South San Francisco-based Crescendo Bioscience has raked in $56 million today for a technology to help doctors and patients better decide which drug is best for them—especially when tens of thousands of dollars are on the line.

Crescendo said today it has raised a total of $56 million in new capital, through a $31 million Series C venture financing, plus another $25 million of strategic investment from Salt Lake City, UT-based Myriad Genetics (NASDAQ: MYGN). The venture round was led by Aeris Capital AG and included existing investors Mohr Davidow Ventures, Kleiner Perkins Caufield & Byers, and other investors. The money from Myriad is structured as long-term debt, and gives Myriad a three-year option to acquire Crescendo at a predetermined amount that depends on Crescendo’s sales performance.

The cash is going toward supporting Crescendo’s first product, called Vectra DA, which the company says is “the first blood-based molecular diagnostic test available that can determine the level of disease activity in patients with rheumatoid arthritis.” The company’s test is supposed to help doctors and patients determine whether the inflammatory disease can be controlled over time with cheap medications like methotrexate, or whether the patient responds better to more expensive products like Amgen’s etanercept (Enbrel) or Abbott Laboratories’ adalimumab (Humira).

Crescendo is betting that its information will be very valuable to patients, doctors, and insurers. The top biotech drugs for rheumatoid arthritis can cost $20,000 a year, and while they can be highly effective, they also don’t work for everybody in the same way. And prescribing by trial and error can be a costly endeavor. About 1.3 million people in the U.S. have rheumatoid arthritis, according to the Arthritis Foundation, and these drugs make up a global market that was worth $12.7 billion in 2010, according to visiongain, a London-based market research firm.

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Arena Pharmaceuticals is getting ready to make another run for U.S. regulatory approval of its obesity drug, and now it has some clinical trial data that the FDA has said it wants to see.

The San Diego-based biotech company (NASDAQ: ARNA) is announcing today that its experimental weight loss treatment, lorcaserin (Lorqess), reached all three of its main goals in a clinical trial called Bloom-DM, which enrolled 604 overweight or obese patients who also have Type 2 diabetes. The study essentially showed that these patients, who are generally tougher to treat than other overweight and obese patients, had a similar experience to more than 7,000 patients who participated in the last two pivotal trials, Bloom and Blossom. Some details are being released today to investors, while more details are expected to come out later at a medical meeting and peer-reviewed scientific journal.

Today’s data release represents Arena’s hope for redemption after what has been a brutal couple of months. The company’s application to market its treatment was ripped by FDA staff in September over some concern about tumors in rats, and then the agency formally turned down Arena’s application to start selling lorcaserin, saying it offered only “marginal” ability to help people lose weight. The FDA, in its complete response letter to the company, recommended that the company turn in detailed reports on this other study, Bloom-DM, to provide more evidence that the drug helps people who face the doubly whammy of obesity and diabetes. An estimated two-thirds of people in the U.S. are considered overweight or obese, which puts them at risk for a slew of other chronic, and costly, ailments like cardiovascular disease, arthritis, and depression.

So while the potential benefit—and market—for an effective weight loss would be huge, the FDA has also made clear through its actions this fall against both Arena and one of its competitors, Mountain View, CA-based Vivus (NASDAQ: VVUS), that any new drug developer must clear an extremely high bar for safety and effectiveness if it wants to start selling a new product to millions of people in need. San Diego-based Orexigen Therapeutics (NASDAQ: OREX), the next obesity drug developer in line at the FDA, will either learn from these lessons and advance onto the market, or step into yet another buzz saw when it appears before an FDA advisory panel on December 7.

Arena CEO Jack Lief wasn’t making any predictions about whether the Bloom-DM study will put his company over the top, but he expressed his usual confidence, and how this latest study will help buttress his argument that lorcaserin deserves a spot in the U.S. market.

Jack Lief

“Patients with type 2 diabetes have much more difficulty losing weight than other patients. And although we believed they would benefit, you have to demonstrate that. This study has demonstrated they benefit as well,” Lief says.

Arena plans to crunch the numbers on this latest study, and discuss the new evidence with the FDA before the end of the year, Lief says. Arena’s partner, Japan-based Eisai Pharmaceuticals, remains committed to pushing forward with the program, a spokesman said.

OK, for the stat nerds out there who want to want to dig into what we’ve learned here, now you can get your hands dirty.

Patients who entered this study had an average body mass index of 36, Lief says. People with a body mass index of 30 or greater—which translates to 5-foot-10 and 209 pounds—are considered obese, according to the National Heart, Lung, and Blood Institute. They also entered the study with an average score of 8.0 on their hemoglobin A1c counts—an important measurement of blood sugar control. People are generally considered normal at … Next Page »

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Mark Corrigan, the chief executive of the biotech Zalicus (NASDAQ:ZLCS), has been shuttling back and fourth from Boston to New York this week as part of the Cambridge, MA-based firm’s effort to gain greater visibility on Wall Street. In fact, last Friday he was due to ring the closing bell at the NASDAQ stock market in Times Square.

Founded in 2000, the company, known for most of its history as CombinatoRx, has burned through more than $230 million to develop its drugs. It was one of the high-flyers in the local biotech scene until its lead treatment for arthritis faltered in a mid-stage clinical trial two years ago. Now the company, with a new name and a new FDA-approved drug, is out to reinvent its image in the investment community.

Last week the company changed its name from CombinatoRx to Zalicus (and no, the firm didn’t name itself after Zalicus, the armored character from the video game World of Warcraft). While name changes aren’t typically news, this company’s renaming deserves special attention because it relates to the December 2009 merger of CombinatoRx and Vancouver BC-based Neuromed Pharmaceuticals. By acquiring Neuromed, the new company obtained a long-lasting opioid pain reliever (Exalgo) that has been available on the U.S. market since April. It’s the first marketed product for Zalicus, and it changes the complexion of the company quite a bit.

Before the merger with Neuromed, Zalicus’s business was built entirely on its system that seeks synergistic combinations of compounds to form new treatments for diseases. That technology has helped the firm gain its research and development deals with the Swiss drug maker Novartis (NYSE:NVS) and Thousand Oaks, CA-based biotech giant Amgen (NASDAQ:AMGN). Neuromed, like the name used to suggest, developed neurological drugs like the long-lasting opioid pain reliever. The product (Exalgo) is marketed by health products giant Covidien (NYSE:COV). Zalicus has also chosen to maintain a research operation in Vancouver that is focused on discovering drugs that block proteins called calcium channels to treat pain.

Still, the company’s lead clinical candidate is an arthritis treatment called Synavive. It’s a combination of a cardiovascular drug and a corticosteroid that resulted from the firm’s original combinatorial drug-screening technology.

The name change gives the company an excuse to tell its story to investors and regain faith among stock buyers on Wall Street. Investors bolted from the firm’s stock after it reported in October 2008 that … Next Page »

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“Early to bed,

Early to rise,

Makes a man healthy,

Wealthy and wise.”

Attempting to motivate their children to go to bed at a reasonable time, parents have for generations invoked these three time-honored rewards. Probably least compelling was the promise of health. Health is the absence of something–sickness–and is only fully appreciated when we do not have it. Yet, when we are really sick, health becomes our paramount concern. Few of us would choose to be a wealthy, wise man or woman if the price was advanced Alzheimer’s disease, terminal cancer, or crippling arthritis.

In this context, we have a major problem as a society. Despite our amazingly advanced technologies in communication, space travel, transportation, etc., we do not have technologies to keep us healthy. We cannot cure cancer, or Alzheimer’s disease or arthritis. Worse, cures are not even on the horizon. Why is it that our capacity to innovate in biomedical sciences seems to lag so dramatically behind our innovation capacity in aircraft design, for example?

As scientists employed as directors of an institute for biomedical innovation, we have to look closely at the impediments to improving health, and explore solutions. We are convinced that much of the answer can be found in our research universities, but they need to be re-structured. They need to be innovative in how they manage their science, as well as in how they perform it. This is no small challenge. Universities are without peer in their ability to discover the fundamental principles of science, and are responsible for much of the innovation in our society. The creativity and nimbleness in their science is not unfortunately matched by an equal creativity and nimbleness in administration and management. Although service innovation is now widely seen as contributing to society needs and economic growth as effectively as science innovation, universities in general continue to operate using time-honored and unchallenged principles. This has to change.

[Editor's Note: This post first appeared earlier today on the QB3 website. It is part of Reg Kelly's plan to write an occasional series of mini-essays on connected themes, rather than commenting on the news of the day.]

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Logical Therapeutics has secured $10 million to pursue its idea for a safer way to relieve chronic arthritis pain.

The Waltham, MA-based company has nailed down the $10 million out of a financing round that could be worth as much as $16.9 million over time, according to a regulatory filing today with the Securities and Exchange Commission. The document doesn’t say who invested, and Logical Therapeutics president Carolyn Green said she couldn’t comment at this time.

The last time Logical announced a fundraising was in June 2007 when it pulled in $30 million from SV Life Sciences, Burrill & Company, Novo A/S, Sigvion Capital, and PA Early Stage Partners. Last month, the company said it had started a mid-stage clinical trial of a new formulation of naproxen (marketed as Naprosyn, Aleve and other brand names) that is supposed to be safer on the stomach and gastrointestinal tract than the older form of the drug.

While non-steroidal anti-inflammatory drugs are workhorse pain relievers sold over the counter to millions of people, particularly for chronic osteoarthritis, they can cause gastric ulcers, which end up costing the U.S. health system $4 billion a year, according to the company. Bleeding ulcers and other complications from these drugs are thought to kill 20,000 people a year in the U.S., the company says. Pharmaceutical companies sought a safer alternative for the gut for years, a quest that gave rise to products like Merck’s rofecoxib (Vioxx) and Pfizer’s valdecoxib (Bextra). Those products were withdrawn from the market after researchers saw links to a higher risk of cardiovascular disease.

Ever since that debacle, use of drugs like Vioxx and Bextra from the same class, known as COX-2 inhibitors or Coxibs, “has been severely restricted and the coxib pipeline evaporated,” Logical says on its website. “As a result, patients are again receiving nonselective non-steroidal anti-inflammatory (NSAID) drugs and facing gastrointestinal toxicity risks. Prescribing NSAID therapy has become a complex balancing act as physicians evaluate a patient’s cardiovascular and gastrointestinal risks.”

Logical Therapeutics’ idea is to bioengineer a version of naproxen that’s inactive in the gastrointestinal tract, but once it is absorbed into the bloodstream will quickly release naproxen to relieve pain. Last month, Logical started enrolling the first of 534 patients into a clinical trial that will directly compare its candidate to standard naproxen over a 12-week period. The study will enroll patients with arthritic knees, and the main goal is to see whether the new drug can reduce the rate of stomach ulcers.

The company has said it hopes to have completed enrollment in the trial, called Nature, sometime in the fourth quarter of 2010.

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Get ready for a double-dose of your usual Seattle biotech roundup, as I was too slammed to give you the regular weekly shot of news last Thursday.

—Six months after Bristol-Myers Squibb (NYSE: BMY) wrote a big check to Bothell, WA-based Alder Biopharmaceuticals, we can see why. Xconomy had the exclusive on how ALD518 generated “outstanding” results in a mid-stage trial of 124 patients with rheumatoid arthritis, in the words of the lead investigator. This story was based on an abstract posted online in advance of the European League Against Rheumatism conference next month in Barcelona.

—Rheumatoid arthritis may be the really big market on the horizon, but Alder didn’t give away the whole store in the Bristol deal. Alder has retained the full rights to ALD518 for cancer, and the company is getting ready to present some other important mid-stage trial data next month at the American Society of Clinical Oncology conference. The idea is that ALD518 can tamp down the excess inflammation that plagues cancer patients, making them vigorous enough to withstand more chemotherapy that kills tumors, which might help them live longer.

—Leroy Hood coined the term “P4 Medicine” as the tagline for his vision of predictive, preventive, personalized, and participatory medicine about seven years ago. Now he has clinched the first partnership with a major U.S. medical school, Ohio State University, which is setting up a demonstration project to put this idea to the test. The deal is for two years, and calls for Ohio State and the Institute for Systems Biology to contribute $1 million each to make this work.

—One intriguing Seattle connection jumped on my radar during my last trip to San Diego, when I met with Nobel Prize-winning chemist K. Barry Sharpless of The Scripps Research Institute. Sharpless is well known as a proponent of “click chemistry,” in which scientists seek out the simplest, easiest, most reliable, irreversible reactions possible for industrial processes, rather than just trying to do what’s most cool or exotic to impress their peers. This technology is at the heart of a prototype device that Lee Hood’s Seattle-based Integrated Diagnostics is using to gather reliable measurements from a pinprick of blood.

—Ikaria, the Clinton, NJ-based biotech company with an R&D operation in Seattle, is gearing up for a $200 million IPO to be underwritten by Goldman Sachs, Morgan Stanley, Credit Suisse and others. The company is profitable because of a drug that treats respiratory illness in infants, but its big swing for the fence is with technology licensed from Mark Roth’s lab at the Fred Hutchinson Cancer Research Center that seeks to induce a reversible hibernation-like state that could someday buy more time for doctors to treat traumatic injuries, or perform heart surgeries. Arch Venture Partners has a 10 percent stake in Ikaria, so Bob Nelsen is rooting for this to be a big win.

—While all this news was breaking, we somehow found a way to organize an event on health IT innovation at the Frye Art Museum, with support from event host Swedish Medical Center and a number of sponsors. You can catch up on what happened by checking out this photo gallery, the speakers’ slides, and Greg’s roundup of some of the pithy insights we picked up.

—Seattle Biomedical Research Institute has been itching … Next Page »

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Roche and Cambridge, MA-based Biogen Idec are halting development of an experimental drug for rheumatoid arthritis because of safety concerns, according a report today by Bloomberg News. The drug, ocrelizumab, was designed to hit the same protein target on cells as the hit antibody ritxumimab, (Rituxan), albeit in a form thought to be more conducive for chronic autoimmune diseases than rituximab, which was originally developed as a cancer drug. Still, the new medicine was linked to “serious and opportunistic infections,” some of which were fatal, Basel, Switzerland-based Roche said today in an e-mailed statement cited by Bloomberg. The drug is still being tested for multiple sclerosis, according to the Bloomberg report.

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We have witnessed some of most striking technological and scientific innovations in humankind during the first decade of the new millennium. While such claims perhaps seem cliché in an age where the media constantly report on new findings that really do not warrant our full attention, several discoveries and innovations in the recent history of genomics were truly groundbreaking and will have long-lasting implications.

The expanding applications of genomic technology that will help us better understand causes and treatments of common human diseases, global warming, and hunger will become clear in the coming decades. The innovations most impressive to me in the past decade were those that have begun to shake many of the foundations upon which the life sciences and biomedical research have been built. Here are what I consider four of those more impressive discoveries:

1) The discovery that environmental stress can induce heritable DNA-based changes.

2) The maturation of highly parallel sequencing and genotyping technologies that have revolutionized our ability to associate changes in DNA with disease.

3) The discovery of whole new classes of RNA that do not carry out instructions from genes, yet are still critical to cellular and higher order biological processes.

4) The development of third-generation DNA sequencing that will lead to greater insights about underlying biology.

As our ability to capture data from entire genomes increases exponentially, this is creating a huge software and computing challenge. Life sciences and biomedical researchers will need novel solutions (a yet to come fifth innovation):

5) The translation of the deluge of data coming from the new discoveries and technologies into actionable results that can impact human wellbeing.

This will be a big trend to watch in the coming decade, but more on that later. First, I want to explain a little about why I’m singling out these four particular discoveries and technologies as groundbreaking:

1. Environmental stresses can induce heritable DNA-based changes.

In 2005 Michael Skinner, a professor at Washington State University, published a paper in Science demonstrating that in response to exposure to an endocrine disruptor (a common environmental toxin), DNA can be chemically modified in certain locations and that these modifications can affect the ability of the biological machinery within the cells in every bodily organ to read the modified DNA. Reading DNA is a necessary first step for cells to manufacture the proteins … Next Page »

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Health care reform discussions almost always revolve around health insurance, as if care and insurance are synonymous. Understanding the difference can lead to the delivery of better care for less money, and help break the health care reform logjam in Congress.

An amendment introduced this week by U.S. Senator Maria Cantwell to America’s Healthy Future Act, currently being considered by the Senate Finance Committee, understands the difference. Senator Cantwell’s amendment would provide for coverage in a ‘direct primary care medical home’ plan, provided that plan is coupled with a quality wrap-around insurance program to cover non-primary care services.

What are direct primary care medical homes? They are primary care practices offering patients comprehensive primary care coverage outside of the traditional insurance system. They provide preventive and primary care, as well as chronic disease management and coordination of care with specialists and hospitals. Patients who elect this health care delivery model pay a flat monthly fee (ranging from $49 to $79 at my affiliated practice, Seattle-based Qliance Medical Group) for unlimited access to a primary care physician. This monthly fee covers everything from regular check-ups, women’s health exams, sprained ankles and broken arms to flu shots, and arthritis or diabetes management.

Direct primary care medical homes are already accomplishing what everyone wants health care reform to do:

• Lower costs

• Improve access

• Increase the quality of care

As a nation, we spend over $2 trillion a year on health care. We want to improve access, lower costs and expand quality coverage to the almost 50 million people who are currently uninsured – but we need to find a way to do this without breaking the bank.

There are ways to lower the overall cost of health care. An astonishing 40 percent of every dollar spent on primary care goes toward paperwork – either on the provider or insurer side – to complete the insurance reimbursement process. By eliminating the insurance payment mechanism and forming a direct relationship between a provider and patient, direct primary care medical homes have more resources available to spend on patient care.

The savings allow practices to offer more providers and longer office hours, even opening seven days per week. Smaller patient loads enable … Next Page »

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Burlington, MA-based ConforMIS has tapped government and private funds around the globe to raise $50 million, providing a huge financial boost to expand its business of providing patients with customized knee implants based on CT or MRI scans of their damaged knees.

ConforMIS chairman and CEO Philipp Lang tells me the company drew investments for its Series D financing round from sovereign funds of Kuwait and Singapore, both new investors in the firm, as well as private equity investors such as previous backer Aeris Capital, of Zurich, Switzerland and Palo Alto, CA. Other investors in the financing round, which wrapped up in June, weren’t disclosed because they asked not to be named, Lang says. The capital is expected to fuel growth of the firm’s U.S. and European sales forces, which are focused on selling its approved knee implants. Lang also says the firm’s technology could be used to develop products for other major joints, such as hips and shoulders.

This financing round is notable because of its large size, especially in the midst of an economic slump. It’s also worth noting the significant contributions from foreign sources. For ConforMIS, which provides products for patients whose arthritic or damaged knees require reconstructive surgery, the funding will improve its ability to push adoption of a relatively new way of making knee implants based on the precise dimensions of each patient’s anatomy. Lang, who founded the company in 2004, says his 90-employee operation is poised for significant growth now that the financing deal is closed.

“We did this fundraising to build this into a full-fledged orthopedics company with a much broader product portfolio in the future,” says Lang, a radiologist who practices on a limited basis at Brigham and Women’s Hospital in Boston. “That doesn’t happen overnight, but that will be an ongoing process over the next couple of years.”

Though it has differentiated products, ConforMIS is up against some much larger and more established competitors in the multibillion-dollar global market for knee implants, such as … Next Page »

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KaloBios Pharmaceuticals, a South San Francisco-based biotech company, said today it has raised $12 million in the second closing of a $32 million Series D round of venture financing. Baxter International, Genzyme Ventures, and Mitsubishi UFJ Capital were among the investors in the round. The company is developing a human antibody fragment to fight bacterial infections in cystic fibrosis patients, as well as another candidate for autoimmune diseases like asthma and rheumatoid arthritis.

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Alder Biopharmaceuticals caught a lucky break last week. The Bothell, WA-based biotech company saw its biggest competitor, Swiss drug giant Roche, get kneecapped by the FDA. The U.S. drug regulator delayed Roche’s application to sell a new rheumatoid arthritis drug, asking it to do more animal studies, which will probably keep the drug off the market at least one more year.

Roche is trying to win approval to sell its experimental drug, tocilizumab (Actemra), but it first needs to show it doesn’t harm fetal development or fertility, according to this Reuters report. The Roche drug is the first in its class, an antibody designed to block an inflammatory protein called IL-6 that hammers the joints of rheumatoid arthritis patients. This approach could offer doctors an alternative to the $10 billion-a-year class of drugs that block a different protein called TNF, like Amgen’s etanercept (Enbrel) and Abbott Laboratories’ adalimumab (Humira.) Analysts have predicted sales of the Roche drug could capture a tidy portion of this huge market, with sales of $2 billion a year.

So how does all this affect Alder? As I wrote back in September, Alder is angling to be a fast-follower behind Roche, with an improved antibody engineered to block the same IL-6 target. The Alder drug, ALD518, is designed to last longer in the bloodstream, so it can be given less frequently, possibly as little as three or four times a year instead of once a month, said Alder CEO Randy Schatzman. It is much more potent, so it can be given in one-tenth the dose, which is one reason it should be much cheaper to manufacture. The drug is also made to clip off a carbohydrate chain that typically hangs off other antibodies, which can sometimes provoke dangerous immune system reactions.

This concept still has a lot to prove in clinical trials, and it will take until 2013 to bring the Alder drug to the market, Schatzman said. So if Roche had gotten approval on time, that would have given it the first-mover advantage for at least four years. Now Roche’s lead will get narrower, because it is probably looking at more than a year of delay, Schatzman says.

“This will delay the Roche program 12-18 months, which is good for us,” Schatzman said in an e-mail on Friday.

Still, after the Roche news broke, Alder spent a day scrambling to get in touch with its clinical advisers to get the scoop on just how serious the FDA’s request was and what new hurdles it might pose for Alder. The answer is that the FDA wanted a full 4-part test of reproductive side effects in animals, while Roche performed just one part of the exam on embryonic-fetal development.

“Our advisors were very clear that there was nothing in the embryo-fetal toxicology that forced this issue, rather it was an increasingly conservative agency requiring a complete repro package,” Schatzman says. While there’s always a chance a conservative FDA could place new demands on Alder when it’s ready to turn in an application, that’s going to be a question for another day.

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OCT USA, a U.S. unit of Korean biotech firm Osteogenic Core Technologies, plans to open an office in Cambridge, MA, today, the Boston Globe reports. The Globe says that OCT—which is developing treatments for osteoporosis and arthritis—plans to hire 30 scientists in Cambridge and pump $8 million to $10 million into its new operation at One Kendall Square over the next three years.

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CombinatoRx, the Cambridge, MA-based biotech company, said this afternoon it is cutting 30 more jobs, which means it has now eliminated two-thirds of its staff since its lead drug candidate for arthritis failed in a clinical trial in early October. The company (NASDAQ: CRXX), which will be left with 55 employees, should have enough cash to operate without raising more capital from investors for four years, the company said. We’ve updated our Boston Tech Layoff Tracker accordingly.

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Everywhere he goes in biotechnology circles, RXi Pharmaceuticals’ CEO Tod Woolf hears the same criticism of RNA interference drugs. What can be done to overcome the challenge with drug delivery?

The answer is, nobody knows until it’s been proven with an effective drug. But Worcester, MA-based RXi (NASDAQ: RXII) says it has obtained the exclusive right to technology from the University of Massacusetts Medical School which could hold the key for the first way to deliver these drugs through the mouth.

The problem of how to deliver RNA interference drugs has been around since the technique was co-discovered a decade ago by one of RXi’s founders, UMass researcher Craig Mello. These drugs are thought to have the advantage of being able to specifically hit targets on cells that other drugs can’t, and to get at the genetic root cause of disease. The problem is that small interfering RNA drugs can get chewed up by enzymes in the body, or flushed through the kidneys into the urine long before they ever get to the diseased cells, Woolf says.

Other companies, like Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY) are packaging the RNAi molecules along with other materials, like polymers, fat droplets called liposomes, or nanoparticles that will make them stable long enough in the blood to do their business, Woolf says. Researchers have also tried localized delivery to tissues like the lungs, a joint, or the eyes.

“A lot of people talk about delivery, delivery, delivery,” Woolf says. “We’ll all be working on this for the next 20 years.”

There doesn’t appear to be one silver-bullet answer for drug delivery. Woolf says RXi now believes the best delivery method will vary from tissue to tissue, disease to disease.

In RXi’s case, it is testing out an oral pill in animals that could work for inflammatory diseases like rheumatoid arthritis, asthma, Crohn’s disease, psoriasis, atherosclerosis, and Type 2 diabetes. This approach is unusual, because most companies have long believed oral delivery of RNA interference drugs was impossible, Woolf says. … Next Page »

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CombinatoRx said today is cutting 45 percent of its staff after its lead drug candidate failed in a clinical trial for arthritis patients, according to a regulatory filing. The company said it had about 160 employees when I profiled it in late September, so that means about 70 workers are likely getting pink slips between now and the end of the year. Employees will get severance payments and outplacement service, the company said.

The Cambridge, MA-based biotech company (NASDAQ: CRXX), founded in 2000, has no marketed products and has spent more than $220 million building a pipeline of contenders. Its lead candidate, Synavive, failed to show a statistically significant benefit over placebo, when compared in a study of 279 patients with osteoarthritis last month. The stock crashed almost 80 percent in the first day, and closed at 59 cents today, before the job cuts were announced.

CombinatoRx plans to release its third quarter financial report tomorrow morning, so we’ll get a briefing about how much cash it has, how fast it is burning through those funds, and what else it has in the cupboard that might turn things around. The company currently has drugs in clinical trials for dermatology conditions and diabetes. The question is whether investors want to hear any of it, or just run for the exits.

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(Update: This story has been updated to include Monday’s closing share price, and a description of preliminary Phase II re-treatment results.)

Trubion Pharmaceuticals shares shot up 43 percent this morning, saw all the gains vanish within an hour, then finished the day up 12 percent after reporting encouraging news from a clinical trial of its lead drug candidate, TRU-015. The Seattle biotech company said that rheumatoid arthritis patients who took repeat doses of its drug got relief from the signs and symptoms of the painful joint disease without any increase in serious side effects.

Trubion climbed 69 cents to $2.29 at 9:41 am Eastern time on the news, then gave it all back, falling 13 cents to $1.39 by 10:21 am. The stock finished the day up 12 percent to $1.79. The volatile trading happened after Trubion presented results from a small clinical trial at American College of Rheumatology meeting in San Francisco. In the study, 18 of 38 patients who entered the re-treatment portion of the trial got at least three more shots of a low and high dose of TRU-015, which is being co-developed with Madison, NJ-based Wyeth (NYSE: WYE). After almost six months, half of those patients had at least a 20 percent reduction in their disease symptoms, while another 17 percent saw their symptoms diminish by half, and 11 percent did even better, seeing a 70 percent improvement, researchers said. Re-treatments didn’t appear to cause any increase in adverse events, the company said.

A second study, which wasn’t ready in time to be included at the meeting, showed that Trubion’s drug appeared to work better against the disease when patients were re-treated. In a follow-up analysis of 240 patients from a 276-patient Phase II study, about 40 percent of patients had their signs and symptoms of arthritis improve by half when re-treated with an 800-milligram dose. That compares with 26 percent who did that well over six months in the first part of the study on the same dose, Trubion has said.

Still, these results aren’t really enough to reverse a slide Trubion has gone through this year, in which it has lost 80 percent of its market value. Bigger news came out at last year’s American College of Rheumatology meeting, in which a 276-patient, placebo-controlled trial showed its drug was about as good as rituximab (Rituxan) was in other studies at reducing the signs and symptoms of rheumatoid arthritis. The problem is that investors were hoping for more. Trubion’s product has been designed by its scientists to have the same targeting capability of rituximab against cells with a marker called CD20. But because the Trubion drug is a smaller molecule than rituximab, it is supposed to be better at penetrating deep into tissues like bone marrow and lymph nodes, where it can stop overactive immune-system B cells from causing damage.

As we noted in a profile back in August, Trubion doesn’t have any major news events on the near horizon, and it has a thin volume of shares that trade each day, so maybe it shouldn’t be a surprise to see such wild swings in one day. Trubion struck an optimistic tone in its statement from the medical meeting, but with a stock this low, it’s not going to be easy to get the capital it needs to take this drug all the way to the marketplace.

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ZymoGenetics has some bad news out this morning on its atacicept drug candidate. The Seattle biotech company said its partner, Germany-based Merck KGaA, halted a final-stage clinical trial of the drug for 200 patients with lupus of the kidneys because it posed a high risk of severe infections.

ZymoGenetics (NASDAQ: ZGEN) made the disclosure this morning in a filing with the Securities and Exchange Commission. The higher risk of infections was caused, in part, by a combination of immune-suppressing drugs used to control excess inflammation, the company said in the filing. The atacicept program will continue enrolling patients with other diseases, like lupus that has spread throughout the body, multiple sclerosis, rheumatoid arthritis, and blood cancers, the company said.

This news drove down ZymoGenetics stock 6 percent to $4.67 at 9:56 am Eastern time. It should have a greater effect on Merck KGaA, though, since ZymoGenetics agreed to hand over most of its responsibility for the program last month to its partner. The move was designed to save cash for ZymoGenetics, which is struggling with a slower-than-expected introduction of its first marketed product, recombinant thrombin for surgical bleeding.

Atacicept (pronounced uh-tack-EE-sept) is meant to work unlike any other marketed drug. It is a genetically engineered protein that’s designed to block BLyS and April, a pair of proteins that stimulate the growth of B cells, which can create antibodies that go awry and attack healthy tissue. The halting of the trial could mean that atacicept won’t reach the market for one of its other uses until 2014, says Kevin DeGeeter, an analyst with Oppenheimer & Co., in a note to clients this morning.

“An important commercial rationale for atacicept is the expected safely benefits compared to anti-CD20 drugs such as Rituxan,” DeGeeter said. “In our view, the safety signal may limit the commercial appeal for rheumatoid arthritis and multiple sclerosis.”

The trial of atacicept in lupus of the kidneys, which opened in December, was designed to enroll 200 patients around the world, with a goal of improving their kidney function after a year. The kidneys are affected in an estimated 30 percent of the 1.5 million people worldwide who have lupus that’s spread throughout the body.

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ZymoGenetics said today it has agreed to accept a $21 million lump sum payment from Bristol-Myers Squibb to settle a patent dispute between the companies over Ig fusion proteins, according to a filing with the Securities and Exchange Commission. The Seattle-based biotech company (NASDAQ: ZGEN) said it dropped its patent lawsuit against the company, originally filed in August 2006, and granted a non-exclusive worldwide license to Bristol for the technology, which is used in its rheumatoid arthritis drug abatacept (Orencia.)

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Judgment day was harsh for CombinatoRx. The Cambridge, MA-based company reported this morning that its experimental arthritis drug, Synavive, failed in a mid-stage clinical trial for patients with osteoarthritis of the knees. The company’s stock crashed 72 percent.

The drug didn’t show a statistically significant improvement over a placebo when 279 patients were asked about the pain they feel while walking on a flat surface, the company said today in a statement. CEO Alexis Borisy, an Xconomist, called the results “disappointing” and added that they “contain some observations that are difficult to reconcile.” CombinatoRx (NASDAQ: CRXX) fell $2.21, or 72 percent, to $0.83 at 10:22 am Eastern time.

This trial was a huge deal for CombinatoRx, as we wrote last week in a preview of the data release. The company has no marketed products, and has spent $220 million through the end of June on building a pipeline of drug candidates. The company’s medicines are unusual, because instead of developing new drugs from scratch, it uses computer screening methods to find novel treatments that combine conventional pharmaceuticals in new ways to improve their effectiveness. Osteoarthritis, the painful joint disease that affects an estimated 20 million people in the U.S., also has been crying out for something innovative. This is the form of arthritis traditionally associated with old age, degeneration of the joints, and for which people still mostly take over-the-counter pain meds, or possibly Pfizer’s Celebrex.

CombinatoRx is already looking to turn the page on this trial. In the statement, Borisy noted that the company has other drug candidates, namely CRx-401 for Type 2 diabetes and CRx-197 for dermatology conditions, which are expected to produce mid-stage clinical trial results in the next few months. Still, it’s gotta hurt. The company’s VP of communications and investor relations, Gina Nugent, told me a couple weeks ago that a failure wouldn’t represent a “clean out your desks moment” although it might cause people there to cry a little.

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