Genentech doesn’t acquire many drugs from other people, partly because it has a prolific internal R&D operation. But the South San Francisco-based unit of Roche, the world’s biggest maker of cancer treatments, is announcing an unusual deal today in which it is paying to get an early-stage cancer drug program from Cambridge, MA-based Forma Therapeutics that could enable Forma to generate returns for its investors without going public or getting acquired.

Here’s the deal: Forma is handing over the exclusive worldwide rights to a small-molecule drug program—still in early-stage animal testing—that’s designed to starve tumors by blocking a molecular target involved in cancer cell metabolism. In return, Genentech is making an upfront payment, providing support for research, covering all the development costs, and agreeing to make milestone payments if the drug hits certain development goals. That’s not unusual, but what comes next is: If the Forma drug reaches its development goals, Genentech has the option to acquire the full rights to the asset, leaving Forma with no royalty stream. If Genentech exercises that option, it would make an asset buyout payment that would be distributed to Forma’s investors, plus further milestone payments to Forma if certain sales goals are met.

What it means is that if this drug pans out, Forma essentially would be able to deliver returns to its venture backers by selling off just one of 8-10 cancer metabolism targets it has discovered so far, and remain an independent company free to discover and develop as many other drugs as it can. What’s more, in this scenario, investors will get a return on their investment from Genentech without having to hand over their equity stakes. So it’s conceivable the VCs could get a return on one of Forma’s drugs, and then potentially an even bigger payday if the startup goes public or gets acquired. The agreement is also another sign of emerging interest in the cancer metabolism field, which many Big Pharma companies are pursuing, and which sparked a big deal last August when Cambridge, MA-based Agios Pharmaceuticals secured a $130 million upfront payment from Summit, NJ-based Celgene (NASDAQ: CELG).

“This deal gives us the best of both worlds,” says Forma CEO Steven Tregay. “It gives us near-term funding to continue to build our capabilities up for our pipeline, while at the same time giving us a well-defined exit for our investors down the road.” Tregay wouldn’t divulge any specific financial terms, but he said Forma was burning about $10 million a year in cash prior to the Genentech deal, and that “we now have a pretty nice cash horde going forward.”

Steven Tregay

James Sabry, the vice president of Genentech Partnering, said in a statement that Genentech “is very pleased to enter into this structurally innovative agreement with Forma. The program represents a promising addition to our portfolio.”

This deal is the latest sign that Forma was onto something when it staked out a contrarian drug discovery strategy when it was founded about three years ago, at a time other companies were cutting research in the depths of the recession. Tregay, a former managing director at the Novartis Option Fund, teamed up with scientists from the Broad Institute to put together a startup with specialized skills needed for a soup-to-nuts drug discovery operation. The company has secured about $33 million in equity financing from the likes of Novartis Option Fund, Lilly Ventures, and Bio*One Capital of Singapore, plus another $45 million in non-dilutive cash from Cubist Pharmaceuticals, Eisai Pharmaceuticals, the Leukemia & Lymphoma Society, and the Experimental Therapeutics Centre of Singapore, Tregay says.

The money has given Forma enough of a cushion to hire … Next Page »

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Boston-based Foundation Medicine has only been around for about two years, but it’s already making friends in big places. Today the company—which is developing advanced cancer diagnostics—announced a collaboration with Celgene (NASDAQ: CELG), based in Summit, NJ. Celgene plans to use Foundation Medicine’s genomics testing technology in trials of cancer drugs, in the hopes of identifying patients who are most likely to respond well to the medicines. The deal comes just four months after Foundation Medicine announced a collaboration with Novartis (NYSE: NVS) to optimize a genome panel for use in cancer research.

The financial details of the Celgene and Novartis deals were not announced, but the big-name backing is vital to Foundation, says Michael Pellini, a diagnostics-industry veteran who joined the startup as CEO on May 12. “These are two fantastic partners to have at this stage, because they bring tremendous insight into cancer biology and drug development,” Pellini says. “They will help us refine our tests.”

Foundation Medicine is built around the increasingly popular idea that cancer treatments should be tailored to individual patients. Foundation’s technology, which it’s currently marketing to pharmaceutical companies, uses high-throughput DNA sequencing to analyze tumors for alterations in more than 200 cancer-related genes. Pellini expects that number to reach 300 “in the coming months.”

Even before the Celgene and Novartis deals, Foundation Medicine’s pedigree had helped it win over … Next Page »

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It’s a big day for Aileron Therapeutics. The Cambridge, MA-based biotech firm announced this morning it has formed a partnership with Swiss drug and diagnostics giant Roche to discover, develop, and commercialize a new class of drugs known as “stapled peptides.”

Under the terms of the deal, Roche (OTCQX: RHHBY) will provide at least $25 million in technology access fees and R&D support to Aileron. What’s more, Aileron will be eligible to receive up to $1.1 billion in milestone payments if drug candidates are developed against five targets from Roche’s main therapeutic areas—oncology, virology, inflammation, metabolism, and the central nervous system. Aileron will also receive royalties on future sales for any marketed products resulting from the collaboration.

This is Aileron’s first major industry collaboration—and a big step forward for the company. My colleague Luke first wrote about Aileron back in November 2008, when the startup talked about its plan to develop peptide-based drug compounds that block interactions between proteins in the body that can’t be affected by conventional small-molecule chemical drugs or genetically engineered protein drugs. The peptides apparently work because they’ve been chemically “stapled” to resist unraveling under the influence of enzymes in the body that would render them useless.

Last year, Aileron closed a $40 million financing round led by the venture arm of GlaxoSmithKline and Boston-based Excel Medical Ventures, with participation from Novartis, Eli Lilly, Apple Tree Partners, and, yes, Roche. Aileron was founded in 2005 by the late Stanley Korsmeyer and Loren Walensky, a pair of biologists from Harvard Medical School and the Dana-Farber Cancer Institute, and Gregory Verdine, a Harvard University chemist.

It’s still very early for the company, in terms of any possible clinical impact. But last November, scientists at Harvard, Dana-Farber, and the Broad Institute of Harvard and MIT reported promising results from multiple disease models and animal tests, when they used a stapled peptide from Aileron to stop the production of a protein associated with uncontrolled growth of cancer cells. The hope is that stapled peptide drugs might be able to target previously “undruggable” protein targets inside cells, without the side effects of existing drugs.

In any case, the deal with one of the world’s biggest biotechs seems to support Aileron’s approach to date. “This alliance with Roche validates the broad potential for our Stapled Peptide platform across multiple therapeutic areas and classes of targets and also provides Aileron with capital to advance our platform and internal drug development pipeline” said Joe Yanchik, Aileron’s president and CEO, in a statement.

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Business leaders, researchers, and investors interested in the intersection of healthcare and information technology packed into the auditorium of the Frye Art Museum on First Hill in Seattle on Wednesday. Luke showed you some of the pictures from our Xconomy Forum already. Let me give you my observations from the event, in the form of a few notable quotes and ideas from our speakers.

One thing that leaped out at me was how intensely personal the field of health IT (and healthcare in general) is. Many of the speakers had a family-related issue that motivated them in their daily work—whether it was a parent or spouse who had battled cancer, or a parent who was a doctor and took them along on their rounds or shared stories of the big challenges in medicine.

Here are a few highlights from the talks and discussions:

Don Listwin, founder of Canary Foundation (and former No. 2 at Cisco Systems):

“Cycle time is the villain in healthcare,” Listwin said. “Personalized medicine is a crock. It takes 20 years to get pills through the system. All this business about ‘we’re going to sequence everything and it’s going to be great’ is interesting but…it’s not going to happen for a long, long, long, long time.”

Listwin also said it’s important to form partnerships in healthcare and biomedical research with China and countries in the Middle East. (“This country is broke; they are not.”) On the technology side, he is a proponent of blood tests coupled with molecular imaging—including ultrasound techniques—as the key to doing early cancer detection. Listwin is one of those people personally motivated to make an impact because of a family experience. He decided to devote his dot-com era fortune to early detection of cancer after his mother died from ovarian cancer.

David Cerino, general manager in Microsoft’s health solutions group (who previously worked in the worlds of online banking and travel):

“At Orbitz, when we screwed up someone’s reservation, we used to say, ‘Well, nobody died.’ Now I can’t say that, and I’m proud of it,” Cerino said. “Healthcare is an information problem but it’s fragmented…We have to put the consumer in the middle so they’re in control of the [health] information,” he said. “I call HealthVault ‘PayPal for health.’”

Cerino noted that Microsoft HealthVault makes money primarily in international markets. The service is free for consumers (he doesn’t call them “patients”) in the U.S. “We sell it on a per-citizen, per-year basis” to foreign ministries of health and other international government agencies that want to sponsor digital health records, for example, in Canada and Germany, he said.

Greg Foltz, neurosurgeon at Swedish Neuroscience Institute in Seattle:

“It’s a tsunami of information now becoming available to physicians,” Foltz said. “I take care of patients with brain cancer. What we’ve had to do in our center is create a team to help these patients; that involves bringing together software, programming, bioinformatics, and scientists used to looking at this data.”

He talked about the electronic health records (EHR) system at Swedish Medical Center, which got rid of paper records more than a year ago: “It’s clear it has prevented errors, and is helping patient care. For me, what I’ve witnessed is, the major barrier is people. Getting physicians to really embrace this is generational. Someone with an iPod and iPhone is embracing EHRs… Software moves faster than hardware, and they both move faster than people. Incentives in healthcare come from … Next Page »

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A few weeks ago I heard a pharmaceutical executive say at an industry meeting that academia shouldn’t be trying to develop drugs. They don’t know how to do it, his message was.

Now, he didn’t specify what he meant: Was it that academics do not know how to discover and optimize promising drug candidates, or that they can’t efficiently carry out the subsequent phases of drug development as a compound moves into clinical trials? But in a way, his comment was telling precisely because of its generalized nature. It represents a blanket view that is not uncommon in the industry (i.e., academia can’t make drugs) which is both right and wrong—and which stands as a barrier to bridging the infamous bench-to-bedside gap.

This gap is wide. The making of a drug usually starts with an interesting observation made by a bench scientist, and ends with an FDA-approved product. In between there are years of painstaking and costly work. Once a promising drug target has been identified it must be validated, any candidate compounds must be optimized and refined through specialized chemistry work, and those compounds must then be put through many animal studies to look at pharmacokinetics and toxicity. Then, paperwork must be filled to get permission from the FDA to study the compound in humans, and of course clinical trials must be designed and carried out at great expense.

This process must integrate two cultures—academia and industry–which often don’t know how to talk to each other. Academics, perched in their ivory tower, look down on the industry folks as uncreative and bureaucratic. People in industry resent the arrogance of academia and shake their heads at academia’s unfocused approach. More than once I have heard the comment that, when it comes to drug development, academics “just don’t know what they don’t know.”

From my own days in the lab, I know there’s some truth to the latter charge. Basic scientists are simply not trained to design their experiments in a way that will make it easier to move towards a clinical path. I worked with a set of proteins that had medical applications for bone regeneration. I knew everything about the proteins—all the downstream pathways possibly linked to them—and I knew the kinds of effects these molecules had on bone growth in mice and chickens. But never in my four years as a bench scientist did I think to design my experiments to help address a medical need. I wouldn’t have known how to, actually. And honestly, I didn’t really care. My pursuit was that of knowledge, not medicines.

Yet now, more than ever, those who pursue knowledge and those who pursue medicines must learn to coexist and cooperate with each other. The traditional model for drug development—in which academia’s role was largely restricted to … Next Page »

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Health IT is one of those innovation sectors that is exploding around us here at Xconomy. Every day we’re hearing about a new company, or health-related website or gadget, or experienced financier who’s getting into the act. It’s still pretty early, but it won’t be for long. And the Northwest is already positioning itself as a big player in this complex field. (Just look at top business leaders like Jeff Bezos, Michael Dell, and Nick Hanauer getting involved with Seattle healthcare firm Qliance, for example.)

Which is why Luke and I are particularly psyched as we gear up for our Seattle event on May 12 titled, “How Information Technology is Transforming Medicine and Healthcare.” This half-day forum is loaded with more than a dozen expert speakers who are using IT to create more effective medicines, help consumers monitor their health, enable providers to deliver healthcare more efficiently, and store and analyze the vast piles of data from our genomes that are the key to the future of medicine. (See Luke’s recent preview of the event and speakers here.)

Coming on the heels of our successful Boston healthcare IT event earlier this week, I’m particularly pleased to highlight a couple of recent additions to the Seattle program here.

—Peter Gelpi, the CEO and co-founder of Seattle-based Clarity Health Services, is working to make referrals between doctors a much more efficient process, through a simple Web-based interface and a deeper understanding of the health community. That’s just part of the story, though; Gelpi, a veteran of Aldus, Adobe, and MedOrder, will tell us more at the event.

—Sujal Patel, the CEO and founder of Seattle-based Isilon Systems, is finding that biomedical and genomic data storage is one of the fastest-growing markets for his company’s technology. As of last fall, the medical and health sector made up about 10 percent of Isilon’s revenue, thanks to A-list customers like Merck, Sanofi-Aventis, the J. Craig Venter Institute, and the Broad Institute.

What do these folks have in common with our other invited speakers, like Don Listwin, the former No. 2 executive at Cisco and founder of Canary Foundation, Rod Hochman, the CEO of Swedish Medical Center, and David Cerino, general manager in Microsoft’s Health Solutions Group? They’re all using IT to help create the future of healthcare. Come find out how on May 12 (registration info is here).

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Complete Genomics, the Mountain View, CA-based company with a goal of sequencing full human genomes for $5,000, is announcing today that it has completed 14 full human genome sequences for commercial customers like March. The company says it has a dozen customers, including Pfizer, Duke University, the Institute for Systems Biology in Seattle, and the Broad Institute of MIT and Harvard. Last month, we reported on how Kirkland, WA-based OVP Venture Partners joined a syndicate that invested $45 million in Complete Genomics.

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This was another busy week on the Seattle biotech scene, with some takeover speculation surrounding the latest success story (Dendreon), a big pharmaceutical industry player moving to town (Covance), and a behind-the-scenes tale of how NanoString Technologies scored one of the bigger venture investments of the year.

—Christopher Henney, the former CEO of Dendreon (NASDAQ: DNDN), sat down for an exclusive interview with Xconomy about his former company, which ran in installments on Monday and Tuesday. Henney predicts that Seattle-based Dendreon, the developer of what many consider the first successful treatment to actively stimulate the immune system to fight cancer cells like a virus, might end up getting acquired, just like the two other successful companies he co-founded—Immunex and Icos.

—Covance (NYSE: CVD), the giant drug development services provider, agreed to acquire the last big piece that was unaccounted for in the breakup of Merck’s former Rosetta Inpharmatics operation in Seattle. Covance agreed to acquire the Gene Expression Laboratory at Rosetta, and according to CEO Joe Herring, this multi-national company has big growth plans for its new asset in Seattle.

—Seattle-based NanoString Technologies scored one of the bigger venture investments of the year when it got $30 million last month from Clarus Ventures, OVP Venture Partners, and Draper Fisher Jurvetson. Behind the scenes, the pivotal moment happened when a young principal at Clarus, who used to work at the Broad Institute in Cambridge, MA, heard glowing reviews from happy customers at that leading-edge genetics center.

—Stewart Lyman contributed some fascinating insight to the Xconomist Forum this week about what it is that made Genentech and his former employer, Immunex, such special places for biotech innovation. He has some suggestions on how new companies can replicate that culture of innovation, and they don’t involve any of the fancy shortcuts preferred by some of the industry’s financial backers.

—Targeted Growth CEO Tom Todaro offered an overview on the unusual strategy he has developed to capitalize on some intriguing basic research into cell division that has origins at the Fred Hutchinson Cancer Research Center. The Seattle company is splitting its resources in half between programs to boost yields of crops, and to create sources of alternative energy. A couple days after this feature ran, Targeted Growth announced it had found a way to significantly boost yields of algae for producing oil.

—AVI Biopharma (NASDAQ: AVII), the Portland, OR-based developer of RNA-based therapies, said it secured $1.2 million in funding from a U.K.-based charity that supports research into Duchenne Muscular Dystrophy.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC), the developer of cancer drugs, closed on another round of financing that ultimately netted a little more than $40 million after expenses.

—Bothell, WA-based Sonosite (NASDAQ: SONO), the maker of portable ultrasound machines for medical diagnosis, said its sales declined 12 percent in the second quarter. It blamed the slowdown on reduced spending by U.S. hospitals.

—Seattle-based Calypso Medical Technologies, the maker of technology to pinpoint radiation therapy for prostate cancer patients, said it formed a collaboration with Palo Alto, CA-based Varian Medical Systems, to incorporate the Calypso technology into Varian’s radiation systems. Terms of the deal weren’t disclosed.

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[Corrected July 29, 10 a.m. See below.] Warren Buffett says he became one of the world’s most successful investors partly because he only invests in businesses he understands. But where do you find investors if your niche is in something called direct multiplexed measurement of gene expression? Last month, Seattle-based NanoString Technologies, the developer of this new way of analyzing genes, had the good fortune to find a couple investors at Clarus Ventures in Boston who actually do understand that field.

This was the interesting backstory I gathered on one of the bigger venture deals we’ve seen lately in the Xconomy network, the $30 million investment last month in NanoString by Clarus Ventures, OVP Venture Partners, and Draper Fisher Jurvetson. The company has invented a machine that provides a digital readout that can say precisely how much a given gene is dialled on or off in a biological sample. This digital technology has high enough bandwidth to enable large-scale genetic analysis experiments, which might, say, be used to compare 100 genes from 100 different patients with diabetes to see how the patients respond to treatment. The people who understood the technology well enough to write a critical check were Clarus managing director Nick Galakatos and Finny Kuruvilla, a young principal at the firm.

The initial seeds for this financing were planted when some of the world’s top geneticists, at the Broad Institute of Harvard and MIT, were among the very first customers of NanoString when it introduced its commercial product last July. They were raving about how the NanoString tool was simple to use, making it possible to digitally analyze the activity of hundreds of genes at a time without the cumbersome need to amplify biological samples using traditional tools like RT-PCR (real-time polymerase chain reaction). Some of the biologists there shared their enthusiasm for the new tool with Kuruvilla.

Kuruvilla knew what the people at the Broad were talking about. He’s got an MD from Harvard Medical School, a doctorate in chemistry from Harvard University, and a master’s in computer science and electrical engineering from MIT. Just before joining Clarus, he worked at the Broad Institute, where he led a collaboration with Santa Clara, CA-based Affymetrix (NASDAQ: AFFX) to develop novel tools and software to crunch huge volumes of genetic data. Essentially, the people at the Broad are trying to work on the frontier of turning the vast amount of genetic data pouring out of sequencers into something closer to knowledge that biologists can build on. When they said NanoString had made a significant advance in this field, Clarus, a fund with $1.2 billion in assets, decided to do more homework over the next year.

“There’s really no substitute for hearing good words from a happy customer,” says Nick Galakatos, the Clarus managing director who led the NanoString investment.

Months before Kuruvilla and his contacts at the Broad got excited … Next Page »

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Some of biotech’s most innovative drugs emerged under the worst financial conditions. Two big breakthroughs in the 1990s, Enbrel for rheumatoid arthritis and Rituxan for lymphoma, came from small biotech companies that toiled for years, and survived brushes with extinction, before they made it.

This history lesson came up in conversations I had with entrepreneurs after the Xconomy Forum: Tomorrow’s Biotech—Innovators and Innovations, which we held yesterday at Biogen Idec in Cambridge, MA. The people who enter this business need a rare combination of intellect and tenacity to survive in a business where 9 out of 10 drugs that enter clinical trials fail, and where it takes more than a decade and hundreds of millions of dollars to develop a drug, even in good times. So it was fascinating to hear people describe the grim realities of the economy as simply another obstacle they need to overcome—and not an insurmountable one.

Startup founders and CEOs participating in the forum covered a lot of ground about creative ways biotech companies are seeking to clear these hurdles by raising money, improving the odds in drug development, and lowering costs. Of course there’s no one simple way to build and sustain a new company, and indeed the forum highlighted some completely opposite strategies.

Meanwhile, the heads of some of the most innovative programs at public biotechs—Biogen Idec’s Gilmore N. O’Neill, Genzyme’s Sam Wadsworth, and Vertex Pharmaceuticals’ Eric Olson, moderated by GlaxoSmithKline’s Michelle Dipp—shared their perspectives on what it takes to foster new ideas and treatments in the public-company context. (FYI, none of them officially condone submarine projects, wink wink nudge nudge.) We also heard from some pioneers of the biotech industry—Walter Gilbert and George Church—during a keynote chat, although I’m saving up highlights from an interview with Church for next week, so watch this space.

Thanks to all who joined the conversation yesterday. And if you missed it, here are some of the highlights from the entrepreneurs at the Forum:

—Peter Hecht, CEO of Cambridge, MA-based Ironwood Pharmaceuticals, talked about his secret for being able to raise $281 million over the past 11 years to build his company, which now has 160 employees. “We’re crazy-passionate about building a great company and doing it over the long haul,” he said, with a sense of purpose that made it sound like more than a platitude.

This guiding principle has enabled Hecht to pull together investors like Polaris Venture Partners and Venrock Associates to support the company—without agitating for a quick acquisition to get fast returns. By sticking with this consistent … Next Page »

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One of the world’s brightest minds at analyzing human DNA was born into a family of creationists. When he was 17 and graduating from high school in a rural area of southwestern Michigan, Eric Schadt couldn’t even imagine going to college.

“My parents were very religious,” Schadt told me on a visit to his office last week. They didn’t emphasize education, and neither did the community, he says. “Higher education just wasn’t something that people looked forward to there. I didn’t really know what college was.”

Schadt, now 44, and an executive scientific director at Merck’s Rosetta Inpharmatics division in Seattle, has traveled on a truly remarkable journey. One of his mathematical mentors at UCLA, Ken Lange, said Schadt reminds him of no less than the world’s leading mathematician who turned his curiosity to the riddle of the human genome—Eric Lander of the Broad Institute in Cambridge, MA.

“Eric Schadt is a real leader in the field of computational genetics,” Lange said in an e-mail. “He has published many seminal papers. He sees the big picture better than the vast majority of geneticists and inspires his co-workers to tackle critical problems.”

Whether Schadt inherited a gene or not for missionary drive from his parents, he’s going to need it. His most audacious goal yet, one that we described in this exclusive story for Xconomy last week, is to make biologists collaborate through an open-source style movement with an ultimate vision of helping develop more effective drugs. This is taking shape in a nonprofit organization, called Sage, which was seeded with $5 million in donations this month.

Through numerous publications in prestigious scientific journals like Nature, Schadt has played a key role at Merck’s Rosetta operation in the years since Lander and his peers sequenced the entire 3 billion letter string of human DNA in the genome in the 1990s and early 2000s. Schadt and his colleagues have worked on the immensely complex next step of trying to help explain what all those data points mean. The concept is about connecting the dots between faulty DNA, which gets transcribed into bad RNA, which can be linked to proteins that actually cause a disease like cancer. There has been lively debate raging among scientists online since we wrote this original story, about where it is all headed, and whether it’s worth all the money.

I decided I wanted to get to know the kind of person who would try to lead an open source biology movement, cutting against ingrained professional norms that keep biological ideas proprietary, not open. So I went to meet Schadt at his office in Seattle’s South Lake Union neighborhood.

On first impression, you would never guess Schadt is the guy behind all those scientific papers. He is legendary … Next Page »

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Agios Pharmaceuticals is moving full steam ahead. The company has moved into a new 21,000-square-foot space in Cambridge, MA, that it says is the world’s largest lab devoted to studying how to throw a wrench into the overactive metabolism of cancer cells that normally allows them to grow and thrive. It has also recruited five new scientific advisers from top academic centers to help direct the work.

Agios (pronounced AHH-jee-oce) burst on the Boston biotech scene after the Fourth of July weekend, when it announced it had raised $33 million in an initial venture financing from Boston-based Third Rock Ventures, Flagship Ventures of Cambridge, and Seattle’s Arch Venture Partners. The company’s driving concept is that cancer cells become addicted to food. Basically, they have highly active metabolic enzymes, like those in fetal cells, that spur faster-than-normal growth. The key to stopping cancer cells in their tracks would therefore be to develop drugs that interrupt that rapid-fire metabolism. I got an update on the company’s progress in its first 100 days from interim CEO Kevin Starr, a partner with Third Rock.

The company’s founding lab is being set up at the University Park at MIT, a mixed-use development a short walk from Central Square. It has hired 10 employees there, who will work with 20 colleagues in China and India doing chemistry work, Starr says. Another 10 or 20 employees will be hired at the Cambridge site by the end of March, he says. Agios is identifying new targets to aim drugs at, and designing conventional small-molecule oral pills to block those pathways, he says. It’s also looking at whether existing metabolic drugs might be useful if designed differently for cancer. He wasn’t too specific about which tumor types the company is pursuing, but Agios has four different drug discovery programs moving ahead, and its first drug candidate could enter clinical trials by 2011, he says.

It sure sounded to me like Agios hasn’t eased up on the throttle much in the past 100 days, and isn’t too concerned about conserving its pennies in a worsening downturn. Starr said simply that the company’s strategy demands being nimble and making a big investment to seize this opportunity before someone else does.

“We believe that to build innovative, breakthrough companies it takes a boldness of vision and execution,” Starr says. “To make the strategy work, we need to invest in a big way.”

People, of course, are also key. Agios was founded by Lewis Cantley of Harvard Medical School, Tak Mak of the University of Toronto, and Craig Thompson of the University of Pennsylvania. Those folks all kept their day jobs at their academic institutions, and are being joined by another quintet of advisers from top research centers. They are: Chi Van Dang of Johns Hopkins University, Joshua Rabinowitz of Princeton University, Clary Clish of the Broad Institute, and Matthew Vander Heiden and James Bradner of the Dana-Farber Cancer Institute.

Agios’ ability to quickly rally all these players around the cancer metabolism work has already drawn interest from a half-dozen potential pharmaceutical partners, Starr says.

The company’s agenda for the next six months suggests it doesn’t intend to make cutbacks. It plans to hire more people, advance its four drug discovery programs toward identifying lead drug candidates, hire a permanent CEO and chief scientific officer, publish some of its work in top scientific journals, and sign a significant pharmaceutical industry partnership in 2009, Starr says. I interviewed Starr after a long week of interviews with biotech CEOs, and I’d say he was probably the most upbeat of any of them. “We’re excited. The more we get into this space, we see this is a breakthrough area in cancer. Getting key people involved is validation of it,” he says.

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Summer’s over, school’s back in session, and the deals were jumping in just about every sector as September got underway.

—IRobot announced co-founder Rod Brooks was stepping down as the company’s CTO (but remaining on the board of directors) to devote full time to his new company, Heartland Robotics. Cambridge, MA-based Heartland will focus on developing industrial and workplace robots to “rehumanize and revitalize” U.S. manufacturing, according to its website. Brooks, Heartland’s chairman and CTO, and CEO Ken Zolot (both Xconomists) gave Xconomy the scoop that they had closed a Series A funding round and licensed core technology from MIT. Brooks also took a leave from his MIT professorship.

—Waltham, MA-based Phase Forward (NASDAQ: PFWD), which develops software that large pharmaceutical companies and research institutions employ to manage the vast amounts of data generated by clinical drug trials, paid $40 million for Clarix, a Pennsylvania maker of phone- and Web-based interactive voice response systems used to help manage supplies for drug trials.

—The “Give One, Get One” program offered by Cambridge, MA-based One Laptop Per Child Foundation last holiday season gave U.S. and Canadian consumers the opportunity to buy two XO laptops for $400: one for themselves, the other for a child in a developing country. But the implementation, as Wade noted, “was a fiasco.” Some orders weren’t filled until March, while others were lost. This holiday season, OLPC plans to repeat the offer—but it’s put Amazon in charge. If any company knows how to fulfill orders during the holidays, it’s Amazon.

—Ryan broke the news on Wednesday that the Broad Institute of Harvard and MIT, which is focused on genomic research, was receiving a $400 million endowment from its founding benefactors Eli and Edythe Broad. The institute—originally structured as an administrative unit of MIT—also quietly announced it is revamping itself as a stand-alone nonprofit, with an independent board of directors and other major organizational differences from its first incarnation.

—In addition to Brooks stepping down as CTO, Bedford, MA-based iRobot (NASDAQ: IRBT) announced it had been awarded a U.S. Army contract for military robots, spare parts, training, and repair services that could total $200 million over the next 5 years. Chairman Helen Greiner told Wade that in addition to the Packbot robots already employed in the Middle East, the contract could include next-generation “SUGVs,” or small unmanned ground vehicles, which iRobot is developing in partnership with the Army’s Future Combat Systems program.

—Merrimack, NH-based maker of equipment for manufacturing photovoltaic cells GT Solar (NASDAQ: SOLR) confirmed that it had won a $173 million contract (its CEO had previously called it a $177 million deal) to supply polysilicon reactors to DC Chemical of South Korea. GT Solar went public on July 24.

—Perhaps inspired by GT Solar’s successful IPO, Essex, CT-based wind power firm Noble Environmental Power set the size of its planned IPO at 23.4 million shares. The company  hasn’t yet specified a price for the shares, but when it originally filed for the offering back in May, it set a maximum target of $375 million.

—MIT spinoff Hepregen, which is working on a way to screen drugs in development for liver toxicity, raised $3 million out of a $5 million first round of venture capital. Investors include Battelle Ventures and Innovation Valley Partners.

—Teradyne (NYSE: TER), the North Reading, MA-based maker of electronics testing equipment agreed to pay roughly $250 million ($15.65 a share) to acquire Eagle Test Systems (NASDAQ: EGLT). Illinois-based Eagle makes analog, mixed-signal, and radio frequency semiconductor test products.

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When we reported yesterday that the Broad Institute of MIT and Harvard was set to receive a whopping endowment of $400 million from Los Angeles-based billionaire philanthropists Edythe and Eli Broad, we noted that it was rumored that the institute—originally structured as an administrative unit of MIT—was also set to become independent of both MIT and Harvard. The Broad alluded very briefly to such a change in its announcement about the donation this morning. And now we can fill in more details, based on an FAQ made available today to Broad staffers, about how the institute is revamping itself as a stand-alone nonprofit with an independent board of directors and other major organizational differences from its first incarnation. But while it will become a separate legal entity, “in terms of how our scientific research proceeds, the Broad Institute is NOT separating from either Harvard or MIT,” the FAQ emphasized.

The organizational restructuring marks a major milestone for what began as an experimental model of collaborative research among MIT, Harvard and Harvard-affiliated hospitals. The new endowment—which adds to the $200 million that the Broad couple already granted their namesake institute—means that the institute, which focuses on the role of genomics in medicine and the molecular underpinnings of diseases, has the financial wherewithal to operate permanently and independently while maintaining research partnerships with MIT, Harvard, and other institutions.

According to the FAQ, “the transition to a permanent status requires that the Broad Institute become a stand-alone non-profit organization with its own Board of Directors.” And such a transition has long been on the table, according to the document:

From the day we were founded in 2003 there has always been the possibility that this transition to a permanent institution would happen, and now it has happened sooner than anyone projected. The discretion surrounding the legal deliberations was necessary to ensure that this transition be worked out as completely as possible before it could be widely known in order to prevent any false or misleading information from appearing, and to ensure timely and appropriate national and international recognition for the incredible and unprecedented generosity of the gift from Eli and Edythe Broad.

The FAQ also spelled out the benefits of becoming a stand-alone nonprofit:

This new status of the Broad Institute establishes it as a unique, identifiable, and permanent part of the Boston/Cambridge biomedical landscape. It also allows us to chart an even more aggressive course, and to move even more nimbly in pursuit of new scientific opportunities.

With many of the details and changes in administrative structure and leadership still being worked out, the institute told employees that the full transition to an independent nonprofit would not likely be completed until July 2009.

The Broad downplayed the move toward independence in its official news announcement, which states that MIT and Harvard will continue “to help govern the institute.” But while the FAQ makes a brief mention of Harvard and MIT having formal roles in the Broad’s new governing structure, and says that some of the its new board members will be drawn from its partner institutions, it suggests that the institute plans to run its administrative operations largely on its own.

As for the brain trust of Harvard and MIT professors who are considered members at Broad, the FAQ says that they will maintain their faculty appointments with their respective universities. But the transition to “stand-alone” status does mean that staff members of the institute who are now considered employees of either Harvard or MIT will become employees of the newly independent institute.

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This week’s Boston-area life sciences news has a little bit of everything—venture deals, new drugs, lawsuits, and a big-time donation. And for the entrepreneurs among you looking for an alternative to the typical venture capital firm, check out Ryan’s directory of corporate VC operations.

—The ranks of New England life sciences companies with their own venture capital arms are growing, so Ryan put together a directory of such outfits, complete with some fascinating details on each one’s focus and personality.

—Luke profiled the efforts of Cambridge, MA-based Biogen Idec (NASDAQ: BIIB) to develop the first drug that might help the body repair the damage done to nerves’ myelin coatings by multiple sclerosis. Currently available MS drugs, such as Biogen’s own Avonex and Tysabri, tamp down flare-ups of the disease in an effort to prevent further damage, but don’t fix myelin defects; a repair drug might help restore walking and other functions affected by the disease.

—Ryan checked in with our Kendall Square neighbor Sermo, and found that the popular social networking site for physicians—which had in the past announced new corporate partnerships, such as one with Pfizer (NYSE:PFE), with great fanfare—had quietly inked deals with eight more of the world’s 12 largest drug companies. Sermo CEO Daniel Palestrant also had a bit of advice for his fellow Health 2.0 firms.

—Dover, NH-based Salient Surgical Technologies pulled its planned $86.25 million initial public offering, for which it originally filed back in March.

—Cambridge, MA-based Quanterix, a Tufts spinoff developing technology for early diagnosis of cancer, Alzheimer’s disease, and other illnesses, closed the second half of a $15 million financing round from Arch Venture Partners, Bain Capital Ventures, and Flagship Ventures.

—A U.S. District Court in Texas reduced the patent-suit damages owed by Boston Scientific (NYSE: BSX) of Natick, MA, to rival Medtronic (NYSE: MDT) from $250 million to $19 million, finding two of the involved patents to be unenforceable.

—Cancer-drug developer Ariad Pharmaceuticals (NASDAQ: ARIA) of Cambridge, MA, is moving quietly toward having its first approved product on the market, Luke discovered. And if its lead drug, developed in conjunction with Whitehouse Station, NJ-based Merck (NYSE: MRK), is a success, Ariad is lined up to hold on to an atypically large chunk of the profits.

—MIT spinoff Hepregen, reportedly raised $3 million out of a $5 million first round of venture capital from Battelle Ventures and Innovation Valley Partners. The startup is developing technology to screen drugs in development for liver toxicity.

—Our sources tipped us off yesterday that Eli and Edythe Broad, the founding benefactors of the Broad Institute of Harvard and MIT, are donating an additional $400 million endowment to the Cambridge, MA-based genomic medicine research powerhouse. The announcement of the donation and its implications is currently underway; we’ll post more when we know more.

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It’s an impressive and even intimidating group. Two world-renowned professors, one from MIT, the other from Harvard Medical School; MIT itself; and the lawyers who won a $612 million settlement from Research in Motion, the Blackberry folks. They’ve joined forces in a patent lawsuit, filed without fanfare last week in federal court, against one of biotech’s pioneers: Santa Clara, CA-based Affymetrix. No dollar amount was named in the suit. But analysts and the plaintiffs, who are seeking treble damages, say the technology in question is vital to much of Affymetrix’s business—an indication that many millions of dollars are at stake.

What may also be at stake is a long-standing relationship that MIT has with Affymetrix (NASDAQ: AFFX)—a maker of microarrays and associated tools for analyzing genes—through the Broad Institute, a Cambridge, MA-based biomedical research institute jointly run by MIT and Harvard. The collaboration, focused in part on the very technology at the core of the patent suit, could put MIT in a bind—or at least create the appearance of a conflict—as the case progresses.

The named plaintiffs in the lawsuit, filed on July 1 in U.S. District Court in Massachusetts, are MIT and a newly formed company called E8 Pharmaceuticals. The firm is the brainchild of MIT biologist David Housman, a pioneer in forensic DNA analysis whose co-invention is at the nub of the litigation, and Richard Mulligan, a MacArthur Prize-winning biologist formerly at MIT and now at Harvard Medical School. (Mulligan, an Xconomist, serves on ImClone’s board and was nominated, but not elected, to Biogen Idec’s board as part of billionaire investor Carl Icahn’s attempted takeover of the company.) The plaintiffs’ lawyers are from Wiley Rein, the Washington, DC-based law firm that represented patent-holding company NTP in its infringement suit against RIM; that suit ended with in the BlackBerry firm settling in 2006 for $612 million.

At issue in the suit against Affymetrix is U.S. patent No. 6,703,228. In their complaint, E8 and MIT hail the technology covered by the patent as a pioneering discovery in genotyping and DNA analysis that “enables users to perform accurate, reproducible and cost-effective genetic analysis, using minute amounts of sample DNA and a small number of reactants to generate results that were previously impossible, even in specialized high throughput centers using many thousands of different reactants.” The patent was awarded to MIT in March 2004, with Housman and his group named as the inventors.

The lawsuit alleges that some of Affymetrix’s GeneChip (the firm’s trade name for microarray) products infringe the ’228 patent, and that by selling these products Affymetrix is causing its customers to also infringe the patent. Neither Mulligan nor Housman would discuss the suit in detail, but they did explain to me that the products at issue are those designed for analyzing a certain type of genetic analysis, called SNP (pronounced “snip”) genotyping. “The issued patent, which is public record, describes the Affy SNP chip genotyping methodology,” says Housman. “It is what it is. Anyone who wants to compare the Affy SNP chip manual to the issued patent is welcome to do so. They are one and the same thing.”

There’s a history here. According to the complaint, in September of 2004, some six months after Housman’s patent was issued, Affymetrix filed its own U.S. patent application claiming the priority date of an earlier 1994 application. Then, in March 2005, Affymetrix added new claims that in effect “asserted the patentability of and ownership of the methods claimed in what is now the ’228 patent.” An interference was initiated in April 2006 as the U.S. Patent and Trademark Office tried to sort out which group was first to develop the methods at issue, and on May 2, 2007—again according to the complaint–the PTO ruled “that the Housman group at M.I.T. was the first to invent the claimed methods and was therefore entitled to the patent.”

E8 and MIT allege that Affymetrix nevertheless kept on using the methods—and directed its customers to use them—in direct infringement of MIT’s patent. E8, meanwhile, now holds an exclusive license to the patent.

Housman and Mulligan are former MIT colleagues and longtime friends. Mulligan was not … Next Page »

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