Three years have gone by since the region’s top biotech company was taken over by Eli Lilly, so it seemed like a good time to find out where all that talent migrated around the Northwest.

—Icos was once the great hope for Seattle biotech, but now three years have passed since the Bothell, WA-based company agreed to be sold to Eli Lilly for $2.3 billion. I wanted to find out where most of that scientific and business talent went in the wake of the mass layoffs that ensued, so I found a few Icosahedrons (as I’m told some of them like to be called) to help me put together a fascinating list of 270 alumni who have moved on to new opportunities.

—Seattle-based Trubion Pharmaceuticals (NASDAQ: TRBN) said this week that its co-founder and CEO, Peter Thompson, has resigned. He’ll be replaced on a temporary basis by Arch Venture Partners’ Steve Gillis while the company searches for a permanent replacement. I also recapped some of Trubion’s latest tribulations, to give a sense of what Thompson is leaving to his successor.

—Kirkland, WA-based OVP Venture Partners wanted a bigger piece of the original action in San Diego-based Fate Therapeutics, and now it grabbed some of that by leading a $30 million Series B venture round in the stem cell company. Carl Weissman, an OVP managing director and the CEO of Accelerator, will take a seat on Fate’s board as part of the deal.

—Seattle-based Oncothyreon (NASDAQ: ONTY) said it has decided to advance one of its experimental cancer drugs, PX-866, into mid-stage clinical trials next year. This is another sign of the company’s improving financial health, and its shift from cancer vaccines to cancer drugs, which I described in an in-depth feature earlier this year.

—Seattle-based NanoString Technologies earned a golden word of mouth endorsement this week from the Broad Institute of MIT and Harvard, which agreed to buy a couple of NanoString’s gene-expression tools to use them for a three-year research collaboration. Broad director Eric Lander, one of the big names in biology, said NanoString has “exciting” technology.

—People who work in Seattle’s global health cluster love to tell anecdotes about how certain projects can make a difference in people’s lives, but there hasn’t been as much effort to really catalog all the projects going on here and where they extend around the world. That was the goal of the Washington Global Health Alliance, a nonprofit led by Lisa Cohen, who wrote about it in this guest editorial. You can read more about the alliance in a profile I did of Cohen and her fledgling association in January.

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Seattle has more than its share of brilliant biologists for a medium-sized American city. But if people and ideas are going to properly mix to create a thriving local biotech industry over the next two decades, we could use a few more common places with intellectual sparks—like bars. At least according to one of the region’s top life sciences entrepreneurs.

When in Boston and San Francisco, Stephen Friend says he gets most of his work done by socializing with scientific colleagues he meets for coffee or a drink. Not so here.

“The way Seattle is currently set up, I don’t have a place I go for a coffee or a drink. A place where I run into the people who are ready to try a new idea. That’s an important anchoring ingredient that we’re missing, and should be happening,” says Friend, the former senior vice president of cancer research at Merck, and co-founder of Seattle’s Rosetta Inpharmatics.

(Coffee itself is certainly easy to find, but Stephen may want to check out Xconomy’s handy Greater Seattle Coffee Cluster guide for the spots that are best known as innovation mixing pots.)

That was one of the many insights that emerged during Seattle Life Sciences 2029, a sold-out event Xconomy organized on Monday night at Seattle Biomedical Research Institute (see the photo gallery here). This event brought together a group of industry visionaries who have rarely, if ever, appeared on the same stage in front of a local audience: Ben Shapiro, the former executive vice president of basic research at Merck; Steve Gillis, the managing director of Arch Venture Partners who co-founded Immunex and Corixa; and Friend. The panel was moderated by Carl Weissman of Accelerator and OVP Venture Partners, and biotech pioneer Leroy Hood offered his thoughts in a video message on how Seattle can make strides to get bigger and better at biotech over the coming two decades.

This came up during a freewheeling audience Q&A, which covered a lot of ground. I’m not going to recap everything here—I think with some of the jokes, you probably just had to be there—but here were some of the best little acorns that that I squirreled away with my digital recorder, which are edited as always for length and clarity:

Steve Gillis

Steve Gillis on what entrepreneurs need to do to adapt in today’s financial climate: “Entrepreneurs need to be open to combining their ideas with existing organizations. Or combining those ideas with like-minded new proposals from other folks, as opposed to always wanting to have what I call their own pie. In the world in which we live, in which money is quite tight, people have to be open to joining forces earlier in evolution. That will result in everyone having a smaller slice of the pie, but it will also result in the possibility of someday eating pie. Instead of just dreaming about it. It’s a fundamental mind-set that needs to change.”

Stephen Friend on how universities need to relax rules on how inventive faculty spend their time: “The concept that you are either inside or outside of the university, and that some fraction of your time has to be spent inside the university, and that some percentage of your time has to be spent in your role as a tenured professor at the university, that has to go away. It’s the concept that someone could teach courses, and can be a role model for education, has to be kept separate from someone who’s actually running a company. The best example I know of is what MIT is trying to do. That organization, the person who leads it, she [Susan Hockfield] feels the university has to become, in a broad sense, the incubator. I don’t think many people, particularly at some universities in this town, are ready to think that creatively. It’s a mistake.”

Ben Shapiro on how Seattle ranks as a hub for life sciences innovation: “It’s worth …Next Page »

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I still have one more feature story I hope to bang out this afternoon, but the Xconomy team will soon be heading over to Seattle Biomedical Research Institute tonight for our big event on the 20-year outlook for the Northwest’s life sciences cluster.

This sold-out event will bring together some of the world’s leading life sciences visionaries, who have rarely, if ever, appeared on the same stage. The highlight will be a panel discussion, moderated by Carl Weissman of Accelerator and OVP Venture Partners, that will include Steve Gillis of Arch Venture Partners; Ben Shapiro, former executive vice president of worldwide basic research at Merck; and Stephen Friend, the co-founder of Rosetta Inpharmatics, and now co-founder and CEO of Sage Bionetworks. We will then feature short presentations from some of the potentially transformative life sciences startups in the region, before the networking portion of the evening.

Thanks to the many people who have helped make this happen. That includes our event sponsors: Fenwick & West, Cooley Godward Kronish, and Christensen O’ Connor Johnson Kindness. We also want to thank our underwriters—Alexandria Real Estate Equities, Fenwick & West, Cooley Godward Kronish, and the Science and Technology Directorate of the U.S. Department of Homeland Security, as well as our venture members, Arch Venture Partners and Polaris Venture Partners. Thanks also to SBRI for serving as the event host, and to the Washington Biotechnology & Biomedical Association for serving as our event partner. Lastly, we have to give a shout out to all the Xconomy Seattle partners: The Alliance of Angels, Northwest Entrepreneurs Network, Technology Alliance, the WBBA, and the Washington Technology Industry Association.

We expect this event to be a highly interactive conversation, so come ready to fire away with some questions.

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What is the single best thing that has happened in Seattle life sciences in the past five years? How might that make a difference over the next two decades as this region strives to become a more vibrant cluster for life sciences innovation?

These are the kinds of questions you don’t see explored much in the real-time frenzy of news headlines, the grind of quarterly earnings reports, or election seasons. But this long-range view of the future will be the central theme of an event Xconomy is organizing for Monday night here in town, under the name Seattle Life Sciences 2029.

We’re excited to have pulled together a unique mix of some of the most accomplished life sciences visionaries in the world, who have rarely, if ever, appeared together on the same stage. They are Steve Gillis of Arch Venture Partners; Ben Shapiro, former executive vice president at Merck and now a partner with Boston-based PureTech Ventures; and Stephen Friend, co-founder and CEO of Sage Bionetworks and formerly of Merck and Rosetta Inpharmatics. Carl Weissman, the chairman and CEO of Seattle-based Accelerator and a managing director with OVP Venture Partners, will be the moderator. We also expect to have a special video message from Leroy Hood, the president of the Institute for Systems Biology.

After the panel discussion, we will introduce four Seattle companies with the potential to transform their respective fields of biotech—Calistoga Pharmaceuticals, Immune Design, VLST, and VentiRx. Executives from those companies will deliver “bursts,” or brief introductions of their work, right before the networking portion of the evening.

The event will be held from 5:30 pm to 8 pm this coming Monday, Oct. 19, at the Seattle Biomedical Research Institute in Seattle’s South Lake Union neighborhood. You can get more information on how to register here. Only a few tickets are left. We expect this to be a highly interactive conversation with the audience, so if you have a question for this group, we want to hear from you. We look forward to seeing you there on Monday night.

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Omeros is attempting to become the first true biotech company to go public in more than a year, and the first in Washington state in two years, but it will have to overcome controversy to do it.

—Seattle-based Omeros, the biotech company with a treatment to help patients recover from knee surgery, has been listed as a contender to go public, possibly as soon as this week, according to Renaissance Capital. But the company will have to overcome an accusation by its former chief financial officer, Richard J. Klein, who has filed a lawsuit in U.S. District Court that claims he was wrongfully terminated after he blew the whistle on the company’s practice of filing false time claims on grant work performed for the National Institutes of Health. The company, in a legal response, admits it made mistakes and changed its policy after Klein’s report, but it denies many of his allegations and says the NIH accepted its self-reporting on the matter.

—Seattle Genetics has had a great run this year on the strength of its “empowered antibody” for Hodgkin’s disease, but it suffered a setback this week with another drug for lymphoma. The Bothell, WA-based company (NASDAQ: SGEN) saw its shares drop after it said a clinical trial of SGN-40, dacetuzumab, was halted early after independent data monitors said it was unlikely to succeed.

—How much do biotech workers really earn? The politicians like to throw around an average salary of about $81,000 in Washington state, but one local entrepreneur found the median salary in the Pacific Northwest was about $60,000 when he analyzed actual job openings from the past year.

—Seattle-based Theraclone Sciences struck a deal with a Japanese company that could bring in $18 million over time to generate new antibodies with broad capability to neutralize many different strains of flu virus. This is building on the Theraclone platform, which led to the creation of two new antibodies against HIV, which was featured in Science last month.

—Bothell, WA-based AVI Biopharma (NASDAQ: AVII) got some good news this week with an $11.5 million defense contract to make a novel treatment for Junin virus, in addition to its existing work against Ebola and Marburg.

—Sage Bionetworks, the Seattle-based nonprofit that aims to ignite an open source movement for biology, has secured a “major founding donation” from Quintiles, the giant contract research organization for biotech and pharmaceutical companies. Sage co-founder Stephen Friend was traveling in Europe, trying to drum up more support for the new collaborative, when the news broke.

—David Miller, the president of Seattle-based Biotech Stock Research who recently ran for the Seattle City Council, offered some great insights in a guest editorial about why biotechies need to pay attention to local issues just like they do the big national stories, like health reform and cheaper “follow-on” biotech drugs.

—Carl Weissman, the CEO of Accelerator and managing director of OVP Venture Partners, offered some advice to government officials who want to stir innovation. Instead of doing a lot of the same old stuff, they should try to recruit more superstar scientists.

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Dendreon watchers got all hyped up in anticipation of the company’s analyst day in New York, but there really wasn’t much in the way of news. So I dug up some other stuff for your reading enjoyment.

—The biggest piece of news out of Seattle-based Dendreon’s analyst day was that the company says it plans to file its application by mid-November to seek approval from the FDA to start selling Provenge in the U.S. Dendreon (NASDAQ: DNDN) had already said this was coming in the fourth quarter, so this added specificity is nice, but not exactly big breaking news. But the company is still hiring quite a bit, which you can read about how much here in case you missed it.

—Dendreon’s former CEO Christopher Henney has moved on to other endeavors, one of which involves being the chairman of AVI Biopharma (NASDAQ: AVII). So it shouldn’t have been a big surprise when this developer of RNA-based therapies recently moved headquarters from Portland, OR to Bothell, WA, under Henney’s watch. I checked out the company’s new digs in person with AVI Biopharma CEO Les Hudson, who’s enjoying his new surroundings, even while he’s trying to find out how to run the building’s HVAC system.

—ZymoGenetics (NASDAQ: ZGEN) released some bad news first thing Monday morning in an SEC filing, in which it said its partner, Merck KGaA, pulled the plug on a couple of trials for an experimental drug for multiple sclerosis called atacicept. This is just the latest in a string of setbacks for this drug, which was once the shining star in the Zymo pipeline.

—Charlotte Hubbert, a Kauffman Fellow at Seattle-based Accelerator, wrote a downright funny and insightful guest editorial for the Xconomist Forum on her journey from academic science to the supposed “dark side” of biotech and venture capital. I can only imagine what her parents think about the remark she made about hosiery.

—Fate Therapeutics, the La Jolla, CA-based company that counts Xconomist and University of Washington stem cell scientist Randall Moon as one of its big-name co-founders, has been on a growth spurt over the past year, as I discovered on an in-depth tour of the company’s labs.

—Redmond, WA-based Spiration, the maker of a minimally invasive device for treating chronic lung diseases, raised another $7 million in debt financing to keep supporting its work to commercialize the device in Europe and complete a pivotal trial in the U.S.

—Larry Corey, a scientist at the Fred Hutchinson Cancer Research Center and world leader in the quest to develop an HIV vaccine (he’s also an Xconomist), weighed in this week with an editorial about why he’s encouraged by findings of a clinical trial of a vaccine that protected about one out of every three people tested.

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I am quite often asked, in some form or another, “What can [STATE][LOCAL] government do to spur on an innovation-based economy in [SEATTLE][WASHINGTON]?”

Well, as I said on a panel at the Technology Alliance meeting in Leavenworth yesterday, the single biggest correlate to the strength of an innovative biotechnology industry in any geography is the quality of the major research institutions. The two heavyweight biotech hubs are Boston and the San Francisco Bay Area. No surprise there:

—in Boston, there are Harvard, MIT, Tufts, Boston University, and various smaller but world-renowned research institutes such as the Whitehead and the Broad; and,

—in the Bay Area, there are Stanford, UC Berkeley, and UC San Francisco.

Seattle and San Diego probably represent the next tier, with UW, the Hutch, Institute for Systems Biology, and others in Seattle, and UC San Diego, The Scripps Research Institute, Salk Institute, and others in San Diego.

If the quality of the major research institutions is the critical correlate, then anything that can be done to bolster the quality of that research would represent at least one highly fruitful way in which to improve Seattle’s competitiveness as a biotechnology center. One way to bolster research is to create additional funds for researchers already in place, and the state of Washington has already done that with the creation of the Life Sciences Discovery Fund. However, I would argue that an even better use of these or any funds brought to bear in this effort should be utilized instead to attract and endow chairs for “rockstar” researchers who have made their names elsewhere. Doing this is a highly-focused, high-profile activity that will have the ripple effect of bringing with them:

—already established quivers filled with grant funding;

—high-profile reputations, raising the profile and reputation of our research institutions (with many additional ripple effects like future recruitment of faculty and top students); and,

—top-notch students and post-docs.

Done right, this focused approach will do far more, with its continued “ripple-on-a-ripple” effect in the long term to solidify and bolster the productivity and profile of our research institutions than almost anything I have seen that is currently being done here or elsewhere.

One fantastic, if not polarizing, example of this involves Lee Hood’s recruitment to the University of Washington. Without saying much about the who’s and where’s of the people and money behind recruiting a superstar of Lee’s stature from Caltech to start a new department of Molecular Biotechnology at the University of Washington in 1992, nobody can dispute the huge positive effect Lee’s presence has had on biotech in Seattle, reaching well beyond the entrepreneurs and scientists who trained under Lee at UW, the faculty that he played a part in recruiting, and the companies that he and those students and faculty have gone on to start.

If we the people of Washington want Seattle to be a sustainable and robust world center of biotechnology, then we need to let our state and local governments know that they should consider committing long-term funding (endowment) of prestigious chairs and professorships at our research institutions which those institutions can use to attract true impact-making superstars of basic life science research. A handful or two of such hires will go far further to cement and grow the innovation-based biotechnology industry here for decades to come.

[Editor's note: this editorial is also running on the OVP blog.]

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If you had told me last year that today I would be running the offices of Accelerator Corporation—at least for one morning while everyone is out of town—I would have probably sniffed in disdain, tossed my hair, and shuffled back to my post-doc lab bench, a free donut in one hand (magic vendor food) and a stack of cell culture dishes in the other. What you would not have seen is my furious Googling efforts to figure out what the heck your futuristic apparition was talking about. Accelerator wha? Venture capital who? Ah, Biotech. I don’t know about that. Like when Nancy Reagan admonished me to stay off drugs in junior high, my scientific training in academia had left me with the same feelings about Biotech. I felt an illicit curiosity about this dangerous thing stamped as “Business.”

Heresy of the highest order, I inherited the prejudice that biotech and Big Pharma were outposts for sell-outs or worse yet, the incompetents in science. Want your Ph.D. thesis committee to fail you? Mention your interest in business. In late night conversations, hushed tones over cold pizza, (next to the ultra centrifuge in the basement autoclave room), I speculated about what biotech might be like. “They make money? They drive cars younger than they are? How illicit! How exciting!” I had the naïve view that biotech and the business of science were havens for everyone who didn’t want to be an academic. I have discovered I was dead wrong. The scientists of biotech are adrenaline junkies who are just as brilliant and zany as any academician.

Since I’m writing this, one can assume that I did indeed finish my post-doctoral training and switched into business. During the worst financial crisis in 80 years. To the riskiest game on the block (venture capital). Like my desire to study stem cells during the Bush Administration, we’ll just file this one under “it seemed like a good idea at the time.”

In February of this year, I started my new vocation as the intern at Seattle-based Accelerator, a venture-backed incubator for biotech startups. For the record, Accelerator has no internship program. It reviews hundreds of business plans every year, and has a track record of forming three of the most promising companies in Seattle biotech of the past five years—VLST, Allozyne, and Theraclone Sciences—who have gone on to raise more than $100 million combined.

There is clue one: I am as lucky as Charlie Bucket and the Golden Ticket. In my six months at Accelerator, I have seen more scientists like me interested in transitioning to business than I ever thought possible. And I have learned that it is a very difficult transition to make, both in practice and in intellect.

Fast forward back to today. This morning I have answered the phones and doors, taken all shipments for three companies, dropped a transferred call twice on a very forgiving CEO, attempted to find the keys to a rental car in Pennsylvania, built a spreadsheet with all therapeutic antibodies originated in phage display, made three appointments to network for an upcoming trip to Tokyo, scouted technology on two university websites, edited an investment presentation, considered the effect of “Lehman Shock” on global investment liquidity, and prepared to meet a man …Next Page »

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Yesterday, we ran the first installment of an extended interview with Steve Gillis, the biotechnology pioneer who’s now a managing director at Arch Venture Partners. Today, we have the second half of the conversation, in which Gillis talks more about ways biotech entrepreneurs can adjust to the tough fundraising climate, and Seattle’s realistic assets as a biotech cluster—when it’s unlikely anyone will ever create another Immunex or Amgen.

Xconomy: Do you have any advice for the scientific entrepreneurs out there now who are in their late 20s or early 30s?

Steve Gillis: Jump in with both feet. What’s the downside? If you have technology that will lead to products that help people treat some unmet medical need, first and foremost before you think about financial return, that should be a motivating factor. Whether you’re going to be public or bought. If you’re worried about the fact that if you’re successful you’ll be acquired and likely out of a job, and therefore you shouldn’t be successful or shouldn’t be acquired, that doesn’t really make sense to me. So what? If you’re bright and entrepreneurial, you can do it again.

At Arch, one of the things we tend to do is back people who made us money in the past. It’s a lot easier hurdle for someone who’s been successful to say, “I’ve been successful with this, and now I want to start something else, and damn it, I can be successful with that.” It’s a pretty good argument. It certainly takes management risk off the table, of risks you’re talking about when you’re considering making an investment in a startup company.

X: You mentioned that the IPO market no longer really exists for startup drug companies, and some people like to say the venture model is broken for biotech. What do you think is going on?

SG: I don’t think it’s broken at all. It used to be that you could raise $100 million in private money, take a molecule through proof of concept in man—whatever that means to whatever audience you’re talking to. But usually it meant the product had a tolerable safety profile, and you knew it worked in some set of patients. You might not have done a study that was highly statistically significant as compared to the standard of care, but as one of my partners once said, you knew there was a pony there. And you could be rewarded with a public valuation of $500 million.

Today, you can get through those same steps, having put $100 million into a company, and be rewarded with a public valuation that’s $50 million. That’s no fun for anybody. So you have to be able to get to that same proof of concept on less money. And presumably, a shorter period of time. The way to do that is with bright people who have done it before. Platform technology with multiple product opportunities, and yeah, maybe you license off one or two product opportunities so you can have non-dilutive capital in your company and not always be beholden to investors for capital. You get there, and get there in a way that some bigger fish is not just interested, but feels they have to have you for dinner.

X: Are there a couple good examples here locally that you think are following this new model?

SG: They are all following the model. They are all bright people. They all know the public market is not a viable option for them or their investors. We’re pushing all our portfolio companies to find sources of opium. As in “OPM”—other people’s money. Whether it’s DARPA, stimulus money, licensing deals. They all hear us. They are all doing it, and will continue to do it.

X: Cancer and immunology are a couple of historic strengths of this cluster, and seems to be gaining prominence globally within Big Pharma. How does this position the Seattle cluster for the future?

SG: I think it positions the area well. There are a lot of good things happening here. But it’s Seattle. Try as you might, it’s not going to be Boston or Cambridge. It’s not going to be …Next Page »

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Most Seattleites would probably list Bill Gates, Paul Allen, Howard Schultz, and Jeff Bezos when asked to name local entrepreneurs who built not just successful companies but entirely new industries. But they’d be forgetting Steve Gillis.

Gillis would have to be considered something like the Fifth Beatle in a group like that—you can walk into his office today without being babysat by PR handlers—but he is one of the pioneers of the biotechnology industry both in Seattle and nationally.

For those who don’t know, Gillis was a charismatic 28-year-old immunologist when he left a faculty post at the Fred Hutchinson Cancer Research Center to start Immunex in 1981. He and co-founder Christopher Henney rode the early wave of investor enthusiasm for genetically engineered drugs to an IPO, recruited top scientific talent from around the world to Seattle, and persevered through some dark days to create a breakthrough drug for autoimmune diseases that generates more than $7 billion a year in worldwide sales for biotech giants Amgen and Wyeth.

Talk to any scientist who worked at Immunex in the early days, and they’ll tell you they adored Gillis, the inspirational scientist with an irreverent brand of humor. Legend has it he used to dare scientists to dream big, and instead of bashing them for running a failed experiment, he’d honor goof-ups with the “Pons & Fleischmann award for achievement in dubious science,” named after the guys who once claimed to discover cold fusion.

Gillis didn’t have as much success in his second career act from 1994 to 2005, as the founder and CEO at Seattle-based Corixa. But when GlaxoSmithKline bought that company for a little more than $300 million, he took a new direction in his career, joining one of the most active life sciences venture firms in Seattle, Arch Venture Partners.

This role at Arch allows Gillis, now 56, to put his fingers in a lot more pots. He serves on the boards of six life sciences companies in Seattle: Accelerator, Trubion Pharmaceuticals (NASDAQ: TRBN), VLST, Theraclone Sciences, Qwell Pharmaceuticals, and VentiRx. He also serves on the board of two other Arch companies in Massachusetts—Brighton, MA-based Surface Logix and Cambridge, MA-based Variation Biotechnologies.

This new perspective as a venture capitalist provides Gillis an opportunity to be even more influential in the community, says one of his protégés from the Immunex days, ZymoGenetics CEO Doug Williams. “He can be enormously helpful to the local biotech scene at Arch, and in fact I think if you look at the companies he’s involved with locally, you’d have to conclude that he already is. Steve is one of those rare people with an equal dose of talent in science and the business of biotech. He’s pretty much done and seen it all, and for him to be able to convey that to many companies instead of just one is of great benefit to the local scene,” Williams says.

I sat down with Gillis a few days ago to talk about life as a venture capitalist, how the biotech investing model has changed, and Seattle’s strengths and weaknesses. Here are the highlights of the conversation.

Xconomy: Can you bring us back to your thought process when you came to Arch? It was the summer of 2005, you had a long run at Corixa, and could have done a lot of different things. Why did you decide to become a venture capitalist?

Steve Gillis: After whatever it was, 14 years at Immunex and 11 at Corixa, that was 25 years of being involved in operations of a public company. I didn’t want to jump back into doing that. I needed some sort of break. Because sometimes running public companies isn’t a lot of fun. A lot of what you do is …Next Page »

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[Update: 09/21/09, 6:27 pm. See below.] Leroy Hood’s new idea for a company that detects cancer at its earliest, most treatable stages in the bloodstream has gotten some venture capital after a year of effort. Seattle-based Integrative Diagnostics has secured $7.5 million out of a $30 million equity round, according to a filing with the Securities and Exchange Commission.

The filing doesn’t say who invested in the company, and when I reached Hood by phone late this afternoon, he said the company was preparing a press release and not yet ready to make that disclosure.

Xconomy first described Integrative Diagnostics almost exactly a year ago, when Hood declared in an interview that “this company is going to transform medicine, I guarantee you.” Hood, the inventor of high-speed gene sequencing machines and founder of 13 biotech companies, said he was enthused by the potential for Integrative Diagnostics to usher in the era of what he calls P4 medicine—shorthand for predictive, preventive, personalized, and participatory medicine.

The idea is to create a new generation of more precise diagnostics that can look at a pinprick of blood and spot cancer cells at their earliest, most treatable, stages of development before people even have symptoms. The company is co-founded by Hood, his fellow faculty member David Galas at the Institute for Systems Biology, and Jim Heath, a chemist at Caltech who is the inventor of two technologies that improve measurement of blood proteins. One is a microfluidic chip that “will do for proteins what DNA chips did for messenger RNA or DNA fragments,” said Hood. The other is a set of simple chemicals Heath has developed to replace antibodies in diagnostic tests, which are hard to make and too unreliable, Hood said.

An earlier version of this technology was incubated starting in 2005 at the Accelerator, the Seattle-based venture-backed startup machine that’s affiliated with Hood’s Institute for Systems Biology. The company, called Homestead Clinical, was one of the companies that didn’t “graduate” from the Accelerator with venture rounds, like VLST, Allozyne, and Theraclone Sciences did.

Hood said at the time, about a year ago, that he thought it would take a couple months to get funding for Integrative Diagnostics, but that obviously stretched to a full year during the recession. He was bullish enough during that earlier interview to say he expected Integrative Diagnostics to give birth to at least five or six companies in the future. I expect to hear more details from the biotech pioneer tomorrow, and will be quick with updates when I know more.

[Additional comment from Carl Weissman, CEO of Accelerator, 09/21/09, 6:27 pm.]

“Integrative Diagnostics, or InDi, is partially based upon technology that was developed at Homestead Clinical Corp. while within Accelerator, or was the subject of an option agreement between Homestead and Caltech. So this is our fourth graduate,” Weissman says. “We always believed in the conceptual basis of the company at Accelerator, but we needed discovery technology to advance to a level that would enable the concept. InDi also disproves a long-held belief that no company could graduate from Accelerator without the financial support of Accelerator investors. We at Accelerator are very gratified with this outcome and fully support the company.”

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[Updated, 3:15 pm Sept. 11 with added "burst" from Immune Design.]

Seattle biotech has taken its share of lumps lately, but beyond the next quarter or next year, what kind of life sciences potential really exists here in the Northwest? Over the next 20 years, will this area have grown as a world leader in university and corporate research, venture financing, and entrepreneurial activity in the life sciences—and, if so, in what fields? Those are the questions Xconomy is seeking to answer at our next event here in Seattle on Oct. 19.

I’m excited to announce today that we have assembled a panel of some of the most accomplished life sciences entrepreneurs and visionaries in the world, all of whom happen to live here in Seattle. They are: Leroy Hood, president of the Institute for Systems Biology; Steve Gillis of Arch Venture Partners; Ben Shapiro, former executive vice president at Merck and now a partner with Boston-based PureTech Ventures; and Stephen Friend, co-founder and CEO of Sage Bionetworks and formerly of both Merck and Rosetta Inpharmatics.

It’s hard to imagine a group more qualified to speak on the region’s future. Hood is a legendary entrepreneur who has co-founded 13 companies, including Amgen, and is best known for inventing high-speed gene sequencing machines that made the Human Genome Project possible. Gillis co-founded Seattle-based Immunex, where he led the team that created a breakthrough for autoimmune disease that now generates more than $7 billion a year in worldwide sales. Shapiro, a former chairman of the University of Washington’s biochemistry department, was executive vice president of basic research at Merck during its 1990s heyday when it did the early development of Gardasil, the vaccine to prevent cervical cancer. And Friend was co-founder and CEO of Rosetta Inpharmatics before that company was sold to Merck for $620 million, and he stayed with Merck for eight years to integrate its personalized medicine approach through the company’s global operations.

Chris Rivera, the president of the Washington Biotechnology & Biomedical Association, will lead off with introductory remarks about the WBBA’s effort to secure more support for the local biotech cluster. The star-studded panel will be moderated by Carl Weissman, CEO of Accelerator and a managing director of OVP Venture Partners.

After that discussion, Bob Nelsen, co-founder of Arch Venture Partners, will introduce startups from the Seattle area with the potential to transform their respective fields of biotech—Calistoga Pharmaceuticals, VLST, and Immune Design. Executives from those companies will deliver “bursts,” or brief introductions of their work, before the networking portion of the evening.

The event will be held from 5:30 pm to 8 pm on Oct. 19 at the Seattle Biomedical Research Institute in the heart of Seattle’s South Lake Union neighborhood. You can get more information on how to register here. We expect this to be a highly interactive conversation with the audience, with yours truly running around with a microphone—so be ready with your questions. We look forward to seeing you there on Oct. 19.

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[Updated: 4:30 pm Sept. 11 with one new name]

Targeted Genetics never cured anything. The Seattle biotech company (NASDAQ: TGEN) didn’t prove the concept that gene therapy could usher in a new era of more effective medicines. It was never profitable. It burned through more than $315 million in investor capital during its 17-year history.

Those are cold facts that can’t be ignored as Targeted Genetics takes in what appear to be its dying breaths, as it says it needs new capital to operate beyond this month. But what will its legacy be on the Seattle biotech landscape? One of the clear answers is this: people.

It all started with H. Stewart Parker, the founder and longtime CEO, whose roots in biotech go back to her days as the first employee at Seattle-based Immunex in 1981. She learned the industry ropes there, climbed the ladder, and spun off that company’s gene therapy research into Targeted Genetics in 1992. She recruited, inspired, and mentored a generation of biotechies who have moved on to make important contributions at other organizations across the Northwest. It’s not going out on a limb to say these people, and others they will train in the future, will continue to make an impact on the local industry for years.

“People literally slept on the floor sometimes, I can remember, in the middle of manufacturing campaigns,” says David Schubert, president of Seattle-based Accelerator, who worked at Targeted Genetics from 1997 to 2000. “People there were incredibly committed and felt a great sense of camaraderie. It was an amazing training ground for talented people.”

Some Targeted Genetics alumni have left for jobs in other parts of the country, but here is a list of notable names in alphabetical order who remain active in Seattle biotech, which I’ve put together with help from Parker and Schubert, and from other readers. This list certainly isn’t comprehensive, so if you can think of former Targeted people who are making an impact in Seattle biotech who I’ve overlooked, please send me an e-mail at ltimmerman@xconomy.com. Or feel free to post a comment at the bottom of the story:

—Tara Allen, clinical research associate, Dendreon

—Todd Allen, Technical Operations at ZymoGenetics

—Kevin Anderson, scientist, Seattle Genetics

—Rema Assaf, senior project manager, Seattle Genetics

—Emma Austin, document control specialist, ZymoGenetics

—Susan Bell, research associate, MDRNA

—Emily Bradeen-Duncan, manufacturing quality assurance associate, Seattle Genetics

—Stacie Byars, director of marketing and membership, WBBA

—Barrie Carter, consultant, president-elect of the American Society of Gene and Cell Therapy

—Victoria Cleator, biotech facilities expert, Seattle Children’s Hospital

—Holly Craven, quality control analyst, ZymoGenetics

—Richard Daifuku, consultant, founder of Redmond, WA-based Koronis Pharmaceuticals

—Daryn Debelak, Northwest account manager for Invitrogen

—Devon DeHaas, Seattle account manager, VWR International
…Next Page »

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It stands to reason in a downturn, when investors get more cautious, the last place they’d want to park money is in a sector where it takes huge sums, agonizing stretches of time, and slim odds of a profit. That’s biotech in a nutshell, yet even in the downturn, it’s where some of the biggest venture capital bets are being placed in Washington state.

The list of the top 10 deals in Washington we got from DowJones VentureSource shows that a select few biotech and medical device companies are leading the way in venture investment. There was a top tier, in which four biotech companies raised more than $20 million, and a second tier, in which cleantech, software, advanced materials (and one biotech startup) pulled in much smaller sums. As my Xconomy San Diego colleague Bruce Bigelow noted, VC investing in the life sciences rebounded strongly during the second quarter nationwide, with the MoneyTree Report counting $1.5 billion in 160 life science startups.

We saw evidence of the trend toward life sciences in all three of our network cities. San Diego biotechs landed the two biggest VC deals of the quarter and in New England, eight of the top 10 second quarter financings went to life sciences companies.

Here’s the rundown of the big local financings of the past quarter:

Washington state’s Top 10 Venture Deals—Q2 2009*

Pathway Medical Technologies (Kirkland, WA) — $42.5 million
(Investors: Forbion Capital Partners, Giza Venture Capital, HLM Venture Partners, Latterell Venture Partners, Oxford Bioscience Partners, WRF Capital).

NanoString Technologies (Seattle) — $30 million
(Investors: Clarus Ventures, Draper Fisher Jurvetson, OVP Venture Partners).

Calistoga Pharmaceuticals (Seattle) — $30 million
(Investors: Alta Partners, Amgen Ventures, Frazier Healthcare Ventures, Three Arch Partners).

MediQuest Therapeutics (Bothell, WA) — $23 million
(Investors: Individual Investors, Integra Ventures, MASA Life Science Ventures, Novo).

Prometheus Energy (Redmond, WA) — $10 million
(Investors: Kenda Capital).

Gist (Seattle) — $6.75 million
(Investors: Foundry Group, Vulcan Capital).

DocuSign (Seattle) — $5 million
(Investors: Frazier Technology Ventures, Ignition Partners, Sigma Partners, WestRiver Capital).

Xori (Seattle) — $4.5 million
(Investors: Accelerator, Alexandria Real Estate Equities, Amgen Ventures, ARCH Venture Partners, OVP Venture Partners, WRF Capital).

Qliance Medical Management (Seattle) — $4 million
(Investors: New Atlantic Ventures, Second Avenue Partners).

MicroGreen Polymers (Arlington, WA) — $3.4 million
(Investors: Not listed by Dow Jones, although Xconomy reported the round was led by WRF Capital).

—*Source: Dow Jones VentureSource

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Kirkland, WA-based OVP Venture Partners has led a new $15 million investment round in Limerick Biopharma, a drug development company based in South San Francisco. Existing investors Arch Venture Partners, Sevin Rosen Funds, and Altitude Funds also participated in the Series C round. Limerick is a new portfolio company for OVP, and OVP managing director Chad Waite has joined Limerick’s board of directors, which is led by newly named chairman Corey Goodman (the former president of Pfizer’s Biotherapeutics and Bioinnovation Center).

Limerick is developing compounds that improve certain drug side effects and clinical outcomes. The drugs work by activating cellular transport pumps to carry other drugs away from tissues where they can have toxic effects. The company’s proprietary molecules can be applied to drug treatments including immunosuppressants, opioids, and immunomodulators, as well as directly targeting metabolic diseases like hypercholesteremia and hyperglycemia.

“Limerick’s novel platform has led to the development of an attractive pipeline of products for metabolic disease, immunosuppression, and mitigation of opiate side effects,” Waite said in a company statement. “The company is now well-positioned to capitalize on this platform and to exploit the commercial potential of its growing library of biochemical activators of cellular transport. Early human trials are quite promising.”

In the past couple of months, OVP has made investments in antibody drug developer Xori (through Seattle-based Accelerator), solar-power efficiency startup Tigo Energy, genetic analysis company NanoString, and healthcare-IT firm Talyst.

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Most of Seattle’s biotech news this week came out of Orlando, FL, where local companies vied for the attention of 30,000 cancer specialists at the American Society of Clinical Oncology annual meeting. The best clinical trial data I saw didn’t actually come from a Seattle-based company—but it had a strong local tie to Paul Allen’s Vulcan Capital.

—A company founded by Vulcan and other venture capitalists in 2005, BiPar Sciences, captured the biggest headlines of this year’s ASCO. The BiPar drug, the first in a class of PARP inhibitors, helped shrink tumors, stop them from spreading, and keep patients living longer than a standard chemo regimen by itself. We had the scoop on May 22 that this drug was going to make waves at ASCO, and it didn’t disappoint. One researcher told Bloomberg News it was no less than a “bombshell” for the breast cancer field.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC) saw its shares boom 47 percent in the last two hours of trading on Monday after it released some detailed results from a 140-patient trial of its lead lymphoma drug, pixantrone. The compound was able to completely shrink tumors in 20 percent of patients who were heavily pre-treated, compared with 5.7 percent who did that well in the control group [[Correction: A previous version said this group got a placebo--it was comparitor drug]]. But there were side effects, including a higher rate of severe cardiac disorders among patients who got the drug. Regardless, the company hopes to seize on the newfound demand for its shares by getting rid of its $118.9 million in debt.

—Microsoft has been getting more serious about dipping its toe into the life sciences software market this year, and this week it took another important step by buying the assets of Rosetta Biosoftware from Merck. This deal gives Microsoft a profitable new division, a customer list of almost 100 names, and highly sophisticated software that would have taken at least three years to build in-house, a Microsoft executive says.

—Carl Weissman, the CEO of Accelerator and a managing director with OVP Venture Partners, stirred the pot in the Xconomist Forum this week with a thoughtful and provocative editorial on why he thinks innovators should get perpetual ownership rights to drug patents. This sparked quite a few insightful comments—many of which say this is a bad idea.

—Bothell, WA-based OncoGenex Pharmaceuticals (NASDAQ: OGXI) released some promising data at ASCO that showed its experimental prostate cancer drug, in combination with chemotherapy, was able to help men live a median time of about 7 months longer than men who got the chemo alone. It’s a small study of just 82 men, and needs to be verified …Next Page »

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Washington state gets more than $1 billion every year from the federal government to support biomedical research, which makes a lot of entrepreneurs wonder why there aren’t more startups being spun out each year. Now a couple of well-known Northwest life sciences entrepreneurs, Tom Ranken and Bob Wilcox, want to take a little more money from Uncle Sam and put it to work advancing that research a little further, by building biotech and medical device companies.

This concept, called Bionager (pronounced BI-on-uh-jer), is still very much at a fledgling stage. Ranken and Wilcox are seeking ways to get the federal government to pump in $10 million to get it off the ground. The goal will be to help finance promising research with commercial potential through the so-called “Valley of Death” where ideas die, because they lack enough proof to win venture capital support to shepherd them through the perilous phases of product development.

The vision is for Bionager to be a for-profit corporation that pools money from the federal government and private investors, who will take equity stakes in startup companies. Unlike many ill-fated incubators run by government economic development groups that seek to create jobs, or real estate developers who seek to fill up lab space, Bionager will seek to generate investment returns, Ranken says. It hopes to make seed investments of $100,000 to $300,000 to each company, and to cut off funding fast if the work doesn’t hit pre-established milestones set by a board with commercial expertise, he says. Once Bionager “separates the wheat from the chaff,” then the startups will be ready to capture the next round of private investment they might otherwise never get.

“This will be a little bit of capital to get you started,” says Wilcox, a former vice president of product development at Bothell, WA-based Ekos, an ultrasound technology company. But as Ranken adds, this isn’t supposed to be some doe-eyed, well-meaning, yet ineffective effort. Bionager intends to offer expert contacts to help get companies going, a firm set of business milestones, and a tight schedule to achieve them. “We’re going to be ruthless,” Ranken says.

Ranken’s past jobs have included stints as president of the Washington Biotechnology and Biomedical Association, and founding CEO of Seattle-based computational biology company VizX Labs. He has complained loudly for years about the “funding gap” he sees as a roadblock to sparking more innovation in the Northwest.

To do something constructive about it, he and Wilcox have sought to establish a five-member board of directors, which includes themselves; WBBA president Chris Rivera; James Severson, vice president of Kirkland, WA-based Veratect; and H. Stewart Parker, the founder and CEO of Seattle-based Targeted Genetics.

Ranken and Wilcox have been pounding the pavement …Next Page »

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Seattle’s biotech companies must be trying to get a lot done before Memorial Day weekend, because we had reports on deals, layoffs, and big strategic moves.

—Dendreon (NASDAQ: DNDN) has spent years trying to prove that its immune-boosting therapy for prostate cancer really works, and now it has to show it can make enough of it to meet coming demand. The company has just one commercial manufacturing facility, and it is rapidly trying to scale it up over the next 14 months so it can pump out a maximum of $500 million to $1 billion worth of Provenge each year, says CEO Mitchell Gold.

—Archus Orthopedics, the Redmond, WA-based developer of spinal implants that help people remain mobile after back surgery, has laid off most of its employees and significantly scaled back operations to conserve its remaining cash.

—Accelerator, the Seattle-based investment vehicle for biotech startups, bankrolled its 10th company, called Xori. The company raised $2.1 million out of a $4.5 million round, toward a goal of developing technology that will make antibody drugs much more quickly, and with better properties, than existing methods.

—Cancer drugs represent one of the most intense fields of interest in biotechnology, so it shouldn’t be a surprise that a lot of Seattle biotech companies have news coming out at this year’s meeting of the American Society of Clinical Oncology from May 29 to June 2. ASCO posted brief online summaries of a lot of clinical trial data to be presented, and I combed through the most interesting abstracts from companies in the Northwest.

—Bionavitas, a Redmond, WA-based developer of light technology to help algae grow much more efficiently, explained its strategy in this feature story. It sees more promising markets in using algae to make food additives and for toxic cleanup—at least in the early days—than for biofuels.

—I heard about an intriguing new startup called Presage Therapeutics, a spinoff from the Fred Hutchinson …Next Page »

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