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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CombinatoRx is coming to one of those defining moments where it will either vault into becoming an emerging biotech industry player or it will take a big leap backwards. The Cambridge, MA-based company (NASDAQ: CRXX) will find out within the next four weeks whether its experimental combination drug for arthritis is likely to become a multi-billion dollar product, or a big, fat zero.

If a clinical trial of Synavive succeeds, “it certainly would mean we would pop the champagne,” says Gina Nugent, the company’s vice president of investor relations. If not, “it wouldn’t really be a clean-out-your-desks moment, but it may be that you’d have to take a shot of tequila. Maybe cry a little,” she says.

CombinatoRx was founded back in March 2000, has no marketed products, and has spent $220 million through the end of June on building a pipeline of drug candidates—so this first major clinical trial counts for a lot. 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. Its lead candidate at the moment is Synavive for osteoarthritis, the painful joint disease that affects an estimated 20 million people in the U.S., according to the National Institutes of Health. 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.

Synavive is designed to take a common generic immune-suppressor, prednisolone, in a very low dose, and combine it with dipyridamole, an anti-blood clotting agent. The idea is that by going to a low dose of the immune suppressor, patients can avoid some of its nasty side effects, like increased risk of osteoporosis and cataracts, while the dipyridamole activates it in such a way that it retains its full anti-inflammatory pain relief action.

The drug is currently in a 279-patient clinical trial of patients with arthritic knees, called Comet-1, says John Randle, the company’s senior vice president of corporate development. The main goal is to show improved pain relief compared with a placebo after three months of treatment, with a secondary goal of showing the combination is better than just plain low-dose prednisolone by itself. Results are expected in October, Randle says.

CombinatoRx was encouraged to go this far by earlier trials. One suggested its combo could help almost two-thirds of patients achieve a 20- percent reduction in symptoms of rheumatoid arthritis after six weeks, compared with about one-third who did that well on placebo. Another study of patients with osteoarthritis in the hands found that patients on Synavive had a 31 percent average reduction in pain, compare with 7 percent on a placebo.

There was a catch here, though, with patients complaining of headaches in the earlier trials. …Next Page »

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Ariad Pharmaceuticals said today it lost a patent lawsuit filed against Amgen, the world’s largest biotechnology company. Cambridge, MA-based Ariad (NASDAQ: ARIA) the U.S. District Court in Delaware said Amgen’s rheumatoid arthritis drug Enbrel doesn’t infringe on Ariad’s patent on reducing NF-(kappa) B activity. Ariad holds an exclusive license on the patent, called ‘516, from discoveries by David Baltimore, Phillip Sharp and Tom Manaitis at MIT, the Whitehead Institute for Biomedical Research, and Harvard University. Ariad CEO Harvey Berger said the company plans to pursue “appropriate legal action” to review the court’s decision.

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Alder Biopharmaceuticals will find out next year whether it has what it takes to beat Roche, one of the world’s pharmaceutical giants. Alder, the Bothell, WA biotech company, is beginning a well-controlled clinical trial this month that will give it a clear sense of whether it has a drug for rheumatoid arthritis that is better than Roche’s, with the added advantage of being faster and cheaper to make.

Alder doesn’t do much to blow its own horn, so I was surprised to learn from CEO Randy Schatzman how fast it has progressed in the past year. Schatzman is a veteran scientist formerly of Roche and Celltech’s R&D operation in Bothell. Alder, founded in 2004 after Celltech closed its doors in Washington, is now one of the better-financed development-stage biotechs in Seattle. It pulled in a $40 million Series C round in January from Delphi Ventures, TPG Biotech, Sevin Rosen Funds, Ventures West, HIG Ventures, and WRF Capital.

Those investors are betting that Alder has a “fast follower” that might trump a rheumatoid arthritis drug approaching the market from Roche, called Actemra. The Basel, Switzerland-based drugmaker is currently awaiting FDA approval for the product. It’s designed to block an inflammatory molecule called IL-6 that attacks joints in rheumatoid arthritis patients, unlike other biotech drugs like Amgen’s Enbrel that hit a different target called TNF. An estimated 1.3 million adults in the U.S. have the painful joint disease, and the market for treatments is already worth an estimated $10 billion a year, according to IMS Health. So Alder’s first attempt at developing a new drug is really a swing for the fence.

“Our philosophy is about aiming for a best-in-class antibody as opposed to first-in-class,” Schatzman says. “Doctors will prescribe the best drug for their patients. You beat people with a better drug, not with a me-too drug.” To put it more succinctly, “it’s an improved fast-follower strategy.”

So what does that mean? Alder has engineered the drug, called ALD518, to block the same IL-6 molecules, but with a number of advantages over Actemra, Schatzman says. The Alder drug can last longer in the bloodstream, so it can be injected less frequently, possibly as little as three or four times a year instead of once a month, he says. It is made to be given intravenously or in a straightforward injection under the skin, while Actemra is IV only, Schatzman says. Alder can also give its treatment in one-tenth the dose because it’s more potent, meaning that it’s cheaper to manufacture. And, Alder’s drug is designed to snip off a carbohydrate chain that hangs off the genetically engineered antibody, which may help it avoid causing rare, but potentially dangerous allergic reactions during infusion, Schatzman says.

Alder does this through a technology that turns yeast cells into mini-factories for antibody drugs, instead of the standard Chinese hamster ovary cells, to better mimic the human environment. Since yeast is a cheap raw material, and the cells divide much faster than the hamster cells, drugs made this way could cut manufacturing costs to a fraction of what it takes to make big sellers like Enbrel or Genentech’s Avastin, Schatzman says. The trick, which Alder will need to continue to prove works in clinical trials, is that yeast-derived antibodies behave the same way in the body as those from hamster cells, or at least aren’t associated with any unusual side effects. (The company also had to prove that it could take small-scale batches of yeast antibodies and make them in large volumes, which it has done, Schatzman says.)

Once Schatzman explained the design of the next experiment, I could see why he needed to raise $40 million. The study of ALD518 for rheumatoid arthritis patients will enroll 120 patients, randomly assigned to drug or placebo, and measure the standard scores on joint pain and swelling for 24 weeks—the same test other drugs have passed in their pivotal trials—which isn’t cheap. If this trial shows positive results in mid-2009, then Alder will have to find a large drugmaker as a partner on the ensuing Phase III trial, which will need to enroll thousands of patients to satisfy FDA’s safety demands on rheumatoid arthritis drugs, Schatzman says. It will probably be 2013 before the drug could reach the market, he adds.

Still, Alder isn’t planning to give away the entire store in a pharmaceutical alliance. The company plans to keep rights to itself with ALD518 for use against cancer. Although anti-cancer medicines traditionally are measured by their ability to shrink tumors or prolong life, Schatzman says his drug could take a different tack, showing benefits for quality of life for cancer patients. Research shows that many tumors pump out lots of IL-6 inflammatory molecules, which contributes to fatigue, weight loss, muscle loss, and generally feeling miserable. The reasoning is that if ALD518 can block that molecule, the patients should not only feel better, but they could be sturdy enough for more chemotherapy, which could help them live longer, he says. That hypothesis is also being put to the test in a 120-patient, randomized clinical trial that should provide an answer on whether it can help patients with lung cancer, he says.

“These Phase II trials will drive value for us if we’re successful,” Schatzman says. “Then we’ll raise more money.”

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The stock chart for Trubion Pharmaceuticals tells an ugly tale this past year. The company had sunk to $4.48 as of yesterday’s close, after selling shares in an initial public offering at $13 in October 2006. Steven Harr, an influential biotech analyst at Morgan Stanley, summed it up in a report in March, saying Trubion “fits into the category of stock we have advised avoiding.” The stock is thinly traded (meaning any big buyers have to bid up the price to get shares), there’s little news coming soon to provide a lift, and the company will probably need more capital in a year or two, Harr said.

It’s been a slide for Trubion, one of the hotter biotech companies in Seattle since it was founded in 2002. The company lured top managers from Seattle-based Immunex, and its backers include Arch Venture Partners, Frazier Healthcare Ventures, and Oxford Bioscience Partners. So I was curious to find out what the company is doing to re-ignite its spark when I stopped by its offices yesterday.

Trubion CEO Peter Thompson was sanguine about the situation, since much of it is out of his control. The company is in the middle of clinical trials that won’t provide an obvious payoff until at least next year. In the meantime, investors are running scared from biotechs like Trubion without moneymaking products, especially with supposedly safer investments like Fannie Mae and Freddie Mac tanking. Plus, Trubion’s lead drug candidate, TRU-015, missed expectations last September when it didn’t blow the doors off Genentech and Biogen Idec’s Rituxan in a study of patients with rheumatoid arthritis. “Enthusiasm is tough to come by in the smallcap biotech space,” says Thompson, an Xconomist. “The trial results will come,” he says. “We are definitely focused on execution this year.”

Here’s where things stand. Trubion’s lead drug, TRU-015, is still in development for rheumatoid arthritis in a collaboration with Madison, NJ-based Wyeth (NYSE: WYE). The results of a 276-patient, placebo-controlled trial showed the drug was about as good as Rituxan was in other studies at reducing the signs and symptoms of rheumatoid arthritis, according to research presented in November at the American College of Rheumatology.

The product has been designed by Trubion scientists to have the same targeting capability of Rituxan against cells with a marker called CD20. But because the Trubion drug is a smaller molecule than Rituxan, it should 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. Ed Clark of the University of Washington, an immunologist and scientific adviser to the company, once called these “leaner and meaner” drugs.

If proven in clinical trials, that has big implications for business and health. An estimated 2 million people in the United States have rheumatoid arthritis, and Rituxan generated $2.3 billion in U.S. sales last year. The Trubion drug appears good enough to win approval for rheumatoid arthritis, and may have an edge over Rituxan because of the need for fewer injections, said Shiv Kapoor, an analyst with Ferris, Baker, Watts, in a note to clients in May. “We believe that investors will be rewarded for their patience once the proper value of TRU-015 and the pipeline are reflected in Trubion’s stock price,” he says.

The stock has come down, Thompson says, because investors expected Trubion and Wyeth to march on with a new Phase III clinical trial, and set a date for submitting an application to the FDA for permission to start selling it in the United States. That didn’t happen. Instead, Trubion started a second Phase II trial of TRU-015 in May, which will compare how patients do on a single dose over a roughly six-month period, versus a repeated dosing schedule. Results from that trial should be available in the second half of 2009, Thompson says. Trubion is also collecting more data from the earlier study from patients who remain on the drug, to see if their arthritis symptoms remain at bay over longer periods of time, without having their immune system B-cells wiped out to the point they become too vulnerable to infections.

If those studies go well, Trubion and Wyeth will be able to move on with a Phase III program that could provide enough data to win FDA approval, Thompson says. Trubion isn’t saying how long it will be before it applies for FDA clearance, but he didn’t correct me when I said it sounds like they could do it in late 2010 or early 2011.

Thompson mentioned two other drugs Trubion has in early stages of human testing. Both of them, TRU-016 and SBI-087, are expected to generate clinical trial results in 2009, he says. It’s a busy time inside Trubion, but it sounds like it’s going to be a few more quarters before investors will tune back in to this story.

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Abbie Celniker has been climbing biotech’s corporate ladder for much of her career. Higher and higher she went, in senior R&D jobs at Genentech, Wyeth Biopharma, Millennium Pharmaceuticals, and most recently as global head of Novartis Biologics in Cambridge, MA. Now, at 49, she has taken a detour to become CEO of a growing startup company in Cambridge called Taligen Therapeutics.

At big companies, the higher Celniker climbed, the further she got from her roots as a molecular biologist. “At a large pharma company, you’re managing or directing things at such a high level, you couldn’t really see things at a level where you’re exposed to the science anymore,” Celniker says. “I fell in love with the science they have here.”

Taligen, she explained to me recently, is developing drugs for inflammatory diseases that work in a new way, by controlling the “alternative pathway of complement”—a part of the immune system that helps initiate and amplify inflammation. The approach is different than that of other protein drugs that work further “downstream” in the chain of inflammatory events, like Amgen’s arthritis drug Enbrel or Biogen Idec and Elan’s multiple sclerosis and Crohn’s disease treatment, Tysabri, she says. Intervening earlier in the complicated cascade of events, the reasoning goes, could better control inflammation.

Whenever a drug sets out to tamp down an excessive immune reaction, though, researchers have to worry about going too far, and making the body vulnerable to infection. (Tysabri, for example, has been linked to a potentially fatal brain infection called PML.) Taligen’s drugs may have an advantage here, because they can be designed to work locally just at the organ or tissue affected by an inflammatory disease, rather than acting throughout the entire body. A drug for asthma, say, could be inhaled into the lungs, or a treatment for macular degeneration, the leading cause of blindness in the elderly, could be injected behind the eye, Celniker says.

Founded in 2004 by Woodruff Emlen and Michael Holers, professors at the University of Colorado, and working with a group of just seven people in discovery research, Taligen has built a suite of protein-based drug candidates that modify the amplification role of the alternative complement pathway. The work is still in early stages, and hasn’t yet progressed to clinical trials, yet it has attracted big money. Taligen announced in February that it had secured a $65 million Series B round of venture capital, divvied into undisclosed chunks based on hitting milestones in development. The first chunk arrived in January, led by Alta Partners and Clarus Ventures, and included existing investors Sanderlin Ventures, Tango and High Country Venture.

The cash is being used to double the size of the company, Celniker says. Taligen moved its corporate headquarters from Aurora, CO, to Cambridge last month when Celniker joined. While its discovery group will stay in Colorado, the company is looking for people in Cambridge with experience in animal testing, manufacturing for clinical trials, and early-stage development work, who are hard to find in Colorado, Celniker says. “It’s hard to build a company to make protein drugs if you’re not in the Bay Area or here,” she says. “We need people who have done it before.”

Celniker makes it sound like it won’t be too hard to find recruits. “Literally you can’t walk down the street without bumping into someone you want to consult with or hire,” she says. And at a company of Taligen’s size, Celniker will surely get to see those people, and the science they’re working on, at close range.

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