might have coronary artery disease—a warning sign for future heart attack or stroke. They gave blood samples for the CardioDx test, which analyzed the extent to which RNA from 23 genes was active or inactive. The patients then got the usual myocardial perfusion imaging (MPI). Both of those readouts were compared later with the gold standard diagnostic findings from invasive angiography or CT angiography.

Researchers found that the new test was superior to MPI in what’s known as negative predictive value, which helps doctors rule out coronary artery disease. The CardioDx test was able to rule out coronary artery disease 96 percent of the time, compared with 88 percent of the time for MPI imaging. The difference was statistically significant.

The CardioDx test separated patients into two categories—those with high or low probability of having coronary artery disease. Researchers found … Next Page »

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Foundation Medicine has added a couple more big names to its roster of investors and partners. The Cambridge, MA-based company, seeking to develop personalized cancer diagnostics based on new understanding of genomics, said today it has added Kleiner Perkins Caufield & Byers and Google Ventures to a Series A financing that now totals $33.5 million.

Boston’s Third Rock Ventures incubated the company and led the company’s original $25 million Series A round that was announced back in April 2010. Besides adding cash, Foundation is picking up more expertise for its board from Kleiner partner Brook Byers—a longtime champion of personalized medicine—and Google’s Krishna Yeshwant.

The new financing for Foundation Medicine comes on the heels of a busy year, in which the company has presented some preliminary data at medical meetings, hired a new CEO in GE Healthcare vet Michael Pellini, and struck partnerships with Celgene (NASDAQ: CELG) and Novartis. The idea for the company is to come up with a more comprehensive analysis of an individual cancer patient’s tumor to see what combinations of mutations might be driving the malignancy, and, therefore, which treatments might have the best chance of working for the individual. The effort is based on the tools of next-generation DNA sequencing, which has made it possible to sequence entire human genomes for less than $4,000.

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[Update: 7:45 am Pacific 10/13] NanoString Technologies has spent much of the last year talking about its foray into diagnostic applications for its basic genetic analysis tool, but today it’s talking to researchers simply about getting some more oomph out of the machine.

Seattle-based NanoString said today, in an announcement at the International Congress of Human Genetics and American Society of Human Genetics conference in Montreal, that it has begun selling its second-generation tool called nCounter. The instrument provides a digital readout on the extent to which genes are dialed on or off in a sample—what’s known as gene expression analysis. The company said the next-generation instrument is supposed to have 50 percent higher bandwidth (known as throughput in the genetics business); more flexible software for analyzing the data from the instrument; and hardware that can be used by basic researchers, but that is manufactured in sync with more rigorous, consistent diagnostic industry standards.

The tool was first released for commercial use in 2008. Last December, NanoString showed where it is going with this tool, by acquiring intellectual property for a 50-gene signature that provides information on breast cancer prognosis. Rather than with simpler single-gene disorders that are already easy to spot, NanoString is hoping to find its niche in these kind of complex “multi-factorial” diseases, in which researchers might want to look at patterns of 50 or 100 genes in hundreds, or thousands, of patients.

The Broad Institute of Harvard and MIT in Cambridge, MA, one of the world’s leading genomics hothouses and an early adopter of the NanoString technology, will be the first customer to get a second generation machine, the company said. The Broad Institute will get two of the new NanoString machines, meaning it will have a total of five. The Broad Institute said it is using the company’s tools for its work on infectious disease, metabolic diseases, and cancer.

“We are looking forward to the next generation nCounter system to accelerate some of our larger projects,” said Nir Hacohen, a senior associate member of the Broad Institute, in a NanoString statement.

[Update with comment from NanoString CEO Brad Gray, and correction on his location.] NanoString originally started selling its first nCounter for $235,000, and it plans to charge the same amount for the new instrument, NanoString CEO Brad Gray says. Here’s more of what he had to say in e-mail: [An earlier version said Gray wrote the e-mail from the genetics conference in Montreal. He was actually in Seattle, coordinating with employees in Montreal.]

As we had hoped, the attendees of the ASHG meeting have given us a very positive response to the introduction of our second-generation nCounter system. During the first few hours of the show this morning booth traffic was heavy, and our sales team members were presenting to groups of two or three customers at once. We also ran a symposium on the use of the nCounter system for measuring copy number variations (CNVs), which had very high quality and engaged attendees. Attendees as far away as Europe are now in the process of discussing pilot projects for CNV, which bodes well for future system installs driven by this application.

The first generation nCounter system measured gene expression on up to 800 genes simultaneously, with unparalleled data quality and ease of use. Our second-generation system, coupled with our new nSolver software, will allow researchers to quickly run even larger studies, and manipulate the large data sets they generate even more easily. The nSolver software, included with the system, will allow export of data to the industry-standard visualization software packages such as Ingenuity Systems pathway analysis software. This further extends the advantages of using nCounter for large translational research studies of hundreds and thousands of samples. In addition, the diagnostic-quality hardware will provide researchers with both superior reliability, and with confidence that NanoString is committed to collaborating with our customers to translate their gene signature “content” into nCounter-based in vitro diagnostic products.

To answer the question on pricing that you posed in today’s Xconomy article, we are introducing the second generation nCounter at the same price as we had sold our first generation system. With the additional performance and features at the same price, we feel great about the value we are providing our customers.

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Companies like Pfizer that constantly need to develop new drugs never got much return on the investment in genomics a decade ago. But Pfizer is showing some renewed interest in genomics through a partnership being announced today with deCODE Genetics, the Iceland-based genomics company.

deCODE, a 15-year-old operation which Arch Venture Partners and Polaris Venture Partners lifted out of bankruptcy in January 2010, has been making a comeback of late. Today deCODE is announcing it has struck its first partnership with New York-based Pfizer (NYSE: PFE), the world’s largest drugmaker.

Financial terms of the deal aren’t being disclosed, but deCODE founder and CEO Kari Stefansson says his company will work for two years to search for variations in the genome that increase the risk of getting lupus, an autoimmune disease. The work could lead to new biological targets for drug development and help researchers develop companion diagnostics to select patients most likely to benefit from certain therapies.

“We are being well compensated for doing the work,” Stefansson says.

Stefansson adds that Pfizer had an internal champion of sorts for this project in David Cox, a geneticist formerly at Stanford University and with Perlegen, who Stefansson said is “a man who has a substantial competence in genetics.” But Pfizer isn’t the only major pharma company with renewed interest in genomic research, now that costs of sequencing entire human genomes has plummeted in recent years. “We are at the point where you can relatively easily collect a very large percentage of variants in genomes from large numbers of people to make discovery very reliable. The pharma industry has become very interested in the use of human genetics again.”

Kari Stefansson

Lupus, known formally as systemic lupus erythematosus, is an area of emerging interest in both the pharmaceutical industry and basic science. Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI) and its partner GlaxoSmithKline won FDA approval earlier this year for an antibody drug that was the first new treatment for lupus in 56 years. Analysts predict this drug, belimumab (Benlysta), will become a $1 billion annual seller over time.

No one knows what causes the disease, but it disproportionately affects women. It occurs when the immune system attacks healthy tissues as if they are foreign invaders, like a virus, causing pain, swelling, and fatigue.

Researchers know that lupus tends to run in families, but aren’t sure which biochemical pathways get perturbed, and how that varies among individuals, Stefansson says. Now that sequencing has gotten so cheap, and a company like deCODE can combine that capability with extensive medical records and genealogy records in Iceland, the time is right to pursue questions like this, Stefansson says. “For us as geneticists, it’s an exciting one to work on,” he says.

deCODE, which has about 140 employees at its Iceland headquarters, announced last week that it has discovered a genetic variation that raises the risk of women getting ovarian cancer. That study looked at the whole genomes of 457 Icelanders, and found a rare variation in a gene called BLIP1 that was linked to an 8-fold higher risk of getting the cancer. The finding was published in Nature Genetics.

Discoveries like that one for a new ovarian cancer marker are part of what has persuaded Big Pharma companies to take a closer look at some of the work deCODE is doing, says Bob Nelsen, a managing director with Arch Venture Partners in Seattle.

“They clearly are becoming more interested, driven by some of deCODE’s rare variant discoveries like the ovarian cancer breakthrough last week,” Nelsen says.

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These are hard times at universities in America. State support is dwindling, tuition is booming, and federal research dollars are in jeopardy. Morale has taken a beating.

But U.S. academic research centers are still the driving force for innovative new medicines, like always. And anyone who cares about U.S. universities should pay attention to what’s happening at UC San Francisco under the leadership of chancellor Susan Desmond-Hellmann.

Desmond-Hellmann, a biotech industry star from her days running drug development at Genentech, has her work cut out in her third year as UCSF’s chancellor. Like any executive arriving on campus, she’s had to learn a lot in a hurry. UCSF is a complex, 23,000-employee enterprise that does everything from studying the basic functions of stem cells to helping discover new drugs to treating patients. Starting in August 2009, she’s had the unpleasant job of overseeing furloughs, layoffs, and multi-million-dollar budget cuts. She’s said no, repeatedly, to promising new scientific initiatives.

But she hasn’t been stuck on the defensive the entire time. UCSF has struck a number of creative partnerships with companies like Pfizer, Sanofi, and Bayer, which are being closely followed at other universities. UCSF has also found a way, with the help of some big-time philanthropy, to break ground on two ambitious projects—a $1.5 billion hospital complex and a $200 million neurosciences research facility in the Mission Bay district. There in the same neighborhood, the university has also continued to support QB3, an incubator where academic scientists are starting companies that test whether their ideas just might have what it takes to become new drugs, devices, or diagnostics.

The Mission Bay cluster has been growing for years, and Desmond-Hellmann plans to describe her vision for what it can accomplish at noon Pacific time tomorrow in her “State of the University” address. I spoke with her about some of these themes in a wide-ranging interview at her office in UCSF’s Parnassus Heights a little more than a week ago. True to her disciplined business training, Desmond-Hellmann plans to outline a 3-year plan with measurable goals that she says will make her and her team clearly accountable for delivering what they promise. If all goes according to plan, she says UCSF will celebrate its 150th birthday in 2014 with a greater capability to advance health than it has today.

UCSF Chancellor Susan Desmond-Hellmann, at her office

“I’m sticking my neck out there and saying the world is changing very quickly, and yet our aspiration at UCSF is to be a world leader in health science innovation,” Desmond-Hellman says. “If that’s our aspiration, what are we going to do to that end? At a terrible time, with a rotten California economy, a rotten national economy, a rotten state of the world, people will see there was a medical center, an academic center in California, that positioned itself to have its best days.”

To see how far UCSF can go in this mission to deliver better healthcare to people, Desmond-Hellmann and her team have been challenging a lot of basic assumptions about how things get done. The university has already been pushed to operate more efficiently wherever it can, like, say, sharing one shiny new gene sequencing machine instead of buying two. But trimming around the edges and wringing out efficiency gains will only go so far.

As Desmond-Hellmann puts it:

“When you look at times of enormous stress in the system, that’s a great opportunity for people to look at fundamental things like whether we have the right curriculum for students learning how to become professionals in life sciences. What about graduate training? Is it OK that the average age for a first [basic NIH grant] is 42 years old? If it’s not OK, what is UCSF doing to address it? How much does it cost to be taken care of in our medical center? Who cares for people? How do we track what happens to patients? How are we doing in terms of safety and quality? What is UCSF really doing to say ‘here’s how life should be better.’”

Working in collaboration with pharma companies is definitely … Next Page »

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Health insurers usually aren’t wild about paying big bucks for diagnostic tests, and things probably won’t get easier for diagnostic companies as Medicare’s budget comes under increasing pressure. But Redwood City, CA-based Genomic Health has found a way to persuade that very big insurer that its test for predicting the risk of colon cancer recurrence is worth the price.

Genomic Health (NASDAQ: GHDX) said today that Palmetto GBA, the national contractor for Medicare has agreed to a national policy for coverage of a genetic test that predicts recurrence risk in colon cancer patients. The test, known as Oncotype DX, costs $4,000 per patient for breast cancer, and $3,280 for colon cancer. As it has with original Oncotype DX product for predicting breast cancer recurrence, Genomic Health has contended that its colon cancer test can save the healthcare system money by helping doctors and patients decide when to avoid unnecessary chemotherapy or choose more aggressive treatment when need be.

“This coverage decision allows all appropriate Medicare patients access to Oncotype DX for colon cancer and further recognizes the value our tests are delivering to physicians, payors and patients,” said Kim Popovits, Genomic Health’s CEO, in a statement.

The policy covers men and women with Stage II colon cancer. Genomic Health estimates that Medicare covers about one-third of the patient population it is aiming to address, says Emily Faucette, a company spokeswoman.

Genomic Health first started marketing the Oncotype DX test for breast cancer in January 2004, and the company received Medicare coverage for that test two years later, in January 2006, Faucette says. The colon cancer test reached the market later, in January 2010. About 200,000 tests for patients with breast and colon cancer have been ordered by doctors through June 30, Genomic Health says. The company has said it expects to generate $200 million to $210 million in total revenue this year, and make a profit of $3 million to $5 million.

Shares of Genomic Health climbed 4.4 percent to $20.82 at 12:47 pm Eastern time after the news.

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Funding needed to advance innovative technologies came in small dollops for several local life sciences startups last week, although one company got a big serving. Our weekly briefing begins now.

—San Diego’s Elevation Partners, which has been developing a long-lasting aerosol drug for treating chronic obstructive pulmonary disease, took in a $17 million tranche in a Series A financing that was previously disclosed. The company also reported some of its clinical results at the European Respiratory Society meeting in Amsterdam.

—The National Cancer Institute (NCI) awarded a two-year, $297,000 Small Business Innovation Research (SBIR) grant and a nine-month, $198,000 contract to San Diego-based NanoSort to develop devices capable of detecting circulating tumor cells using two new approaches. NanoSort, a development-stage biomedical device company, said it is working to use lab-on-a-chip technologies to drastically reduce the size and cost of high-performance flow cytometers and related equipment for research, diagnostics, and drug discovery.

—San Diego’s Naviscan, which won European clearance earlier this month to market its high-resolution Positron Emission Tomography (PET) scanners, raised almost all of a nearly $400,000 round of debt, rights, and securities, according to a recent regulatory filing. The scanner is predominantly used for mammography and guided breast biopsies. Since 2007, Naviscan has raised more than $17.5 million from Mayo Medical Ventures, QuestMark Partners, Sanderling Ventures and Walker Ventures, according to VentureWire.

—Connect, the nonprofit group supporting innovation and entrepreneurship in San Diego, named 24 finalists for its annual Most Innovative Product awards, including six life sciences entries. The San Diego-area finalists selected for innovative products in diagnostics and research are Biocept, Life Technologies, and Targeson. The finalists selected for … Next Page »

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Connect, the San Diego nonprofit group for innovation and entrepreneurship, says it has selected three finalists in eight categories for the region’s 24th annual Most Innovative New Product (MIP) Awards competition. The 24 finalists were culled from more than 140 nominations submitted, according to a statement from Connect. The finalists in each category are evaluated by San Diego experts and business executives in that category. Winners will be announced at an awards luncheon, set for Dec. 9 at the Hilton La Jolla Torrey Pines.

The finalists in each category are:

Clean Technology

Genomatica, for Process that produces high-volume industrial chemicals from renewable feedstocks.

Noble Environmental Technologies, for proprietary ECOR process to produce environmentally friendly building materials.

Wildcat Discovery Technologies, for electrolytic process that makes environmentally friendly materials.

Communications and IT

Ethertronics, for its Ether 1.2.1 technology for embedded antennas in mobile devices.

Kyocera Communications for Kyocera Echo, a dual-touchscreen smartphone.

Swarmology for Swarm.it, real-time contextual search and marketing technology.

Life Science – Diagnostics and Research Tools

Biocept, for OncoCEE-BR diagnostic screening technology to detect circulating tumor cells.

Life Technologies, for Ion Personal Genome Machine, technology for semiconductor-based DNA sequencing.

Targeson, for ultrasound contrast imaging of VEGFR2 receptor on lining of blood vessels.

Life Science – Medical Products

Hypnoz Therapeutic Devices, for Jaw Elevation Device used to maintain open airway during medical procedures.

IOS Technologies, for technology that enables dental professionals to create digital impressions and 3-D models.

Optimer Pharmaceuticals, for fidaxomicin (DIFICID), a new antibiotic treatment for C. difficile.

Software

FICO, for Falcon Fraud Manager 6 Analytics, used to detect payment card fraud.

MOGL for MOGL, online restaurant mobile rewards program.

SwoopThat, for online technology that helps college students find cheapest online price for every book they need to buy.

Hardware and General Technology

Aculon, for Aculon AL-X and Aculon H1-X products, nano-scale films and coatings for a variety of survaces.

LifeProof, for LifeProof case for the iPhone 4.

Memjet, for high-speed inkjet printing technology.

Action and Sport Technologies

Hydroflex, for flexing surfboard design.

KVA Stainless, for technology to produce seamless stainless steel tubing, pipes, stamping, and forming.

TaylorMade Golf, for R11 Driver with movable weight than enables golfers to customize to their swings more precisely.

Aerospace and Security Technologies

Geodetics, for positioning and navigation technology for dynamic platforms offering a variety of processing, global positioning system (GPS) and inertial measurement unit (IMU) options that can be configured to cover a broad performance spectrum.

Langford & Carmichael, for ScenGen, a software program that generates all possible scenarios for a given situation at a very high speed.

MicroPower Technologies, for MPT2500 Rugged-i, solar-powered wireless video surveilance camera technology.

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