Vertex Pharmaceuticals, the Cambridge, MA-based developer of treatments for hepatitis C, said today that investors who hold about $109 million worth of debt securities have converted those holdings into equity stakes. The deal doesn’t leave Vertex debt free, because the company still has to pay back $35 million in principal, at a 4.75 percent interest rate, in 2013. The debtholders who are accepting stock will now get 4.8 million shares of Vertex (NASDAQ: VRTX). The company’s shares have more than doubled in value to $40.69 at today’s close, compared with the 52-week low of $19.87.

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A number of New England’s life sciences companies had good news to report this week.

—Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX) reported results from clinical trials that indicate its experimental hepatitis C drug, telaprevir, could work well for patients who haven’t responded fully to standard treatments, and could be as effective taken twice a day as it is taken three times a day. Luke explains what the news means for Vertex’s efforts to capture a share of the potentially huge market for hepatitis treatments.

—Medical device maker Interlace Medical of Framingham, MA, won FDA clearance to market its minimally invasive device for removing uterine fibroids and polyps.

—Burlington, MA-based CorNova raised $2.5 million of a proposed $6 million in equity financing, according to regulatory filings. CorNova is developing coronary stents with platinum surfaces.

—Anti-inflammatory drug developer Virdante Pharmaceuticals completed a second closing of its Series A financing round, bringing the total collected so far to $30 million. Thomas, McNerney & Partners led the deal, which was joined by Osage Partners, Biogen Idec New Ventures, Clarus Ventures, MedImmune Ventures, and Venrock Associates.

—Bedford, MA-based iRobot (NASDAQ:IRBT) launched a new healthcare unit. Under the direction of technology veteran Tod Loofbourrow, the unit will focus on developing robots to help seniors live independently.

—Pharma giant Novartis declined an option to continue development of a hepatitis C drug from Cambridge-based Idenix Pharmaceuticals (NASDAQ: IDIX). Idenix, whose stock dropped on the news, will seek another partner to back development of the drug, IDX184.

—RNA-interference drug developer Cequent raised $3.35 million in the first tranche of a venture round that could be worth as much as $15 million. The Cambridge-based startup is engineering E. coli bacteria to deliver RNAi molecules designed to combat a certain type of polyp in the colon.

—Pulmatrix raised $30.2 million in a Series B venture round led by Arch Venture Partners and Novartis Bioventures Fund and joined by Polaris Venture Partners and 5AM Ventures. The Lexington, MA-based startup is using technology from MIT and Harvard to prevent flu viruses and other pathogens from invading lung tissue.

—Cancer diagnostics developer On-Q-ity of Waltham, MA, reportedly raised $21 million in a Series A round of venture capital from Mohr Davidow, Bessemer Venture Partners, Physic Ventures and Northgate Capital. The firm was formed through the merger of CELLective Diagnostics and The DNA Repair Company, both Mohr Davidow Ventures portfolio companies.

—Ironwood Pharmaceuticals of Cambridge and its partner, New York-based Forest Laboratories (NYSE: FRX), said that Ironwood’s lead drug candidate, linaclotide, fared well in two pivotal clinical trials. The drug is designed to relieve chronic constipation; Luke has all (and I mean all) the details.

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Combination therapy has been a central component of treatment for certain viral diseases for more than 15 years. The benefits of combination therapy can arise from activation of multiple host pathways, suppression of mutational variants that can lead to viral escape, or perhaps both.

In HIV, the benefit of combination therapy is due to suppression of viral resistance, which is the result of using multiple agents acting at distinct sites within the virus life cycle. In hepatitis C (which I’ll abbreviate as HCV) the addition of ribavirin to interferon turned what was primarily an on-treatment lowering of viral titers into the first significant rate of viral clearance that persisted even after therapy was stopped. This sustained virological response, known as SVR, has become the primary measurement of clinical benefit in HCV. The mechanism underlying the dramatic effect of combining ribavirin with interferon is not clear. The benefit could be due to a pharmacologic interaction between pathways activated by interferon and pathways activated by ribavirin, or it may be the result of a modest ribavirin antiviral effect added to an “antiviral state” induced by interferon.

Just this year, companies in the HCV field began exploring the use of direct antiviral combinations. It is hoped that by appropriately choosing complementary targets, benefits of combination similar to what was seen in HIV may soon be seen in HCV therapy. Whether or not the combination of direct antivirals will permit the elimination of interferon and/or ribavirin remains unknown at this time, and is perhaps the most highly anticipated answer in the HCV field today.

Combinations of antivirals today

Three companies have moved into the clinical stage of exploring direct antiviral combinations for HCV.

Roche is most advanced in combination studies of direct antivirals with its INFORM-1 study. In this study, HCV patients were treated for 14 days with various dose levels of two drug candidates that inhibit different parts of the virus life cycle. These drug candidates are RG7128, a nucleoside polymerase inhibitor licensed from Pharmasset, and RG7227, a protease inhibitor licensed from Intermune. Data from the first several dosing cohorts was disclosed this past April at the annual meeting of the European Association for the Study of the Liver. Additional data, including responses at higher doses and in patients who previously failed interferon/ribavirin, will is being reported at the annual meeting of the American Association for the Study of Liver Diseases conference in Boston.

The INFORM-1 study clearly shows that two antiviral agents can act in concert to produce a greater antiviral effect over 14 days than either agent produced alone. At the same time, critical questions remain for longer studies — Can direct antivirals alone retain viral titers at undetectable levels over longer periods of treatment? Even more important, will a state of virus negativity elicited by a direct antiviral combination afford the same rate of SVR once therapy is stopped as when virus negativity is induced by the interferon/ribavirin combination? Is there anything special …Next Page »

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Vertex Pharmaceuticals wants to make sure doctors walk away from this weekend’s big liver disease research meeting with two main ideas stuck in their heads. No. 1—The company’s experimental drug is showing that it can cure even the toughest-to-treat patients with hepatitis C. No. 2—it may work just as well in a twice-daily dose as it does when given three times a day.

The latest batch of clinical trial data from Cambridge, MA-based Vertex (NASDAQ: VRTX) shows that its telaprevir treatment was able to attain the clinical definition of a cure in more than 80 percent of patients who got the drug. That’s regardless of whether they got the drug three-times-a-day, or a more convenient twice-daily dose. Side effects were similar for each dosage. Results from the mid-stage 161-patient study, known as C208, are being presented this weekend at the American Association for the Study of Liver Diseases, being held in Boston.

This latest finding is part of the mounting evidence Vertex is gathering on its quest to develop the first-of-its-kind protease inhibitor for hepatitis C, a chronic liver disease. The drug is currently being tested as an oral pill that patients take in combination with the standard treatments—pegylated interferon alpha and ribavirin. Vertex is hoping to more than double the cure rate for patients who are new to treatment, and make it so most patients only need to take the standard treatments for 24 weeks instead of 48, which is important because those drugs cause flu-like symptoms that make most patients feel miserable. The new drug is expected to trigger an outpouring of patients seeking treatment if teleprevir reaches the market on schedule in 2011, and it could generate $2.3 billion in U.S. sales by 2013, according to an analysis by investment firm Cowen & Company.

While Vertex is considered to be at the front of the pack when it comes to treating hepatitis C, there is a growing crowd of competitors following fast behind with an estimated 40 different drugs in clinical trials. That includes drug candidates from deep-pocketed rivals like Schering-Plough and Roche. Vertex has sought to fend off the threats to future market share a couple of ways. One is by showing that its drug can eradicate the virus—and cause a clinical cure—for the majority of the toughest patient population—those who didn’t respond at all to a prior round of standard treatment. That result was shown earlier this week in a small study known as ‘107, and Vertex is attempting to prove that point on a larger scale in the ongoing trial of 650 patients called Realize.

While it’s important to be seen as the most potent drug on the block, it’s also vital to at least stay even with the other guys when it comes to convenience. Vertex’s original mid-stage trials looked at three doses per day of 750 milligram telaprevir pills. That means patients who work during the day need to take their pills with them, and take them after a snack or lunch, says Vertex chief medical officer Bob Kauffman. By going to twice-a-day, with 1,125 milligrams—the same total amount of telaprevir in a given 24-hour cycle—researchers hoped they could achieve the same antiviral activity without seeing extreme peaks or valleys in blood concentration that might lead to increased side effects, or weak potency that could allow the virus to bounce back over time, Kauffman says.

“We think this is a big deal,” Kauffman says. “For people who work, this means you can just take the drug in the morning before you go to work, and take another one when you come home in the evening. It is more patient-friendly.”

Side effects were the big concern, and the results from the C208 study suggest they are “similar” for the twice-daily and thrice-daily regimens, Kauffman says. Eight of the 161 patients dropped out of the study because of serious side effects, mostly because of rash (4 patients), and anemia (3 patients), Vertex said. It didn’t say how many of the serious side effects were in the twice-daily dosing group.

All of Vertex’s three pivotal studies—known as Advance, Realize, and Illuminate—are testing the three-times-a-day dosing regimen, so that’s where the bulk of the evidence is going to be in the FDA approved prescribing information, if telaprevir is cleared for sale. The company is talking with regulators about whether this result from C208 might be sufficient to include language in the label that says twice-a-day is OK, Kauffman says.

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Vertex Pharmaceuticals (NASDAQ: VRTX) is vying to set a new standard of care for hepatitis C in some of the toughest patients to treat, and today it is reporting some surprisingly strong evidence that suggests the drug is working like researchers hoped it would over the long haul.

The Cambridge, MA-based biotech company offered an interim peek at results from 117 patients who took its telaprevir compound after they failed to fully respond to standard therapy. Vertex looked at “null responder” patients who didn’t respond at all to prior therapy, and found that 16 out of 28 of them, or 57 percent, achieved a clinical cure after they got telaprevir in combination with another round of standard treatment. The clinical cure, known formally as sustained viral response, is achieved when the hepatitis C virus disappears from the blood for a full 24 weeks after the course of treatment.

Telaprevir had about the same effectiveness rate for patients who partially responded to an earlier round of treatment (55 percent achieved clinical cure), while that rate shot up to 90 percent for patients who initially were helped by standard therapy, but ended up relapsing later. These results were from a study known as ‘107. Comparing separate clinical trials can be a dubious exercise because of apples-to-oranges issues, but the clinical cure rates Vertex is reporting today are higher than what it announced in April at a conference of the European Association for the Study of the Liver, in a separate study that also enrolled tough-to-treat patients, called Prove 3.

Side effects from this latest batch of results were consistent with what Vertex has seen in prior studies. Eight of the 117 patients quit taking their medication because of side effects, including four who dropped out because of rash, and one who cited anemia.

For those who are new to the Vertex story, here’s a quick refresher on why this all matters. Telaprevir is aiming to be a first-of-its-kind protease inhibitor against hepatitis C, a chronic liver disease. If it can deliver in the final stage of clinical trials, it will change the standard of treatment for the disease just as an earlier generation of antivirals did for HIV infection. The market is potentially huge, because an estimated 3.2 million people in the U.S. have hepatitis C infections, and about 650,000 have failed …Next Page »

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It was a busy week in the land of New England life sciences. Let’s dive in.

—Luke did a massive analysis of the financial health of all the public biotech companies we follow the Boston area and the news… Well, it wasn’t good.

—Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ:VRTX) brought in $155 million in cash by selling $120 million in debt and $35 million for the rights to potential milestone payments. Both deals were related to the potential European commercialization of telaprevir, Vertex’s experimental drug for hepatitis C.

—Adimab, a Lebanon, NH-based biotech startup developing a new platform for discovering antibody drugs, raised $8.2 million in a Series D round of venture financing. Google Ventures led the financing and Polaris Venture Partners, SV Life Sciences OrbiMed Advisors, and Borealis Ventures participated as well.

—Merrimack Pharmaceuticals of Cambridge forged a co-development and co-marketing deal with French pharmaceutical firm Sanofi-Aventis. The partnership, focused on Merrimack’s antibody cancer drug MM-121, will bring the Cambridge firm $60 million upfront and as much as $470 million more in milestone payments, not to mention double-digit percentage royalties, should the drug reach the market.

—Luke chatted with Peter Hecht, CEO of Cambridge -based Ironwood Pharmaceuticals, which recently recruited former Genentech CFO David Ebersman to its board. Does the move signal that Ironwood—whose lead, potential blockbuster, drug is in late-stage clinical trials—is preparing to go public? Hecht wouldn’t say so, but Luke explains why Ironwood might fare well on Wall Street.

—The FDA followed an earlier advisory panel recommendation that clofarabine (Clolar), a leukemia drug from Genzyme (NASDAQ: GENZ), not be approved for use in a broader population of patients. The agency said that Cambridge-based Genzyme should conduct another trial of the drug in patients over age 60; it’s currently approved just for children with leukemia.

—Ryan spent the day at the MassBio Investors Forum in Boston, checking in with folks from Cambridge-based RNAi-drug developer Alnylam Pharmaceuticals (NASDAQ:ALNY), (which referenced a potential spin-off company perhaps in the works); Waltham, MA-based EyeGate Pharma (which has rounded up $12 million of a planned $20 million to $25 million financing); Cequent Pharmaceuticals, another Cambridge-based RNAi-drug developer (which is moving its first drug into clinical trials); and Pathogenica (a brand-new diagnostics firm spun out of George Church’s lab at Harvard Medical School). He also gleaned some insights (and arguments) about the future of biotechnology from Harvard Business School professor Gary Pisano and life sciences investment firm CEO Steven Burrill.

—Epizyme, a Cambridge startups out to turn the science of epigenetics into new drugs that work by turning genes on and off, raised $32 million in a Series B venture round led by Bay City Capital. Amgen Ventures, Astellas Venture Partners, MPM Capital, and Kleiner Perkins Caufield & Byers participated as well.

—Boston-based antibiotic developer Paratek Pharmaceuticals struck an exclusive development and commercialization deal with Swiss drug giant Novartis. The deal, which could be worth as much as $485 million in initial milestone payments, focuses on Paratek’s PTK 0796, which is in late-stage clinical development for treating complicated skin and skin structure infections as well as certain cases of pneumonia.

—Immuneering, which is developing computer models to predict patients’ responses to cancer drugs, became the first life sciences startup to join Polaris Venture Partners’ new Dog Patch Labs startup incubator in Cambridge. The move will take the company out of CEO Ben Zeskind’s apartment in Boston’s Back Bay.

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New England has a deep pond with many of the very biggest fish in the global life sciences industry, but it also has its share of minnows, and they are getting eaten alive in the downturn.

That finding leaped out at me after I scoured through financial data on 85 publicly traded life sciences companies in greater Boston, Seattle, and San Diego as part of our regular Biotech Survival Index feature. The final numbers aren’t pretty for Boston. Just 15 of the 46 public life sciences companies we follow in Massachusetts had more cash on their balance sheet at the end of June 2009 than they did on New Year’s Day, based on a review of the most recent round of quarterly financial filings with the Securities and Exchange Commission. (Companies were included if they were listed on the NASDAQ or NYSE, and had market capitalization of at least $100 million).

Even though jobs have been cut, drug candidates have been shelved, and some last-ditch partnerships have been struck, all that frenzied activity didn’t really add up to a strengthened financial future for a majority of the region’s money-losing companies. The cash crunch has prompted a couple of Massachusetts companies to fold this year (Altus Pharmaceuticals and Epix Pharmaceuticals), a couple more to sell out for a pittance (Targanta Therapeutics and NitroMed), and one company that actually improved its financial position to move to Wisconsin (Exact Sciences).

While those companies were vanishing, there was some good news to be found in the filings. Some of Boston’s anchor tenants took advantage of their financial strength to beef up their cash balances, pay down debt, or otherwise tidy up financial matters. Essentially, the rich (Biogen Idec, Genzyme, Thermo Fisher Scientific, and Millipore, to name a few) got richer.

But what really shocked me the most was how poorly Boston’s life sciences companies have coped with the downturn compared with peers in the two other cities where Xconomy follows life sciences—Seattle and San Diego. Granted, neither of those cities has anywhere near the number of profitable life sciences companies that Boston does (18). And many of the little biotechs in those cities were backed into a corner in the first half of 2009, and either had to do or die—and things don’t appear quite that dire yet at many companies in Boston. But a majority of companies in Seattle (7 of 12) actually strengthened their balance sheets during the first half of the year. The same pattern emerged in San Diego, where 15 of the 27 companies built up their cash reserves in the same period.

If you combine those two hubs into a West Coast cluster that has a sample size similar to Boston’s (39 companies versus 46), the Bay State doesn’t look so resilient in comparison. About 56 percent of companies on the West Coast (22 of 39) strengthened their financial position in the first half of the year, while just 33 percent of the companies in Boston (15 of 46) did that well.

Read on for a complete rundown of the financial position for all 46 Massachusetts companies, listed in alphabetical order. To purchase a much expanded version of this report, in PDF format, click the “Add to Cart” button below. The expanded version, available for $95,* includes an assessment of each company’s financial position at the end of June compared to six months earlier, the projected length of time it can survive on its existing cash reserves, and an analysis of the strategic moves it has made to stay afloat in the current environment. Click here to see a sample entry. *Price is subject to change without notice.

We intend to repeat this analysis regularly to monitor the financial health of the life sciences companies we follow in San Diego, Seattle, and Boston. Please send feedback to editors@xconomy.com.

Abiomed (NASDAQ: ABMD)
Cash on hand: $54.5 million
Related Xconomy coverage:
“Abiomed Wins FDA Approval of Heart Pump”

Alkermes (NASDAQ: ALKS)
Cash on hand: $380.4 million
Related Xconomy coverage:
“Alkermes Knocks on Door of Biotech Big Leagues, Aims to Make Drugs of its Own”
“Alkermes, Swinging for the Fence, Touts New Anti-Addiction Drug”
“Alkermes’ Ambitious Builder, Richard Pops, Grabs Reins to Re-Ignite Growth Phase”

Alnylam Pharmaceuticals (NASDAQ: ALNY)
Cash on hand: $473.8 million
Related Xconomy coverage:
“Alnylam Takes Time to Mull Over RSV Game Plan”
“Alnylam, With Tekmira and New Northwest Firm Alcana, Look to Push Borders of RNAi Delivery”
“Alnylam Pushes First RNAi Drug That Circulates Through Body Into Human Test”
“Alnylam’s In the Money, Expects $500 Million in Bank At Year End”
“Alnylam Looks to Spinoffs to Unleash RNAi Technologies for Stem Cells, Vaccines“ …Next Page »

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As has been the case in recent weeks, M&A news featured prominently in this week’s New England tech and life sciences deals.

—Harvard spinoff Tetraphase Pharmaceuticals of Watertown, MA, raised $10 million out of a planned $29.6 million equity financing round, the company indicated in an SEC filing. Tetraphase is developing new antibiotics to treat drug-resistant infections.

—Norwalk, CT-based Xerox (NYSE: XRX) said it will acquire Dallas, TX-based business process outsourcing firm Affiliated Computer Services (NYSE: ACS), a, for $6.4 billion in cash and stock.

—Software maker Egenera of Marlborough, MA, raised $3 million in new equity financing. Existing investors including Austin Ventures, Crosslink Capital, Kodiak Venture Partners, Pharos Capital Group, and Technology Crossover Ventures contributed to the round, according to Mass High Tech.

—Aspect Medical Systems (NASDAQ:ASPM) of Norwood, MA, agreed to be acquired by Irish healthcare products giant Covidien (NYSE:COV) for some $210 million in cash. Aspect’s brain monitoring equipment will become part of Covidien’s Oximetry and Monitoring product line.

—Acton, MA-based Blackwave, a provider of Internet-video servers, took in $3.5 million of a planned $9.1 million round of equity financing from undisclosed investors. Flybridge Capital Partners, Globespan Capital Partners, and Sigma Partners have participated in previous funding rounds for the company.

—Taiwan’s Prime View International (PVI) sweetened the deal in a proposed merger with E Ink, and shareholders of the Cambridge, MA-based firm complained that PVI’s initial offer of $215 million in cash was too low. Under the terms of the new deal, E Ink shareholder would get 120 million shares of preferred stock in the combined company, in addition to the $215 million.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ:VRTX) inked a pair of debt deals related to European commercialization of its hepatitis C drug, telaprevir, that will bring in $155 million in cash. Ryan has the details on the deals and the drug’s prospects.

—Google Ventures led a Series D financing round for Lebanon, NH-based Adimab, which is developing a fast and powerful platform for discovering new antibody drugs. Other investors in the deal, the value of which was not disclosed, include return backers Polaris Venture Partners, SV Life Sciences, OrbiMed Advisors, and Borealis Ventures.

—Merrimack Pharmaceuticals of Cambridge, MA, inked a deal with French pharmaceutical giant Sanofi-Aventis giving Merrimack $60 million up front, plus as much as $470 million in potential milestone payments, in return for rights to co-develop and co-market MM-121, an experimental antibody drug for cancer.

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Vertex Pharmaceuticals said today it will bring in $155 million in cash through a pair of deals related to the potential commercialization of its lead hepatitis C drug in Europe, the company said this afternoon. In both transactions, investors are betting on telaprevir, a projected multibillion-dollar seller, to win European approval.

The Cambridge, MA-based drug developer (NASDAQ:VRTX), which also has a significant presence in San Diego, is receiving about $120 million in cash from the sale of corporate debt that must be paid back by October 31, 2012. The notes are secured by $155 million in milestone payments Vertex is eligible to receive from Janssen Pharmaceutica for the European commercialization of telaprevir. In the second transaction, the firm will be paid $35 million in cash for the rights to potential milestone payments Vertex is in line to receive from Janssen for the European market introduction of telaprevir. And Vertex won’t have to repay the $35 million if it doesn’t earn the milestone payments.

Vertex, which is counting on telaprevir to be its first big moneymaking product, has been burning through huge amounts of cash this year as it goes through the final phase of drug development. The company reported a second-quarter net loss of $171.3 million, and said it had $754 million of cash left in the bank on June 30, in its most recent quarterly report. The new debt financing, and a $105 million payment from Japanese partner Mitsubishi Tanabe Pharma will bolster the company’s reserves, so that Vertex should finish this year with $800 million in the bank, according to a separate statement issued today. The company plans to continue to burn through cash as it pursues FDA approval for telaprevir in the second half of 2010.

Vertex spokeswoman Jane Kramer said that the investors in both deals included hedge funds and other firms, but the names of the investors will not be disclosed.

Vertex has retained full commercial rights to telaprevir in the U.S. market, while it has partnered with Janssen, a Johnson & Johnson subsidiary, and Mitsubishi Tanabe to commercialize the potential blockbuster drug in Europe and Asia, respectively.

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If there were a prize for the whiplash-inducing roller coaster story of the year in San Diego biotech, Anadys Pharmaceuticals would have to be a contender. But if CEO Steve Worland has his way, some of that stomach-turning drama of the past eight months will soon just be a memory.

“You might say we’ve been stabilized, but I’m not sure we were really unstable before,” Worland says. “We’ve turned an important corner.”

Anadys got to this position, talking about stability, after it dropped bombshells on investors twice this year—once in a good way, and once not so good. The positive one came in January, when the company (NASDAQ: ANDS) shocked Wall Street by dribbling out data from the first eight patients with hepatitis C who got the lowest dose of its experimental drug, ANA598. The patients had 99 percent of their virus wiped out within the first 72 hours, which was a far better anti-viral punch than any other drug in its class. The stock, which had been on practically no one’s trading screen the day before, with just 68,000 shares changing hands, rocketed on the news from $1.91 to $4.10 on volume of more than six million shares.

This was just the beginning. The preliminary results were from the lowest of three doses studied in a clinical trial, and Anadys suggested the data would only look better a couple months later, at a key research meeting, the European Association for the Study of the Liver. Anticipation was in the air: Anadys engaged in talks with potential partners about the data. The hepatitis C space was hot. Cambridge, MA-based Vertex Pharmaceuticals built a legion of fans on Wall Street for its industry-leading drug, and then Vertex paid more than $375 million in March to acquire another hepatitis C drug developer at a similar stage of development as Anadys. Shortly after, Worland talked about how his company and others were changing the paradigm for treating hepatitis C, following the cocktail-drug approach pioneered by HIV treatments.

Then came the plunge. Anadys presented full results from the clinical trial, which showed that, as predicted, the company’s ANA598 product had even stronger anti-viral activity at higher doses. There were no serious side effects, no signs of patients developing drug resistance, or of the virus bouncing back.

Anadys CEO Steve Worland

What was the problem? A separate study of 24 healthy volunteers showed that three patients dropped out of the study because they had developed Grade 2 rashes, measured on a scale of one to four, with four being the most severe. The price of Anadys shares fell, even though hepatitis C patients on the drug had no severe rashes, other drugs in the class have the same side effect, and healthy volunteers essentially have no reason to stay in a study if they see any side effects at all. Such nuances were lost on the fast-money crowd. Anadys shares fell 40 percent that day, making it the biggest decliner on the Nasdaq, and shares kept falling. “People thought the rash was more severe than it was,” Worland says. “It was an extreme reaction.”

Regardless of which interpretation you prefer to believe, Anadys had to deal with the consequences. It wasn’t able to find a partner to help take ANA598 through the next phases of clinical development on its preferred terms, and cash began to run low. By June, Worland had to act, by shedding …Next Page »

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While San Diego has seen a big decline in VC investments this year, it’s nice to know that Domain Associates, one of the region’s most-active life sciences VCs, has raised a new fund. We’ve got the rundown on that and more news of interest to the life sciences community.

—San Diego’s life sciences community got some encouraging news earlier this week when the venture capital firm Domain Associates said it has closed Domain Partners VIII, a $500 million venture capital fund devoted exclusively to the life sciences industry. While Domain is based in Princeton, NJ, the firm maintains an office in San Diego, and many of its investments are in California.

—Seattle’s Bonnie Ramsey first learned of a cystic fibrosis drug under development by San Diego’s Aurora Biosciences nine years ago, when she was working for the Cystic Fibrosis Foundation’s Therapeutic Development Network. Aurora was later acquired by Vertex Pharmaceuticals (NASDAQ: VRTX), and now the Cambridge, MA, biotech has advanced development of Aurora’s CF drug—now known as VX-770—to the final stage of clinical trials. Luke talked at length with Ramsey, who is a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington.

—How long should it take a company’s reconstituted board of directors to elect a new chairman? It’s taken more than two months at San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN), which was subjected to a proxy fight this spring. That’s taxing the patience of Rick Barry, the founder and portfolio manager of Eastbourne Capital Management. Barry, whose firm holds a 12.5 percent stake in Amylin and has been pushing for change at the diabetes drug specialist, told me he wants the new chairman to be chosen from one of the four newly elected directors to the company’s 12-person board.

—SpectraScience (OTCBB: [[ticker: SCIE]]), a San Diego-based maker of optical biopsy technology used to detect cancerous tissue, has raised $930,000 of a planned $5 million investment round among individual investors. The medical diagnostics company plans to use the capital to expand its sales and distribution network for equipment it has developed to search for telltale signs of cancer.

——The National Institute of Neurological Disorders and Stroke has awarded a $3.3 million grant to privately held Ichor Medical Systems of San Diego for development of a DNA vaccine for Alzheimer’s disease. The company makes it easier for cells to absorb its DNA vaccines by using an electroporation delivery system that creates temporary pores in cell membranes.

—Sequenom (NASDAQ: SQNM), the San Diego biotech developing DNA-based diagnostic tests, has maintained radio silence since it first disclosed three months ago it had uncovered R&D test data was mishandled for its much-anticipated genetic test for Down syndrome. In a recent statement, Sequenom says the company is no longer relying on previously announced test data and results, but it’s unclear if that means the company’s planned introduction is slipping further behind schedule. Sequenom had planned to introduce its SEQureDx test in June.

—Avanir Pharmaceuticals (NASDAQ: AVNR), a one-time San Diego biotech now based in Aliso Viejo, CA, said it hopes to submit results of its late-stage drug trial for treating an unusual neurological disorder to the FDA in the first half of next year. The company said this week that its drug passed a final-stage clinical trial, designed to see whether it was effective in treating involuntary bouts of laughter, crying, and other emotional outbursts.

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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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This week we had the usual mix of news on partnerships, clinical trials, and the like, as well as some fascinating in-depth discussions with key players in the life sciences arena.

—Antibiotic developer Rib-X Pharmaceuticals announced that the oral form its experimental antibiotic radezolid passed a mid-stage clinical trial as a treatment for a common form of pneumonia. The New Haven, CT, firm is looking to partner with a pharmaceutical company to help move the drug toward FDA approval.

—Genzyme (NASDAQ:GENZ) of Cambridge, MA, won approval from European regulators to market plerixafor (Mozobil) for patients with lymphoma and multiple myeloma who need stem cell transplants. The drug helps boost the number of stem cells that can be collected from the blood for such transplant procedures.

—Altus Pharmaceuticals (NASDAQ:ALTU) of Waltham, MA, said it will need to raise more capital before the end of next month in order to continue its operations. In March, the firm reduced its staff and abandoned development of a cystic fibrosis treatment in order to focus on ALTU-238, a treatment for patients with growth hormone deficiency.

—Cambridge-based Alnylam Pharmaceuticals (NASDAQ:ALNY) joined forces with Vancouver’s Tekmira Pharmaceuticals (TSX:TKM) to come up with new drug-delivery particles to get RNA-interference drugs where they need to go in the body. Alnylam will fund the research and gets exclusive rights to the resultant discoveries.

—Anti-viral drug maker Idenix Pharmaceuticals (NASDAQ:IDIX) priced a secondary public offering of 7.25 million shares at $3.14 each. The Cambridge-based firm expected to raise $21.2 million from the offer.

—Irish drug company Elan filed suit against its Cambridge-based partner, Biogen Idec (NASDAQ:BIIB), over Biogen’s objections to a deal with affiliates of health Johnson & Johnson (NYSE:JNJ) that Elan announced last month. That deal focuses on …Next Page »

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Bonnie Ramsey remembers the dark days of treatment for cystic fibrosis. About 30 years ago, when she devoted her career to the research and treatment of this genetic lung disease, children who were diagnosed had a life expectancy of about 17 years. The outlook is much brighter for patients now, as quality of life has improved significantly, and median lifespans have doubled.

But part of what makes Ramsey more optimistic today is an experimental treatment from Vertex Pharmaceuticals (NASDAQ: VRTX), based in Cambridge, MA. This drug, VX-770, along with a related compound, VX-809, have the potential to be the first drugs ever to fix underlying genetic defects at the root of this condition that affects 30,000 people in the U.S., she says.

Ramsey’s opinion counts for a lot. She’s a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington, and serves as executive director of the Cystic Fibrosis Foundation’s Therapeutic Development Network, in which she coordinates a 77-site network of clinical trial sites dedicated to helping companies develop new therapies for this rare disease.

The work for the CF Foundation is how she first got exposed to San Diego-based Aurora Biosciences in 2000, the company that began developing the new drug and was later acquired by Vertex. The CF Foundation has contributed more than $75 million to Vertex to keep the program going over the years, so this is a relationship that’s hugely important to both sides. The drug has now shown enough promise that it has advanced into the final stage of clinical trials needed to win FDA approval.

Ramsey spoke with me in depth about the changing standard of care in cystic fibrosis, why the Vertex programs matter, and how foundations are playing an increasingly important role in financing clinical trials. Here is an edited account of the conversation:

Xconomy: So you got started back in the dark days of treatment for cystic fibrosis, 30 years ago. What have been the major advances since then?

Bonnie Ramsey: There have been advances in terms of research, and those have been phenomenal. Things really turned around in the 1980s. Everyone is aware the gene was identified in 1989, but …Next Page »

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[Correction appended---08/11/09]

Acetylon Pharmaceuticals is unveiling its technology today after closing a $7.25 million Series A round of financing to develop novel drugs to treat multiple myeloma and rheumatoid arthritis, according to the company. Many of the startup’s backers have close ties to the Dana-Farber Cancer Institute in Boston—including the company that owns the NFL’s New England Patriots, Acetylon president and CEO Walter Ogier tells Xconomy.

The biotech startup is researching drugs designed to block a specific enzyme involved in cancer and many other diseases, based on discoveries by scientists affiliated with Dana-Farber and Harvard University. The firm has drummed up investments from an interesting mix, including Acetylon co-founder and chairman Mark Cohen, a technology entrepreneur who serves on the board of Dana-Farber, and the Kraft Group, the Foxborough, MA, holding company founded by Patriots owner Robert Kraft, who is also a major supporter of Dana-Farber, according to Ogier.

Acetylon was formed last year to develop drugs that target one among a class of enzymes known as HDACs (short for histone deacetylases), which are involved in regulating the expression of certain genes in most types of cells. Interfering with these enzymes can interfere with gene expression, making them popular targets among pharma and biotech companies developing drugs to treat cancer and other diseases. In fact, the leading HDAC inhibitor drug on the market is Whitehouse Station, NJ-based drug giant Merck’s (NYSE:MRK) vorinostat (Zolinza) for treating the immune system cancer called lymphoma.

The problem with many HDAC inhibitors is that they can disrupt the function of healthy cells, causing side effects such as vomiting, fatigue, and even heart attacks, said Acetylon’s Ogier, who has joined the company as its first and only employee. Acetylon aims to avoid such side effects by developing drugs that home in on one specific enzyme known as HDAC6, as opposed to earlier drugs in this class that inhibit the function of many of the 18 known enzymes of this type.

“This is an interesting company because we have some new …Next Page »

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Lots to report this week, and lots of it has to do with Genzyme’s manufacturing trials and tribulations.

—An investor from Florida filed suit against Genzyme (NASDAQ:GENZ), charging that the Cambridge, MA-based biotech behemoth didn’t quickly enough disclose problems at two of its manufacturing plants.

—The FDA informed Genzyme that it would re-inspect one of those plants, in Allston, MA, which has been closed since June for decontamination after a virus was found to be contaminating the facility, and which was the subject of an FDA warning letter in February. The plant closure resulted in shortages of two of Genzyme’s best-selling drugs.

—Because of those shortages, the FDA granted U.K.-based specialty pharmaceutical company Shire permission to begin distributing its competitor to one of the two Genzyme drugs, the Gaucher’s disease treatment imiglucerase (Cerezyme), even before Shire completes clinical trials for its drug. Shire will provide the treatment, velaglucerase alfa, free to patients who enroll in a special protocol.

—A startup spun out of Dana-Farber Cancer Institute announced partnerships with Germany-based Merck KGaA, and Switzerland-based Debiopharm Group. Medford, MA-based MSM Protein Technologies will help its new partners develop antibody drugs that target complicated biological molecules called G-protein coupled receptors.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ:VRTX) scored $105 million in an amended deal with Mitsubishi Tanabe Pharma; the deal focuses on manufacturing and sales rights to Vertex’s experimental treatment for hepatitis C, telaprevir.

—RNA interference drug developer RXi Pharmaceuticals (NASDAQ: RXII) of Worcester, MA, said it would raise $8.3 million in working capital through an offer of 2.4 million shares of common stock at $3.50 per share, and warrants for almost a million shares at $4.50 per share.

—Cardiorobotics raised $11.6 million in a Series A financing from Eagle Ventures, the Slater Technology Fund, the Pittsburgh Life Sciences Greenhouse, and others. The Newport, RI- and Pittsburgh, PA-based startup is developing “snake robot technology” for minimally invasive heart surgery.

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Is it just me, or is the roundup of New England technology and life sciences deals news getting a little longer each week?

—Matrix Partners of Waltham, MA, reportedly raised $600 million for two new funds. A $450 million main fund is to be invested in software, mobile, consumer Internet, communications, and systems startups, and a $150 million special opportunities fund will be used to back companies outside of Matrix’s core fields.

—Drug developer Avila Therapeutics, also of Waltham, closed a $30 million Series B round of venture capital led by the Novartis Option Fund. Abingworth Management, Advent Venture Partners, Atlas Venture, and Polaris Venture Partners joined the deal.

—Waltham’s Phase Forward (NASDAQ: PFWD), a provider of software for data collection and analysis during clinical trials, acquired Indianapolis, IN-based Maaguzi for $11 million in cash. Maaguzi’s online system is used to collect data reported directly by patients.

—Cambridge, MA-based Cerulean Pharma raised $10 million in a Series B financing round. Polaris Venture Partners, Venrock Associates, Lux Capital, and Bessemer Venture Partners—all return investors—participated in the deal, which will help support clinical trial’s of Cerulean’s lead drug, a nanoparticle-based version of the anti-cancer molecule camptothecin.

—FRX Polymers, a maker of eco-friendly, flame-resistant plastics based in Chelmsford, MA, said it has raised $6 million from Israel Cleantech Ventures and Capricorn Venture Partners.

—Needham, MA-based Extreme Reach, a provider of management tools for online and mobile video advertising, raised an unspecified amount of new financing from Village Ventures, Greycroft Partners, and Long River Ventures.

—Ounce Labs, a Waltham, MA-based maker of security and compliance software, was acquired by IBM for an undisclosed amount. The company’s technology scans the source code of programs during software development to identify potential vulnerabilities early on, and can also help spot sources of security and compliance trouble in legacy systems.

—Burlington, MA-based software maker Vela Systems completed a $10.5 million equity financing from unnamed investors. Vela, whose technology allows construction companies to manage their paperwork using mobile devices, took in the first $6 million of the round in July 2007.

—Cambridge-based Forma Therapeutics inked a drug-discovery deal with Swiss drug giant Novartis; specific terms of the arrangement weren’t disclosed.

—Dana-Farber Cancer Institute spinoff MSM Protein Technologies announced partnerships with Germany’s Merck KGaA, and Switzerland’s Debiopharm Group. The deals will give the European firms access to the Medford, MA-based startup’s technology for analyzing complicated biological molecules called multi-spanning membrane proteins, which are the targets of many drugs.

—Vertex Pharmaceuticals (NASDAQ:VRTX) of Cambridge scored $105 million up front in an amended deal with Mitsubishi Tanabe Pharma. The agreement gives Mitsubishi rights to sell and manufacture Vertex’s experimental hepatitis C treatment, telaprevir, for use in combination with the existing drugs interferon and ribavirin in Japan and the Far East.

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Vertex Pharmaceuticals (NASDAQ:VRTX) is making its second move this month to raise non-dilutive cash from its previous agreements to commercialize its experimental hepatitis C drug telaprevir. The Cambridge, MA-based firm said this morning that it will receive an upfront sum of $105 million from Mitsubishi Tanabe Pharma in an amended deal between the two companies to commercialize the potential blockbuster drug in Asia.

Mitsubishi, one of the largest pharma outfits in Japan, is paying Vertex for rights to sell and manufacture telaprevir for treating HCV infections in combination with the existing drugs interferon and ribavirin in Japan and the Far East. Vertex is also eligible for between $15 million and $65 million in milestone payments—in lieu of royalties—for the approval and commercial launch of telaprevir in Japan, according to Vertex. This amends the two companies’ 2004 deal, in which Mitsubishi gained certain rights to telaprevir in Asia as a standalone HCV therapy.

The new agreement gives Vertex an immediate cash infusion as the firm moves telaprevir, a protease inhibitor drug, through expensive, late-stage clinical trials in the U.S., Europe, and Japan. Earlier this month, Vertex announced an interesting fund-raising plan to sell rights to receive $250 million in payments that the company is eligible to garner for the successful approval and launch of telaprevir in Europe from the Janssen Pharmaceutica unit of health products giant Johnson & Johnson (NYSE:JNJ). (Yes, that’s the rights to receive the payments, not the commercial rights themselves, which Janssen would still control if the payment rights were sold to another party.) Vertex still has exclusive commercial rights to telaprevir in North America, where analysts expect the drug to become a multibillion-dollar product if it is approved.

“The cash received [in this amended deal with Mitsubishi] strengthens our corporate financial position during an important period of investment and growth as we advance two Phase III programs in hepatitis C and cystic fibrosis,” said Kurt Graves, chief commercial officer of Vertex, in a prepared statement.

Telaprevir is an oral drug that is designed to attack an enzyme important to viral replication in HCV, a chronic liver disease that affects an estimated 170 million people worldwide, according to Vertex.

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New England’s life sciences companies produced a couple of sizeable venture deals this past week, but they also faced some significant challenges.

—Rapid Micro Biosystems closed a Series A financing round worth $18.6 million. Kleiner Perkins Caufield & Byers, TVM Capital, Quaker BioVentures, and VIMAC Milestone Medica Fund provided the backing for the Bedford, MA-based startup, which already has commercialized its technology for detecting microbes that can contaminate drug manufacturing facilities.

—Luke profiled the efforts of Swiss drugmaker Actelion to capture a larger share of the market for treating the inherited disorder Gaucher’s disease. That market is currently dominated by Cambridge, MA-based Genzyme (NASDAQ: GENZ), which sells more than $1.2 billion worth of its drug imiglucerase (Cerezyme) each year, but the firm is running low on supplies of the drug after having to shut down one of its manufacturing plants to clean up a viral contamination.

—Vertex Pharmaceuticals (NASDAQ:VRTX) of Cambridge, MA, said it was seeking a buyer for rights to the $250 million in milestone payments it could receive for successfully developing and launching its hepatitis C drug, telaprevir, in Europe. Vertex has a partnership with Janssen Pharmaceutica, a unit of Johnson & Johnson (NYSE:JNJ), that entitles it to $100 million if telaprevir garners European approval and another $150 million upon the launch of the drug in Europe.

—Burlington, MA-based ConforMIS raised $50 million in government and private funds to expand its business of making customized implants for knee replacement and repair surgeries. The Series D financing included contributions from the sovereign funds of Kuwait and Singapore, both new investors in the firm, and from private equity investors such as previous backer Aeris Capital of Zurich, Switzerland and Palo Alto, CA.

—Waltham, MA-based Oscient Pharmaceuticals (NASDAQ:OSCI) filed for Chapter 11 bankruptcy protection after racking up $183.3 million in debt and slashing hundreds of jobs. The drug maker also agreed to sell the rights to its antibiotic drug gemifloxacin mesylate (Factive), to a subsidiary of Cary, NC-based Cornerstone Therapeutics (NASDAQ:CRTX) for more than $5 million, and is seeking a buyer for its top-selling drug, fenofibrate (Antara), which is prescribed for patients with above-normal cholesterol and triglyceride levels.

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Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ:VRTX) revealed today its plans to raise cash through the sale of rights to $250 million in milestone payments it could receive for successfully developing and launching its experimental hepatitis C treatment, telaprevir, in Europe, according to a press release. No buyer of the rights was announced. Vertex gained rights to the payments through its 2006 collaboration with Janssen Pharmaceutica, a unit of Johnson & Johnson (NYSE:JNJ), which agreed to pay Vertex $100 million if telaprevir garners European approval and $150 million upon the launch of the drug in Europe in exchange for European marketing rights. Here is a story from the In Vivo Blog with some insights about why selling rights to these milestone payments may make sense for Vertex.

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