While San Diego has seen a big decline in VC investments this year, it’s nice to know that Domain Associates, one of the region’s most-active life sciences VCs, has raised a new fund. We’ve got the rundown on that and more news of interest to the life sciences community.

—San Diego’s life sciences community got some encouraging news earlier this week when the venture capital firm Domain Associates said it has closed Domain Partners VIII, a $500 million venture capital fund devoted exclusively to the life sciences industry. While Domain is based in Princeton, NJ, the firm maintains an office in San Diego, and many of its investments are in California.

—Seattle’s Bonnie Ramsey first learned of a cystic fibrosis drug under development by San Diego’s Aurora Biosciences nine years ago, when she was working for the Cystic Fibrosis Foundation’s Therapeutic Development Network. Aurora was later acquired by Vertex Pharmaceuticals (NASDAQ: VRTX), and now the Cambridge, MA, biotech has advanced development of Aurora’s CF drug—now known as VX-770—to the final stage of clinical trials. Luke talked at length with Ramsey, who is a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington.

—How long should it take a company’s reconstituted board of directors to elect a new chairman? It’s taken more than two months at San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN), which was subjected to a proxy fight this spring. That’s taxing the patience of Rick Barry, the founder and portfolio manager of Eastbourne Capital Management. Barry, whose firm holds a 12.5 percent stake in Amylin and has been pushing for change at the diabetes drug specialist, told me he wants the new chairman to be chosen from one of the four newly elected directors to the company’s 12-person board.

—SpectraScience (OTCBB: [[ticker: SCIE]]), a San Diego-based maker of optical biopsy technology used to detect cancerous tissue, has raised $930,000 of a planned $5 million investment round among individual investors. The medical diagnostics company plans to use the capital to expand its sales and distribution network for equipment it has developed to search for telltale signs of cancer.

——The National Institute of Neurological Disorders and Stroke has awarded a $3.3 million grant to privately held Ichor Medical Systems of San Diego for development of a DNA vaccine for Alzheimer’s disease. The company makes it easier for cells to absorb its DNA vaccines by using an electroporation delivery system that creates temporary pores in cell membranes.

—Sequenom (NASDAQ: SQNM), the San Diego biotech developing DNA-based diagnostic tests, has maintained radio silence since it first disclosed three months ago it had uncovered R&D test data was mishandled for its much-anticipated genetic test for Down syndrome. In a recent statement, Sequenom says the company is no longer relying on previously announced test data and results, but it’s unclear if that means the company’s planned introduction is slipping further behind schedule. Sequenom had planned to introduce its SEQureDx test in June.

—Avanir Pharmaceuticals (NASDAQ: AVNR), a one-time San Diego biotech now based in Aliso Viejo, CA, said it hopes to submit results of its late-stage drug trial for treating an unusual neurological disorder to the FDA in the first half of next year. The company said this week that its drug passed a final-stage clinical trial, designed to see whether it was effective in treating involuntary bouts of laughter, crying, and other emotional outbursts.

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Bonnie Ramsey remembers the dark days of treatment for cystic fibrosis. About 30 years ago, when she devoted her career to the research and treatment of this genetic lung disease, children who were diagnosed had a life expectancy of about 17 years. The outlook is much brighter for patients now, as quality of life has improved significantly, and median lifespans have doubled.

But part of what makes Ramsey more optimistic today is an experimental treatment from Vertex Pharmaceuticals (NASDAQ: VRTX), based in Cambridge, MA. This drug, VX-770, along with a related compound, VX-809, have the potential to be the first drugs ever to fix underlying genetic defects at the root of this condition that affects 30,000 people in the U.S., she says.

Ramsey’s opinion counts for a lot. She’s a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington, and serves as executive director of the Cystic Fibrosis Foundation’s Therapeutic Development Network, in which she coordinates a 77-site network of clinical trial sites dedicated to helping companies develop new therapies for this rare disease.

The work for the CF Foundation is how she first got exposed to San Diego-based Aurora Biosciences in 2000, the company that began developing the new drug and was later acquired by Vertex. The CF Foundation has contributed more than $75 million to Vertex to keep the program going over the years, so this is a relationship that’s hugely important to both sides. The drug has now shown enough promise that it has advanced into the final stage of clinical trials needed to win FDA approval.

Ramsey spoke with me in depth about the changing standard of care in cystic fibrosis, why the Vertex programs matter, and how foundations are playing an increasingly important role in financing clinical trials. Here is an edited account of the conversation:

Xconomy: So you got started back in the dark days of treatment for cystic fibrosis, 30 years ago. What have been the major advances since then?

Bonnie Ramsey: There have been advances in terms of research, and those have been phenomenal. Things really turned around in the 1980s. Everyone is aware the gene was identified in 1989, but …Next Page »

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Waltham, MA-based biotech firm Altus Pharmaceuticals (NASDAQ:ALTU) ended the second quarter of 2009 with $8.1 million in cash, enough money to continue operations into September 2009, the company revealed yesterday.  “As a result of our current cash position and in order to continue operating the company, Altus needs to raise additional capital before the end of September,” Georges Gemayel, president and CEO of Altus, said in a statement. The company reduced its staff by about 70 percent and dropped the development of a cystic fibrosis treatment called liprotamase in March 2009 to focus resources on its drug ALTU-238, a weekly treatment for patients with growth hormone deficiency.

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Back in September, I wrote in this space that if a global flu pandemic ever strikes, public health officials might turn to a Lexington, MA-based startup company called Pulmatrix.

The pandemic (a bit overblown, I must say) did strike. And yes, the public health officials have been calling Pulmatrix.

This company’s technology is nowhere near ready for prime time in big clinical trials, much less the marketplace, so isn’t all the fuss a bit premature? Maybe. Then again, most biotech companies work on pretty incremental advances over the standards of care, but Pulmatrix is one of those rare beasts that has a chance to transform how physicians think about treating many major respiratory diseases. The technology has attracted $18 million in initial equity financing from Polaris Venture Partners and 5AM Ventures, and a scientific advisory board that includes David Edwards of Harvard University and Robert Langer of MIT. It’s been a few months since we last wrote about this company, so I got an update from CEO Bob Connelly.

The concept at Pulmatrix challenges the status quo of antiviral treatment, in which a drug is engineered to kill a single infectious invader, which works for a while until that virus inevitably uses its evolutionary tricks to develop resistance. This is the “one drug, one bug,” method, as Pulmatrix puts it. Instead of going that route, Pulmatrix is developing a technique that’s supposed to stop any pathogen or flu strain that might find its way into the lungs. It calls this the “one drug, multiple bug” approach.

“The single drug for multiple bug approach is what’s really generating a lot of attention for us, even though we’ve been keeping a low profile,” Connelly says.

Pulmatrix is trying to do this by creating aerosols that have positively-charged ion-based compounds, like calcium and magnesium, that would be sprayed into the lungs. These compounds are supposed to do a couple of things. First, they stimulate immune defenses to prevent infection. Second, the aerosols are supposed to change the viscosity of the mucus that lines the lungs, which activates proteins in the lungs to form 3-D matrices that create a firewall of sorts that blocks pathogens of any kind from burrowing deep into lung tissue. So far, in animal and early human studies, this method hasn’t gummed up the mucus lining of the lungs, which could make it harder to breathe, or worse, create a haven for infectious bugs to thrive.

“Think of it as like a river with a light coating of ice on top, but with the river flowing smoothly underneath,” Connelly says. “It’s more difficult to penetrate the surface top layer, and there’s still clearance below.”

What’s more, Pulmatrix is supposed to change the properties of the airways, so that when people breathe in a pathogen—like swine flu—it doesn’t form into those tiny droplets that people can sneeze …Next Page »

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Alnara Pharmaceuticals won’t likely reveal the full results of its late-stage clinical trial of enzyme-replacement drug liprotamase in patients with cystic fibrosis until this fall, but the Cambridge, MA-based biotech firm has completed the trial in recent weeks and continues to find the effectiveness of the treatment “extremely encouraging,” Robert Gallotto, chief business office of Alnara, tells Xconomy.

Gallotto isn’t disclosing detailed results of the key trial, designed to form the basis of an application for approval of liprotamase, so it’s too early to say whether the study was a success. Yet he indicates that he and others at Alnara are pleased with the results of the trial, which ended several weeks ago when the last of 145 patients involved in the trial received a final examination. He expects the full results of the trial to be reported during the Annual North American Cystic Fibrosis Conference in October. (The drug already showed positive effects in cystic fibrosis patients in a separate late-stage study reported last year, and it wouldn’t be a big surprise to see similar results in the larger trial that was just completed.)

“We are extremely encouraged with what we’ve seen,” Gallotto says. “The data continues to be encouraging and we look forward to sharing it in its totality sometime in the fall.”

Liprotamase became the No. 1 drug in Alnara’s pipeline in March, when the young biotech startup gained control of the treatment in a licensing deal with a nonprofit affiliate of the Cystic Fibrosis Foundation, of Bethesda, MD. The drug replaces a pancreatic enzyme for absorbing nutrients that is lacking in patients with diseases such as cystic fibrosis, a genetic disorder that results in lung infections and digestive problems. Gallotto and Alnara CEO Alexey Margolin were also intimately involved in the development of liprotamase in their former jobs as executives at Cambridge, MA-based Altus Pharmaceuticals (NASDAQ:ALTU), which discovered the drug but ended its program to develop it in January due to financial constraints. That prompted the CF Foundation, which had provided funding for Altus to develop the drug, to take over the program from Altus.

The latest clinical trial of liprotamase—which previously showed promising results in studies involving patients with chronic pancreatitis and other pancreatic disorders—was designed to test the …Next Page »

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Vertex Pharmaceuticals (NASDAQ: VRTX), the Cambridge, MA-based biotech company which has significant operations in San Diego, said today it has started a pivotal clinical trial program for its drug candidate for cystic fibrosis, a genetic lung disease. The company is running a series of three trials of VX-770, a drug that aims to be the first of its kind to target the defective protein that causes cystic fibrosis. The trials will aim to enroll 240 patients at 110 clinical trial sites in North America, Europe, and Australia.

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Biomedical research funded by Uncle Sam is hot, but publicly traded biotech companies that seek to develop those discoveries in the Northwest are cold. Here’s a recap of the week’s ups and downs in the local life sciences scene:

—President Obama is proposing a whopping $10 billion addition to the National Institutes of Health’s budget as part of his economic stimulus plan, and this has researchers in the Northwest scrambling to turn in their applications. The University of Washington, already the nation’s largest public research center with $1 billion a year in sponsored research, may capture as much as another $300 million in federal stimulus grants, says Linden Rhoads, vice provost of UW TechTransfer. Still, she says that’s no excuse for state lawmakers to start whacking away at the university’s state support.

—Yet even with basic biomedical research on the rise, many public biotech companies are struggling. Based on my review of the quarterly financial filings of the 12 public companies in the Northwest, six were looking pretty vulnerable with less than $20 million in available cash as they headed into 2009.

—Healionics, the Redmond, WA-based company that spun out of the University of Washington bioengineering lab of Buddy Ratner, took its first step this week toward becoming a commercial business. It shipped its first product, a biomaterial coating for shunts that are made to relieve pressure behind the eyes of dogs with glaucoma. If it works by helping allow fluid to pass more easily through the shunt, it could set an important precedent for using the biomaterial in human beings with glaucoma—a more lucrative potential market.

—Halosource, the Bothell, WA-based maker of technology to purify drinking water, won certification from the U.S. Environmental Protection Agency for its technique. This is no big deal in the U.S., where we take clean drinking water for granted, but it’s an important validation to partners Halosource is working with in India, China, Brazil and other parts of the world that are looking at its cheap, gravity-fed system for ridding water of viruses and bacteria. This technology is now providing clean water for 2 million people in India, double the number who were using it nine months ago.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drug technology, received a bit of a lifeline this week when it received $7.25 million from Novartis in exchange for a non-exclusive worldwide license to its technology. But easy come, easy go. The company has to use $870,000 to write a severance check to its former CEO, Steven Quay.

—Nanostring Technologies CEO Perry Fell has resigned his post, and is being replaced …Next Page »

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Dozens of companies have given up on gene therapy after the technology failed to live up to its early promise, but not Genzyme. The world’s largest maker of drugs for genetic diseases has stuck with this field through two decades of ups and downs, and it expects to see important results in coming days on whether it has found an effective approach in people.

Genzyme (NASDAQ: GENZ), with headquarters in Cambridge, MA and a gene therapy manufacturing unit in San Diego, is planning to present results this month at the American College of Cardiology from a clinical trial of 289 patients who took its experimental gene therapy for peripheral artery disease. This treatment is designed to encourage re-growth of new blood vessels to circumvent clogged arteries in the legs. If successful, this trial will show whether a single shot can help patients with severely limited mobility keep walking for longer periods without pausing to rest.

Gene therapy, in simple terms, is about modifying viruses to carry copies of genes into cells where they can replace missing or faulty genes at the root cause of certain types of disease. This technique was hyped in the early 1990s as a panacea for many ills beyond the reach of conventional medicine. Time magazine published a cover story in 1994 titled “Genetics: The Future is Now.” More than 100 biotech companies were formed with dreams of becoming the next Amgen or Genentech. Then the field ran into a brick wall in 1999 when Arizona teenager Jesse Gelsinger died of a massive inflammatory response in a gene therapy clinical trial.

That scared away most investors, and provoked a fierce ethical debate. Gene therapy regained some momentum in 2002 when French researchers found that the technique could restore a functioning immune system for infants with severe combined immunodeficiency, sometimes called “bubble boy” disease. But even that step forward was followed by a setback when four of nine were later found to have developed leukemia between ages of 3 and 6. There are still no FDA-approved gene therapies on the U.S. market. Yet Genzyme still has about 100 people on any given day working on gene therapy programs, for peripheral artery disease, Parkinson’s disease, and age-related macular degeneration, among other conditions.

“Gene therapy was probably oversold in the early days,” says Sam Wadsworth, who oversees the company’s gene therapy research as Genzyme’s group vice president of translational research. But he’s quick to add that the scientists have a reason to keep going. “We believe that one day we will bring these therapies to patients. We know it. We will not pursue things that have no hope.”

Genzyme has been forging ahead in this field since the early days in 1991. Like some other companies, notably Seattle-based Targeted Genetics (NASDAQ: TGEN), it went after what was then considered low-hanging fruit—cystic fibrosis, a deadly lung disease in children and young adults that’s caused by a single faulty gene. Deliver the correct gene inside cells, and gene therapy was supposed to offer a cure.

It didn’t work out that way. Genzyme dropped that program long ago. The company now has three programs—peripheral artery disease, Parkinson’s disease, macular degeneration—that share some features in common. They can be treated with localized therapy …Next Page »

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Most biotech startups wait seven years or more before entering late-stage clinical trials. But Alnara Pharmaceuticals, which is just six months removed from its $20 million first-round financing, has acquired a license to an enzyme-replacement pill in the final stage of development for patients with cystic fibrosis and chronic pancreatitis.

Cambridge, MA-based Alnara has licensed the drug, liprotamase, from a nonprofit affiliate of the Cystic Fibrosis Foundation, taking over development of a treatment in the latter half of a Phase III trial, which is intended to provide the clinical data needed to submit an application to the FDA for approval of the drug, says Alnara CEO Alexey Margolin. Liprotamase could become the first pancreatic enzyme supplement from non-animal sources to be approved, providing an alternative to existing treatments for pancreatic insufficiency that use enzymes derived from the pancreatic glands of pigs. The drug is made from genetically engineered copies of microbial enzymes, which are believed to be more reproducible to manufacture, and carry fewer risks of provoking an immune system reaction, than the enzymes from pig pancreata.

Alnara has seized control of the oral drug because of an interesting confluence of factors. Financial constraints prompted Cambridge-based Altus Pharmaceuticals (NASDAQ:ALTU), the original developer of liprotamase, to fork over rights to the drug to the CF Foundation as part of a restructuring plan revealed in January. The CF Foundation, a Bethesda, MD-based organization that has supported the development of the drug since 2001, was on the hunt for another biotech firm to continue to develop it. The drug fit Alnara’s strategic mission to develop orally delivered protein drugs directly to the gut. And Alnara CEO Margolin knew this program quite well. He’s the former chief scientist at Altus and had been in charge of the program to develop the drug. Financial details of the licensing agreement between Alnara and the CF Foundation weren’t revealed.

“When I left Altus, I never thought that I would work on [liprotamase] again,” Margolin says, “and I never thought that when we closed our Series A [round] that in five or six months we would have a Phase III program.”

Margolin says he was surprised to see Altus cede rights to the drug, which cleared an earlier late-stage clinical trial in 2008. The current trial is intended to test the safety of the drug and how well it helps CF and pancreatitis patients maintain weight, height, and other measurements of its nutritional benefits. The study is expected to wrap up by this summer, Margolin says, and afterward Alnara will begin steps to ask the FDA to approve the drug. Also, the CF Foundation has agreed to financially support the continued development of the treatment. (He declined to say when the application for approval would be submitted to the FDA.)

About 90 percent of people with cystic fibrosis take pancreatic enzyme supplements to help them absorb nutrients, Margolin says. Cystic fibrosis, which affects 30,000 Americans and 70,000 people globally, is a genetic disease that causes lethal lung infections and digestive problems. The current market for pancreatic enzyme supplements—made by firms such as Belgium-based drug firm Solvay—is around $350 million per year, Margolin says.

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Gilead Sciences, the Foster City, CA-based biotech company that has a research center in Seattle, said a scientific committee of the European Union adopted a negative opinion of its aztreonam lysine drug. The treatment, an inhalable antibiotic for cystic fibrosis developed by Seattle-based Corus Pharma, was turned down by the FDA last fall. EU regulators said Gilead needs more evidence about long-term benefits, repeated treatments in different age groups, and risk of bacterial resistance, said Thomas Russo, an analyst with Robert W. Baird.

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Epix Pharmaceuticals says that it is eligible for a $500,000 milestone fee from Cystic Fibrosis Foundation Therapeutics—a nonprofit affiliate of the Cystic Fibrosis Foundation—for completing screening for small molecule drug candidates for cystic fibrosis. Lexington, MA-based Epix (NASDAQ:EPIX) is searching for drugs to target a mutated form of the cystic fibrosis transmembrane conductance regulator ion channel, which is believed to play a role in the lung infections and digestive problems that can cause premature death in patients with the rare genetic disease. The firm reports that the milestone fee would bring the total milestone payments it has garnered under its agreement with the CF Foundation to $5 million.

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It was the best of times and worst of times for the life sciences in San Diego last week. Stalwarts Cadence Pharmaceuticals and Vertex Pharmaceuticals raised cash to expand their businesses, while La Jolla Pharmaceutical and 4-D Neuroimaging basically went in the opposite direction. Biofuels also were back in the news, along with the unmanned Predator surveillance aircraft, so read on!

—San Diego-based Histogen CEO Gail Naughton was the “mane” attraction when she presented preliminary results of a hair re-growth study last week at the 4th Annual Stem Cell Summit in New York. In early results from a five-month trial, Naughton says the biotech’s injectable ReGenica compound stimulated new hair growth in men after 12 weeks.

—Cadence Pharmaceuticals (NASDAQ: CADX) said last week it’s raising $86.6 million in a private sale of 12 million shares, which will be used to build its sales force and to market its new drug candidate, Acetavance. The San Diego biotech is working on an application for FDA approval of the drug, which is a form of the painkiller acetaminophen (the main ingredient in Tylenol) developed for intravenous use in hospitals.

—Vertex Pharmaceuticals (NASDAQ: VRTX), which has 200 employees in San Diego and 1,300 at its headquarters in Cambridge, MA, is raising $320 million in a secondary offering of stock. The biotech is in the final, extremely expensive phase of developing new drug candidates for treating hepatitis C and cystic fibrosis.

—In a subsequent interview, Vertex chief financial officer Ian Smith told Luke the offering also marks a shift to “blue-blood” investment firms that prefer …Next Page »

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Vertex Pharmaceuticals has been around the block with biotech hedge funds. These are the people who aim to get rich trading volatile stocks second-to-second, and make big bets, long or short, on whether an experimental drug will work. Now that Vertex has passed some of the riskiest stages of drug development, the company figured it was time for steady, buy-and-hold investors to support the next phase, as it morphs into a commercial player.

That was one of the insights that I gathered yesterday in a conversation with Vertex chief financial officer Ian Smith. He was in a pretty good mood—as you might be too, if you’d just helped your company raise $320 million in a secondary stock offering. The financing is important because it gives Vertex (NASDAQ: VRTX) enough cash to operate until it introduces its lead drug to the market and starts generating positive cash flow, according to analyst Thomas Russo of Robert W. Baird & Co. Especially in the midst of a recession, that’s good news for Vertex’s 1,300 employees in Cambridge, MA, and 200 in San Diego.

But beyond the stability that comes with the dollars, Smith was just as enthused about being able to recruit the type of long-term shareholder he wants backing Vertex for the next five years. Vertex was able to attract these blue-bloods because of growing interest from investors in a pair of drugs that aim to transform the standard of care for patients with hepatitis C and cystic fibrosis. Since these drugs have continued to make important progress, and telaprevir, the hepatitis drug, is thought to be worth at least $2 billion a year in U.S. sales by 2013, Vertex saw an opportunity to invite in new investors who want to hold onto shares throughout that trajectory, not just between now and next Tuesday. To get some insight into the company’s thinking, look at its stock chart from 2007, when shares fell 37 percent, even though the company continued to make progress.

“We as a company have been trying to align our shareholder base with the progress of the company,” Smith says. “These are people who invest for the long haul.”

Smith wouldn’t give all the names yet of the new crew of investors, but this deal went to a small number of investors—three “anchor” funds that took the biggest stakes, two other “high-quality” funds, and a few others, Smith said. What they all have in common is that they like to invest in late-stage biotech companies that have cleared major risky steps, and need to get to the next level. These funds typically backed some of the industry’s bellwethers–Genentech, Gilead Sciences, Biogen Idec, and Celgene—when they reached this stage, Smith says. One of them is San Francisco-based Capital World Investors, although he said he couldn’t yet name the others.

Smith, as well as other Vertex leaders, have been cultivating relationships …Next Page »

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Vertex Pharmaceuticals has struck a deal to raise a jaw-dropping $320 million in a secondary offering of stock. The biotech company, which has 1,300 employees at its Cambridge, MA headquarters and 200 in San Diego, is rallying investors around drug candidates that it hopes will set new standards of effectively treating hepatitis C and cystic fibrosis. It is in the final, hugely expensive stages of development to prove that point, and this offering could represent an important test whether investors still have the appetite for this sort of classic biotech risk.

Vertex (NASDAQ: VRTX) said it is offering 10 million new shares, priced at $32 each. Merrill Lynch and Cowen & Co. are underwriting the $320 million deal. The transaction hasn’t officially closed yet, so company officials can’t comment under SEC rules, but we expect to hear more about the strategy when the deal is done.

This much is clear: The company is in the final stage of clinical trials with telaprevir, which is attempting to be a first-in-class protease inhibitor drug for hepatitis C, a chronic liver disease. This drug has shown an ability to almost double the cure rate of standard meds, with a course of treatment that takes half as long. The drug has an opportunity to exceed $2.6 billion a year in U.S. sales in 2013, according to analyst Rachel McMinn of Cowen & Co. The cystic fibrosis drug, VX-770, is being primed for the final stage of clinical trials this year. It represents an opportunity to develop the first oral pill that can affect the underlying protein abnormality that causes the deadly lung disease.

While $320 million might sound like a lot of money to most people, this is actually not a whole lot to Vertex. The company has run up an accumulated deficit of $1.9 billion since it was founded 20 years ago. This year alone, the company expects to report a breathtaking loss of $495 million to $530 million as it conducts a big push to turn telaprevir and VX-770 into FDA-approved products.

The company was already in a position absorb that kind of loss, entering this year with about $832 million in cash reserves. But the new cash will definitely pad the cushion as it makes the switch from a drug development organization into a marketer of new drugs judged on its ability to maximize profits. Earlier this month, Vertex signaled its willingness to make that transition, as its charismatic founder, CEO Josh Boger, announced he will step down and be replaced by Matthew Emmens, a veteran hand at commercializing drugs within big drugmakers.

Investors might balk at the thought of how a new offering will dilute the value of existing shares, but that hasn’t dampened the demand for Vertex stock. The company’s last stock offering was just six months ago, when 7.5 million shares were offered at $25.50 apiece. The stock price has climbed 25 percent since then.

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Mpex Pharmaceuticals has reeled in $27.5 million in the first closing of a Series D round of financing as the firm advances its inhaled antibiotic for chronic respiratory ailments through clinical trials, according to the company.

The San Diego-based drug developer says that its fourth round of financing was led by Investor Growth Capital and included investments from SV Life Sciences, HBM BioVentures, Aberdare Ventures, and Adams Street Partners. Mpex notes that its backers have committed to invest up to $40 million in the Series D round.

Mpex CEO Daniel Burgess says in a prepared statement that this latest round of financing is enough to fund the company through its Phase 2 trials of an inhaled version of approved antibiotic levofloxacin to prevent lung infections in patients with cystic fibrosis as well as chronic obstructive pulmonary disease. The company also plans to use the financing to prepare for late-stage clinical trials needed to get marketing approval for the drug.

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(Update: The last three paragraphs were added after a conference call with reporters.)

Vertex Pharmaceuticals founder, president and CEO Josh Boger, one of the best-known and more colorful executives in the biotech industry, is retiring on May 23. He will be replaced by Vertex director Matthew Emmens, the company said late this afternoon in a statement.

Boger, 57, left Merck to found Cambridge, MA-based Vertex in 1989. Boger will remain on the company’s board, although Emmens will take on the trifecta of power roles as president, CEO and chairman of the board in May, the company said. Emmens has been a director of Vertex since 2004, and previously served as CEO of Astra Merck, and Shire, where he continues as chairman. He takes over a company with 1,300 employees spread among nine buildings in Cambridge, MA, another 200 employees in San Diego, and smaller sites in the United Kingdom and Coralville, IA.

“I am very proud of what Vertex has accomplished, and we now stand on the cusp of great clinical and medical success,” Boger said in a statement. “I welcome Matt, and have great confidence in his extensive experience leading companies through launches of breakthrough products, to take the reins and guide Vertex as we bring our innovations to patients.”

Vertex is on the verge of transforming from a traditional money-losing R&D focused biotech company—with a $1.9 billion accumulated deficit according to its last quarterly report—into one that needs to be a more fully integrated commercial operation. The company is moving ahead in the final stage of clinical trials with a first-in-class protease inhibitor treatment for hepatitis C, called telaprevir, which has shown an ability to double the cure rate of standard treatments in about half the time. The drug has an opportunity to exceed $2.6 billion a year in U.S. sales in 2013, according to analyst Rachel McMinn of Cowen & Co. The company is also working to finish developing the first oral pill for cystic fibrosis that can have an affect on the protein abnormality that causes the deadly lung disease.

This is a big vision, and a big commercial challenge, as Boger himself articulated last month in a presentation at the JP Morgan Healthcare Conference in San Francisco. He likened Vertex’s goals with those of biotech pioneers like Genentech in the 1970s, when it developed the first genetically engineered protein drugs, and Gilead Sciences in the 1990s, when it moved forward with AIDS medicines that made it possible for patients to take fewer pills a day. Ever the showman, he accompanied those historic examples, respectively, with the with the Bee Gees hit “Stayin’ Alive” and Nirvana’s classic “Smells Like Teen Spirit.”

Emmens, also 57, has 35 years of experience in the pharmaceutical industry, Vertex said. “In the area of hepatitis C, and also in cystic fibrosis, Vertex has the potential to transform patients’ lives and build tremendous value, and together with the employees my goal is to make this vision a reality,” he said in a statement.

(Updated material from company conference call.) Boger and Emmens discussed the move in prepared remarks during a 12-minute conference call, although they didn’t take any questions from reporters because they said they needed to brief various stakeholders like investors. (The early reaction from investors was slightly positive, as Vertex shares climbed 14 cents to $34.10 in after-hours trading following the announcement.)

The two executives first got to know each other when they worked together more than 20 years ago during Merck’s 1980s heyday as America’s most-admired company, Boger said on the call. The challenge for Emmens will be to apply the company’s innovative spirit to a different kind of problem—making sure its new drugs reach their sales potential. Emmens will help “take the company to the next level,” Boger says. He added, “I’m confident that 20 years on, this moment will feel as right as any.”

Emmens said he doesn’t see himself stepping in as a fixer. His life’s work, he says, is as a company builder. “I’m not here to mess with success,” he said.

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Altus Pharmaceuticals, a Waltham, MA-based biotech company, said today in a regulatory filing it is eliminating 107 jobs, or 75 percent of its workforce, and halting development of an experimental cystic fibrosis drug to conserve cash. Altus, which will now have 35 employees, is handing back the rights to Trizytek to the Cystic Fibrosis Foundation. Altus shares (NASDAQ: ALTU) plunged more than 50 percent this morning on the news to 26 cents.

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KaloBios Pharmaceuticals, a South San Francisco-based biotech company, said today it has raised $12 million in the second closing of a $32 million Series D round of venture financing. Baxter International, Genzyme Ventures, and Mitsubishi UFJ Capital were among the investors in the round. The company is developing a human antibody fragment to fight bacterial infections in cystic fibrosis patients, as well as another candidate for autoimmune diseases like asthma and rheumatoid arthritis.

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It’s cold outside, so I was a little bummed there was no actual fire at an event last night billed as a “fireside chat.” This get-together actually took some time to warm up (pun intended). But once it got rolling, three of the most experienced life sciences entrepreneurs in the region shed some light on inspiration that makes them do what they do (and some lucky breaks they got on the way).

This trio of executives—Bruce Carter, Bruce Montgomery, and Stewart Parker—offered lots of insight for entrepreneurs in all industries, not just those trying to develop new drugs.

These people know more than most about taking on big challenges. Biotech and pharmaceuticals is just about one of the riskiest, most expensive propositions in all of global business. The pharmaceutical industry pumped about $45 billion into the effort last year, and it yielded just 19 new drugs, the worst output in 24 years. So a little inspiration can’t hurt.

Here are the highlights of the speakers’ comments, at the event at the Rainier Club in Seattle, organized by the Washington Biotechnology & Biomedical Association.

Bruce Carter, CEO of ZymoGenetics

On the role of serendipity in biotech: “You’ve got to have curiosity and an open mind.” He pointed to the example of Paul Janssen, a Belgian chemist who had an extraordinary run in the mid-20th century in which he discovered 40 drugs in 30 years. He did all sorts of off-the-wall experiments, and tried to learn from them when the results were hard to explain. In one case, he was looking for anti-parasitic drugs, and found one worked in chickens. When he tried it in mice and rats, it didn’t work. “Instead of throwing it away, he said, ‘How curious,’” Carter related. When he took the chicken’s feces and fed it to mice, the drug worked. That showed that something about the chicken’s system broke down a metabolite of the drug into an active agent. It was later isolated and turned into a drug. “It’s about curiosity when facing an unexpected finding, and then following it,” Carter said.

On why the United States is the undisputed leader in biotechnology: “Europeans always want to focus on the 100 reasons why something won’t work. Americans are willing to look at the one reason why it will work.”

On how biotech is such a tough business: “Last spring, I was talking with the CEO of Merck KGaA. I told him that if I was 20 again, I’m not sure I would go into biotech again. It takes too long, it’s too difficult, and takes too much money.” The other CEO’s response? …Next Page »

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The biotech industry is always on the lookout for cash, so one of the more positive developments of recent years has been the entrance of disease foundations into the pool of potential investors. Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ:VRTX), for one, has said that their efforts to develop VX-770 for treating cystic fibrosis wouldn’t be possible without the support of the Cystic Fibrosis Foundation. But officials at disease foundations say the current financial morass has impacted their own budgets, and the groups are going to be choosier about which companies get their coveted investments.

For sure, disease groups like the CF Foundation, the Juvenile Diabetes Research Foundation, and the Michael J. Fox Foundation for Parkinson’s Research plan to continue to support private companies working to bring treatments to the marketplace. But disease foundations, like much of the field of biotech investors, are subject to the realities of the recession.

“I think we are finding that we are saying ‘no’ more often,” said Robert Beall, CEO of the Bethesda, MD-based CF Foundation, during a visit to Boston last week for the Massachusetts Biotechnology Council’s investors’ forum. He added that the economic climate and the high cost of drug development have caused his organization to fund biotechs’ CF drug programs through late-stage clinical trials, and his group is being careful to invest in companies that have the finances to advance projects with their own money. “Every voluntary health organization is going to have to establish priorities.”

Unlike venture capitalists, which invest in biotech firms to gain equity stakes, disease foundations tend to back biotechs’ for specific programs with direct benefits to its constituents, the patients. For biotechs, the foundation money often provides capital that boosts the value of the company without adding a new supply of shares that can dilute the value of existing ones. Plus, the relationships with the patient groups bring firms all-important access to experts in the field and patients for clinical trials. In return for investments, disease foundations hope to get new treatments for its patients and perhaps some financial return such as royalties on drug sales. But the business model relies in part on biotechs having the financial means to allocate their own resources to these programs, and that has become tougher in this economy.

Allison Formal, vice president of research and business development for the Leukemia & Lymphoma Society, noted that her group has seen a …Next Page »

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