Well, 2009 did not turn out to be the biotechnology disaster here in Seattle that many people had predicted.

By my reckoning, only four of the local biotech companies that I track on my website went bust in 2009 (Eden Biosciences, VizX Labs, Northstar Neurosciences, and Rosetta Inpharmatics). This last blow was softened when Microsoft bought some of Rosetta’s assets from Merck (it’s biosoftware division) and hired a number of its employees. Many of the VizX employees (along with its GeneSifter software) were absorbed by Geospiza. The loss of four companies put Seattle on a roughly equal footing with Boston, which saw at least five companies fold, and San Diego, where at least six companies went under.

Although we didn’t lose quite as many companies, it was still a very tough year locally for those employed in the biotech sector. At least nine companies reported significant layoffs, including Cardiac Science, CMC Icos, Trubion Pharmaceuticals, Cell Therapeutics, Poniard Pharmaceuticals, Amgen, Targeted Genetics, ZymoGenetics, and VLST.

On the positive side, Dendreon moved much closer to being able to sell sipuleucel-T (Provenge), their novel treatment for prostate cancer, and has been on a hiring frenzy. OncoGenex Pharmaceuticals had a breakout year with its own prostate cancer treatment. Partnerships were both formed and broken at a dizzying pace, with Seattle Genetics, ZymoGenetics, MDRNA, Alder Biopharmaceuticals, Arzeda, Ikaria, Kineta, Trubion, and Nanostring among the notable participants. Amgen won its long running patent fight with Roche and was able to block them from selling generic erythropoiesis stimulating drugs in the U.S. Some top executives moved around, with Immune Design gaining part-time help from ex-Zymo CEO Bruce Carter, and with Peter Thompson leaving Trubion and Stewart Parker departing Targeted Genetics.

Other notable events: PATH won the $1.5 million Hilton Prize, the world’s biggest humanitarian award, for it’s work improving health in poor countries, and local biotech Omeros was successful in launching their IPO (although the stock price has dropped some 25 percent since then).

A number of new companies launched or moved into the area, including Arrowsmith Technologies, Beat Biotherapeutics, Qwell Pharmaceuticals, ImaRx, Novo Nordisk, AVI Biopharma, Covance, Arzeda, Xori, Presage Therapeutics, Integrated Diagnostics, Sage Bionetworks, and Genzyme (via its acquisition of Leukine from Bayer). Chris Rivera got off to an excellent start as he took over the head job at the Washington Biotechnology & Biomedical Association. The State’s Life Sciences Discovery Fund expenditures were cut by 41 percent to help balance out the state budget deficit.

In 2010, at least three companies that operate in Seattle will hope to have their drugs approved: Dendreon’s sipuleucel-T (Provenge) for prostate cancer, Amgen’s denosumab (Prolia) for osteoporosis, and Cell Therapeutics’ pixantrone for non-Hodgkin’s lymphoma. Here’s hoping that they all fair well.

Health care reform is sure to bring numerous changes to the industry. One key change likely to be enacted via legislation in 2010 will define a regulatory pathway for the approval of follow-on biologics, which are generic versions of biologic-based drugs. This has the potential of providing significant savings for consumers, although such benefits will depend on the period of market exclusivity awarded to innovator drugs.

Continuing economic problems indicate to me that 2010 will also be a very challenging year for biotech companies in Seattle and beyond. I expect to see many more deals for the acquisition of product candidates, but not so many acquisitions of companies. I wish all of you on the local biotech scene a productive and successful year in 2010.

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Medical devices captured more than its usual mindshare in the Seattle life sciences scene this week, with news of a substantial venture deal and a new product that appears to be catching on in the marketplace.

—Pathway Medical Technologies, the Kirkland, WA-based developer of a high-speed drill that removes fatty buildups from leg arteries, revealed it is seeing strong demand from physicians for its device. More than 100 physicians have gotten the Jetstream system installed in its first five months on the market, says chairman Tom Clement.

—Xconomy broke the news that Ekos, the Bothell, WA-based maker of an ultrasound-based device to dissolve blood clots in the legs, raised $12.5 million in venture capital to support a commercialization drive of its device. CEO Bob Hubert hopes to cap off this round with another $2 million to $2.5 million.

—We took an in-depth look at PATH, the hard-driving nonprofit organization that aims to improve the health of poor people around the world. The Seattle-based group has pulled in $1.3 billion in funding from the Bill & Melinda Gates Foundation, making it the second-largest recipient of Gates grants in the world, behind the GAVI Alliance. In an extensive interview, CEO Chris Elias explained what has made PATH so successful.

—ZymoGenetics fell way short of Wall Street expectations in its first year in the marketplace with its first FDA-approved drug, recombinant thrombin for surgical bleeding. Now the man in charge of sales and marketing, Michael Dwyer, is leaving the company, according to a regulatory filing released yesterday. The company didn’t explain the circumstances of Dwyer’s departure.

—Merck snapped up Gary Gilliland, a star researcher from Harvard University, to run its merged cancer research center in Boston. He will replace Stephen Friend, the founder of Merck’s Rosetta Inpharmatics division in Seattle. Friend is leaving the company later this year to start an intriguing open-access system to allow biomedical researchers to better collaborate.

—Cardiac Dimensions, the Kirkland, WA-based maker of an implantable device for congestive heart failure, said it received approval to market its product in Europe. The company still has a ways to go in the U.S., where it hopes to introduce the Carillion Mitral Contour System in 2011 or early 2012.

—MDRNA, the Bothell, WA-based developer of RNA interference drugs, got a bit of a lifeline this week, … Next Page »

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It was a volatile week in the stock market, and as usual, in Seattle biotechnology. We got insights into an expansion of a biotech drug factory, the advance of a potentially important new drug for multiple sclerosis, and a warning that cuts are coming at Arch Venture Partners’ portfolio companies. Here are some of the week’s highlights:

—Allozyne raised $30 million in venture capital last year, so I checked in with them to see how they’ve spent the cash. It turns out the Seattle-based company, a “graduate” of the Accelerator, plans to enter clinical trials before the end of March with a drug that could be the first every-other-week or monthly injection for multiple sclerosis patients. If this works, it could open the door to a lot more uses of its platform technology.

—Sonosite dumped its chief financial officer, Bernard Pitz. The Bothell, WA-based maker of portable ultrasound machines didn’t say what happened, but it doesn’t like he quit to pursue other interests as the usual corporate boilerplate goes. Pitz left “at the request of the company,” after he just got the job in May.

–Arch Venture Partners told us they warned their portfolio companies to cut back and brace themselves for the financial crisis. Quote of the week from Arch’s Bob Nelsen. “My guess is we are all in for a severe whack, but not a depression, but who knows,” he says.

—Cell Therapeutics isn’t going down without a fight. The Seattle biotech company is running seriously thin on cash, and has a stock price that’s worth less than a pack of gum. But it got some terrific data published this week on its Zevalin drug in the Journal of Clinical Oncology, combined with a heavyweight endorsement from lymphoma guru Oliver Press.

—Leroy Hood turned 70 last Friday, so I marked the occasion by profiling the biotech entrepreneur who made high-speed gene sequencing possible in the 1980s when scientists said it was impossible. One great moment from the gala dinner that night at the W Hotel came when Hood’s son, Eran, was interviewed on a video biography. He said his dad’s life is best summed up by ’90s rap star Tupac Shakur’s album “Me Against the World.” Replace crooked cops with stifling university administrators, and you see the parallels. No word on whether the elder Hood has any of these tracks saved on an iPod.

—CMC Icos is getting ready to break ground on a big expansion of its biotech drug factory in Bothell. It’s one good break the region has gotten after Icos was carved up by Eli Lilly. It wouldn’t surprise me if this turns into a piece of critical infrastructure for local startups that need a place to get their experimental drugs made.

—Dendreon took advantage of a brief boost in its stock to sell about $20 million worth of common shares. The Seattle biotech company announced that an interim analysis of a trial of Provenge for prostate cancer showed it still has a chance of reaching its goal of extending lives when the final analysis is due in mid-2009.

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CMC Icos Biologics made news a couple weeks ago when it said it plans to expand its biotech drug factory in Bothell, and double its workforce there to about 250 employees in three to four years. The big question in my mind was why, so I tracked down CMC Icos president Gustavo Mahler to ask.

There are plenty of factors at work. CMC, a Danish company, bought the facility from Eli Lilly in December last year. It inherited a facility set up to make biotech drugs for early-stage clinical trials for other companies under contract, as well as 127 employees.

Since then, CMC has retained about 100 of those people, and hired another 35 to keep the plant humming along, Mahler says. It has upgraded the factory to meet FDA specifications for commercial manufacturing, known as Good Manufacturing Practices, or GMP. That’s important, because as CMC moves to quintuple its capacity, it will be able to continually serve its customers from the early days of clinical trials all the way through to larger-scale commercial quantities, Mahler says. He wouldn’t say which of his customers’ products are driving the demand for more capacity, because names are kept confidential, but he said CMC currently has seven customers. Because of the complexity of making their products, which are brewed in vats of living cells, biotech companies would rather not look for another manufacturer when the time comes to make big batches, Mahler says.

“Switching from one contract manufacturer to another is pretty painful,” Mahler says.

The other trend CMC sees on the horizon is the FDA clearing a path for companies to make “biosimilars” or generic-like copies of branded biotech drugs like Amgen’s Epogen for anemia. If that happens in another year or two, it could put pressure on the worldwide capacity for biotech drug manufacturing, meaning that CMC Icos would have a pretty valuable property, Mahler says.

The jobs themselves are a bit unusual for biotech, where people tend to have loads of education and very specialized skills in fields like biochemistry or bioinformatics. Some of the people will need bachelor’s degrees, while others can have high school educations, Mahler says. The work will require technicians who monitor things like the acidity of the broth the drugs are made in, and the concentration of oxygen inside those bioreactors. Others will manage equipment and keep it clean, he says.

Many of the people with more highly technical backgrounds have been retained, which is a big reason why CMC chose to expand in Bothell as opposed to anywhere else, Mahler says. Of the eight-person senior management team, six of them are holdovers from Icos. “They are great, high-caliber people. They are experts in their area, and they work well together,” he says.

Mahler added that people there are pleased that the new owner has a future expansion plan. I believe that is 100 percent true, given how so many Icos workers were angry and heartbroken when Lilly took over, grabbed the impotence drug Cialis, and eliminated about 365 local jobs in early 2007.

It sure sounds like CMC and Mahler have a lot going for them, except for one biggie that could derail things—the financial crisis. CMC Icos hasn’t yet settled on a construction start date, because it is seeking financing for the expansion, and keeping a close eye on how the turmoil might affect its customers, and their ability to scale up production, Mahler says. This is one ripple effect in the local economy we’ll be sure to keep an eye on.

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Quote of the week in Seattle life sciences goes to Xconomist Clay Siegall: “For biotechnology, it sometimes feels as if we are always in a financial crisis,” he says. While the world faced the possibility of economic catastrophe, the headlines from Seattle biotech suggest it wasn’t all that unusual of a week, as companies continued to report incremental progress.

—ZymoGenetics, the granddaddy of Seattle biotechs, is getting ready to release data on an experimental drug for hepatitis C designed to have the viral killing power of standard interferon drugs, but without the nasty side effects. This is a “sleeper” drug in the ZymoGenetics pipeline, but early results from six patients suggest it is doing what the company wants, at a lower-than-expected dose.

—We’re in a financial crisis? If you’re CMC Icos Biologics, it’s the time to invest $35 million in an expansion of its biotech drug factory in Bothell, where it manufactures genetically engineered medicines for other companies under contract. We’ll have more to report on this strategy next week.

—The Technology Access Foundation (TAF) looks to improve computing skills among kids of color, but that’s not the only kind of tech it has in mind. TAF is helping teachers prepare lessons to get high schoolers excited about cutting-edge biotech, like new concepts in development for treating diabetes. Sure beats dissecting frogs.

—Leroy Hood gave Xconomy the exclusive story on his newest company, Integrated Diagnostics, in part of a wide-ranging interview. This company aims to develop tests that analyze drops of blood for early telltale signs of an emerging cancer, while it’s still at a treatable stage. A financing deal is expected to close in two or three months, Hood says.

—Siegall, the CEO of Seattle Genetics (NASDAQ: [[ticker:SGEN]), offered his perspective on what it takes to keep innovation alive in times of crisis. Read this, and your blood pressure will drop a few points, guaranteed.

—One fascinating local company that flies below the radar, Bothell, WA-based Halosource, said last week it is expanding into China. We wrote back in July that their water purification technology has started catching on in a big way in India, providing clean, cheap drinking water to more than 1 million people there. We’ll see if they can build on that momentum in the world’s most populous country.

—Lastly, we found a bit of evidence that credit markets haven’t ground completely to a halt. Omeros, a Seattle-based biotech company that backed away from an IPO this year, raised as much as $20 million in a debt financing. When something as risky as a biotech company with no marketed products can borrow money, it makes me wonder how much the commentators really know.

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