If you’ve never heard of NaviNet, the builder of what the company claims is the nation’s largest real-time healthcare communications network, then the Cambridge, MA-based firm bears most of the responsibility, says company CEO Brad Waugh. The 11-year-old firm spent its first 10 years building the network and its customer base, and over the past year has the firm put a greater emphasis on telling health plans, doctors, and others about its multiple capabilities, Waugh says.

NaviNet helps doctors’ offices instantly access patients’ insurance information, such as their benefits eligibility and claims status, over the Web. So far it’s connected 770,000 doctors and other healthcare providers to the network, covering about 40 percent of the total market, according to Waugh. Big health insurers like Blue Cross Blue Shield, Aetna, and UnitedHealthcare are attracted to and use NaviNet’s services because they save money by accessing sharing information via the company’s Web portal rather than through costlier call centers, Waugh says. NaviNet makes the bulk of its money, he says, on transaction fees that insurers pay the firm to connect with doctors.

There are certainly other important details of NaviNet’s business to speak of. But the big question I had was how the company is adapting to the rapidly evolving landscape of the U.S. healthcare system, which is expected to undergo major reforms under the Obama administration. (Read on for my conversation with Waugh on this topic.) With the goal of driving down healthcare costs, among other things, the federal stimulus package passed earlier this year includes $19 billion in incentives for hospitals and practices that adopt electronic health records. While the exact rules governing how the money will be doled are still being worked out, Waugh says that his company already has the information “rails” over which the government and the healthcare system could move information smoothly and securely.

The 238-person company is already seven years into operating profitably, Waugh says, but because NaviNet is private, he doesn’t have to share actual financial numbers. He says the continued growth of the business will help support an eventual public offering. (I’m sure the company’s investors, such as Waltham, MA, venture firms …Next Page »

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Quite a few publicly traded biotechs released quarterly financial statements this week, but we arranged some fascinating conversations with entrepreneurs and researchers to offset the necessary number-crunching.

—Seattle Genetics is having a breakout year, and one sure sign is that it has enrolled cancer patients in a clinical trial much faster than the industry norm. That was one big reason why the Bothell, WA-based biotech company (NASDAQ: SGEN) was able to sell 11 million new shares to investors this week, in an offering that raised a cool $118 million. Usually these offerings dilute the value of existing shares and drive down the stock price, but Seattle Genetics actually climbed 5 percent the following day.

—Amgen has spent five years researching biomarkers that might provide clues as to which cancer patients will respond to a drug, and which won’t. Much of the “personalized medicine” work, performed at research centers in Seattle and Cambridge, MA, was validated last week in the first big prospective clinical that showed patients with a normal form of the KRAS gene were more likely to benefit from taking panitumuab (Vectibix) than those with a mutated form.

—I had a fascinating conversation this week with Bonnie Ramsey, one of the world leaders in research and treatment of cystic fibrosis. Ramsey, who’s affiliated with Seattle Children’s Hospital and the University of Washington, talked in great depth about the surprising extent to which research has improved the outlook for CF patients over the past 30 years, and the significance of an emerging treatment from Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX).

—Stephen Friend is best known in Seattle as the founder of Rosetta Inpharmatics, and now he’s back in Seattle, dreaming big again. Friend described his vision, and progress during the early days, at the nonprofit genomics collaborative he’s leading called Sage Bionetworks.

—We published a couple of guest editorials this week that are of interest to biotechies. The first was from Jim Thomas, a vice president at Amgen in Seattle, on how he says lawmakers can provide a way for “biosimilars” to enter the marketplace without undermining incentives for companies like his to develop innovative new medicines. The next piece on national policy was from Ryo Kubota, CEO of Bothell, WA-based Acucela, who advised policymakers not to reform healthcare in any way that dampens the entrepreneurial spirit that makes America the best place for developing new drugs.

—Seattle-based Dendreon is starting to branch out across the U.S. map. The company (NASDAQ: DNDN) confirmed this week that it is planning to add two new manufacturing plants for its prostate cancer drug, sipuleucel-T (Provenge) in the greater Atlanta area, and in Orange County, CA. The company also reported that it had $287 million in cash and investments when the second quarter ended on June 30, helped along by a $227 million infusion it got from investors after Provenge passed its pivotal clinical trial in April.

—AVI Biopharma, the RNA-based drug developer that’s moving its headquarters from Portland, OR, to Bothell, WA, said it ended the second quarter with $20 million in cash. AVI (NASDAQ: AVII) has been strengthening its financial position for months, and predicted that it will pull together more funding this year from governments and other sources.

—Seattle-based Oncothyreon (NASDAQ: ONTY) said it ended June with $22.7 million in cash, which—hold on here for a double-take—was actually $3.5 million more than it had at the beginning of the year. The company has fattened up its balance sheet with another $14 million through a stock offering this month, giving it more breathing room in its quest to develop cancer drugs.

—The financial prospects looked a lot dimmer this week for Seattle-based Targeted Genetics (NASDAQ: TGEN). The gene therapy stalwart, which has been warning of its possible demise since May, said this week that it “must raise additional capital” if it is going to remain in business beyond the end of this month.

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Cancer drugs are notorious for offering slim odds of helping patients live longer, while guaranteeing they’ll suffer some unhappy side effects. Lots of scientists are searching for clues in the genome for how to select people most likely to benefit from a drug, while sparing everyone else. Boston-based Immuneering thinks there’s a better place to look—the immune system.

Immuneering popped on my radar at last week’s XSITE event at Boston University, where I met CEO and founder Ben Zeskind. He’s 27, with a list of accomplishments that puts him in boy wonder territory. He’s got a bachelor’s in electrical engineering and computer science from MIT, a Ph.D in bioengineering from the Whitehead Institute, and an MBA from Harvard Business School. Zeskind didn’t tell me about his background, but got my attention when he said he’s recruited Bob Carpenter to be his chairman and mentor. Carpenter is 64, a 30-year biotech entrepreneur who once sold a company to Genzyme (NASDAQ: GENZ) for $1 billion, and since then has spent 15 years on the Cambridge, MA-based biotech giant’s board of directors.

This mentor-and-protege team has its sights on making a fundamental change in cancer treatment. Immuneering wants to take blood and tumor biopsy samples, look at whether the patient has immune cells with the right characteristics to produce a powerful, long-lasting immune response against tumors, and run those readouts through a proprietary mathematical model to predict the odds that a patient will respond to a drug. This fundamental understanding should also offer suggestions for how to boost the odds of success, explain why some drugs work for individuals and not others, and do it for virtually every type of cancer with a few tweaks to the model, Carpenter says.

Since the global market for cancer drugs was worth $66 billion in 2008, and is expected to grow to $84 billion by 2012, governments and health insurers are going to continue putting a lot of pressure on drugmakers to justify all that cost, largely through tools that can predict …Next Page »

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Despite an avalanche of new genomic information, the slope upward to applying it widely in medicine looks steep. This picture was laid out bluntly by biology pioneers Walter Gilbert and George Church at Xconomy’s biotechnology forum on Thursday, April 30. They saw big problems with both investment and public awareness. Their remarks were particularly striking to me because I’m currently writing a history of the genome project for Basic Books of New York.

Both panelists have been associated with Harvard for decades. Gilbert, now a photographer and investor, is the inventor of a Nobel-prize-winning DNA sequencing method in the 1970s and co-founder of what is now Biogen Idec. Church, also a pioneer in sequencing and advisor to and founder of several companies in the field, is best known lately for his Personal Genome Project.

Public participation, according to Church, is vital to spreading genomic medicine widely. Millions of patients and their doctors, he said, must be educated to see the relevance of genetic factors in illness. Then they must demand such information, help obtain it in the detail needed to give power to genetic tests, and use the results.

Gilbert focused on the now-classic dilemma of personalized medicine. This is the reluctance of large drug companies to study and push genetic stratification of patients into those likely or unlikely to benefit from a particular drug or dosage. Perhaps, he said, insurance companies would see the point of finding out whether a cancer patient would be helped by a treatment that costs $50,000 a year.

Both saw needs to go around existing systems. The investment system, Gilbert said, is “broken.” Venture capitalists, and many company founders, now demand an exit in three to five years. “It’s hard to put money in for 20- to 30-year periods.” This is a major obstacle to …Next Page »

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A suburban healthcare group began selling personal DNA testing kits in San Diego this week, enabling ordinary people to buy an over-the-counter test to determine their predispositon to genetic disease.

The Personal Genome Service packages, which retail for $399, were previously only available online. The first DNA kits ordered by San Diego’s Palomar Pomerado Health (PPH), the largest public healthcare district in California, were quickly purchased by PPH CEO Michael H. Covert and other employees, according to Andy Hoang, a PPH media relations manager. “This truly interests people,” Hoang said. The healthcare district, which operates two hospitals and provides a variety of other medical services, has received hundreds of inquiries about the kits, Hoang said. Making the DNA kits available to the public, he added, puts PPH at the forefront of preventive personalized health care.

The diagnostic kit was developed by 23andMe, a startup based in Mountain View, CA, that received $8.9 million in Series A venture funding in 2007 from Google, MDV, Genentech, and New Enterprise Associates. The CEO, Anne Wojcicki, is married to Google co-founder Sergey Brin. To perform the test, a customer spits into a test tube (23andMe maintains a blog called, The Spittoon) and sends the sample to 23andMe for diagnostic screening that uses a machine developed by San Diego-based Illumina. Customers are sent information about their genetic makeup and whether they are genetically prone to certain diseases or characteristics.

The San Diego Business Journal pointed out that California regulators last year questioned the accuracy and validity of the tests. 23andMe was cleared to do business again. Some experts have warned that genetics is much more complex than a quick do-it-yourself test.

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While San Diego learned yesterday it is the new home of the nation’s first wireless health care research institute, a vision of the sweeping changes that such technologies pose was taking form in a UC San Diego conference room.

The high-level meeting was organized by federal health officials in an effort to help guide the development of one of the hottest areas in health care—the convergence of “personalized” medicine, based on genomic research, with the latest generation of information management technologies. The session included prominent medical researchers, government health officials and executives from Intel, Google, Qualcomm, and Cisco Systems who are currently overseeing IT initiatives in health care.

The U.S. Department of Health and Human Services, which sponsored the meeting, plans to use the discussion as a way to map future funding and research priorities in personalized health. Russ Altman, a Stanford University professor of bioengineering, genetics and medicine, told the group that sequencing individual patients’ full genomes will be available for everybody in 10 to 15 years.

“Genome information will be fundamentally disruptive to providing health care,” Altman said. And because of the enormous data storage needed to analyze genomic information, Altman added, “anybody who is interested in genomic research also is a huge fan of electronic health care databases.”

Qualcomm’s Don Jones told me during a break that electronic health records have become a particularly hot topic since President Obama signed the federal economic stimulus package. The government’s economic recovery plan calls for spending more than $19 billion to help medical facilities throughout the country adopt electronic health records. Jones predicted the most valuable innovation will be the integration of these records with medical diagnostic tests, wireless monitoring tools and analytical software that, for example, can detect telltale patterns that presage a heart attack or stroke.

Jones also led Qualcomm’s support for San Diego’s new West Wireless Health Institute, which was announced yesterday with a $45 million grant from the Gary and Mary West Foundation. The nonprofit research institute is intended to help develop wireless heart monitors and other types of medical biosensors. Jones also noted that wireless health care also will be a prominent theme at this week’s annual CTIA Wireless conference, which begins tomorrow in Las Vegas, NV.

Kevin Patrick, a UCSD professor of family and preventive medicine, told me that startup companies also are emerging with innovative healthcare technologies. Patrick said he was one of several researchers helping Santech, a San Diego startup that is exploring novel uses of the Internet and cell phones to tackle such health problems as obesity and diabetes.

“We recently released the first study in the world on using text messaging to promote weight loss,” Patrick said.

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Many life sciences shut down operations between Christmas and New Year’s Day, so obviously they need to cram a lot of work into weeks like the last one. Here’s a rundown of the big news.

—Amgen, the giant biotech with about 1,000 employees in Washington, went before an FDA advisory panel to make an unusual case. It wants permission to market its colorectal cancer drug for fewer patients, because data suggests it might work better in a subgroup of patients with a certain genetic profile. The FDA panel said the data’s not up to snuff, but more trials are ongoing to prove this point, so the story’s not over.

—Seattle-based VLST inked an important drug discovery partnership with Novo Nordisk, the Danish pharma company that is the world’s largest maker of insulin for diabetes. Under the deal, VLST gets $12 million in upfront payments and an equity investment, in exchange for granting Novo right of first refusal to develop some of its most promising drug candidates for autoimmune diseases. More milestone payments will flow to VLST if Novo opts in.

—The state’s Life Science Discovery Fund doled out another round of grants worth almost $19 million. This money will go toward vaccine research, improved delivery of biotech drugs into cells, helping resuscitate people with sudden cardiac arrest, and rural mental health services.

—OncoGenex Pharmaceuticals emerged from obscurity a couple weeks ago when it released data that its prostate cancer drug candidate prolonged lives in a clinical trial, and investors are catching on. The company, based in Vancouver, BC, and Bothell, WA, was the single best performer on the Nasdaq in the week ended Dec. 12.

—Seattle-based Northstar Neuroscience, a maker of an electrical stimulation device for severe depression, got a public dressing-down by RA Capital, a Boston-based hedge fund. RA argues that since investors value its cash balance more than its technology, it ought to just liquidate.

—Uptake Medical, a Seattle-based maker of a minimally invasive technique to treat emphysema, raised $3 million in venture capital to help it finish …Next Page »

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Amgen is preparing to make an unusual argument to an FDA advisory panel tomorrow. The world’s largest biotech company (NASDAQ: AMGN), with research operations in Seattle and Cambridge, MA, plans to make a case that one of its drugs should be used by just a subgroup of patients with colorectal cancer who appear to be most likely to benefit from it.

Normally, drugmakers spend a lot of time and money trying to prove their products should be used by the broadest number of patients possible. This meeting will be closely watched by hundreds of cancer drugmakers, since it could be an important test case for the movement toward creating more personalized cancer medicines.

The hearing will focus on two colorectal cancer drugs that hit the same target that’s a culprit in tumor proliferation, EGFR. The medicines, Amgen’s panitumumab (Vectibix) and Eli Lilly’s cetuximab (Erbitux), have both been shown in backward-looking statistical analyses to work much better for about 40 percent patients with a normal form of a gene called KRAS. If you’re one of the unlucky others with a mutant form of KRAS, which makes cancer more aggressive, the drugs won’t work. Since these treatments are hugely expensive, at $10,000 a month for the Lilly product and $8,000 a month for the Amgen version, there’s a societal interest in genetic testing of these patients before they get treatment. It also could spare a whole lot of people the nasty skin rash and other side effects that come with the drugs, if they have little chance of benefit.

“Amgen has concluded that the benefit/risk profile of panitumumab will be improved by restricting monotherapy use to those patients whose tumors have the wild-type (normal) KRAS gene,” the company said Friday in briefing document posted online.

I’m always skeptical when drug companies say they are eager to narrow down their potential pool of customers, but in Amgen’s case there is a back story of business and science that explains how it arrived at this position.

For starters, the Lilly product got to the market first in February 2004, when it was developed by ImClone Systems. The drug has built a commanding lead in market share, with $1.3 billion in sales last year.

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

That result wrecked Amgen’s marketing strategy, which had been to position panitumumab …Next Page »

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Most Americans are depressed about the economy. But if we pull back and try to rise above the clouds, there are real reasons for hope.

The combination of a “Yes We Can” administration headed to the White House, along with our country’s established leadership in innovation, has us standing at the crest of a trail that could ensure we never enter this chasm again. Let’s get back on our feet and remember what we are made of.

America is the world’s leading innovator in medicine, energy, information technology, and almost every discipline. Our research, patents, startups, and venture capital, all show a country driven to innovate, to create, and to dream the big dream for a better future.

United States’ innovation drives our everyday lives. The light bulb. The transistor. The PC. The Internet. The human genome. An innovator’s spirit cannot be doused by a few rain showers, and thrives on adversity. We are amazed by modern day dreamers and historic visionaries, including Thomas Edison, Jonas Salk, Steve Jobs, Bill Gates, and others. They, like most Americans, possessed an innate disrespect for the status quo. They defied conventional wisdom and created new industries.

America succeeds where others fail because we value creativity over conformity. We respect the hope and naïveté of the young, because sometimes they are right. We seek risk, because it makes us stretch and break new ground. We support a free market for all good ideas, and welcome the best and brightest from distant shores.

We learn from failure and don’t punish it automatically, but we do not tolerate poor performance either. We reward the risk-takers.

Try that in Germany, or Japan, or China.

We must stay on the trail of innovation, in spite of adversity. Be aware that the trail is prone …Next Page »

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For months and months, we heard the mantra of “Obama: the change we need; change we can believe in.” The election is finally over. The people have spoken. Now that Senator Barack Obama is president-elect, it is my hope that certain “changes” supported by the president-elect will help jump-start two areas of focus in the Boston life sciences community: embryonic stem cell research and “personalized medicine.”

Since 1996, a law has banned federal spending on research that harms human embryos. In August 2001, President George W. Bush issued an executive order that loosed this restriction slightly by allowing federal funding for embryonic stem cell research that used one of the few then-existing stem cell lines. Now, seven years later, President-elect Obama is reviewing President Bush’s order and may reverse or amend the decision made in 2001. Expectations are high for a change. In a 2007 news release supporting legislation to loosen restrictions on stem cell research, Mr. Obama said:

I am frustrated … that we are preventing the advancement of important science that could potentially impact millions of suffering Americans … My hope, and the hope of so many in this country, is to provide our researchers with the means to explore the uses of embryonic stem cells so that we can begin to turn the tide on the devastating diseases affecting our nation and our world.

Some have asked why, given the advances in stem cell research with the federal prohibitions in place, particularly the dramatic results seen in the last few years with making stem cell-like cells from skin cells (also known as reprogrammed or induced pluripointent stem cells (iPS)), any change is needed. But there are a number of reasons why removing limitations on embryonic stem cell research is “change we need.”

Research in reprogrammed cells, while dramatic, is still in its infancy. In fact, the first reprogrammed cells were reported just a few short years ago. As a result, many issues need to be worked out. iPS cells are currently produced, at least in part, through the introduction of genes associated with cancer, using a virus that could lead to cancer-causing mutations. Needless to say, more research is needed before this methodology reaches the clinic.

Another important issue is the equivalence of iPS and other types of stem cells. Are the cells the same? Do certain types of stem cells have properties that might provide clinical advantages? Some scientists believe that iPS cells will never be suitable for cell therapy. Time and research will tell. Relaxing the ban would allow scientists in the field to use equipment and facilities funded with federal research dollars, potentially accelerating research while, at the same time, reducing research costs.

Relaxing the ban could provide another important dividend. For ethical and political reasons, many pharmaceutical and biotechnology companies have stayed away from stem cell research. It is hoped that federal support of stem cell research will encourage commercial investment, resulting in what we all hope for: clinical treatments.

Will the Obama administration change the federal position on embryonic stem cell research? …Next Page »

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Nobody ever accused Bruce Montgomery of being a mealy-mouthed, politically-correct businessman. On Microsoft’s own turf, he offered some free advice last night about what to do with an extremely messed-up healthcare IT industry.

“If Microsoft really wants to own the world, create a standardized electronic medical records system and give it away for free the first five years. Then start charging,” said Montgomery, a senior vice president at Gilead Sciences, the world’s largest maker of AIDS medicines, in an event hosted by the Washington Biotechnology & Biomedical Association last night at the Microsoft campus in Redmond.

The problem is that every hospital is using different programs that don’t talk well to each other. Some of these, including one called SAS that’s been favored by the FDA (and universally loathed by pharma companies, from what I gather), deserve to be put out of their misery, Montgomery said. “Put SAS out of business,” Montgomery said. Get some “code monkeys” to work on a modern user interface, he added, and, “You could put them out of business in a week.”

This naturally generated a few laughs, and probably a few nervous ones, at the software company with a troubled history of anti-competitive behavior. Microsoft didn’t make any bellicose statements about world domination last night, but the company clearly has its sights on a big opportunity to make hospitals, pharmaceutical companies, and drug regulators drop their old habits of using paper records and clunky old proprietary programs, in favor of something easier to use and more efficient that captures a patient’s medical records in the doctor’s office, or in clinical trials of experimental drugs.

Zachary Hector, Microsoft’s worldwide pharma industry solutions manager, laid out the broad vision with a slick TV commercial at the beginning. It depicted a young woman who’s pre-diabetic, going for a run, carrying around a PDA-type device that monitored her blood sugar in real-time. The information would be relayed to her doctor, and automatically channeled into a database along with records from other patients in a clinical trial. Later, while going about her everyday chores, the woman would carry a credit card with a fingerprint scanner, which she could stick into an ATM like device to order a diabetes medication.

“Patients are taking more control over their health because of the Internet,” Hector said.

Patients want this kind of predictive information, he said. Market research shows patients care about wellness, prevention, fitness, early detection, disease avoidance, and preventive medicine, Hector says. The age of one-size-fits-all blockbuster drugs like Pfizer’s atorvastatin (Lipitor), which generated more than $12 billion in sales last year, is coming to a close as its patent protection will be dead in 2011. In a world where entire human genomes can be sequenced for as little as $5,000 next spring, a deluge of information is coming about tiny variations in the 6-billion letter string of DNA. Enormous research is being done on how those variations might affect the way certain individuals respond to certain drugs. …Next Page »

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Some of the world’s biggest selling cancer drugs today work for only a small fraction of patients, and researchers have struggled to say for sure why that is. A Cambridge, MA-based biotech company, Ensemble Discovery, has developed a diagnostic test that its partner Roche, the world’s largest maker of cancer drugs, is advancing to clinical trials early in 2009. The goal is to see if Ensemble has developed a more precise method to predict if a drug is going to work for an individual patient.

Ensemble is announcing today that it has extended a collaboration that started in July 2007 with Switzerland-based Roche to see whether its proprietary diagnostic tests will offer better predictive clues about whether drugs like Genentech and Roche’s trastuzumab (Herceptin) or ImClone Systems’ cetuximab (Erbitux) are going to work. The company didn’t disclose how much it is receiving in milestone payments from Roche, or what the clinical trial timetable looks like, but I was able to get a basic rundown on the technology from CEO Mike Taylor, senior vice president of biology David Livingston, and Laurence Reid, the chief business officer.

Ensemble was founded in 2004 based on a new class of therapeutics developed by David Liu at Harvard University. It has raised $32 million since inception from Flagship Ventures, Arch Venture Partners, Harris & Harris Group, CMEA Ventures, and Boston University. Most of their bet is being placed on Ensemble’s experimental drugs, but the company has also applied its technology to a new form of diagnostic test that could someday help insurers decide whether to give a patient a $10,000-a-month drug like cetuximab, or to try something else because they know it’s doomed to fail.

“We’re very pleased that Roche has perceived the value of it and look forward to working with them in the coming months,” Taylor says. “It’s an important application for us, and we’re pursuing it aggressively.”

The company’s technology is called DNA-programmed chemistry. These molecules can be designed to be nimble enough to detect interactions between proteins in ways that other engineered biotech molecules can’t, Taylor says. It makes proprietary probes with fluorescent tags that will light up under a microscope and tell a researcher whether a protein drug like trastuzumab will bind properly with the special variety of protein, called a dimer, on that individual’s tumor cells.

It’s too early to say yet what this sort of information might mean, Livingston says. It could mean that researchers would suggest fewer patients get a certain drug, or might prompt recommendations that more get them. It might suggest a combination of drugs would work better than one alone, he says.

Roche clearly has a big interest in this field of personalized therapy, given its status as a leading maker of diagnostic tests and the majority owner of South San Francisco-based Genentech, which pioneered personalized therapy by introducing trastuzumab to the market in 1998. That drug is approved for only one-fourth of breast cancer patients who have a mutated form of the HER-2 gene. Animal tests have suggested that tumors with a slight variation of this gene, called a heterodimer, might be better equipped to develop resistance to the drug—which could lead researchers to think ahead about strategies to launch pre-emptive attacks on resistance with another drug, Livingston says. …Next Page »

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No sooner did Rebecca note the recent dearth of life sciences venture financings than we got word of a sizable one: Lexington, MA-based Predictive Biosciences, which has a small office in San Diego and is out to help build a new era of personalized medicine, announced today that is has secured $21.75 million in Series B financing. The round was led by new investor New Enterprise Associates and joined by Kaiser Permanente Ventures (also new) and previous investors Highland Capital Partners and Flybridge Capital Partners.

Predictive, founded in 2006, had previously raised $10 million and was formed around work done over a number of years at Children’s Hospital Boston. We profiled the startup almost a year ago to the day, in a piece that looked at its strategy of trying to develop tests designed to facilitate better, more individualized treatment of cancer. The company’s first goal: developing tools to allow doctors to detect cancer from urine samples, thereby sparing patients expensive and often grueling practices such as invasive exams and biopsies.

One of the company’s co-founders, Marsha Moses, currently leads the Urinary Proteomics Initiative at Children’s Hospital, where she helped to build what she described as “the largest urine bank in the world.” As our correspondent Malorye Allison wrote, “Having all that pee on hand and all those years of research under their belts has helped the Predictive team identify a new set of biomarkers, or telltale molecules, that are shed into the urine by a range of cancers, including biggies like breast and colon tumors.”

In today’s announcement, Predictive said the new funds will help support ongoing clinical development of its urine-based assays, which are focused initially on detecting bladder cancer recurrence. (Bladder cancer patients typically must endure a cystoscopy—an extremely uncomfortable procedure where a tube is inserted into the bladder—every three months for the first two years after their cancer is removed, and more than a dozen times in total over a five-year period.) “Over the coming months, we will continue to execute our clinical development and commercialization plans, and complete preparations to launch a multi-center clinical trial in bladder cancer recurrence patients,” said Predictive CEO Peter Klemm in a statement.

The company also has high hopes for another program for ruling out bladder cancer in patients with hematuria, or blood in the urine, says Eugene Chiu, another Predictive co-founder who is now VP of business development. Only a small percentage of patients with hematuria actually have bladder cancer, but many have to undergo cystoscopy to rule out the disease, Chiu says. For a patient who doesn’t actually have cancer, Predictive’s tests could determine that with such a high accuracy the patient and his doctor could decide to skip the cystoscopy, he says.

Ultimately, the company aims to develop tests for breast, ovarian, prostate, and colorectal cancers, among other cancers—thereby helping usher in a new era of more personalized treatment. “What this really does is in a way it individualizes and personalizes the diagnostic interventions which are done,” says Chiu.

Although Predictive is based in Massachusetts, both CEO Klemm and CFO Vikram Lamba work out of San Diego. (Klemm and Lamba were CEO and CFO, respectively, of San Diego’s GeneOhm Sciences, which was sold for $230 million to Becton Dickinson in 2006.) “We’re looking at building a global organization, and the fact that our management team is actually on both coasts in a way is an advantage for us,” says Chiu.

And he predicts that Predictive’s success will be good for both regions. “We’re going to make some waves,” Chiu says.

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It was almost exactly a year ago that Microsoft launched its HealthVault service, a secure online database for users to store and manage their medical records. And in recent months, we’ve reported on the software giant’s increasing efforts in health care, including its new partnerships with prescription drug provider CVS Caremark and Boston, MA-based health startup American Well. Now, Microsoft is teaming up with San Diego-based Scripps Health to study the long-term effects of personal genome testing on health and lifestyle.

The study, which is co-sponsored by the Bay Area firms Affymetrix and Navigenics, seeks to do genetic scans on as many as 10,000 people affiliated with the non-profit Scripps Health system. The scans and analysis will tell participants about their genetic risk for health conditions like diabetes, obesity, heart attack, and certain types of cancer. But the point of the study is to follow what happens after that: will participants change their lifestyle to combat their newfound health risks, and if so, how? The plan is to track their behaviors over 20 years using detailed questionnaires and periodic health surveys. To protect the privacy of users, the identifying information on their saliva samples and questionnaires will be “encrypted and kept in a secure database,” according to Scripps.

What’s in it for Microsoft? Participants will be able to store their clinical and lifestyle information in a Microsoft HealthVault account, and access it or share it with health care providers. “This collaboration is a significant step forward in empowering people to proactively address their specific individual health needs, as well as give clinical researchers access to a broader pool of genetic data to develop new disease treatments,” said Peter Neupert, corporate vice president of Microsoft’s health solutions group, in a statement.

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Geospiza, a Seattle-based maker of software to support biological research, said today it is hitching its wagon to San Diego-based Illumina, a rising star in next-generation gene sequencing. Geospiza is joining Illumina Connect, a sort of referral service in which researchers who buy Illumina’s gene analysis machines are advised that Geospiza software can help them sift through the resulting piles of data. It’s not guaranteed cash flow, but it’s a source of promising sales leads for privately-held Geospiza.

It’s the first formal relationship between the two companies and the result of several months of effort, says Rob Arnold, Geospiza’s president. Geospiza began working on the partnership in December, after it learned through a survey that 9 out of 10 of its customers were interested in buying Illumina’s next-generation sequencing machine, called the Genome Analyzer. The device, which costs $400,000 to $500,000, is capable of bringing down the price of sequencing an entire human genome to about $60,000, down from several million bucks a few years ago, Arnold said.

“You can do an enormous amount of work on these machines, you can go deeper and wider than anything researchers have had before,” Arnold says. For example, researchers can look at 10 genes of interest in 1,500 patients with breast cancer, and see how their individual genes respond differently to different drugs.

That’s the tantalizing promise of personalized medicine, yet the $400,000 is still a hefty tab for academic researchers. After shelling out that much cash, many opt for software developed in-house (i.e., cheaply) to sort through and make sense of the data. Geospiza’s task is to convince them that by spending a bit more for its software—at $30,000 a year or $2,500 a month—they can keep better track of that precious experimental data.

Illumina isn’t devoting its salesforce to pitch the Geospiza system, called FinchLab, although it did highlight the value of the system in an instructional “webinar” with about 200 researchers last month, Arnold said.

“Unlike many applications, FinchLab is highly tailored to the specific needs of the Genome Analyzer, with tools for managing and analyzing next-generation genetic sequence data that can accelerate research and discovery,” said Omoshile Clement, senior product manager of Informatics at Illumina, in a Geospiza statement.

Geospiza doesn’t disclose its financial statements, but it’s clearly not a bad thing to get on board the Illumina train. That company’s business is booming, with first quarter sales climbing 69 percent in the first quarter, to $122 million, Illumina said in April.

The Illumina Genome Analyzer is competing with devices from Applied Biosystems, Roche, and Cambridge, MA-based Helicos Biosciences, Arnold said. Geospiza is confident that researchers will start turning to software that can help them cope with information overload from machines like Illumina’s. “Folks are getting overwhelmed with data,” Arnold said. “It’s like going through several thousand spreadsheets of data. Without more of a data management system to track, and present it, there’s no practical way to get through it.”

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It has long been known that different individuals react to the same drug differently. Matching the right therapy with the right individual, commonly know as “personalized medicine,” could improve treatment, reduce side effects, and ultimately save healthcare dollars.

This idea has captured the attention of not only research scientists, but also healthcare providers, the pharmaceutical industry, pharmacy benefits managers, venture capitalists, and the FDA. Progress is being made in this area, and a number of personalized medicine products are already on the market. Though sales numbers are still quite small, diagnostic tests and targeted treatments aimed at enabling personalized medicine are expected to become part of mainstream medical practice within 10 years. Yet, passage of pending legislation that is purported to promote medical advances will likely have the opposite effect, hindering much-needed venture capital investment in this emerging field.

At the heart of personalized medicine are diagnostics tests that reveal, for example, a patient’s risk of a particular disease or likelihood of responding well or poorly to a particular drug—often based on gene expression or gene mutations. But there are many hurdles that a diagnostic company must overcome before bringing a diagnostic to market. It is estimated, for instance, that it could cost as much as $100 million to bring a broad-based screening test successfully to market. Who will fund such work remains uncertain.

There are other uncertainties. Costs and volatility could increase even more if proposed FDA regulations are enacted. Questions still remain as to who will pay for this technology when it reaches the clinic. Will it be the patient? Will it be insurance companies? Will such technology even be accepted by healthcare professionals?

As with any emerging technology, if risk and uncertainly are outweighed by the potential for profits, investment and development will continue. And as with any emerging technology, the potential for profit in the diagnostics and personalized medicine space is protected by strong patents. However, recent congressional action would prevent patent protection on inventions critical to personalized medicine.

On February 9, 2007, Representative Xavier Becerra introduced the Genomic Research and Accessibility Act, a bill that, once enacted, is purported to put an immediate end to the practice of patenting any and all portions of the human genome. The legislation proposes to amend chapter 10 of title 35, United States code, by adding the following new section:

“Notwithstanding any other provision of law, no patent may be obtained from nucleotide sequence, or its functions or correlations, or the naturally occurring products it specifies.”

According to a press release from Congressman Becerra’s office, “The practice of gene patenting is preventing critical research from advancing because scientists are wary of trespassing patent laws.” Congressman Becerra adds that “enacting the Genomic Research and Accessibility act does not hamper innovation, indeed, it encourages it. The proliferation of scientific prowess, medical innovation, and economic advancement will all occur if the study of genes is allowed to happen unabated. Incredible manifestations of intellectual property will result: medicines, machines, processes—most deserving of recognition, some potentially life-saving, and all worthy of a patent.”

While Representative Becerra’s statements promise innovation, enactment of his simple bill into law will have the opposite effect with respect to personalized medicine. Enactment of the bill would not just prevent patenting DNA, which itself is harmful to the biotechnology industry. It would also prevent patents on gene correlations, e.g., the association of gene mutations with risk of disease or response to treatment—associations that form the basis for personalized medicine’s diagnostic tests.

While Congressman Becerra and others argue with few facts that gene patents stifle scientific research, the inability to obtain intellectual property protection in the field of diagnostics and personalized medicine will stifle a nascent industry.

Becerra’s bill, a political move in response to popular press attacks on gene patenting, appeared likely to fail, but like other aspects of patent reform, the subject is still alive in Congress.

On October 30, 2007, the House Judiciary Committee held a hearing on “Stifling or Stimulating—The Role of Gene Patents in Research and Genetic Testing.” It was no surprise that not all witnesses spoke in favor of patenting DNA-based inventions. What was surprising and encouraging was that representatives of the Biotechnology Industry Organization (BIO) and the Association of University Technology Managers (AUTM) testified that the Becerra bill or similar legislation altering patent rights in nucleic acid inventions would harm commercialization of genetic medicine.

As discussed at the October 11th conference “Personalized Medicine: Breaking Down the Barriers and Achieving Results” that my firm, Nixon Peabody, cosponsored, companies looking to invest in nucleic acid inventions and personalized medicine need to realize that the public relations battle may affect future legislation. And as such, all stakeholders in the personalized medicine industry should be planning and implementing their public outreach now to decrease the risk of legislation that may threaten the future of personalized medicine. Failure to act may result in erosion of IP protection and a commensurate decline in investment in biotechnology and diagnostics.

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It passed the House by a vote of 420 to 3, President Bush is for it, and it has fervent supporters on both sides of the political aisle—but even that didn’t save the Genetic Information Non-Discrimination Act (GINA or S. 358) from unexpectedly stalling in the Senate last spring.

Now, to try and get it moving again, one of the bill’s key supporters, the Washington, DC-based Genetic Alliance has launched a campaign to “turn up the heat” and let lawmakers know “this is a critical issue,” according to Alliance president and CEO Sharon Terry. Anxious to see the bill pass, a large contingent of Boston-area genomics firms is supporting the Genetic Alliance move.

GINA aims to protect people from losing their health insurance or jobs based on genetic test information. Supporters include many biomedical companies, who say the bill is vital to keeping the genomics revolution rolling.

One of the most anticipated fruits of that revolution is personalized medicine—in which drug treatment is tailored to an individual’s biology. Determining that biology can involve genetic tests. “If you want to enroll human subjects in genetic studies, ideally such information can become part of their medical record,” says Raju Kucherlapati, scientific director of Boston-based Harvard-Partners Center for Genetics and Genomics. “People will be reluctant to enroll if they think the information night be used to discriminate against them.”

Many people fear that if information about predisposition to a serious disease goes into their official medical record, insurers or employers will drop them to avoid possibly having to pay for expensive treatments down the road—which is why many women currently getting tested for genes linked to breast cancer already pay for the tests themselves.

GINA’s supporters have been pushing for this legislation for 12 years. “We finally felt certain it was going to pass,” says Patrice Milos, vice president and chief scientific officer at Cambridge-based Helicos, which supports the bill. But then, exploiting an arcane Senate rule, Senator Tom Coburn (R-Oklahoma) placed a hold on the bill, preventing a vote.

The delay has been a serious disappointment to those who, like Kucherlapati, feel “GINA is essential for personalized medicine.” Milos concurs. “As a company that sits at the cutting edge of the science to look at individual sequence data, we think this is critical.”

Kendall Square is one of the birthplaces of genomics. “This is a hotbed of both technologies used to explore the human genome and companies exploiting it for new therapeutics and diagnostics,” says Keith Batchelder, of the consulting firm Genomic Healthcare Strategies, another supporter of the bill. “You’ve got Harvard, Broad, and MIT that have all been at the center of it.”

Surveys suggest fear of discrimination from insurers or employers is one of the major reasons people avoid genetic testing, even when it is advisable because of family history. GINA supporters say this fear seriously impedes research and impacts personal health: People skip screenings that could help them. Some states have passed genetic anti-discrimination laws, but GINA would apply across the entire country.

What’s most frustrating to supporters is that Coburn’s move appears almost whimsical. This is merely one of approximately 90 bills the notorious ‘Dr. No,’ as he has become known, has single-handedly blocked. Others include a gun control bill that even the NRA backed, a bill to prevent suicide among veterans, and one aimed at naming a post office for Rachel Carson. Even Coburn’s fellow Republicans have been miffed by how often he is the lone outlier on a particular bill. (Coburn’s office has not responded to our request for comments.)

The list of GINA supporters is impressive. Organizations such as the Biotechnology Industry Organization (BIO) and the Personalized Medicine Coalition (PMC) have expressed strong support for the bill. (Helicos, BG Medicine, Aureon Laboratories, HistoRx, and numerous other New England-based groups are members of the PMC.) Last week Elizabeth Nabel said that passing GINA would be “the most important step to enable personalized medicine.” Nabel is Director of the National Heart Lung and Blood Institute, and she was speaking at a personalized medicine conference at George Washington University Hospital in D.C. Francis Collins has been a longtime supporter, and he testified to lawmakers about the bill’s importance last spring. Collins, who led the U.S. government team in the race to sequence the human genome, heads the National Institutes of Health’s genomic research program.

The President is also on board. In a 2001 radio address, President Bush said discrimination based on genetic test results “violates our country’s belief in equal treatment and individual merit.” Since GINA has been in process, he has reaffirmed his support.

According to surveys, most Americans are also in favor of outlawing genetic discrimination. “One of the great things about this bill is that it has bilateral support,” says Batchelder. “People are united around this issue.”

Well, not quite everyone is for it. And in this case, one person could be enough to derail it.

A hold is hard to get around. That’s especially true now with the war in Iraq taking up so much discussion time. The bill’s main sponsor, Representative Louise Slaughter (D-New York), has set up a petition to get Coburn to drop his hold, a move the Genetic Alliance is actively supporting in its new campaign. But if he doesn’t back down, the only way around him is to guarantee a huge block of discussion time for the bill—a process called cloture—or to tag it onto something already in process. Terry says she now expects the latter will happen, and that requires keeping the bill on lawmakers’ radar screens.

While they are weary from the long struggle, supporters say they remain determined. “Until we pass this legislation, we are not getting our return on the genome,” Terry says.

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It’s got advisors like Bob Langer and Judah Folkman, a particularly innovative strategy, and more than 15 years of research behind it. But Lexington, MA-based Predictive Biosciences is starting out by trying to be as small as it possibly can be.

With just $10 million in initial financing, and that all tied to strict milestones, the diagnostic startup “is operating on a staffing model of less than a dozen employees,” said Eugene Chiu, the firm’s co-founder and VP of business development. Chiu was speaking at Genomic Health Strategies’ Personalized Medicine meeting last week, where he, Predictive co-founder Marsha Moses, and venture capitalist Michael Greeley served on a panel that detailed the genesis of this little company, its strategy, and why they have such high hopes for it. It was a cozy little meeting with lots of insiders, more like a think tank in some ways. The presentation on Predictive was meant to show one model for a personalized medicine company. (Predictive plays in the personalized medicine space in the sense that its tests could facilitate more individualized treatment of cancer.)

To be more specific, Predictive Biosciences is developing tests to detect cancer from urine samples, thereby sparing patients the usual diagnostic discomforts. The company, which was founded in 2006, grew out of work that Moses and Bruce Zetter, another co-founder, did at Children’s Hospital Boston. Both now have labs within the vascular biology program at Children’s, which Folkman, a member of Predictive’s scientific advisory board, directs. Today, Moses also leads the Urinary Proteomics Initiative at Children’s Hospital. There, she’s helped to build “the largest urine bank in the world,” she said.

Having all that pee on hand and all those years of research under their belts has helped the Predictive team identify a new set of biomarkers, or telltale molecules, that are shed into the urine by a range of cancers, including biggies like breast and colon tumors. And while most screening tools for cancer are pretty poor—they raise a lot of false alarms, miss many cancers, and often generate a lot of confusion—Predictive is working on using the biomarkers it has discovered to produce tests that yield “actionable results,” according to Chiu.

Predictive’s first target market is cancer survivors. After being treated for cancer, people typically undergo a series of painful procedures, such as biopsies or invasive exams, to see if they are cancer-free. Bladder cancer patients, for example, “have 13 to 15 cystoscopies over five years. One every three months at first,” Chiu said. A cystoscopy is a really uncomfortable procedure where a tube has to be slipped into the bladder.

Using Predictive Biosciences’ tests, doctors could ostensibly weed out the patients who really need those cystoscopies from those who don’t, thereby “personalizing” their follow up. Once the test for bladder cancer is validated, the company hopes to go on to develop tests to predict recurrence of breast, colon, and other cancers. Eventually, such tests could also be used for screening healthy patients. Predictive is aiming to get its first product to market within two years. The company is also designing clinical management tools to help doctors plan follow-up for patients depending on test results.

All in all, Predictive has a novel idea and has put a lot of work behind it. So why so much fiscal caution?

Well, many investors see diagnostics as a perennially low-margin business that cannot reap anything close to the rewards seen with pharmaceutical ventures. “Everyone was trying to talk us out of investing in a diagnostics company,” said Greeley, a general partner at IDG Ventures, one of the two firms that put up the initial capital for Predictive. Highland Capital is Predictive’s other investor.

Greeley and his colleagues saw another angle to it. For one thing, “We think ‘value pricing’ is on the horizon,” he said. In other words, as healthcare costs continue to skyrocket, a growing number of pundits think diagnostics will become more important as a way to cut costs, enabling diagnostics companies, paradoxically, to garner higher prices. Still, the VCs admit they are uncertain about how big the market will really be. A lot depends on how many tests Predictive can churn out.

In a hotbed of entrepreneurial activity like Boston, the decision to form the company may actually seem overdue, but Moses points to a convergence of factors that finally pushed her into start-up mode. “There was growing interest in biomarkers,” she said, and there have been huge improvements in the company’s technology platform, called proteomics. These tools can now accurately analyze samples to detect even tiny levels of proteins, including the biomarkers in which Predictive is interested.

Predictive’s approach has also gotten a vote of confidence of sorts from the public. “Every time our papers come out in the press,” says Moses, “we are inundated with unsolicited urine samples from people who ‘get it.’”

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