Lycera founder and chief scientific officer Gary Glick is feeling pretty good these days. And who can blame him?

Just last fall, CEO Bill Sibold left the Plymouth, MI-based drug startup after less than a year on the job. That’s usually not a good sign.

Six months later, Lycera still doesn’t have a CEO. But that hardly seems to matter. Last month, the journal Science Translational Medicine published a Lycera study that validated its key cellular bioenergetics technology to treat autoimmune diseases.

And now this: Lycera announced today that it will collaborate with drug giant Merck to develop its Th17 drug program, a deal that includes $12 million in upfront cash, research funding, and clinical and regulatory milestone payments worth up to $295 million.

In a phone interview, Glick, a professor at the University of Michigan, says the company wants to find the right CEO but is in no particulary hurry.

“We’re executing quite well,” says Glick, with a strong hint of satisfaction in his voice. “We’re not in a rush to fill the position.”

The Merck deal represents a major milestone for the company, Glick says, because “it really validates the technology and team we’ve put together over the last 18 months…I’m really, really excited.”

Lycera’s cellular bioenergetics technology is actually more developed than Th17. Later this year, the company plans its first clinical trial of a drug designed to disrupt the ability of diseased white blood cells known to feed itself.

However, Th17 program is what caught the eye of Big Pharma because … Next Page »

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Lycera has taken a significant step forward in commercializing an oral drug to treat autoimmune disorders.

The Plymouth, MI-based pharmaceutical startup, a spinoff from the University of Michigan, recently released results from a study that suggested its compound can selectively silence diseased white blood cells while leaving healthy ones intact. The results were published in the journal Science Translational Medicine.

The findings could signify an important step ahead for Lycera, as it seeks to develop a new class of orally-administered drugs to treat immune system diseases ranging from lupus and rheumatoid arthritis to psoriasis and graft-versus-host disease, says Lycera founder and chief scientific officer Gary Glick.

“We may not be able to prevent the body from making the (infected) cells but we could turn them off as soon as they appear,” he says.

The company hopes to begin Phase I clinical trials, the first of three stages normally required for FDA approval of new drugs, later this year. Founded in 2006, Lycera has raised about $36 million from EDF Ventures in Ann Arbor, Arch Venture Partners in Chicago, IL., Clarus Ventures in Cambridge, MA and InterWest Partners in Menlo Park, CA.

About 50 million Americans suffer from an autoimmune disorder, in which immune system cells that normally help us ward off bacterial and viral infections direct their assault against healthy tissues, according to the American Autoimmune Related Diseases Association.

Type 1 diabetes is perhaps the most prominent example of an autoimmune disorder: the immune system kills cells in the pancreas that make insulin the body needs to regulate blood sugar.

An estimated 1.3 million American adults also suffer from rheumatoid arthritis, which causes … Next Page »

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FDA regulatory moves turned out to be the biggest news items over the past week, prompting San Diego’s Amylin Pharmaceuticals and CareFusion to respond separately to the agency’s actions. Get our latest assessment here, along with updates on venture funding, CEO pay, and the new museum-quality home for San Diego’s Avalon Ventures.

—Investors hammered San Diego’s Amylin Pharmaceuticals after the U.S. Food and Drug Administration refused to approve its formulation for exenatide once-weekly (Bydureon), which was expected to be a blockbuster diabetes drug. Amylin and partners Eli Lilly and Alkermes said they hope to gather all the data for a re-submission “by the end of 2011.”

—As Luke reported when the news broke, the FDA decision regarding exenatide once-weekly was a chilling signal for any life sciences company developing diabetes drugs.

—Testing a recently discovered pathway of cellular communications, San Diego’s CalciMedica plans to start an early stage trial next year of a once-daily oral pill designed for patients with moderate to severe psoriasis. CalciMedica’s experimental drug could also be useful someday for other chronic inflammatory diseases like rheumatoid arthritis, ulcerative colitis, and asthma.

—Venture Capital firms invested a total of $231 million in 32 San Diego companies during the third quarter that ended in September, with $129.7 million (56 percent) going to 17 life science companies (53 percent), according to the MoneyTree Report. Six of the top 10 deals of the quarter involved life science companies: Otonomy, AutoGenomics, Accumetrics, Auspex Pharmaceuticals, Cylene Pharmaceuticals, and Cebix.

—The MoneyTree Report on third-quarter venture funding echoes results that we reported earlier this week, showing $4.8 billion was invested in … Next Page »

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Taligen Therapeutics wants to apply its technology platform to treat rare diseases in which the immune system goes haywire and attacks healthy cells. The Cambridge, MA-based biotech startup says it has received $10 million from its investors to drive its first drug toward initial human studies against a rare autoimmune disease.

The new funding brings the total amount of the firm’s Series B funding round to $36 million. The latest $10 million installment came from Taligen’s previous investors Alta Partners, Clarus Ventures, High Country Venture, and Sanderling Ventures, according to the company. The first closing of the second-round financing was revealed in February 2008, when the company said investors committed to put in as much as $65 million in separate chunks if the firm met certain development goals.

Taligen CEO Abbie Celniker says the company got the money because it made it made “substantial progress” over the past year that enabled it to advance close to its first clinical trial.

The company, founded in 2004 with technology from the University of Colorado, has been developing protein drugs that target an immune reaction called the complement pathway. Its lead drug, TT30, prevents overactive complement reactions in certain diseases by replacing defective proteins. While the drug has the potential to treat a number of immune and inflammatory diseases, the company has decided to focus initially on rare diseases where there’s less competition such as atypical hemolytic uremic syndrome (aHUS), which affects one in 500,000 Americans, and paroxysmal nocturnal hemoglobinuria (PNH).

A potential advantage of Taligen’s drugs over existing treatments is that they aim to … Next Page »

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With hundreds of biotechnology companies and thousands of people employed in life sciences, San Diego has a large, informal network of people with deep knowledge across a wide range of skills. The Torrey Pines mesa, among the densest biotech clusters in the world, “acts like one big biotech incubator,” says Scott Thacher, CEO of Orphagen Pharmaceuticals, a San Diego startup working to identify drug targets for a range of autoimmune diseases and metabolic conditions.

Thacher tapped into the network seven years ago when he left Allergan to launch Orphagen. Although he tried to “get something going” in Orange County, CA, where Allergan is located, Thacher found himself gravitating south to San Diego. Following one lead after another, he located equipment, lab space, skilled workers and, perhaps most important, experienced entrepreneurs willing to provide help and advice.

Now Thacher and the founders of other life sciences startups are moving to formalize and expand their networks. They have formed the San Diego Entrepreneurs Exchange, an organization focused on the needs of very early-stage startups and new entrepreneurs. Besides Thacher, who is president of the new organization, the SDEE executive team includes David Schwarz, president of Advanced Cellular Dynamics; Ruo Steensma, president of Steensma Consulting; Deborah Slee, a medicinal chemist and independent consultant; and David LaRocca, CEO of Mandala Biosciences.

Thacher sees the exchange as a place where entrepreneurs—particularly those whose companies lack VC support—can get information and advice. The organization plans to sponsor regular networking and educational events to help new entrepreneurs acquire the skills they need to get funding and build their businesses.

Thacher says the idea came to him recently when … 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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It was a quiet week for deals in the Northwest, but we dug up some important ones in business software, wireless, and biotech.

—Seattle-based Amazon’s (NASDAQ: AMZN) acquisition of Zappos, the online apparel and shoe seller based in Las Vegas, has closed. The deal, first announced back in July, is valued at $1.2 billion in Amazon stock.

—Bellevue, WA-based Onehub has raised $1.3 million in Series A funding from Ignition Partners and angel investors. The company was founded in 2007 and makes Web-based software for business collaboration and file-sharing.

—We took a close look at small financing deals in the Northwest, worth between $100,000 and $1 million, that have flown under most people’s radar in the past month. According to stats from ChubbyBrain, a New York-based information and data services company tracking the innovation economy, the following companies raised a small amount of equity in September: Acucela, Adometry, BallLogic, InEnTec, Inson Medical Systems, Second Porch, Site 9, SynapticMash, Smilebox, Vantos, and WA 32609.

—Seattle-based Kineta, a biotech firm developing drugs to fight autoimmune diseases, has formed a strategic alliance with MPI Research, based in Michigan, as Luke reported. Financial terms of the deal weren’t given, but Kineta said it will receive support for animal studies that will enable the company to begin clinical trials next year.

—Portland, OR-based RF Arrays raised $6.5 million in equity, options, warrants, and/or other rights to acquire securities, according to a regulatory filing. The investors were not disclosed, but New York-based New Science Ventures has previously backed RF Arrays, which develops wireless communications technology.

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Investing in biotech can be scary. Only one out of 10 new drug candidates ever makes it through the gauntlet of clinical trials to become an FDA approved product, and it usually takes hundreds of millions of dollars and a decade or more of research to separate the winners from the losers. Investors usually can’t bother asking serious questions about profit-and-loss statements, or price-to-earnings ratios, until a company is 15 years old or more. And the hype—from gene therapy, to stem cells, to you fill in the blank—can be quite distracting.

So Christopher Henney, 68, who has seen it all in a 30-year career in biotech as co-founder of Immunex, Icos, and Dendreon, knew he had his work cut out yesterday. He was trying to convince a crowd of 100 financial pros at the CFA Society meeting in Seattle that biotech, the classic boom-or-bust industry, is really a good place to invest.

“I want to de-mythologize the scariness,” Henney said at the outset.

Henney started off his talk by reminding the audience how he and Steve Gillis, a pair of immunologists at the Fred Hutchinson Cancer Research Center, went on to start Seattle-based Immunex, one of the members of what he called “the class of 1983.” These were the second-generation companies, following industry pioneer Genentech, that all went public back in a great wave of enthusiasm for biotechnology. The class included Amgen, Biogen, Cetus, Chiron, Genzyme, and Immunex. Seven of the 10 to 12 biotech companies (Henney didn’t name the losers) that went public in that early wave went on to create market valuations that exceeded $1 billion, Henney said.

But even during that great wave of optimism about the power of new genetic engineering technologies for creating new drugs, there were prominent skeptics. Henney told the story of how he and Gillis had a meeting in the early days of Immunex with “one of the doyennes” of the Seattle investment community, whom he didn’t name. Henney and Gillis told their story with great enthusiasm, and got a rude awakening.

“At the end, I remember him saying, ‘I don’t think it’s a scam, but I won’t introduce you to anybody, either,’” Henney recalled.

Both of them were academic scientists who “had a fair amount of hubris about our self-worth. To be told that what we’re doing was a scam, it wasn’t something I wanted to tell my Mom about,” Henney said.

He added, “It was our welcome-to-the-NFL moment.”

Still, the investor taking that position would have been right for the first 15 years or so. It took 17 years from Immunex’s founding before it struck gold with etanercept (Enbrel), a drug for autoimmune diseases that now generates more than $7 billion a year in worldwide sales for Amgen and Wyeth. It took much longer, and hundreds of millions of dollars more than industry pioneers like Henney thought it would, to create blockbuster drugs like that. “If you had thought about that beforehand, nobody would have given us any money at all,” Henney said.

But they got the money, and learned a lot of lessons along the way. In his talk last week, Henney distilled them into six hallmarks of a successful biotech that investors should look for, along with five red flags to watch out for as well (which I’m going to save for another story).

So, here are the six hallmarks to look for in a successful biotech … Next Page »

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In 2005, Gonul Velicelebi was the vice president of research and drug discovery at TorreyPines Therapeutics (NASDAQ: TPTX) when scientists there determined that a molecule dubbed STIM1 played a crucial role in activating immune cells.

To Velicelebi, STIM1 was like a key that helped open a hidden pathway that scientists had been seeking for 20 years. It also opened a new path for Velicelebi, who in 2006 founded CalciMedica, a startup focused on developing a variety of small molecule drugs to suppress autoimmune and inflammatory diseases. “This is a whole new pathway for modulating immune response,” she says.

A key aspect to CalciMedica’s approach is that it appears to sidestep a buildup of toxic compounds associated with the long-term use of some drugs prescribed to prevent organ transplant rejection and to treat autoimmune diseases. “There is a huge unmet need,” Velicelebi says. “Rheumatoid arthritis alone is 2 percent of the population,” and then there is lupus and inflammatory bowel diseases, like Crohn’s disease.

The TorreyPines team had pinpointed STIM1 as a key component in … Next Page »

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Spaltudaq has never really said a whole lot publicly about what it’s doing. So I was eager to get an update this week from CEO David Fanning about what’s percolating at the Seattle biotech company, particularly since he’s just down the hall from Xconomy’s Seattle office on First Hill.

The basic idea hasn’t changed much since Spaltudaq got started in 2005 as one of the early companies born at Accelerator, the biotech incubator affiliated with the Institute for Systems Biology. Spaltudaq’s scientists look at blood or tissue samples from patients, and identify antibodies that are made by people’s immune systems against foreign invaders like viruses, bacteria, or cancer cells. Mother Nature has evolved pretty efficient defense mechanisms against these troublemakers, so it seems like a good idea to sort through critical antibodies with broad potential uses, and make genetically engineered copies of them as drugs. It was compelling enough for the company to raise $29 million in March 2007 from Arch Venture Partners, Canaan Partners, HealthCare Ventures, Amgen Ventures, MPM Capital, and Alexandria Real Estate Equities.

Originally, Spaltudaq looked at developing antibodies for cancer. Then, a realization hit. “Choosing cancer is like choosing Mt. Everest for your first mountain climbing class,” Fanning says. So Spaltudaq has broadened its efforts to include infectious diseases and autoimmune diseases.

Fanning spent most of his time in the interview talking about infectious diseases. Spaltudaq’s scientists are looking for clues in tissue samples from rare individuals who have developed “universally relevant and effective” antibodies, he says. He’s thinking of individuals who survived exposure to the wicked Ebola virus, or those infected with HIV in sub-Saharan Africa who somehow never get sick, possibly because they developed certain antibodies to keep the virus in check. Such antibodies for influenza, if turned into a drug, could be stockpiled as a backup treatment in case of a pandemic. The company has two antibody candidates for flu, which have been able to protect animals from getting the virus after being directly exposed to seasonal flu, or bird flu, Fanning says.

None of the programs have advanced far enough yet to reach clinical trials. Fanning, a former chief operating officer of Seattle-based Corixa, got plenty of experience there in doing deals to keep research and development alive through the long years needed to show a drug works. He wants to do it again. “We’re reasonably confident we’ll see partnerships in place in six months,” he says.

One totally extraneous point. Since I get asked this a fair bit about Spaltudaq, I had to ask Fanning whether he’s keeping the name of the company. “We have the discussion internally from time to time” about changing the name, he says. For now, it’s staying. Founder Johnny Stine came up with the name, which stands for an Indian healing ceremony to ensure that people don’t die before their time. “It’s a neat name, and really links to our goal of developing drugs for patients,” Fanning says.

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