It was a busy news week in the New England life sciences scene, with acquisitions, clinical data, and partnership deals.

—Thanks to a new co-promotion deal, Genzyme will begin marketing a diagnostic test for thyroid cancer developed by South San Francisco-based Veracyte. Genzyme, the Cambridge, MA-based unit of Sanofi (NYSE: SNY) makes a common drug for treating the disease.

—Cambridge-based Infinity Pharmaceuticals (NASDAQ: INFI) presented data from a 16-patient study indicating saridegib, its experimental once-daily pill, could potentially shrink tumors and help people live longer when combined with chemotherapy.

—Millennium, also of Cambridge, nabbed FDA clearance to begin selling a version of the multiple myeloma drug bortezomib (Velcade) that can be injected just under the skin, as well as intravenously. It’s significant because the under-the-skin drug seems to be more tolerable, reducing the drug’s side effect of nerve damage in the fingers and toes.

—Xconomy national biotech editor Luke Timmerman wrote about how Cambridge-based Vertex Pharmaceuticals (NASDAQ: VRTX) and its South San Francisco-based partner Alios Biopharma are positioning themselves to defend their share of the hot growing market for hepatitis C treatments.

—And my colleague Arlene wrote about the family-run business that is Woburn, MA-based Courtagen Life Sciences. Three brothers fill the roles of CEO, president, and chief scientific officer, while their dad chairs the board. Read about more about how it all came together.

—Bedford, MA-based Avila Therapeutics, a maker of so-called covalent drugs for treating cancer, was bought by New Jersey-based Celgene (NASDAQ: CELG) for $350 million upfront. Potentially $575 million more could come to Avila through milestones. The startup’s venture investors included Polaris Venture Partners, Atlas Venture, Abingworth Management, and Advent Venture Partners. Check out investors’ and friends’ reactions to the deal across the Web here.

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Vertex Pharmaceuticals went from king of the hill in the treatment of hepatitis C to yesterday’s news in about six wild months. But while many on Wall Street say Vertex’s big drug will soon become obsolete, Vertex and its small partner in South San Francisco have quietly put themselves in position to defend a big share of this future multi-billion dollar market.

Cambridge, MA-based Vertex (NASDAQ: VRTX), which has significant operations in San Diego, is running a series of small clinical trials this year that will mix and match combinations of antiviral medicines against hepatitis C. These trials will help determine whether Vertex and its partner, South San Francisco-based Alios Biopharma, have hit upon a combination of drugs that can raise the cure rate, and reduce side effects, for millions of patients with this liver-damaging virus.

While Vertex’s new drug has been a huge step forward in the past year, the ultimate way to fight the fast-mutating virus, many scientists believe, will be by putting together a cocktail of antivirals that attack hepatitis C from multiple angles like with HIV.

“There isn’t one magic pill that will solve the problem,” says Vertex CEO-to-be Jeff Leiden. “It’s clear the HCV space will evolve into different combination treatments for different patients. It’s not yet clear what the best combination is going to be. What you want is to have the component parts in your company so you can put them together.”

Vertex's Jeff Leiden

The hepatitis C world saw dramatic upheaval in the past year as researchers learned more about antivirals in development. Vertex won FDA approval in May for its new protease inhibitor, telaprevir (Incivek), which doubled the cure rate to about 80 percent for new patients when given in tandem with standard pegylated interferon alpha and ribavirin. About 25,000 people rushed in to get treated with the new combo regimen in its first seven months on the market, generating hundreds of millions in cash flow per quarter for Vertex, and pushing it into the black.

Exciting as it all was for physicians, patients, and Vertex shareholders, the company was soon upstaged. Researchers have long been looking for a way to get rid of the injectable interferon part of the regimen, which causes nasty flu-like symptoms that people must endure for months. To go beyond combo therapies (like the one from Vertex and another from Merck that include injectable interferon), the next step is to hit the hepatitis C virus with not just protease inhibitors, but also drugs from other classes—nucleotide polymerase inhibitors, and non-nucleotide polymerase inhibitors.

Princeton, NJ-based Pharmasset (NASDAQ: VRUS) stole the show last November at the American Association for the Study of Liver Disease when it said its nucleotide polymerase inhibitor cured all 40 patients with certain hepatitis C genotypes in a small study—a result that led to its $11 billion acquisition by Foster City, CA-based Gilead Sciences (NASDAQ: GILD). A few weeks later, another maker of drugs in that class, Alpharetta, GA-based Inhibitex (NASDAQ: INHX), got bought by Bristol-Myers Squibb for $2.5 billion. Separately, Bristol-Myers Squibb released some more promising clinical results from its own pipeline just last week.

Those developments got everyone talking about a new paradigm in hepatitis C, which many on Wall Street believe will leave Vertex in the dust. Jason Kantor, an analyst with RBC Capital Markets in San Francisco, said in a Dec. 19 note to clients that “the consensus view is that Vertex’s HCV franchise will essentially go to zero beyond 2015.” Vertex stock has dropped almost 40 percent in the past year, down from its 52-week high of $58.87 to $35.86 at yesterday’s close.

While Leiden has spent much time talking with investors about Vertex’s other drugs in development—particularly one expected to hit the market this year for cystic fibrosis—he says the company isn’t about to surrender in the hepatitis C market. He has a plan intended to allow Vertex to compete beyond 2015, when the first all-oral, interferon-free regimens are expected to could come along and replace today’s standard of care.

Sometime before the end of March, Vertex expects to see results from an early-stage study of an all-oral combo regimen of telaprevir (a non-nucleotide polymerase inhibitor called VX-222 that it acquired from a Canadian company in 2009) and the usual ribavirin. If Vertex can cure about 75 percent to 80 percent of patients with this cocktail, and reduce side effects by eliminating interferon, Leiden says the company would be ready to go to pivotal clinical trials this year with its own all-oral combination.

“If we can do that, it will be a very exciting result. If you take that regimen into pivotal trials, now we’re talking about 2014 to finish those trials,” Leiden says.

And that isn’t the only combo Vertex has in mind. Within weeks … Next Page »

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[[Correction: 11:20 am ET]] It’s never been easy to make a buck in biotech venture capital, but there used to be more predictability and logic to it, according to Clarus Ventures’ Nick Galakatos.

You’d invest a few million, or tens of millions, and push a new drug or device toward some scientific validation in a few years. The world would recognize the value, you’d cash out, and repeat the process.

But in the strange way the market has worked for biotech since the financial crisis of 2008, that’s not always how it is anymore.

“For any VC firm to be in business, you have to raise another fund, and to raise another fund, you have to have exits,” says Galakatos, the co-founder and managing director of Clarus. “When you think about exits, there are traditional ones, like IPOs and M&A. But the IPO market is not a healthy market, and the M&A market is idiosyncratic. And idiosyncratic is really the right word. You can’t predict the M&A market very well, you can’t probabilize that. Five years ago, you could say ‘I’ll create a company, and do X, and there will be five buyers.’ You can’t say that anymore.”

Galakatos, a 20-year veteran of biotech ventures, spoke philosophically at times about the state of biotech venture capital during an interview last week at the JP Morgan Healthcare Conference. Clarus, a firm with $1.2 billion under management in biopharmaceutical and medical technology companies, is feeling the same heat others have in this industry. Biotech VCs have all been pushed to show returns to their investors that justify their high-risk endeavors, especially when investors have plenty of other ways to put capital to work.

This will be an important year for Clarus, which will go a long way toward determining what its future looks like for the next five. The firm raised its last fund, worth a reported $660 million, in February 2008 just before the financial collapse. Clarus was “exceptionally fortunate” to raise the fund (now worth $700 million, Galakatos says) when it did. But now that four years have gone by, it will probably be just a few more months before Clarus hits the fundraising trail again, Galakatos says. “Probably in the latter part of this year, we’ll go out and raise a new fund,” he says.

[[Correction: the returns cited below are for current partners at Clarus, but their investments were made previously at MPM Capital, not Clarus.]] The partners at Clarus have had a strong run of returns. Before the financial crisis struck in 2008, the partners at Clarus were able to claim success when Rinat Neuroscience was bought by Pfizer for $500 million, Syrrx was acquired by Takeda Pharmaceuticals for $270 million, Tercica was bought by Ipsen for $373 million, and CoTherix was snapped up by Actelion for $420 million.

In the post-financial crisis era, Clarus has pulled out a few wins, but not as many. ESBAtech was sold … Next Page »

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After the stock market closed last night, New York-based Bristol-Myers Squibb (NYSE: BMY) announced that a cocktail containing two of its experimental drugs to treat hepatitis C obliterated the virus in some patients in a Phase 2 study. The results were so compelling the company used the “C” word in a press release, declaring, “This study was the first study to demonstrate the possibility that hepatitis C can be cured,” without interferon, which has to be injected and can cause side effects.

But the good news was quickly overshadowed by bad news from the FDA on another Bristol drug, dapagliflozin, which the company and its development partner, AstraZeneca (NYSE: AZN), had submitted for approval in Type 2 diabetes. At about 2 a.m., the companies announced that the FDA had issued a dreaded “complete response letter,” requesting additional data to help better assess the risk/benefit profile of the drug.

The FDA’s response was no surprise. In July, an advisory panel to the FDA voted nine-to-six against approving dapagliflozin. Although the agency doesn’t have to follow the recommendations of its advisory panels, it usually does. Dapagliflozin is part of a new class of drugs designed to inhibit SGLT2, a protein that promotes glucose absorption. The July assessment of Bristol’s drug was so harsh some Wall Street analysts declared the death of the entire SGLT2 class. In today’s statement, though, Bristol and AstraZeneca said they “remain committed to dapagliflozin and its development.”

Investors will be more likely to find something to cheer about in Bristol’s experimental hepatitis treatments, daclatasvir and asunaprevir. Both drugs target a subset of patients who have a particular genotype and who haven’t responded to the commonly used treatments interferon and ribavirin. With this recent study, the company reached its goal of proving that the combination would render the virus undetectable in some patients. A Phase 3 study of the dual treatment is now underway, meaning investors looking for some indication of how it works in a large patient population will have to wait a while.

Not surprisingly, Wall Street is focusing today on the bad news in diabetes. Shares of Bristol dipped about 1 percent to $33.42 in pre-market trading, and shares of AstraZeneca were down nearly 2 percent to $47.30.

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A decade ago, when newspaper and magazine editors prepared their rundown of the year’s most important news stories, they really were just choosing the articles that they thought had the most impact. That was old media.

Today, everything is measured and anything can be quantified—at least on the Internet. In cyberspace, people vote with their clicks, and my list of the top 10 stories of 2011 is based on the stories posted on the Xconomy San Diego website (from Jan. 3 through Dec. 23) that attracted the most traffic. That’s new media.

And a new year is beckoning, so it’s out with the old and in with the new.

Believe it or not, some stories published before 2011 still pulled in a lot of interest over the past year. For example, one of the top stories of 2011 was a post I wrote two years earlier about the pervasive skepticism voiced by biofuels industry leaders during the 2009 Algae Biomass Summit in San Diego. It also is noteworthy, although perhaps no surprise, that a 2009 post I wrote about the first human trial of San Diego-based Histogen’s hair regrowth treatment continues to attract readers who are Googling for news about baldness and hair restoration.

The No. 1 story of 2011, however, was surprising—at least to me. It was a commentary about the dramatic changes underway in new treatments for hepatitis C by San Diego Xconomist Steve Worland, the CEO of San Diego-based Anadys Pharmaceuticals. Worland alludes to the spate of new product introductions by Merck and Vertex, and predicts an increasing number of direct acting, cocktail-type antiviral drugs. It’s a hot topic, although Wall Street’s interest might have been piqued as analysts and traders searched to understand why Roche acquired Anadys for $230 million about five weeks after we published Worland’s op-ed.

It’s also worth noting that these high-traffic stories tend to occur in … Next Page »

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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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[Update: 10:40 am ET] Vertex Pharmaceuticals is getting a new CEO, as it faces tough new competition with its flagship hepatitis C drug and prepares to roll out a second new medicine for cystic fibrosis.

Cambridge, MA-based Vertex (NASDAQ: VRTX) said today that Jeff Leiden, a member of the company’s board and a managing director at Clarus Ventures in Boston, will replace Matt Emmens as president and CEO on Feb. 1. Emmens plans to remain a full-time executive chairman until May, when Vertex says he will retire from a full-time role at the company, but remain a member of the company’s board.

[Update with Emmens's age] Emmens, 60, is the former Merck executive who took over from founder Josh Boger as CEO in May 2009, as the company was finishing up clinical trials and preparing for the commercial push of a groundbreaking new therapy for hepatitis C, telaprevir (Incivek). The drug was cleared by the FDA in May, and although analysts expect it to be a billion-dollar seller, it quickly surpassed Wall Street sales expectations in its first couple quarters, allowing Vertex to report its first product-driven quarterly profit in its 22-year history.

But the hepatitis C landscape has changed in just the past couple months, as Gilead Sciences moved to acquire a competing drugmaker for $11 billion, and Vertex’s stock has plunged amid fears that it will soon be upstaged in the marketplace.

Shares jumped as high as $58 a share earlier this year, then plummeted all the way to $30.54 at yesterday’s close, leaving Vertex with a market valuation of $6.3 billion. Most of the value is based on the prospects for Incivek, although Vertex also has an application in to the FDA to start selling a new cystic fibrosis drug, ivacaftor (Kalydeco). That drug is getting a faster-than-usual six-month regulatory review, which the FDA sometimes grants to groundbreaking new medicines. The FDA deadline to finish its review is April 18.

“Under Matt’s leadership, Vertex established itself as a company capable not only of discovering important new medicines, but of successfully bringing those medicines to patients,” Leiden said in a statement. “As a member of the Vertex Board, I have been extremely impressed with the company’s ability to retain its clear focus on both groundbreaking science and improving the lives of people with serious diseases. It will be a privilege to lead Vertex at this exciting time and to further build the organization as we prepare for the global launch of our second new therapy, advance our diverse pipeline and build value for shareholders in the years ahead.”

Leiden, 56, is the former president and chief operating officer of Abbott Laboratories, where he gained experience in the highly competitive rheumatoid arthritis drug market with adalimumab (Humira).

Emmens, in a company statement, added: “I am proud of the accomplishments we have made during my almost three years at Vertex and believe the company is well-positioned to bring forward additional innovative new medicines. Jeff brings significant and broad leadership experience to Vertex, and I am confident that his understanding of the company, combined with his unique blend of scientific, commercial and financial expertise, will help Vertex deliver on its goals in the future.”

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Biotech rivalries are sometimes a bit like boxing matches, where you have two lone fighters vying for the prize. But the hepatitis C market is turning into a battle royal that’s more wide open and unpredictable, with all the competitive maneuvering, surprise crashes, and comebacks you might expect from the Daytona 500.

The medical advances in hepatitis C have been dizzying this year, especially in what it means in terms of multi-billion dollar business implications. The safest thing to say is that there’s plenty of good news for patients this year, but that shareholders in the major hepatitis C drug developers had better hold on tight as a new standard of care gets established.

Some commentators figured that Gilead Sciences (NASDAQ: GILD), the world’s biggest maker of HIV drugs, had essentially locked up the dominant position in this new drug class through its $11 billion acquisition last month of Princeton, NJ-based Pharmasset (NASDAQ: VRUS). But it’s still too soon for anyone to declare victory over the wily and fast-mutating virus that causes hepatitis C. Given the way drug development is going now, it’s possible we could have dueling antiviral drug cocktails that cure almost 100 percent of patients within five years. And before we get there, we’re going to see some fascinating chess moves—and probably a few surprising collaborations—from companies like Vertex Pharmaceuticals, Merck, Roche, Johnson & Johnson, Bristol-Myers Squibb, and Abbott Laboratories, as well as several smaller biotech startups like Alpharetta, GA-based Inhibitex (NASDAQ: INHX).

The Pharmasset compound that prompted Gilead to write such a big check, PSI-7977, is “certainly not a panacea, not the lone answer,” says Kleanthis Xanthopoulos, the CEO of San Diego-based Regulus Therapeutics, and the co-founder of another hepatitis C drug developer, Anadys Pharmaceuticals.

Regulus Therapeutics CEO Kleanthis Xanthopoulos

Xanthopoulos says Gilead was “taken to the cleaners,” and that the hepatitis C market is still up for grabs. “It’s going to take some time before people figure out how it plays out,” he says. The Pharmasset drug “is a powerful player, but you will need other direct-acting antivirals. You want to go to a 100 percent cure rate. I can guarantee the Pharmasset compound isn’t going to do it alone.”

Hepatitis C has never really captured big headlines in the U.S., as it has never benefitted from massive awareness boosting campaigns that have supported research for, say, HIV, or breast cancer. But hepatitis C has clearly emerged as one of the biggest opportunities in pharmaceuticals over the past few years. There are more than 3 million people in the U.S., and an estimated 170 million worldwide, with this liver infection that can lead to cirrhosis and liver cancer. Most people have never bothered to get treated, partly because the infection takes years to fully wreak havoc. The other reason is the standard of care with a combination of drugs—pegylated interferon alpha and ribavirin—causes flu-like symptoms that last for almost a year, and usually cures only 30-40 percent of patients. Essentially, most people figure the treatment is worse than the disease.

Vertex Pharmaceuticals changed the equation back in May. The company won FDA approval for a direct antiviral drug, a protease inhibitor called telaprevir (Incivek), that is added to the usual two-drug combo regimen. By adding the Vertex drug, researchers saw the cure rate boom to almost 80 percent of patients, while cutting the treatment time with the other drugs in half. The Vertex drug also significantly raised … Next Page »

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Dendreon has never lifted a finger to develop any new drugs for hepatitis C, but now the Seattle cancer drug developer is getting $125 million in cash for its stake in the emerging market for the chronic liver infection.

The company (NASDAQ: DNDN) said today it made the money by selling off the rights to its royalty stream related to boceprevir (Victrelis), a new hepatitis C drug. Dendreon sold the royalty rights to CPP Investment Board.

While Dendreon has always invested its time and money in developing cancer drugs, it obtained the hepatitis C intellectual property through its 2003 acquisition of San Diego-based Corvas International. Corvas had licensed its IP to Schering-Plough, which used it in part to develop boceprevir, a protease inhibitor for hepatitis C. Schering-Plough is now owned by Merck, and Merck started generating revenue from the intellectual property in May when it won FDA approval of the new drug. Dendreon didn’t disclose what percentage it gets from worldwide sales of Victrelis, but the company said it collected $2.9 million in royalties from Merck in the three-month period that ended Sep. 30, according to its most recent quarterly report.

“The sale of the Victrelis royalty interest allows the company to strengthen our cash position, and enables us to further invest in our core business initiatives,” said Greg Schiffman, Dendreon’s chief financial officer, in a statement.

Dendreon certainly has found itself in a position where it needs to scrape together cash any way it can. The company is on track to fall way short of the $350 million to $400 million sales forecast it had this year for its lone marketed product, sipuleucel-T (Provenge) for prostate cancer. The sales shortfall prompted Dendreon to lose more than 60 percent of its market valuation, and prompted Dendreon to cut 500 jobs back in September. Despite the cost cuts, the company still burned through $106 million of cash in the most recent quarter. It had $568 million in cash and investments left in the bank at the end of September.

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New England area biotechs had news this week on stock price, clinical data, new financings, and more.

—AMAG Pharmaceuticals of Lexington, MA, saw its stock shoot up 18 percent to $16.21 on Monday after announcing its CEO Brian Pereira’s departure and its plans for reducing operating expenses. AMAG (NASDAQ: AMAG) has struggled in transitioning from a diagnostic-imaging product maker to a drug developer, with its shareholders recently voting down a plan to merge with Allos Therapeutics (NASDAQ: ALTH).

—An early analysis of a pivotal study of Cambridge, MA-based Ariad Pharmaceutical’s experimental drug ponatinib showed the treatment may be safer than it was originally thought to be. A previous trial of the drug showed that about 12 percent of patients developed an adverse event known as pancreatitis, but Ariad (NASDAQ: ARIA) lowered the dose for the second trial and the rate of pancreatitis decreased to 3.7 percent of patients.

—Lebabon, NH-based PharmaSecure inked a $3.9 million investment late last month to put towards its technology for more cheaply preventing the sale of counterfeit drugs in markets like India. The money came from Innovation Endeavors—the fund led by former Google CEO Eric Schmidt—as well as Gray Ghost Ventures, Healthtech Capital, and TEEC Angel Fund.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ: VRTX) saw its stock drop 17 percent over two days after other biotechs developing rival hepatitis C drugs shared promising data at the American Association for the Study of Liver Disease (AASLD) annual meeting in San Francisco this week.

—Rhythm Pharmaceuticals, a Boston startup developing experimental obesity and diabetes treatments, hired Keith Gottesdiener, a veteran of the pharmaceutical giant Merck, as its new CEO.

—Dusa Pharmaceuticals plans to begin Phase 2 clinical testing later this month of its drug-device combination for preventing the recurrence of pre-cancerous skin growths known as actinic keratoses (AK). The company has sold the treatment, Levulan Kerastick, as a method for removing existing growths, but dermatologists have reported success preventing their recurrence by applying the product for longer than initially directed. Wilmington, Ma-based Dusa (NASDAQ: DUSA) is seeking FDA approval to market the product for that purpose.

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The price of shares at San Diego’s Gen-Probe, Amylin Pharmaceuticals, and Optimer were clipped for various reasons over the past week, but several local startups successfully raised capital. Our good news, bad news briefing begins here.

—Rempex Pharmaceuticals, a San Diego biopharmaceutical startup developing a new approach to antibiotics resistance, said it raised $67.5 million in Series B venture funding—bringing total funding for the company to $76 million since its founding less than five months ago. The startup is on a fast track, and plans to use the capital to accelerate the commercialization of its therapies for treating gram-negative bacterial infections. Rempex said it plans to file a new drug application for its first drug candidate in the second half of 2012. New investors Frazier Healthcare Ventures and Vivo Ventures joined existing investors SV Life Sciences, OrbiMed Advisors, and Adams Street Partners in the latest round.

—Cambridge, MA-based Vertex (NASDAQ: VRTX) has held the high ground in hepatitis C therapies since the FDA approved its protease inhibitor drug telaprevir (Incivek) last year. But two rivals are gaining ground. The price of Vertex shares have fallen with the rise of Alpharetta, GA-based Inhibitex (NASDAQ: INHX) and Princeton, NJ-based Pharmasset (NASDAQ: VRUS). Vertex, which has operations in San Diego, hit a 52-week high of $58.87 on May 12, but it has been trading around $31 in recent days.

—Adding to the competition in hepatitis C drugs, San Diego-based iTherX Pharmaceuticals raised almost $3.2 million to advance its development of a prophylactic treatment for Hepatitis C, according to a regulatory filing earlier this week. The startup said in March that its drug candidate TX-5061 appears to prevent the hepatitis C virus from entering liver cells, and has shown “potent preclinical antiviral activity against all HCV genotypes.” Former UCSD virologist Flossie Wong-Staal is a co-founder and chief scientific officer. The company raised $2.8M in 2010.

—San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN) agreed to pay Eli Lilly more than $1.5 billion as it gradually reassumes responsibility for global commercialization of its best-selling diabetes drug in a deal that ends its 10-year partnership with Lilly. Under their agreement, which also ends litigation with Lilly, Amylin will take over sales of exenatide (Byetta) in the U.S. by the end of this month—and global sales of both Byetta and an experimental, extended release version (Bydureon) over the next two years. Amylin shares, which hit a 52-week high of $16.65 on Jan. 27, have been trading around $10 a share over the past few weeks.

—Xconomy east coast biotechnology editor Arlene Weintraub profiled PharmaSecure, a four-year-old startup in Lebanon, NH, with operations in San Diego, Michigan, and India. The company provides machines to drug-makers that print unique bar codes and serial numbers on drug packaging. PharmaSecure raised $3.9 million last month from Innovation Endeavors, Gray Ghost Ventures, Healthtech Capital, and angel investors. The Tech Coast Angels (TCA) participated in … Next Page »

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Cambridge, MA-based Vertex Pharmaceuticals has seen its stock take a whopping 17 percent hit in the past two days at a scientific meeting, as investors have had time to think about the implications of new clinical trial data from a couple of competitors in the hepatitis C field.

Vertex (NASDAQ: VRTX) saw its stock tumble from $36.63 at Friday’s close to $30.41 at today’s close—a 17 percent drop over two days of trading—as investors absorbed a flurry of news stories at the annual meeting of the American Association for the Study of Liver Disease (AASLD) in San Francisco. Vertex’s decline coincided with a boost in the stocks of of Alpharetta, GA-based Inhibitex (NASDAQ: INHX) and Princeton, NJ-based Pharmasset (NASDAQ: VRUS).

Vertex has been the reigning king of hepatitis C for the past year. Its protease inhibitor drug telaprevir (Incivek) was FDA approved as a new treatment that boosts cure rates to almost 80 percent, while shortening the time people need to take interferon and ribavirin, a standard combination that causes significant side effects. The company has handily beaten Wall Street sales estimates for its first couple quarters on the market, and turned profitable, while fending off competition from a protease inhibitor from Merck (NYSE: MRK). But researchers are pushing hard now to fight hepatitis C with a combination of new antiviral medicines, much like how HIV is controlled, and Vertex’s existing drug could end up being less important over time than other treatments.

Pharmasset, which is developing a nucleotide polymerase inhibitor, saw its stock climb at the meeting when it said its drug had cured all 40 patients in a clinical trial. Importantly, the Pharmasset drug produced cures whether patients got interferon or not—and although the number of patients was small, it would be a big advantage if Pharmasset’s drug could eliminate the need for interferon. The company is still at least a couple years away from challenging Vertex on the market, but analysts see this new drug and potentially another one from Inhibitex as becoming potent new options that might be able to reach a goal that has so far eluded Vertex—the elimination of interferon, and the flu-like symptoms it causes, from the standard treatment regimen for hepatitis.

Thomas Russo, an analyst with Robert W. Baird, downgraded Vertex to “neutral” today after going over the results from the liver meeting. One of the bullet points in his note today was headlined “AASLD event reveals Vertex itself uncertain, lacking convincing strategy to defend position 2014+.”

Russo said he applauded Vertex management for “sincere, credible” comments about how Pharmasset may have changed the hepatitis C paradigm, but he isn’t sure Vertex can fend off the challenge through its own internal development, or through an acquisition.

“We remain positive on cystic fibrosis catalysts in the first half of 2012, but investors first need confidence in the HCV floor, and we’ve lost conviction this stock can “thread the needle” in an environment of new uncertainty (and resignation?) coming from the company itself,” Russo wrote.

Besides the nucleotide inhibitors in the works, other pharma companies are developing so-called non-nucleoside inhibitors as a third class of antiviral medicine that could go into combinations. Roche recently agreed to acquire San Diego-based Anadys Pharmaceuticals (NASDAQ: ANDS) for $230 million to get its “non-nuc,” while Abbott Laboratories is also pursuing a drug in that category.

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Drug approvals and advances in new cancer therapies were the prevailing themes in San Diego’s life sciences news over the past week. Our briefing begins now.

—TEDMED, the exclusive medical and healthcare symposium that died in 2004 and was resurrected in 2009, is now the walking TEDMED. The entertaining show with a mix of big ideas, celebrity presentations, humor, and music that played at the Hotel del Coronado for the past three years said it is moving to Washington DC. Playing at the John F. Kennedy Center for the Performing Arts in the nation’s capital will give the $4,000-a-person symposium a bigger stage and a more influential audience, according to Priceline.com founder Jay Walker, who led an investor group that acquired the show in April. About 850 attended last week’s four-day symposium in the San Diego area.

—Federal regulators approved a new pain-killing drug intended to put off the post-surgical need for opioids that was developed by Pacira Pharmaceuticals (NASDAQ: PCRX), the Parsippany, NJ-based drug developer with operations in San Diego. The FDA’s approval marked the end to a protracted drug-development saga for the long-acting form of a pain drug called bupivacaine. Pacira plans to begin marketing the drug, branded as Exparel, in January.

—The FDA approved a new diagnostic test that was developed by San Diego-based Gen-Probe (NASDAQ: GPRO) to detect strains of the human papillomavirus (HPV) that pose a higher risk for cervical cancer and precancerous legions. Gen-Probe said regulators approved its Aptima HPV test to run on TIGRIS, a fully automated, high-throughput molecular diagnostic system. Using a Pap smear sample, the company says its test detects 14 high-risk types of HPV, giving patients and doctors information earlier and more accurately.

—Luke’s BioBeat column focused on several cancer drugs the FDA approved in August, which he suggested could be a turning point in the decades-long battle against cancer. Instead of broad-based anti-cancer drugs, Luke says regulatory approval of vemurafenib (Zelboraf), brentuximab vedotin (Adcetris), and crizotinib (Xalkori) signals the … Next Page »

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Vertex Pharmaceuticals has tallied up an amazing amount of red ink in its 22-year history, but now it can say that all those long R&D years have created a profitable business.

The Cambridge, MA-based biotech company (NASDAQ: VRTX) said today that it generated $659 million in total revenues, and turned a profit of $221 million ($1.02 a share) in the third quarter that ended Sept. 30. Once before, the company had a quarterly profit in the 1990s from a one-time milestone payment, but this is the first time in Vertex’s history that it has generated a quarterly profit from its own product sales, says company spokeswoman Megan Pace. Vertex reached this point after ringing up an accumulated $3.8 billion deficit through mid-2011, according to its most recent quarterly report.

The emerging financial strength at Vertex is being driven by its new FDA-approved drug telaprevir (Incivek) for patients with hepatitis C. The product, first cleared for sale in the U.S. in May, has been creating a new wave of demand among patients which has been consistently underestimated by Wall Street. Vertex tallied $74.5 million in product sales in the previous quarter, and now has ramped up Incivek sales to $420 million in the period that ended on Sept. 30.

An estimated 3 million people in the U.S. are thought to have chronic hepatitis C infections, and about 170 million worldwide are believed to have the condition. Many patients have elected to go untreated before Vertex’s drug came along, because the prior drugs caused flu-like symptoms that last for almost a year, while offering a cure rate of less than 40 percent. Vertex’s drug has changed the situation, because when given in combination with standard pegylated interferon-alpha and ribavirin, it has cured about 80 percent of patients with this liver-damaging disease, and enabled patients to cut the treatment time in half. The drug costs about $49,200 for a full 12-week course of therapy.

Investors, many of whom have been burned by excessive hype around other biotech drug introductions, had much more tepid forecasts, especially since Vertex is competing with a new drug from Merck from the same class of protease inhibitors. Analysts only forecasted Vertex to generate $31.5 million of sales in the drug’s debut quarter, and about $300 million to $400 million in the period ended Sept. 30, according to reports from TheStreet.com.

“More than 17,000 people with hepatitis C have started treatment with Incivek since its approval in May, underscoring the strength of the launch,” said Nancy Wysenski, Vertex’s chief commercial officer, in a statement. “We are focused on further broadening the number of doctors using Incivek and are continuing to work with the hepatitis C community to increase awareness and screening and to help ensure patients are able to get the support they need.”

The financial performance enabled Vertex to bolster its cash reserves to $658.7 million as of Sept. 30, compared with $593.5 million on June 30, even while it was spending much bigger money on marketing. And, the company is looking to add a second revenue stream to its financial statements next year. This month, it filed an application with the FDA for clearance to sell ivacaftor (Kalydeco, aka VX-770) as a new treatment for cystic fibrosis, a deadly lung disease. That product could generate $700 million in annual revenue over time, according to analyst Tom Russo of Robert W. Baird.

Vertex didn’t provide any update for investors on its forecasts for quarterly sales, and profits.

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Between the formation of the new $100 million West Health Investment Fund and the new wet-lab space Johnson & Johnson is hosting for as many as 20 startups, you’d have to say it’s been a good week for life sciences innovation in San Diego. Get briefed here or get left behind.

—San Diego’s Gary and Mary West, who provided $90 million to establish the West Wireless Health Institute, established the $100 million West Health Investment Fund to invest solely in startups that promise to drive down the cost of health care. Don Casey, the fund manager and West Wireless CEO, vowed that the fund would not cause a “balloon squeeze,” where innovation moves the cost from one part of the health system to another.

—Johnson & Johnson has refurbished part of its Pharmaceutical Research & Development facility in San Diego to provide lab and office space for as many 20 life sciences startups. Each startup will have to make monthly payments to stay at the Janssen Labs at San Diego, but J&J says there is no “quid pro quo,” and each tenant will get office space and access to a common area with wet lab research equipment that would be difficult for a company to afford on its own.

—Anadys Pharmaceuticals (NASDAQ: ANDS), the San Diego-based biotech developing antiviral drugs for treating hepatitis, agreed to an all-cash buyout offer worth $230 million from Roche, the Swiss pharmaceutical giant. Roche’s offer to pay $3.70 for each Anadys share was a 256 percent premium over the previous trading day’s close of $1.04. Anadys had just released encouraging results from a mid-stage clinical trial of its lead hepatitis C drug.

—Venture capital firms invested $6.95 billion in 876 deals throughout the United States—including $202 million in 21 venture deals in the San Diego area—during the three months that ended Sept. 30, according to the MoneyTree Report. The third-quarter survey from PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters also highlighted a shift in VC activity, with a pullback in funding for life sciences. That was also true in San Diego, where nine life sciences companies got $26 million, or 13 percent of total VC investments here.

—Following a two-year setback, San Diego’s Sequenom (NASDAQ: SQNM) rolled out a laboratory-developed blood test that can determine with … Next Page »

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San Diego-based Anadys Pharmaceuticals was only valued at about $60 million yesterday by Wall Street, but it’s worth $230 million today.

The developer of hepatitis C drugs (NASDAQ: ANDS) said today it has agreed to be acquired by pharmaceutical giant Roche for $3.70 a share, a 256 percent premium over its closing price of $1.04 at the close of trading on Friday. The all-cash deal is expected to close before the end of the year, Anadys said.

The takeover was announced just a few days after Anadys (pronounced UH-nad-iss) released results from a mid-stage clinical trial of its lead hepatitis C drug candidate, setrobuvir (ANA598). The Anadys treatment, along with standard pegylated interferon and ribavirin, showed that after 12 weeks it was able to completely eradicate the hepatitis C virus in 78 percent of patients who were getting first-round therapy. That compared to 56 percent who did that well on the standard treatments alone. About 39 percent of patients on the Anadys drug had skin rashes, compared to 22 percent in the control group.

Anadys’ plan is for its antiviral compound, a non-nucleoside polymerase inhibitor, to be one of the key ingredients in a cocktail strategy that approaches hepatitis C much like HIV.

Vertex Pharmaceuticals (NASDAQ: VRTX) and Merck (NYSE: MRK) have stirred interest in the field this year by winning regulatory approval of new protease inhibitors for hepatitis C, while Pharmasset (NASDAQ: VRUS) has generated excitement among investors for a different kind of antiviral, a nucleoside polymerase inhibitor. Roche has its own internal program as well with a nucleoside polymerase inhibitor, which scientists believe can be combined with the other drugs in development. About 170 million people worldwide are estimated to have hepatitis C infections, which leads to liver damage over a period of years.

“Since Anadys’ formation, our focus has been on driving forward research and development that would make a real difference to the lives of patients, especially those with hepatitis. With Roche’s considerable capabilities and experience in HCV, we believe this acquisition provides the best chance of success for the new potential treatments to reach patients,” said Anadys CEO Steve Worland, in a statement.

Roche’s global head of pharma research and early development, Jean-Jacque Giraud, added in a statement that Roche is hoping to put together a combination of treatments that will get rid of the standard interferon. That drug is known to cause flu-like symptoms that make patients feel miserable for months at a time, and often discourages people from seeking treatment.

“This acquisition augments Roche’s already strong HCV portfolio. Our aim is to offer physicians and hepatitis patients a powerful combination of therapies that bring us closer to a cure, even without the use of interferon,” Giraud said. “Anadys’ compounds provide additional modes of action that could lead to interferon-free treatment regimens without viral resistance.”

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We had an unusual mix of headlines this week on RNA interference, biofuels, and a quiet little startup in Bothell with Icos pedigree.

—There weren’t any major life science company financings to report this week, but the state’s academic centers had something to crow about with $80 million in new federal grants going to the University of Washington and Washington State University. The money is intended to help scientists find ways to turn lots of our regional biomass into renewable fuels, and hopefully create a few jobs along the way.

—I’m trying an experiment next week with a “Tweetchat” with one of the industry leaders in the field of RNA interference—John Maraganore of Cambridge, MA-based Alnylam Pharmaceuticals. For those of you interested in RNAi, and who have Twitter accounts, this will be a good opportunity. It will start at 10 am Pacific on October 4th, and go for about 30 minutes. The idea is to have an open conversation about where this whole gene-silencing business is going after a series of well-documented setbacks. For those of you not on Twitter, but interested in sending a question in to Maraganore, shoot me an e-mail. There is no shortage of interest in RNAi here in the Northwest, with Seattle-based PhaseRx, Bothell, WA-based Marina Biotech, Vancouver, BC-based Tekmira Pharmaceuticals, Vancouver, BC-based Alcana Therapeutics, and Seattle-based Groove Biopharma all working on various pieces of the puzzle.

—Cocrystal Discovery, led by a couple former Icosahedrons in Gary Wilcox and Sam Lee, has kept a pretty low profile its first three years in business. But that’s starting to change now that this company struck a new partnership with Israel-based Teva Pharmaceutical, and Wilcox gave me the inside scoop on what this team is setting out to do with antiviral drugs against hepatitis C, flu, and more.

—Adaptive TCR, a spinoff from the Fred Hutchinson Cancer Research Center, named a few familiar local biotech names to its roster of various advisors. Lee Huntsman of the Life Sciences Discovery Fund has joined Adaptive’s board of directors; Cassian Yee of the Hutch has been added to the scientific advisory board; and Carol Gallagher (formerly of Calistoga Pharmaceuticals) and Stewart Parker of the Infectious Disease Research Institute have been named to the startup’s corporate advisory board. Adaptive, for those just tuning in to this story, is using the tools of modern DNA sequencing and computing to help scientists better understand how DNA get shuffled around in B and T cells that make up our adaptive immune systems.

—We had a lot of perspective this week on what it’s like for women in biotech—not something I’ve written much about here the past three years. This week in BioBeat I talked about what looks like a potent new force for closing the gender gap in biotech—a new all-female networking group called Women in Bio. Coincidentally, we also had a guest post from Lisa Suennen, a venture capitalist in San Francisco, who talked about another women-dominated biotech event she recently attended in the Bay Area.

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One of the older tricks in biotech is to sign up a Nobel Laureate as a scientific advisor, and hope some of his or her credibility impresses investors. Never mind if the renowned scientist only shows up for a company meeting a couple times a year. But Gary Wilcox, the CEO of Cocrystal Discovery, didn’t duck when I asked him how much time Stanford University’s Roger Kornberg actually spends on advising the startup.

“He’s involved every day,” Wilcox says. “Roger e-mailed me just 15 minutes ago. He’s incredibly excited.”

Cocrystal has kept a low profile since it was founded three years ago, but this startup with labs in Bothell, WA, and Mountain View, CA, struck an interesting deal last week. Cocrystal said it had formed a collaboration with Israel-based Teva Pharmaceutical, the giant generic drugmaker, in which Teva is investing $7.5 million upfront to gain development access to a hepatitis C compound in early development, among other assets. Cocrystal has now raised a little more than $18 million from Teva, government grants, and a founding equity round led by The Frost Group, the investment vehicle of billionaire Philip Frost.

Cocrystal was started in 2008 by a couple of veterans of Bothell, WA-based Icos, as well as Kornberg, who won the Nobel Prize in 2006 for his work in describing how DNA gets copied into RNA. The big idea at the startup is to use new X-ray crystallography technology to get vivid pictures of replication enzymes within viruses that are critical to making the viruses dangerous. The crystallography techniques provide images with resolution down to the level of individual atoms, and enable Cocrystal to account for how atoms move in real-time, as opposed to taking a more simplistic snapshot image, Wilcox says. Once scientists have that deeper understanding of every nook and cranny in the target, and its range of motion, Cocrystal uses proprietary software to select the ideal small-molecule candidates to bind with the target, Wilcox says.

This approach has enabled a small company like Cocrystal, with about 20 employees split between its Bothell and Mountain View labs, to avoid the massive small molecule screening campaigns that Big Pharma companies have been finding notoriously costly. It’s too early for Cocrystal to get cocky since it is still probably a couple years away from its first clinical trial, but it has been enough to keep Kornberg interested, and for Cocrystal to set up a lab not far from his office at Stanford.

“We have a really good molecule in preclinical development,” Wilcox says. “But probably what’s equally important is we have a giant step forward with our general approach. We have a way of doing things different and better.”

Kornberg himself offered a pretty straight-laced reply when I asked for his comment, but he made plain he’s interested in the broad potential of the Cocrystal platform: “Our technology offers a systematic approach to the development of exceptionally effective drugs against any targets for which crystal structures may be obtained,” he wrote in an  e-mail.

Getting teams in two different cities working together … Next Page »

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This week we had a so-small-it’s-scary acquisition of a local medical device company, along with some more encouraging news of a local biotech company entering its first clinical trial.

—Seattle-based Calypso Medical Technologies agreed to be acquired by Palo Alto, CA-based Varian Medical Systems this week for $10 million upfront, plus undisclosed future milestone payments. This will amount to a big write-off for Calypso investors, including Seattle-based Frazier Healthcare Ventures, who have poured more than $150 million into the company since its founding in 1999. The Calypso system, which enables medical pros to deliver prostate cancer radiation therapy with pinpoint accuracy, generates $15 million in annual sales, the company says.

—Theraclone Sciences, a Seattle biotech company that has pulled in the more modest sum of $41 million since its founding in 2005, reached a key milestone. Theraclone said it has started its first clinical trial of an experimental antibody it believes has potential to treat or prevent a wide variety of types of influenza. This first trial will assess safety at a variety of doses, and future trials will have to sort out whether it’s more useful as a hospital-based treatment for severe flu patients, or whether it can help protect first-responders in the event of a flu pandemic.

—I announced our next big Seattle biotech event this past week, called “The Immunex Impact.” This event, timed for the 10th anniversary of Amgen’s acquisition of Immunex, will bring together a number of prominent Immunoids still doing their thing in Seattle. Steve Gillis, Chris Henney, Doug Williams, Stewart Parker, and Dave Urdal will all be there, among others. Tickets are going super-fast for this one, and I’m really looking forward to seeing a lot of readers there at the Institute for Systems Biology on December 1. For info on how to register, click here.

—Cocrystal Discovery, the Bothell, WA-based startup led by Icos veterans Gary Wilcox and Sam Lee, pulled in $7.5 million last week through an investment from Israel-based Teva Pharmaceutical. Teva, the generics company seeking to invent new drugs, is betting on Cocrystal’s experimental polymerase inhibitor against hepatitis C, as well as other antiviral programs.

—This week in the BioBeat column, I chose to stir the pot about how more biotech industry leaders should stir the pot. Essentially, an industry like biotech that relies on broad support from the public and investors needs to work hard to keep people engaged. And being outspoken every once in a while about industry issues is definitely one way to do it.

—This week, I had the good fortune of being one of about five guys who attended a networking event with 200 professional biotech women. It was the kickoff event for the Seattle chapter of Women in Bio, which seeks to help women advance their careers in biotech. There was a lot of enthusiasm in the room, and for proof, check the handful of photos I snapped there.

—Lastly, I had some national news about how pharma giant Merck has decided to join the long list of Big Pharma companies that are now investing in biotech companies. Merck is getting its start with a $250 million fund for biotech startups, and another $250 million fund for global health innovations.

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Cocrystal Discovery, the Bothell, WA-based drug discovery startup led by a couple of Icos veterans, has nailed down $7.5 million in new investment to develop a new kind of hepatitis C drug with Israel-based Teva Pharmaceutical.

Teva, the big maker of generic drugs that’s increasingly seeking to invent new ones, agreed to invest the money into Cocrystal’s early-stage work on a drug candidate made to block a polymerase enzyme that’s integral to the hepatitis C virus. Teva has also secured the option to invest more if the program reaches certain milestones, and has obtained rights to exclusively license the drug for its own development pipeline. Besides the hepatitis C program, Teva has gotten the option to invest in two more antiviral or antibacterial drug programs at Cocrystal. In return for all the investments, Teva said it will get a 23 percent ownership stake in the small company.

Cocrystal has kept a low profile since it raised $10 million back in September 2008, in a round led by The Frost Group, the investment vehicle for billionaire Philip Frost. Given Cocrystal’s pedigree, this new deal shouldn’t come as too much of a surprise—Frost is the chairman of Teva, and sold his last company, Miami, FL-based Ivax, to Teva for $7.4 billion in 2006.

Internally, Cocrystal is led by chairman and CEO Gary Wilcox, who was previously executive vice president of operations at Bothell, WA-based Icos until that company was bought by Eli Lilly for $2.3 billion in January 2007. Cocrystal’s president is Sam Lee, who led drug discovery teams at Icos. The third founder is Roger Kornberg, a professor of structural biology at Stanford University who won the Nobel in 2006 for insights into how DNA is copied into RNA.

The basic idea at Cocrystal, which Wilcox told me about here three years ago, is to develop conventional small-molecule drugs to kill viruses, built on a better understanding of the biological targets they are supposed to hit. The company is using new X-ray crystallography technologies to get high-resolution views of replication enzymes within viruses, which it hopes will provide insight on how to design drugs that block that critical machinery that makes viruses dangerous. On its website, Cocrystal says it has drug discovery programs ongoing for hepatitis C, flu, and rhinovirus (common cold).

Hepatitis C, a chronic liver-damaging virus that affects 170 million around the world, has clearly emerged as one of the hot areas in drug development as Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX) and Whitehouse Station, NJ-based Merck (NYSE: MRK) have each introduced new protease inhibitor drugs that have greatly increased the cure rate for this infection. Scientists are now working on a number of different antiviral combination therapies to see if they can continue to raise the cure rate, and get rid of standard medications that cause side effects.

I sent a note to Wilcox to see if he has any additional comment, and will update this space if I hear back.

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