Scientists are finding new and amazing evidence that networks of bugs, bacteria, and other microbes in our bodies might help us maintain healthy immune functions—and the absence of them could make us sick. Vedanta Biosciences, a newly formed startup in Boston, is emerging from top-secret status to reveal its goal of developing treatments based on the relationships between microbes and our immune system.

PureTech Ventures, a Boston firm that specializes in founding life sciences startups based on new scientific discoveries, has formed Vedanta this year with leading academics in the fields of immunology and microbiology, according to Daphne Zohar, a managing partner at PureTech and acting CEO of the company. Vedanta is now coming out of stealth mode as a paper co-authored by one of the firm’s major scientific contributors, Kenya Honda of the University of Tokyo, is being released today in the journal Science.

The paper explains the discovery, which Vedanta is working to commercialize, of how a class of bacteria or “Good Clostridia” in the gut might prevent the immune system from going awry and causing inflammation, according to the startup. (Clearly, these good-guy bacteria don’t include the harmful Clostridia such as C. diff.) The scientists show how feeding the bacteria to mice stymied the development of certain allergies and inflammatory bowel disease. Their study found that the bacteria help recruit regulatory T cells to the gut whose job is to prevent such ailments caused by unchecked immune responses.

Vedanta is working with its scientific advisors to translate this discovery into potential treatments for human diseases, says Bernat Olle, a PureTech senior associate who co-founded Vedanta and serves as the its vice president of operations. “We think that the work Honda has done makes a strong case for” developing drugs for “allergies and inflammatory bowel disease,” Olle says. “We’re in the process of now prioritizing the [health] conditions we want to go after.”

The startup, which is incubating in PureTech’s Boston office, appears to be tapping a highly energized field that is rapidly providing clues about why allergies and autoimmune diseases have been on the rise in the U.S. and other developed countries. The so-called “Hygiene Hypothesis” suggests that a … Next Page »

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Seattle-based Omeros has raked in $25 million for its drug discovery technology from a couple of unusual suspects—billionaire Paul Allen and Washington state’s Life Sciences Discovery Fund.

Omeros (NASDAQ: OMER) is collecting $20 million from Allen’s investment operation, Vulcan Capital, along with a $5 million grant from the state fund that aspires to spur more commercialization of biotech ideas in Washington. In an unusual deal structure, both Vulcan and the state agency will have skin in the game with Omeros. Vulcan and the Life Sciences Discovery Fund will be eligible for a percentage of the future profits from partnerships Omeros signs, and they will stand to collect royalties on product sales if the technology paves the way for new drugs against targets on cells known as G-protein coupled receptors (GPCRs).

The deal provides an important new shot of cash for Omeros, which doesn’t have any moneymaking products on the market and didn’t raise as much capital for its drug development programs as it had hoped to in its IPO last year. The new financing will help Omeros push forward with its quest to identify ways to develop treatments that bind with more than 100 GPCR protein targets that have previously been considered “undruggable.”

An estimated 30 to 40 percent of all existing prescription drugs today are made to hit the more accessible forms of these targets, including big brand name therapies for allergies, pain, and mental illness. Merck’s loratadine (Claritin), Bristol-Myers Squibb’s aripiprazole (Abilify), and Purdue Pharma’s oxycodone (Oxycontin) are a few of the drugs that work this way. As anyone following the pharma business knows, companies are desperately looking for new blockbusters like that to replace the revenues they will lose in coming years as patents expire and cheap generic copies emerge.

By investing $25 million in the Omeros discovery technology, Vulcan and the Life Sciences Discovery Fund are essentially taking a piece of the action in a local company that thinks it has found a way to feed the pharma industry and satisfy its hunger for innovative new medicines.

“We see the Omeros GPCR technology as a major disruptive opportunity,” says Steve Hall, the managing director of Vulcan Capital. “Paul Allen is not a short term investor. We see potential to yield new innovation and returns over multiple decades.”

Steve Hall

Terms of the deal are unusual. Vulcan and the Life Sciences Discovery Fund will be eligible to get a “mid-teens” percentage of proceeds from any partnership income Omeros generates up to $1.5 billion. If Omeros generates $1.5 billion in cumulative proceeds from its GPCR program, Vulcan and the state agency will get a 1 percent slice of the subsequent revenue. Vulcan and the state agency will also get royalties on any products generated by the Omeros program. Vulcan is also getting warrants to buy shares in Omeros over the next five years at exercise prices of $20, $30, and $40 a share.

Investors may choke on their morning coffee today when they see those high warrant prices. Omeros, at Friday’s closing stock price, traded at just $7.30.

This is also clearly an unusual step for a state agency, but it’s not hard to see the underlying rationale. Washington state’s Life Sciences Discovery Fund has been whacked by 40 percent budget cuts by state lawmakers once before during the economic downturn. If Omeros can … Next Page »

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We took a long Columbus Day weekend here at Xconomy, but it didn’t shorten our roundup of life sciences news much. Here’s your latest update.

—Healthcare venture capital deals continue to climb back from their first-quarter plunge during the three months that ended September 30, according to the latest report from CB Insights, a New York firm that tracks investments in private companies. Venture firms invested $1.75 billion in 184 healthcare deals during the quarter, which sounds good, but it’s below the $1.9 billion that went into 192 healthcare companies during the same quarter of 2009.

—San Diego-based Synthetic Genomics and the nonprofit J. Craig Venter Institute are forming a new company called Synthetic Genomics Vaccines that will use the latest advances in synthetic biology and genomic sequencing to develop next-generation vaccines. The Venter Institute is contributing science and scientists, but no money.

—Albuquerque, NM-based Exagen Diagnostics is buying the San Diego-based diagnostics business of Cypress Bioscience (NASDAQ: CYPB) for as much as $8 million in upfront and milestone payments. Cypress also hopes to get additional future payments in the form of royalties on product sales.

—San Diego’s VentiRx, which also has operations in Seattle, said its lead drug candidate for nasal allergies helped to relieve common allergy symptoms in a clinical trial of 80 patients who were exposed to allergens in a scientifically controlled environment. The VentiRx drug is intended  to be the first once-weekly nasal spray for allergies.

—Luke found the geography of biotech has … Next Page »

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Every corner drugstore carries cheap meds for allergies, and about 30 million people in the U.S. still suffer from the symptoms. But now VentiRx Pharmaceuticals, a small biotech with operations in Seattle and San Diego, has generated some intriguing data that suggests it might have found a completely new way to treat—and possibly prevent—allergies.

VentiRx is announcing today that its lead drug candidate for nasal allergies was able to help relieve the stuffy nose, runny nose, sneezing, and itchy eyes commonly found in allergy sufferers, in a clinical trial of 80 patients, during allergy season, who were exposed to allergens in a scientifically controlled environment. The VentiRx drug, designed to be the first once-weekly nasal spray for allergies, showed a statistically significant improvement at both a low and high dose, when compared to patients who got a placebo. Detailed results will be presented at an upcoming medical meeting, the company says.

There’s some intriguing science underpinning this finding that makes today’s finding especially interesting. While there are lots of different options for treating allergies—antihistamine pills, corticosteroids as nasal sprays—VentiRx is trying to pull off a novel biological trick by stimulating something called the TLR8 receptor of the innate immune system. This idea seeks to exploit the growing scientific literature on the “hygiene hypothesis,” which essentially says that people in super-sanitized places like the U.S. and Europe have higher rates of allergies because our immune systems aren’t exposed to many pathogens when we are young, and so our immune systems overreact as adults when we are confronted with everyday allergens. Through careful stimulation of TLR8, a first-line defense mechanism of the immune system, VentiRx is seeking to create a diversion of sorts, that basically distracts the immune system so it doesn’t go wild when encountering everyday pollens, grass, or dust.

“We have shown clear clinical activity for this drug,” says Rob Hershberg, VentiRx’s co-founder and executive vice president of R&D.

Rob Hershberg

By stimulating the TLR8 receptor of the immune system in a generalized sense, VentiRx is hopeful that this drug could be helpful for people with a wide variety of different kinds of allergies to ragweed, pollens, or various other allergens, Hershberg says. It’s the first potential drug that can be made into a once-weekly nasal spray, compared with other sprays on the market today that are taken once or twice a day. And further in the future, VentiRx is planning to see if the product can be turned into a preventive medicine for people who want to brace themselves in advance for seasonal allergies or even year-round symptoms.

All of that is still on the drawing board for now. VentiRx raised $25 million in venture capital back in January from MedImmune Ventures, Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates, but that’s really just a small down payment for the development plan to come. The company is also developing a cancer drug, but that’s another  story for another day.

For now, VentiRx is thinking  about much bigger clinical trials it will need to run  for treating allergies. So VentiRx is now having some advanced talks with potential partners with the money and manpower to run a global clinical trial plan, with the big numbers of patients required to win approval from the FDA and other regulatory agencies around the world.

“The product profile that’s emerging is a unique one. Our attitude is that this is a compound that should be developed across the globe, against a variety of allergens,” says Mike Kamdar, the company’s other co-founder, and executive vice president of business development.

Allergies of the nose, called allergic rhinitis in medical terms, represent a $5 billion potential market alone, Kamdar says. Some of the widely used allergy meds on the market today … Next Page »

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2010 is off to a pretty fast start in terms of Northwest deals. We’ve already seen a lot of action in biotech, software, and cleantech.

—Seattle-based InstantService, a provider of live chat services, was acquired by Art Technology Group (NASDAQ: ARTG) of Cambridge, MA, an e-commerce software firm, for $17 million in cash, as Wade reported. InstantService’s technology will be used to help ATG’s clients offer live text-based chat with customer service agents on e-commerce sites.

—San Diego and Seattle-based VentiRx Pharmaceuticals raised $25 million in new funding, as Luke reported. The financing, which is an extension of a $26.6 million Series A deal from 2007, was led by new investor MedImmune Ventures, while existing investors Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates also participated. VentiRx is developing drugs to boost the body’s innate immune system to fight cancer and allergies.

—Sage Bionetworks, the Seattle-based nonprofit that’s leading a movement toward open-source sharing of biological data, has formed a partnership with Pfizer (NYSE: PFE), as Luke reported. Financial details and other terms weren’t disclosed, but the deal will provide enough cash for Sage to hire some new staff and will help support the nonprofit’s goal of building computational models in “network biology.”

—Seattle-based ZymoGenetics made $90.9 million in a stock sale after discounts and expenses. The company’s investors and underwriters bought 16.1 million shares at $6 apiece. The money will be used for R&D and to help ZymoGenetics (NASDAQ: ZGEN) market its drug for combating surgical bleeding.

—Kineta, a Seattle biotech company developing treatments for viral infections and autoimmune diseases, raised $942,000 in equity, debt, and options from 25 investors, as Luke reported.

—Bothell, WA-based Halosource, a maker of water purification technology, raised $10 million in a Series D financing led by Prime Partners Asia Merchant Capital of Singapore, as Luke reported. Halosource’s investors include Credit Suisse, Siemens, the Abu Dhabi Investment Authority, and in Seattle, Alexander Hutton Venture Partners, Buerk Dale Victor (now Montlake Capital), and WRF Capital. The new money will be used to fuel Halosource’s expansion to more developing countries.

—Kirkland, WA-based OVP Venture Partners led a $9 million investment in Aggregate Knowledge, a San Mateo, CA-based online advertising and analytics firm. Kleiner Perkins Caufield and Byers, DAG Ventures, and the company’s original angel investors also participated in the deal. The Seattle connection between Aggregate Knowledge and OVP was David Jakubowski, a former Microsoftie and advertising technology expert who is now AK’s chief revenue officer.

—Bellevue, WA-based DataSphere raised $10.8 million in Series B funding from Ignition Partners and two other strategic investors. DataSphere works with media companies to power hyperlocal websites and local advertising on those sites. I spoke with CEO Satbir Khanuja about his company’s strategy and prospects.

—Seattle cleantech software firm Verdiem raised $4.7 million in equity financing, according to a regulatory filing, as Luke reported. The investors were not disclosed. Verdiem’s software for personal computers is meant to help big companies and other organizations cut their electricity consumption.

—Seattle-based RealNetworks acquired Varia Mobile, also in Seattle, for an undisclosed amount. Varia, which makes content distribution and publishing software for mobile phones, was founded in 2007 and had a strategic alliance with RealNetworks (NASDAQ: RNWK) prior to the acquisition.

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VentiRx Pharmaceuticals has raised a venti-sized load of new cash. The San Diego and Seattle-based company that’s developing drugs to amplify the body’s innate immune system to fight cancer and allergies has pulled in $25 million through a new round of financing.

The deal is technically described as an extension of a $26.6 million Series A financing that VentiRx received in March 2007, meaning the company has now raised $51.6 million in the total round. The extension, which allows investors to buy VentiRx shares at the same price as they did before, was led by new investor MedImmune Ventures, while existing investors Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates all participated again. Maggie Flanagan LeFlore of MedImmune Ventures is joining the VentiRx board in connection with the deal.

The big idea at VentiRx, which I described in a detailed feature almost exactly one year ago, is to create conventional small molecule drugs that stimulate Toll-like receptors (TLRs), particularly one called TLR8. The family of TLRs are key components of the body’s innate immune system—the first-line defense that recognizes foreign invaders at their point of entry under the skin, in the mucus linings of the nose, and in the gut. VentiRx has developed one candidate for cancer that’s finishing an early-stage clinical trial, and another candidate for allergies that has passed an initial safety study. The new money is being used to move ahead with a pair of more rigorous, mid-stage clinical trials of both drugs this year which should establish whether they have proven this new concept of fighting cancer and allergies by stimulating TLR8.

“We view this as the last financing we’ll need before liquidity at VentiRx, whether it comes through an acquisition, an IPO, or a Big Pharma partnership,” says Michael Kamdar, the company’s executive vice president and chief business officer.

Michael Kamdar

VentiRx hasn’t come out publicly with hard data to support its scientific approach, but the findings will be available this year, Kamdar says. The company was able to secure the new round of funding after seeing signs that its cancer drug appears to stimulate an effect known as antibody dependent cellular cytotoxicity, which means it could help improve upon with antibody drugs for cancer like rituximab (Rituxan) or cetuximab (Erbitux), Kamdar says.

He noted that AstraZeneca, the parent company of MedImmune Ventures, has a longstanding interest in TLR biology, and has internal programs that look at different TLRs, such as TLR7 and TLR9, but not the same target as VentiRx, Kamdar says. Flanagan LeFlore added … Next Page »

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Virtual companies have been all the rage for some time with biotech venture capitalists, but I’ve been wondering whether this lean-and-mean outsource-darn-near-everything model is really a better way to develop drugs than the traditional soup-to-nuts approach at companies like Genentech. I haven’t seen a good academic paper on this question, and until I do, I’m going to keep asking people who live with this idea on a daily basis, like VentiRx scientific co-founder Rob Hershberg.

VentiRx, as I first described in this space back in January, personifies the trend toward small teams of experienced drug developers who rely on contractors to do a lot of the work. The company, which has a team of just a dozen people in Seattle and San Diego, raised $29 million in its Series A funding in March 2007 from Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates. VentiRx still has money left in the bank, so it’s apparently sipping fuel like a Honda Civic Hybrid, but the big question I had for Hershberg was this: What has this small team of committed people really accomplished?

The company hasn’t done anything to win headlines at a major medical meeting, but it has made a lot of the step-by-step progress that companies must make on the long slog to FDA approval. VentiRx now has two drug candidates whose safety has been demonstrated at a variety of doses in clinical trials for cancer and allergies. And prospective partners are starting to take a closer look, just as the VentiRx business model called for, Hershberg says.

At least one other virtual company, Brisbane, CA-based cancer drug developer BiPar Sciences, has proven that a virtual company can deliver bang-up results for a new drug, and made windfall profits for its investors when it sold to Sanofi-Aventis for $500 million earlier this year.

“There is really something to be said for focus,” Hershberg says. “I’m not saying the virtual model works in taking a drug all the way from the laboratory to the market. But in going from late-stage preclinical to proof-of-concept in people, like with a Phase Ib or Phase IIa clinical study, you can create a lot of value. It’s really an ideal structure. When you get into the later stage studies, that’s when bigger companies need to get engaged.”

The concept at VentiRx is that it could hit a goldmine if it can prove … Next Page »

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Back in September, I wrote in this space that if a global flu pandemic ever strikes, public health officials might turn to a Lexington, MA-based startup company called Pulmatrix.

The pandemic (a bit overblown, I must say) did strike. And yes, the public health officials have been calling Pulmatrix.

This company’s technology is nowhere near ready for prime time in big clinical trials, much less the marketplace, so isn’t all the fuss a bit premature? Maybe. Then again, most biotech companies work on pretty incremental advances over the standards of care, but Pulmatrix is one of those rare beasts that has a chance to transform how physicians think about treating many major respiratory diseases. The technology has attracted $18 million in initial equity financing from Polaris Venture Partners and 5AM Ventures, and a scientific advisory board that includes David Edwards of Harvard University and Robert Langer of MIT. It’s been a few months since we last wrote about this company, so I got an update from CEO Bob Connelly.

The concept at Pulmatrix challenges the status quo of antiviral treatment, in which a drug is engineered to kill a single infectious invader, which works for a while until that virus inevitably uses its evolutionary tricks to develop resistance. This is the “one drug, one bug,” method, as Pulmatrix puts it. Instead of going that route, Pulmatrix is developing a technique that’s supposed to stop any pathogen or flu strain that might find its way into the lungs. It calls this the “one drug, multiple bug” approach.

“The single drug for multiple bug approach is what’s really generating a lot of attention for us, even though we’ve been keeping a low profile,” Connelly says.

Pulmatrix is trying to do this by creating aerosols that have positively-charged ion-based compounds, like calcium and magnesium, that would be sprayed into the lungs. These compounds are supposed to do a couple of things. First, they stimulate immune defenses to prevent infection. Second, the aerosols are supposed to change the viscosity of the mucus that lines the lungs, which activates proteins in the lungs to form 3-D matrices that create a firewall of sorts that blocks pathogens of any kind from burrowing deep into lung tissue. So far, in animal and early human studies, this method hasn’t gummed up the mucus lining of the lungs, which could make it harder to breathe, or worse, create a haven for infectious bugs to thrive.

“Think of it as like a river with a light coating of ice on top, but with the river flowing smoothly underneath,” Connelly says. “It’s more difficult to penetrate the surface top layer, and there’s still clearance below.”

What’s more, Pulmatrix is supposed to change the properties of the airways, so that when people breathe in a pathogen—like swine flu—it doesn’t form into those tiny droplets that people can sneeze … Next Page »

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They love their coffee at VentiRx. They love it so much that they named their San Diego- and Seattle-based biotech company after the extra-large size of beverage containers that Starbucks shrewdly branded for its menu. The name also happens to symbolize VentiRx’s supersize ambitions for creating new drugs against cancer and inflammatory diseases.

Naturally, I had to catch up with the company’s scientific co-founder, Rob Hershberg, at a Starbucks in downtown Seattle and order a venti coffee myself. (I think he actually got a grande something, but I didn’t take notes on what it was). Hershberg, a molecular biologist and former Harvard Medical School professor, got his biotech experience as chief medical officer at Seattle-based Dendreon (NASDAQ: DNDN), and a key scientific role before that at Corixa. His co-founder on the business side, Michael Kamdar, made his mark negotiating deals at San Diego-based Anadys Pharmaceuticals (NASDAQ: ANDS).

The VentiRx duo has raised $29 million in venture capital from Arch Venture Partners, Frazier Healthcare Ventures, and Domain Associates. The money is going toward building a portfolio of conventional small-molecule drugs designed to work in new ways against cancer and inflammatory diseases. Specifically, the company’s lead drug candidate is supposed to amplify the body’s front-line defense against disease —the innate immune system—to kill cancer cells in combination with other treatments. The company’s second candidate builds on the company’s immunology expertise to make a drug that creates a diversion of sorts that tamps down an overactive response that causes allergies. Something like 30 million people in the U.S. complain of allergies, so anything that works, and is convenient, is a venti-sized opportunity.

“It’s gonna be big,” Hershberg says, with a cheeky nod to the company name.

One thing that’s designed to stay small at VentiRx is the payroll. The company has a total of just 12 employees, with the R&D operations led by Hershberg in Seattle, and the business and finance side in San Diego run by Kamdar. The two of them run the company like co-CEOs, Hershberg says, and have made a pact to talk every day and see each other in person at least once a week, he says.

The game plan is to keep the company lean and hire outside contractors to do much of the work, or operate as a “virtual company” in the language of the VCs, Hershberg says.

VentiRx got its start in 2005 and 2006 with $2 million in seed capital from Arch and Frazier, and some key guidance from Arch managing director Steve Gillis, a mentor of Hershberg’s when they were both at Corixa. They had a shared enthusiasm … Next Page »

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Intense allergic reactions to things like bee stings or peanuts can be life-threatening because some people can suffocate from massive inflammation in the windpipe. But it’s a little-known fact that the same kind of allergic reaction can also cause swelling and narrowing in the food pipe (aka the esophagus). Sometimes it’s so severe that food gets stuck there and needs to be removed in the emergency room.

If Meritage Pharma has sized up this ailment correctly, it may be able to pave the way for a new drug for a little-known disease called eosinophilic esophagitis (EoE). The San Diego-based biotech company is off to a running start, having raised $22.5 million in a Series A financing in March from Domain Associates, Latterell Venture Partners, and The Vertical Group. I learned more about this disease, and Meritage’s experimental drug to treat it, during a visit with CEO Elaine Phillips at the company’s offices (which happen to be just down the hall from Domain).

Meritage (pronounced MARE-uh-tazh) estimates that about 90,000 children and 110,000 adults in the U.S. are diagnosed with this condition in the U.S. each year. Phillips says they generally complain of difficulty in swallowing, chest pain, or heartburn-like symptoms. Sometimes patients get misdiagnosed and put on proton-pump inhibitor drugs like omeprazole (Prilosec), which reduce stomach acid with heartburn. There are no FDA-approved medications specifically for EOE. Meritage’s idea is to develop budesonide, an immune-suppressant commonly used as an inhalable asthma drug, into a thick-liquid formula that will deliver the medicine where it can be most effective in the lining of the throat.

“We’re making it like molasses,” Phillips says.

Actually, Phillips explained, the liquid form of the drug won’t stick in the throat quite like molasses. The drug will be made to coat the throat so it can be easily absorbed by the mucus lining of the esophagus.

This program is still in the early stages of development. The drug is scheduled to enter its initial human clinical trial, a placebo-controlled study of 80 children, by the end of this year. Some early work was done at San Diego-based Verus Pharmaceuticals, which spun budesonide off to Meritage back in March. The new company reunites a quartet of executives who previously worked together at Verus. The Meritage team includes chairman Cam Garner, Phillips as CEO, … Next Page »

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Idera Pharmaceuticals, the Cambridge, MA-based developer of treatments for autoimmune and infectious diseases, said today it has received an undisclosed milestone payment from drug giant Novartis. Idera (NASDAQ: IDPH) received the payment because Novartis started an early-stage clinical trial of QAX935, a drug that stimulates Toll-Like Receptor 9. The companies entered a partnership in June 2005 to develop drugs against TLR9 for asthma and allergies. Idera stock fell 2 percent to $14.34 at 10:33 a.m. Eastern time today.

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