[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

The FDA is the easy target for those of us who are in drug development. But what I am most mad about is the unwillingness of our industry to focus and invest in innovative, high-impact drugs instead of “me too” knockoffs. Thus, my “anger” is focused on institutions that myopically insist on investing in low-risk, copycat ideas that undermine the true strength of our industry over the long term.

Risk-taking and innovation in drug discovery are critical to our field. Aspiring merely to be fast followers instead of striving for innovation is putting our competitive advantage at risk. The entrepreneurial spirit has been key to America’s success in many industries, especially biotech, but there have been several recent events that are stifling innovation.

The downturn in the economy has obviously dampened the financing of new ideas. Changes to patent law arguably encourage long, drawn-out opposition hearings that could be detrimental to the smaller inventor. However, my key concern for our industry is the lack of new and innovative drugs, despite the stunning pace of scientific progress over the last several decades. Not enough companies are focused on innovation and not enough people in charge are taking the right level of risk to actually come up with a new idea that can have a substantial impact on human health. Innovation is the alpha and the omega of our industry and should always be cherished as a way to create valuable and meaningful high-impact drugs.

Comments (1) | Reprints | Share:          

[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

It takes a lot to get me riled-up—I’m overly rational, if anything. Outside of the bad behavior we were supposed to outgrow in kindergarten—dishonesty, disrespect, etc.—there are few professional issues of sufficient emotional magnitude. One of the most frustrating issues today is the FDA situation. While easy to say, “The FDA is at fault and needs to be reformed in order to speed the approval of new medicines,” that is a dramatic oversimplification of the problem. All parties in the ecosystem are at fault to some extent, and it will take concerted efforts and change by each in order to fix it.

For example, the FDA has absolutely been more/overly safety conscious in recent years, but I believe we all would act that way if faced with being hauled in front of Congress to justify the risk-benefit of a drug approval that positively impacts more than 99.99 percent  of the people who use it. Why should we, as a country, require or expect that medicines be as safe as clean water? At the core, sick people, whether with cardiovascular issues, autoimmune disease, or other afflictions, are taking a medicine in order to improve their condition, so while absolutely safe drugs would be wonderful, a level of risk is warranted based on the improvement in the disease. If we can cross that bridge and accept that medicines will have risks, then we have the tools to deal with the safety vs. speed of approval conundrum. We can shorten commercialization timelines while dramatically improving safety monitoring if we test for efficacy and major safety during development, while tracking long-tail safety issues in the commercial setting—perhaps the first 100,000 people prescribed a new product?

Comments (2) | Reprints | Share:          

[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

The most important issue facing Aastrom and many other companies in biotechnology is the lack of adequate funding to support innovative new companies, technologies and therapies. The challenges in drug development, especially in the early stages, are only compounded by the current regulatory environment with a primary focus on risk reduction.

Unfortunately, with this combination there isn’t one punch we can throw to rapidly improve the situation. But, the current situation has to change if the United States is going to remain the global leader in the discovery, development, and commercialization of innovative new therapies in the next two decades. If we don’t improve the current conditions, we will continue on a path to increasing irrelevance in biomedical research and innovation, especially given the fact that other countries are rapidly recognizing the potential of our industry to improve human health and create jobs, and they are in many ways ahead of the U.S. in supporting these companies.

To address the problem in the U.S., NIH funding has to be re-directed to focus less on support for early-stage research and discovery and more on the critical translational phase of new product development. This period is often referred to as the “valley of death” in new product development in healthcare—the period between early preclinical promise and clinical proof of concept. In a risk-averse environment, funding for products at this stage is very limited, and many will not move forward even though they could represent important advances in patient care. We need to introduce more funding sources that are positioned to accept the inherent risks at this stage.

As we work to introduce new funding sources, the FDA should also consider opportunities to recalculate the risk/benefit equation for many products. Working more as a supportive partner with industry, the FDA can work to make faster decisions. To protect both patients and industry, the FDA can also introduce mechanisms to more rapidly respond to post-marketing issues related to approved products. In this way, the FDA can balance the benefits of bringing new therapies to market quickly with the risks associated with the decision and a plan to take action post-approval if necessary. The ability to review and approve new therapies with great speed and, equally importantly, the ability to “disapprove” and remove therapies from the market or alter the product indication post approval, could significantly improve the competitive position of the U.S. in biotechnology in the years ahead. Industry will have to accept the fact that FDA decisions might not mean approval forever. They will build a model where marketing can begin while additional data is collected to provide further confirmation that benefits outweigh risks.

Finally, venture capital investors need to return to their roots—funding truly innovative companies, technologies, and therapies at the early stages. They need to lose their recent aversion to risk—seemingly honed over the past decade. Importantly, they may be more willing to move in this direction if the FDA takes steps to establish a more receptive and less uncertain regulatory environment.

A reflection of the current funding environment: a partner with a prominent venture capital firm recently told me that his firm is only funding companies that have an already approved product (the historical province of private equity and growth capital firms) or very early-stage “science-based” companies. The level of regulatory uncertainty has reached critical levels. When very smart and successful venture capital firms cannot accept the level of regulatory uncertainty, the alarms have clearly sounded—and changes in Washington and within industry seem essential to address these problems successfully.

Comments (1) | Reprints | Share:          

Carol Gallagher, the former CEO of Calistoga Pharmaceuticals, is glad to see Gilead Sciences spending billions on acquiring a new drug for hepatitis C, rather than spending billions on stock buybacks. And Jason Rhodes, the chief business officer of Epizyme, borrowed a line from Hillary Clinton, on how “it takes a village” to raise a biotech company.

These were a few of the nuggets I took away from yesterday’s live chat on Twitter about the state of biotech startups. This was the third life sciences “Tweetchat” that we’ve done this fall, in which readers have been invited to fire off their questions about what’s new in RNA interference, biotech venture capital, and startup survival strategies. Here are some of the highlights from the afternoon:

—Gallagher on how to get by in a period of scarce biotech venture capital: “Absolutely need to demonstrate efficient use of capital and clear value inflections to get $$ and creativity to alternatives.”

—Gallagher on the role of Big Pharma partners, and other ways to finance R&D: “Pharma budgets under pressure. Disease specific foundations can be great partners e.g. Multiple myeloma, CF.”

—When asked about the effect the biotech venture capital crisis has had on entrepreneurs, Gallagher replied, “It’s more challenging but some was a needed contraction–still believe good companies get funds but challenging for early cos.”

—On the key to success with Calistoga (it was acquired by Gilead for up to $600 million). “Calistoga had a very clear and well-differentiated hypothesis that at each step the card turned over favorably and a Gr8 team,” Gallagher said.

—When Laura Strong, president of Madison, WI, Quintessence Biosciences asked Gallagher about whether “lean/virtual” biotech companies are appealing to people accustomed to raising lots of money, Gallagher jumped on it. “Agree–efficiency a must—if virtual can get it done, then Gr8. Calistoga began registration trials with 23 employees,” Gallagher wrote.

Rhodes pointed out the interesting bind that pharma partners have found themselves in. These companies are hungry for innovation to replace aging blockbusters losing patent protection, but by cutting R&D budgets, they have made it tougher on themselves to form research collaborations with small biotech companies that might plug their gaps.

—As Rhodes @JasonPaulRhodes put it on Twitter, “Hurdle for research collabs high as big pharma R&D budgets under pressure despite need for innovation.”

—While the hurdles are high, Rhodes added they aren’t insurmountable. “Even now, pharma co’s willing to collab if believe partner can deliver (and quickly) w/clear Rx target & patient groups defined,” he wrote.

—When I asked Rhodes if Epizyme is building a “diversified portfolio” of funding sources like pharma companies and disease foundations, to cushion it from the ups and downs in biotech venture capital, he took it a step further: “Creative financing a must, not Series A, B, C, then IPO. It takes a village to build a company, VCs, partners, & founds (foundations.)”

—And, in what might be the first use of Latin I’ve seen on Twitter, Rhodes essentially said there’s an essential ingredient for success in biotech: “Track record of successful execution by leadership & org sine qua non for investors, partners and recruiting.” Another way to put it: talented and driven novices are going to find some hard sledding.

Thanks to all those who tuned in to the conversation, and especially those who entered the fray with questions. I’m intrigued by how these chats bring readers together from all over the map to discuss key topics we write about regularly. For those of you in the biotech business just exploring Twitter or relatively new to it, I’d suggest you “follow” the Tweets from the people below, who asked some good questions during today’s chat.

@LifesciNYC

@jrkelly

@scientre

@PearlF

@BiotechStockRsr

@DavidASteinberg

@Rob_Carlson

@BayBio

@karls_mlab

@BioBenj

Comments | Reprints | Share:          

Quick reminder for those of you on Twitter to join us for a live chat at 3 pm Eastern/Noon Pacific on the state of biotech startups. Carol Gallagher (@carol_gallagher) and Jason Rhodes (@JasonPaulRhodes) are the featured guests, who will field questions on how biotech startups can make it at a time when biotech venture capital is scarce.

You can follow the Q&A under the searchable hash tag #biostartups.

As always, you are welcome to add your comments or send questions directly to Jason, Carol, or anyone else joining the conversation. This should be a lively one. See you there online this afternoon.

Comments | Reprints | Share:          

At Wayne State University, labs aren’t just a sterile space for solemn experiments. For students in the school’s Initiative for Maximizing Student Development (IMSD), it’s a chance to work directly with their instructors, get a taste of the scientific life, and gather some up-close career advice in the process.

“The laboratory setting is almost like a kitchen,” says Joseph Dunbar, WSU’s associate vice president for research and the program’s director. “They can ask questions, interact … there’s not as much of a chasm between students and faculty. They see what’s possible, and it gives them confidence to talk about their careers in an intimate fashion.”

Last month, the National Institutes of Health announced a five-year grant of more than $3 million to support the IMSD program, which seeks to nurture student interest in scientific careers by providing them with opportunities to participate in behavioral and biomedical research projects.

Dunbar says the original idea behind the program was getting more ethnic minority students to work on scientific research projects. Wayne State was a natural fit for the program: When the IMSD program started in 1978, many students came from auto industry families and were the first in their familes to go to college.

“In metro Detroit, you had multiple generations of families working for the auto industry, and you’d grow up, go to high school, and then go to Mr. Ford or Mr. GM for a job—that’s just how it was done,” Dunbar says. “But those jobs are probably never coming back, and we know that America’s next move forward probably involves science and technology.”

At Wayne State, the program has supported more than 700 students so far. As of 2010, 390 undergraduates in the program had gone on to complete bachelor’s degrees, 64 had obtained master’s degrees, and 68 had gone on to complete doctorates. Some of the post-IMSD careers have been noteworthy. Eric Ansorge, who did research at WSU on heart failure through the program, is now an Army major in charge of a large biomedical research program. … Next Page »

Comments (5) | Reprints | Share:          

The economic deep freeze is thawing for IPOs on U.S. exchanges, according to a quarterly report issued today by the Ernst & Young accounting firm.

The number of companies in registration for an initial public offering increased to 140 during the three months that ended June 30, according to the latest the “Ernst & Young U.S. IPO Pipeline” study. That’s almost 24 percent more than the 113 companies that were registered during the same quarter last year, according to Ernst & Young’s data. Beneath story, I’ve put together a list of companies in the IPO pipeline for each Xconomy city as of June 30.

Ernst & Young says the 140 companies now in the lineup represent a potential total of $23.7 billion in estimated market valuation. That’s down from the $25.3 billion in total value during the same quarter last year, but the highest number of companies registered to go public since late 2007, when the financial crisis was beginning to engulf the U.S. economy. Just 28 companies were in registration at the end of the second quarter in 2009, one of the darkest periods of the recession.

A total of 42 companies went public on U.S. markets during the second quarter, a 13.5 percent increase over the 37 IPOs during the second quarter of 2010.

The warming trend is good news for the venture firms and other investors that view IPOs as a key way to keep the capital flowing to new companies, and to exit from startup companies with a return on their investments. Of the 140 companies in the IPO pipeline, venture capital firms back 40 percent, 31 percent are backed by private equity firms, and 23 percent are backed by both.

Technology-related IPOs accounted for 25 of the total companies in the pipeline at the end of the quarter, and they are trying to raise a total of $4.4 billion. The oil and gas industry was the next bigger sector, with 17 companies trying to raise a total of $4.6 billion. Other active sectors include financial companies, retail and wholesale, and diversified industrial products. Here’s a breakout of companies in the pipeline for each Xconomy city: … Next Page »

Comments | Reprints | Share:          

On July 14, Advanced Cell Technology (ACT)—a long-struggling developer of therapies derived from human embryonic stem cells—started its first human trials, by treating two patients suffering from blinding eye diseases. The company’s chief scientific officer, Robert Lanza, was still on a high when reached by phone in his Marlborough, MA, office a few days later. “It’s vindication,” he says. “In the early days, we were called murderers. We almost went under a few times. This was not easy.”

That may be an understatement. Ever since human embryonic stem cells were first isolated 13 years ago, ACT (OTCBB: ACTC) has been laboring to capitalize on the cells’ talent for transforming themselves into any tissue in the body. Over the years, Lanza and his colleagues have been blamed for everything from overconfidence to unethical science—the latter coming from conservative politicians who wanted to ban such research because the cells are derived from unborn embryos. But ACT charged ahead, raising money from hedge funds and other risk-hungry investors, and concentrating on using embryonic stem cells to regenerate retinal pigment epithelial (RPE) cells, which form a tissue that protects the eye’s photoreceptors.

ACT was cleared by the FDA to test its RPE cells in two separate trials: one in patients suffering from Stargardt’s macular dystrophy and the other in those with dry age-related macular degeneration (AMD). Stargardt’s affects young people, and AMD strikes the elderly, but they are both marked by the degeneration of the RPE cell layer. And both are leading causes of blindness. ACT was the second company cleared by the FDA to test an embryonic stem cell-derived therapy, the first being Geron (NASDAQ: GERN), the Menlo Park, CA-based company that’s testing its cells in patients with spinal cord injuries.

ACT’s first two patients were treated at the David Geffen School of Medicine at UCLA, and are now being watched for six weeks to ensure the cells don’t cause any dangerous side effects. Lanza explains that each trial will include 12 patients, and the doses will escalate over time. If no adverse events are observed in the first set of patients—who will receive the smallest dose of 50,000 RPE cells—the next set of patients will receive 100,000 cells. Then they’ll be observed, and so on, until the highest dose of 200,000 cells is reached.

Lanza says he was both intimidated and impressed by the FDA’s thorough review of ACT’s trial regimen. “They know as much as I do about embryonic stem cells,” he says. “They put us through … Next Page »

Comments (6) | Reprints | Share:          

New York biopharmaceutical company NeoStem (NYSE: NBS) says it signed a definitive merger agreement to acquire Amorcyte, an Allendale, NJ, biotech developing cell therapy treatments for cardiovascular disease. Amorcyte, a development stage company, has a product candidate, AMR-001, in the works for the treatment of acute myocardial infarction. NeoStem plans to commence a phase II clinical study on AMR-001 by first quarter 2012.

NeoStem issued 6.8 million shares of common stock and warrants to purchase 1.9 million shares to acquire Amorcyte. NeoStem will issue an additional 4.1 million shares upon the achievement of certain milestones regarding AMR-001. The deal is pending approval by Amorcyte and NeoStem shareholders.

The Amorcyte acquisition is the latest move by NeoStem to shift its focus to cell therapy. In January, NeoStem acquired Progenitor Cell Therapy, also of Allendale.

Comments | Reprints | Share:          

Michganders are sensitive about jobs and by jobs I mean there are not nearly enough of them.

Mention Pfizer shutting down its research and development center in Ann Arbor, MI or Becton, Dickinson pulling HandyLab’s operations out of Michigan after acquiring the local startup, and people get downright grumpy. What good is an exit if it doesn’t produce jobs?

With that in mind, Molecular Imaging Research(MIR) should be the feel good story of the year. After acquiring the Ann Arbor-based contract research organization (CRO) for $12.5 million in 2008, Charles River Laboratories last year said it too would withdraw from Ann Arbor.

Enter Baird Venture Partners and Arcus Ventures. The two venture firms said Monday that they acquired MIR assets from Charles River Laboratories, based in Wilmington, MA, and raised $7 million to not only keep MIR’s operations in Ann Arbor but also to expand the company.

“This can really become a compelling jobs story for Ann Arbor and Michigan,” Baird Venture partner Peter Shagory told Xconomy. “We’re excited about bringing another significant tech company to Michigan.”

Baird previously invested in Accuri Cytometers, a University of Michigan spinoff that was recently acquired by BD for $205 million.

Baird and Arcus are hardly being altruistic. The two firms had been hunting for an opportunity to crack the CRO market, especially with pre-clinical molecular imaging. As Big Pharma and small biotech firms increasingly outsource R&D services to outside firms, a CRO that focused solely on imaging technologies like fluorescence and advanced MRI/PET/CT scans could really add value to drug makers who need to test therapies on small animals, Shagory says.

“We think it’s a high growth area with significant potential,” Shagory says.

With its expert workforce, solid reputation, and a specialized facility in Ann Arbor, MIR offered the kind of critical mass that will allow Baird and Arcus to hit the market running instead of building operations from scratch, Shagory says.

The company has performed over 250 imaging studies since 2003. In the last 12 months MIR provided imaging services to 23 pharmaceutical and biotechnology companies, including eight top 20 companies.

Baird and Arcus hope to raise another $1.5 million on top of the $7 million. They hope to expand the facility and hire more people to boost the existing team of 12 employees.

The investors also recruited Tom Ludlam as CEO. Ludlam formerly lead Prologue Research International, an oncology-focused CRO, which was acquired in mid-2010 by Novella Clinical.

Comments | Reprints | Share:          

Michigan may be many things, but lazy isn’t one of them. A prominent investor told me the other week that the state boasts an incredible work ethic, one that rivals the frenetic pace of Silicon Valley.

Given the automobile industry’s long decline, the state has made several bets on its economic future: clean energy and software in Ann Arbor, medical devices in Grand Rapids and Kalamazoo, high-tech manufacturing in Detroit, and nanotechnology and defense in Troy and Oakland. But will any of this hard work really pay off? Will the seeds planted now and over the past few years enable Michigan to be a leader in key fields of technology some 20 years in the future? What else needs to be done to ensure that they will?

Xconomy would love to find out. On April 14, from 5:30-7 p.m. (with networking to follow) at TechTown in Detroit, we’re hosting a forum called Michigan 2031, where some of the state’s most prominent entrepreneurs, academics, and venture capitalists will brainstorm what Michigan’s economy will look like in 20 years.

This is Xconomy’s first public event in Michigan—and we are really excited about this great evening. As an added bonus to our featured discussion looking out over the next two decades, we are planning an investor-entrepreneur lightning round to examine the current climate for innovation and what is hot now—and how the innovation that’s afoot today might pave the way for Michigan’s sustained success in 2031.

Here’s a list of the confirmed participants so far:

• Randal Charlton, Executive Director, TechTown
• David Cole, Chairman Emeritus, Center for Automotive Research
• Roger Newton, Founder, President, & CEO, Esperion Therapeutics
• Chris Rizik, CEO, Renaissance Venture Capital Fund
• Don Runkle, CEO, EcoMotors
• Ann Marie Sastry, Co-founder and CEO, Sakti3
• Charles Rothstein, Co-founder and Senior Managing Director, Beringea
• Dug Song, Co-founder and CEO, DUO Security

As you can see, it’s a who’s who of entrepreneurs, investors, and other innovators across information technology, life sciences, energy, and more. I’m really looking forward to it myself. Please register here and I hope to see you on April 14.

Tom out.

Comments | Reprints | Share:          

On the day that Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) is scheduled to issue its third-quarter financial results, Life chairman and CEO Greg Lucier provided a hugely insightful overview of the company’s changing corporate strategy.

“We’ll do about $3.6 billion in revenue this year,” Lucier said at a breakfast meeting in San Diego earlier today. “About $300 million is in medical molecular diagnostics, and we think that in five years, several billion will be in the medical field. So we’re changing the entire complexion of the company to become more medical, to be a big research company and a big medical company over the next five years. You’ll see a lot more announcements over the next several quarters as we make that change.”

Lucier’s talk was billed as a breakfast chat “on the future of personalized genomic medicine” by Biocom, the San Diego life sciences industry group that hosted the event. But it covered other ground as well, including prospects for San Diego’s innovation economy in exploiting breakthroughs that moderator M. Wainwright Fishburn called the “pathways to fast water.”

“If you think about what we’ve been through in San Diego, it’s been a bit of a tough challenge,” said Fishburn, a corporate lawyer and Biocom board member. While biopharmaceuticals and wireless communications served as past economic foundations in San Diego, new opportunities are emerging in mobile health, industrial biotechnology, and personalized medicine.

Greg Lucier

Lucier agreed. “We’re at a very interesting inflection point, and I think that inflection point is this transition from science to engineering,” he said. “We now have the ability to properly characterize key aspects of how life works… It’s starting to have an enormous influence on how drugs will be developed, and quite frankly, how crops are going to be developed, the food you eat, and very importantly, the fuel to power the Earth.”

As an example, Lucier cited a study published four years ago in Trends in Molecular Medicine that showed the relative effectiveness of different types of drugs—due simply to genetic variation among the patients getting the drugs. The response rate ranges from a roughly 75 percent effectiveness for statins to roughly 25 percent for beta blockers and 20 percent for oncology drugs.

“In cancer, only one in five drugs will actually have the desired impact you want to have on a patient,” Lucier said. “It’s not a very good success rate, and it shows you just … Next Page »

Comments (3) | Reprints | Share:          

The spark of innovation can often be found in outrage—outrage that the world, or some part of it, does not yet contain something that has yet to be invented or brought to it. And James Peyer, University of Michigan stem cell biology Ph.D. student, part-time do-it-yourself entrepreneur, and participant in this weekend’s Detroit Maker Faire, is outraged.

Here’s why: When he was an undergraduate at the University of Chicago, his younger brother was taking advanced high school biology courses. “I was appalled by the tremendously low quality of exposure to real science that high-schoolers were getting,” Peyer says. “They didn’t actually learn anything about how research was done, how science was actually done, and how we learn new things, and how we innovate and invent using science.”

That was outrage No. 1. Here’s outrage No. 2: An important tool scientists use in biotechnology is a PCR machine, or thermal cycler, to manipulate and replicate DNA. But even the smallest and cheapest PCR machine is $2,000—beyond the means of most high school science departments. The machines, themselves, are really simple—an aluminum block that heats up and cools down to rip apart DNA. Still, universities with big budgets or third-party funding agencies are already configured for PCR machines to cost anywhere from $2,000 to $8,000, so that is how much they cost for everybody.

“When we’re paying a couple hundred bucks for something like an iPhone, I feel like an aluminum block that heats up and cools down should not be $2,000,” Peyer says.

So, Peyer is doing something about it, to try and fill a void in the world to placate his outrage. His company, Otyp, is creating a simple kit for high-school science classes, a kind of “Hello, World” tutorial program for biotechnology that teaches high-schoolers the basics of manipulating DNA. Without getting too detailed on the technology, the experiment lets students clone a fluorescent gene and paint it out on a petri dish in whatever pattern they want. Otyp is also creating an inexpensive, open source version of a PCR machine that local school districts can actually afford.

Now, take Otyp, and Peyer’s sense of mission for it, and multiply it by 290. And that’s what you have at this weekend’s (July 31-Aug. 1) Maker Faire at The Henry Ford in Dearborn, MI—hundreds of innovative, outraged people who are hungry to change the world by filling a void.

This is the spirit of Detroit that Sherry Huss, director of the Maker Faire, wants to tap into. The Henry Ford, she says, is really a museum about the history of making, showcasing what Detroit was … Next Page »

Comments (5) | Reprints | Share:          

Every venture capital firm and every venture capitalist touts itself/herself/himself as adding value to the entrepreneur’s quest to build great companies. But when it comes to backing up that talk with action, few venture capitalists have the track record of Henry McCance, now chairman emeritus of Greylock Partners.

I recently visited McCance in the firm’s Harvard Square offices. Yesterday, I reported on Greylock’s origins and legacy, and McCance’s views of why the firm moved its headquarters to California and what New England can do to reclaim a greater portion of the center of startup gravity. The legendary investor was objective in his assessment that New England lost its edge with the setting of the minicomputer sun some 25 years ago, but he doesn’t think the situation is irreversible. Harvard and MIT aren’t going away, he says, and a new wave of startup energy in emerging areas such as cleantech might change the game.

Whether we’re talking about a New England resurgence, or generally raising the odds for startups to grow and become successful and boost the economy wherever they may be, VCs, of course, can help—by investing in the right firms and people and providing great connections and guidance. And a big part of my conversation—and follow-up e-mails—with McCance was about what makes a great VC. In straightforward fashion, he laid out four criteria or elements. I thought they might be of great interest to other VCs, but especially to entrepreneurs looking for investors.

1) Find the Visionaries—The best VCs are not reactive, McCance says. “They instead are proactive.” That means they proactively identify and recruit the visionaries in emerging fields. “We want to work with the best entrepreneurs on the ideas they are most passionate about. That’s how you get the great talent,” McCance says. One quick example he gave involved pioneering biotechnology firm Genetics Institute, which was formed in 1980. “We realized in the late 1970s that a new industry called biotechnology was going to be created on top of important advancements coming out of academic research in chemistry and biology,” says McCance. “This was going to enable new approaches to drug development, which before then had been very much a trial and error approach at ‘big pharma.’ Mark Ptashne and Tom Maniatis were world-class Harvard scientists with an entrepreneurial itch. Walter Cabot, the chairman of Harvard Management, had recently invested in Greylock and wanted to be sure Harvard’s key, but perhaps naïve, scientists were in good hands, therefore he steered them towards Greylock. I believe J.H. Whitney and Venrock were our partners. Kleiner Perkins funded Genentech at about the same time, and Amgen was founded a year later. All three companies had their pick of the best and brightest researchers coming out of Harvard, M.I.T., Stanford, Caltech, and UCLA, because there was an exciting, free form, entrepreneurial research environment that big pharma could not replicate.”

Henry McCance

2) Support the Visionaries With Top Executive Leadership—Visionaries, and you have heard this before, are great at identifying and pursuing a big view of the world and how it will change, but sometimes they are not so good at going to market. VCs must be able to step in and constructively find executive leadership for a firm that complements the visionary’s strengths. In the case of Genetics Institute, says McCance, “Greylock identified Gabe Schmergel, through a recommendation from another Greylock portfolio company CEO, to become Genetics Institute’s first and only CEO. Gabe was a graduate of Harvard Business School, and a fast-rising executive at Baxter International.”

3) Instill a Culture of Frugality-– “We initiate a culture of frugality” to take “the money as far as we can,” says McCance. This is especially true early on in a startup’s life. “We try to keep the burn rate low in the early years of a venture when the cost of capital is highest. Hopefully, enough milestones or progress will be met with a Series A financing that follow-on rounds of capital can be raised at significantly higher valuations. However, again luck is involved, and market conditions can be favorable (as they were for Genetics Institute, permitting an IPO in 1984) or unfavorable, as they are now.”

4) Dare to be Great—”The fourth and very important things successful VCs and entrepreneurs do is, ‘Dare to be great,’” says McCance. “To me that means that successful new businesses will not … Next Page »

Comments (1) | Reprints | Share:          

San Diego’s Synthetic Genomics and Texas-based ExxonMobil celebrated the first anniversary of their strategic alliance today with the official opening of a greenhouse for growing and testing algae that could someday replace crude oil in the production of diesel and other fuels.

On this day last year, ExxonMobil announced plans to spend at least $600 million to develop next-generation transportation fuels from algae—a renewable resource—with $300 million directed to Synthetic Genomics, a five-year-old startup that has assembled an all-star roster of biologists. The founders include CEO J. Craig Venter, the human genome pioneer, Nobel Laureate Hamilton O. Smith, and Juan Enriquez of Boston’s Excel Venture Management.

The greenhouse, near Synthetic Genomics’ headquarters atop San Diego’s Torrey Pines Mesa represents the next step in a 1,000-mile journey to algae-based fuel production, figuratively speaking. The greenhouse is intended to serve as a facility bathed in real sunlight (instead of indoor laboratory lighting), where scientists can work to identify—or genetically engineer—the particular algae that is best-suited to serve as a biological feedstock in the existing fuel production infrastructure. The next major milestone in the program would be establishing an outdoor test facility, a step the partners would likely announce about this time next year.

“I like to think of this greenhouse as sort of a halfway house,” Venter told a small crowd of dignitaries and journalists who gathered for the event under an intense Southern California sun. “Most of what you hear in algae research happens in the research laboratory. But things don’t always translate well out from the laboratory bench to the scale that we need here, of literally billions of gallons of fuel if this is going to have any impact at all on shifting the CO2 levels or coming up with alternate sources of energy.”

Growing algae in the greenhouse requires only sunlight, “which we have in abundance here today,” and carbon dioxide, Venter said. Synthetic Genomics scientists are working with various types of both cyanobacteria (also known as blue-green algae) and eukaryotes. Promising batches begin in small glass flasks and are transferred in steps to larger containers, including 8-liter and 100-liter plastic bags (also known as photobioreactors) that hang on racks in the greenhouse. Algae also are grown in oval, raceway-like ponds stirred by paddlewheels.

One surprising detail that Venter disclosed: All the algae under cultivation in Synthetic Genomics’ greenhouse are grown in saltwater taken from the Pacific Ocean, off the end of a pier near La Jolla. Algae thrives in both fresh water and saltwater, but Venter says he does not want to develop a process that takes agricultural resources by using fresh water. “Fuel cannot compete … Next Page »

Comments (2) | Reprints | Share:          

With help from New York-based ChubbyBrain, we’re introducing a new feature for Xconomy San Diego today that we call our “under-the-radar” deals.

Here at Xconomy, our news coverage about technology innovation and startups includes the big venture financing deals that are the lifeblood of the early stage companies working to commercialize advances in the life sciences, cleantech, wireless, and other high-tech industries.

Sometimes these deals offer the first glimpse at companies that are operating in stealth mode, such as San Diego-based Achates Power, which raised $12.1 million in October toward a targeted $20 million venture round. What we call under-the-radar deals, however, are not necessarily stealthy companies. Rather these are the smaller deals that fall between $100,000 and $1 million, which are often left out of the region’s regular VC reports.

In fact, our current list of under-the-radar deals includes $514,061 in equity funding for Tour Engine, a San Diego cleantech startup that hopes to significantly improve fuel economy and reduce emissions with its “split-cycle” engine design. In contrast to stealthy Acates Power, which is also developing a novel engine design with substantial venture backing, Tour Engines’ founder Oded Tour wants to generate interest in his startup and he is eager to talk about the technology. A profile of his company is on my Xconomy list of things to do.

While each of these smaller, early stage companies has a unique entrepreneurial vision, we think it’s important to note the smaller financings for a variety of other reasons: Innovators often need these stakes to prove the viability of their technology, or to show there will be a market for their innovation. Following the collapse of the capital markets, there also seems to be a newfound appreciation for bootstrapping, and as Xconomy founder Bob Buderi points out, it doesn’t take a lot of capital these days to start a Web 2.0 company and many other types of virtual companies. As a result, these small deals also serve as indicators of new technology trends and companies in the making.

The smallest deal on our list, a $107,100 equity round for San Diego-based Great Call (the parent company of Jitterbug wireless), was previously reported as part of Great Call’s acquisition of Waltham, MA-based MobiWatch.

Among the more interesting companies to get funding is Chimeros, which moved to San Diego from Santa Barbara, CA, in mid-2008—despite a concerted effort to establish a biotechnology cluster near UC Santa Barbara and Amgen, the biotech giant based in nearby Thousand Oaks, CA. The founding CEO, Miguel de los Rios, told the Pacific Coast Business Times the move was prompted primarily by two factors. One was a shortage of scientists in the area with the kind of specialized skills the company needed; the other involved difficulties in working with local landlords to develop laboratory facilities the company needed to expand. Using nanotechnology spun out of UC Santa Barbara, Chimeros has developed methods for encapsulating strands of DNA, small molecule drugs, and other compounds with “nanocages” that help ensure the drug is delivered to the right type of cells. The company has venture backing from DFJ Frontier, the Santa Barbara-based Gideon Hixon Fund, New York-based New Science Ventures, and Prospect Venture Partners of Palo Alto, CA.

As I mentioned, the list of under-the-radar deals for startups in the San Diego area came from ChubbyBrain, an information services firm that uses regulatory filings, user submissions, and other sources to track angel, VC, and other investments in private companies. Their full list of under-the-radar deals for October includes five San Diego-based startups:

Comments | Reprints | Share:          

Sanofi-Aventis (NYSE: SNY) hosted a large event at its R&D site in Cambridge, MA, yesterday to make its pitch for why Boston-area biotech companies should want to form partnerships with the French drug giant. It was an impressive show of force by the company, which has historically kept a lower profile in local biotech circles than some of its Big Pharma competitors.

The top brass from Sanofi were there at the firm’s Cambridge Research Center in Kendall Square. Sanofi CEO Chris Viehbacher outlined the global drug-maker’s plans to form stronger ties with biotech firms in Boston and around the world as part of a broader strategy to build a more sustainable business. Viehbacher also confirmed that Sanofi plans to form a venture capital unit to invest in biotech companies and further efforts to access innovation from outside of the company.

Sanofi, like many other Big Pharma companies, is looking outside of its organization to biotech firms for what Viehbacher called the “right brain activity” that leads to creativity and innovation. Sanofi’s shift toward more external product development efforts includes a partnership deal with Merrimack Pharmaceuticals, announced last month, focused on the Cambridge, MA-based biotech’s experimental antibody drug for cancer. There’s a good reason for this: the large and expensive internal R&D organizations of Big Pharma companies like Sanofi haven’t been productive enough. Over the next several years Sanofi is facing patent expirations on some of its biggest sellers, such as anti-clotting drug clopidogrel bisulfate (Plavix) and the sleeping pill zolpidem (Ambien).

“We all know there is a patent cliff in this industry, and it goes from 2012 to 2014,” Viehbacher said. “But my goal isn’t just to fill a sales gap,” it’s to build a sustainable business. (Viehbacher spoke to Xconomy at length in June about his strategy for building sustainable business at Sanofi.)

Sanofi has been in Massachusetts for more than a decade, but the company has been less active in partnering with biotechs in the state than other Big Pharma outfits. The company conducts a wide variety of genomic research at its Cambridge Research Center on Albany Street, and last year the firm expanded its presence in the state with its acquisition of British vaccine developer Acambis, which has operations in Cambridge and Canton, MA. This year the company has formed alliances with … Next Page »

Comments (5) | Reprints | Share:          

Senomyx (NASDAQ: SNMX), the San Diego company using biotechnology to develop proprietary flavor enhancers and blockers, says that S6973, a compound it has been developing to enhance the intensity of sucrose, can now be commercialized.

In a statement today, Senomyx says it has learned that an expert panel that operates under the auspices of the Flavor and Extract Manufacturers Association has designated S6973 as Generally Recognized As Safe (GRAS) under federal regulations that govern food additives. The designation follows an official review of data concerning the compound that Senomyx submitted to the industry group. With the GRAS designation in hand, Senomyx says it can now begin commercialization of the sweetness enhancer.

Senomyx says S6973 enables foodmakers to reduce sugar in foods and drinks by as much as 50 percent and still provide an equivalent sweet taste. In the statement, Senomyx CEO Kent Snyder calls the GRAS determination “one of Senomyx’s most important achievements and represents a significant commercial opportunity for the Company.”

When Senomyx announced in August that it was expanding its collaboration with Switzerland’s Firmenich, Senomyx spokeswoman Gwen Rosenberg told me that a $10 million milestone payment would be due when S6973 is ready for commercialization. The company was expecting that to happen as early as the first quarter of 2010. Firmenich now must decide if it wants to commercialize S6973, Rosenberg says.

Two other food companies also have rights to the compound, but Senomyx has not disclosed those partners.

Comments | Reprints | Share:          

San Diego’s little Cibus Global is preparing to one day take on Monsanto, the Fortune 500 agri-industry colossus and leading producer of genetically engineered seed. The bioscience company last month formed a joint partnership with an agricultural products company based in Tel Aviv to spur development of new strains of crops. High on Cibus’ to-do list is the development of crops resistant to weed killers sold by its new Israeli partner, Makhteshim-Agan. This is the model pioneered by Monsanto, which developed a line of “Roundup Ready” crops that are genetically altered to resist its herbicide, Roundup.

Cibus, a private venture-backed company with just 34 employees, seems more than a bit outmatched by its would-be rival. Monsanto is a multibillion-dollar company whose Roundup Ready strains account for much of the corn, cotton and soy grown in the U.S. But as Bruce noted in his report, Cibus believes that its technology for producing new crop strains is less likely to raise the ire of activists who oppose the dissemination of genetically modified organisms, or GMOs. Cibus believes its technology—a sort of controlled evolution—will offer a marketing advantage in Europe, where concerns about GMOs have limited the acceptance of modified crops.

Cibus says its technology, dubbed Rapid Trait Development System, or RTDS, uses the natural DNA repair system in plant cells to trigger a genetic change linked to the desired trait. Cibus CEO Keith Walker tells me the company’s technology changes just one letter in a plant’s genetic code. These little mistakes randomly occur all the time in nature, Walker says; yet Cibus says its technology can control the process.

“The traits we introduce in a plant could … Next Page »

Comments (2) | Reprints | Share:          

It’s taken as a given that universities are integral to the innovation process. Researchers create technology, the university finds a licensee or a startup company is formed to develop the invention, and products are created that drive growth in the economy.

But that is a simplistic view of a complex system. And today, a select group of researchers from around the world is gathering at U.C. San Diego to help examine the process of university-industry interaction and technology transfer in more detail. Their focus is a series of questions—that have long been asked but have yet to be definitively answered and are of abiding interest here at Xconomy: What is the true connection between research universities and innovation, and how does it work? How does knowledge really move from the academic laboratory to industry? And are there new ways to improve and accelerate the process?

Sponsored by the Kansas City, MO-based Kauffman Foundation, the seminar is intended to help analyze a global research effort focused on what industry wants from universities, and how those goals can be achieved. The research, part of an onging multi-year study, consists of interviews and other data drawn from more than 90 companies in four countries where innovation and new technologies play a key economic role: the United States, Japan, Canada, and the United Kingdom.

“What we are trying to accomplish is for people to think about what incentivizes and supports a positive interaction between the university and industry,” says Mary Walshok, a UCSD Associate Vice Chancellor and a seminar host. The participants are “people who care about these things, and who are in a position to influence government policy in the U.S., Japan, Canada and the U.K.”

The three-day event begins with a presentation this evening by Larry Smarr, director of the California Institute for Telecommunications and Information Technology, which Walshok says operates as an example of university-industry “best practices.”  The invited participants … Next Page »

Comments (1) | Reprints | Share: