AVI Biopharma has made some significant job cuts in Washington and Oregon after missing out on a potentially huge federal contract to make an RNA-based treatment against pandemic flu.

The Bothell, WA-based company (NASDAQ: AVII) is cutting the jobs of about 35 of its 125 employees—28 percent of the workforce—according to CEO Chris Garabedian. The company initially announced the job cuts at the bottom of a press release on Friday, without providing further explanation. The cuts will come from AVI’s Seattle-area operations, as well as its operations in Corvallis, OR, Garabedian says.

AVI Biopharma has sought to reinvent itself this year under the new CEO, who has brought in a new management team that has focused on its lead drug candidate for Duchenne Muscular Dystrophy (DMD), as well as biodefense programs to treat the deadly Ebola and Marburg viruses. But the company fell short in its bid to secure a long-term contract to make drugs against pandemic flu, which could have been worth as much as $500 million. Plus, AVI recently disclosed it was unable to overturn a European patent claim by Netherlands-based Prosensa, which claims it owns some intellectual property in AVI’s lead muscular dystrophy program.

“With our stock price at 52-week lows, and the recent disappointing news of not getting the flu contract, combined with Prosensa’s success in defending their patent in Europe related to Exon 51 (our lead program), we felt it was important to reprioritize / refocus on the primary value-driving programs of DMD, Ebola, and Marburg,” Garabedian said in an e-mail today.

AVI stock climbed 2 cents today to 73 cents a share, giving it a market valuation of just under $100 million. The company said in its most recent quarterly report that it expects to burn through about $30 million to $35 million of cash in 2011. AVI reported it had $46.3 million left in the bank at the end of September, in its most recent audited quarterly statement.

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Chris Garabedian took his first shot at being a CEO last December. Immediately, people thought this was a little bit crazy.

Friends wondered, why leave a job as an up-and-coming VP of corporate strategy at a biotech powerhouse like Summit, NJ-based Celgene (NASDAQ: CELG) to run an obscure little company like AVI Biopharma (NASDAQ: AVII)? AVI was built on a technology, antisense drugs, that few people in the industry believe in. The company’s track record is brutal—30 years spent on R&D with no FDA-approved drug to show for it. There was a leadership void, since a shareholder rebellion led to the ouster of the previous CEO. And, with labs in Corvallis, OR and headquarters in Bothell, WA, it’s a long way off the beaten path for most biotech industry executives and investors.

Garabedian, 44, admits he was skeptical at first. But when encouraged to take a look a year ago by the company’s largest investor, George Haywood, he looked. And the more Garabedian studied, the more he started to think it could be a classic diamond in the rough. It’s a bold, brash thing to say, but Garabedian told me a few weeks ago that the AVI of today reminds him of the 1990s version of Foster City, CA-based Gilead Sciences (NASDAQ: GILD) when it was worth about $500 million, long before it went on to become the world’s largest maker of HIV drugs, worth $32 billion today. Garabedian spent most of eight years in various roles at Gilead during its boom years, before joining another biotech success story in Celgene. Now he says it’s time to apply what he learned in those places.

“Those are experiences at Gilead and Celgene that shaped me, and helped me know what it takes to grow a breakout biotech,” Garabedian says. “I always felt that if I saw another opportunity to do that at another company, that’s something I could be excited about.”

Chris Garabedian

AVI, he says, is the place. There’s certainly room to grow. The stock closed yesterday at $1.55 a share, and the company has a little more than 110 employees, and a market valuation of about $210 million.

“We could make this a breakout biotech. It will take some time. It’s not going to happen in a year,” Garabedian says. “But I think this could be a company valued in the multi-billions in the next several years.”

Before diving into Garabedian’s blueprint for how he intends to lead AVI to that lofty perch, I wanted to know a little more about him. Unlike a lot of biotech CEOs, he never went on to get an MD, a PhD, or an MBA degree. He got a bachelor’s degree from the University of Maryland in marketing, and worked his way up in biotech through various marketing-related roles.

He did some consulting in his first real job out of college for a couple years. He says he “got the biotech itch” while consulting in the early ’90s. He caught on full time with Abbott Laboratories, where he worked on marketing, brand management, and product development in various parts of Abbott’s business in cardiovascular medicine and neurology, he says. “I started to learn how to work with R&D teams,” on things like when to hit the brakes on a new drug development program, when to press on the gas, and what it takes to get the ultimate prize—FDA approval to sell your new drug.

Garabedian’s first experience in a small, nimble biotech came in 1997 as a senior director of marketing for Gilead. He was brought in initially to help craft … Next Page »

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On May 11, Shire (NASDAQ: SHPGY) CEO Angus Russell told a panel of journalists at the Reuters Health Summit in New York that the British drug giant is interested in pursuing gene therapy and stem cells. Those are two areas of science that have yet to prove they can produce effective, innovative new therapies. Still, over lunch later in the day in midtown Manhattan, Russell made a strong case to me that Shire is finding tremendous opportunities on the fringes of pharmaceutical development. “You can’t tar us with making the tenth me-too drug and trying to charge a bazillion dollars a year for that,” he says. “We’re not in that game. I don’t condone that.”

As proof, Russell pointed to Shire’s burgeoning Boston unit, which makes drugs to treat rare diseases. Shire plunged into the rare-disease field in 2005 when it bought Cambridge-based Transkaryotic Therapies (TKT) for $1.6 billion. The unit, which recently moved to a large campus in Lexington, specializes in drugs to treat enzyme disorders, and it is responsible for some of Shire’s biggest hits, including idursulfase (Elaprase) for Hunter syndrome, velaglucerase alfa (Vpriv) for Gaucher disease, and agalsidase alfa (Replagal) to treat Fabry disease.

Shire got a huge head start in Fabry disease and Gaucher disease back in 2009, when competitor Genzyme ran into manufacturing issues. The FDA had not yet approved Shire’s products, but the agency gave the company permission to market them anyway, to help address the shortage resulting from Genzyme’s troubles. “It accelerated the growth of that business,” Russell says. All told, products emerging from the TKT acquisition now account for 30 percent of Shire’s sales—up from 4 percent when the companies first merged.

Russell said he’s amazed by how many drug companies are now embracing rare, “orphan” diseases, which they used to shun as lacking in blockbuster potential. New York-based Pfizer (NYSE: PFE) is among the ranks of Big Pharma companies pursuing new therapies for orphan diseases. “Things have changed,” Russell says. “The classic pharmaceutical model was built around economies of scale, reach, global presence, and sheer size. Everything was focused on getting that physician to write that script.”

Russell believes the new economics of healthcare are driving the drug industry’s flight to the orphan-drug market. “The world is much more holistic now,” he says “We have to factor in payers, we have to factor in the patients being much better informed because of the Internet, and then we’ve got policymakers that are aggressively addressing issues of cost.” As a result, he says, “We’re seeing the shrinking of that mass-marketing model.”

Certainly the economics of rare diseases have been positive for Shire. On April 28, the company announced that revenues in the first quarter jumped 19 percent year-over-year to $972 million. Replagal sales skyrocketed … Next Page »

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[Updated: 3:57 pm Eastern] One of the hot privately-held biotech companies in the Boston area, Acceleron Pharma, has made some significant job cuts.

The Cambridge, MA-based company eliminated 57 jobs, or about 40 percent of its workforce, late last month, according to a story first reported today in the Boston Globe. Acceleron’s vice president of corporate development, Steve Ertel, confirmed in a phone interview that the company made the cuts a couple weeks ago after striking a partnership with U.K.-based Shire. Acceleron now has about 90 employees.

[Update with company comment.] “We decided to right-size the organization to take advantage of our position of strength,” and reduce the company’s cash burn rate, Ertel says. The cuts were made across departments, in order to maintain the company’s expertise in manufacturing, discovery research, protein engineering, and clinical development, Ertel says.

Acceleron’s cutbacks are surprising given that the company has made a lot of headway in the past couple years, striking partnerships with big companies like Summit, NJ-based Celgene (NASDAQ: CELG), and most recently with U.K.-based Shire. Acceleron, founded in 2004, has raised about $100 million in venture capital from a big-name VC crew that includes Advanced Technology Ventures, Flagship Ventures, OrbiMed Advisors, Venrock Associates, MPM Capital, Bessemer Venture Partners, Polaris Venture Partners, and Sutter Hill Ventures.

In late September, Acceleron CEO John Knopf told my colleague Ryan McBride about how he hoped the new partnership with Shire would enable the company to wean itself off any dependence on venture capital.

Acceleron has been putting its money to work building a pipeline of experimental drugs, and infrastructure to manufacture protein drugs in-house. Some of the more visible work is going on to combat Duchenne Muscular Dystrophy, cancer, and anemia caused by chemotherapy.

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Acceleron Pharma is in an enviable position among its biotech peers. Instead of relying on venture capital in a time when the VC well has been running dry, the Cambridge, MA-based firm has been supporting its operations primarily with cash from its pharmaceutical company partners. And now Acceleron has found prospects for additional deals with large drugmakers.

Earlier this month, Acceleron said that it brought in a $45 million down payment in its collaboration with the Ireland-based drug company Shire that is mainly focused on the biotech’s potential treatment for the genetic disease Duchenne Muscular Dystrophy. And since early 2008, the 140-person biotech has been generating revenue from a partnership with Summit, NJ-based cancer drug maker Celgene (NASDAQ:CELG). That deal, in which Acceleron is developing a treatment for anemia in cancer patients, has brought in much more than the $45 million upfront payment, Acceleron officials say. Plus, Acceleron also has a partnership with the Waltham, MA-based biotech firm Alkermes (NASDAQ:ALKS) to develop a long-lasting drug for rheumatoid arthritis.

All this means that Acceleron has the cash to fuel its operations without surviving solely on the capital it has raised from its venture capital investors—a predicament that biotech startups can get caught in when they don’t yet have money-making products on the market.

“Our hope is that we won’t have to go back to our ventures backers,” said John Knopf, the company’s CEO, who co-founded the firm in 2003. He noted that the recent deal with Shire “positions us well [financially] for the next couple of years.”

Knopf and his team have been quite successful in drawing both pharma partnerships and venture capital to his firm (which was formed around the idea that drugs designed to target certain receptors on cells can boost or stymie the growth of tissues in the body like muscle or bones to treat diseases.) From pharma partners, the firm has taken in about $140 million, according to Steven Ertel, the firm’s vice president of corporate development. Acceleron has also been rather prodigious in VC fund-raising as well, pulling in about $100 million since 2004 from big-named venture backers such as … Next Page »

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New England’s life sciences companies inked the majority of this week’s deals, but several software firms had interesting business to report as well.

—Boston-based startup Rhythm Pharmaceuticals completed its Series A financing round with a total of $40 million. Third Rock Ventures participated in the closing, joining MPM Capital and New Enterprise Associates, who led a $21 million initial closing of the round back in March.

—Database software maker VoltDB of Billerica, MA, raised $5 million in an equity-based round of funding, according to a regulatory filing. Four investors participated in the round, according to the filing; members of Sigma Partners and Kepha Partners are listed on the document as VoltDB directors.

—Waltham, MA-based Red Bend Software acquired Santa Clara, CA-based VirtualLogix for an undisclosed sum. Both companies make software for the mobile market—Red Bend’s technology allows for over-the-air management of mobile devices’ software and VirtualLogix’s technology enables mobile handsets to run multiple operating systems.

—Cambridge, MA-based Anchor Therapeutics inked an agreement worth up to $480 million with the Ortho-McNeil-Janssen Pharmaceuticals subsidiary of Johnson & Johnson (NYSE: JNJ). The deal gives Ortho-McNeil-Janssen access to Anchor’s “pepducin” drug technology, and focuses on several drug targets in the fields of cancer and metabolic diseases.

—ByAllAccounts of Woburn, MA, raised $5 million in a deal led by Castile Ventures, and joined by Commonwealth Capital Ventures. The startup, which raised $5 million in a Series A round led by Commonwealth in 2008, makes technology that … Next Page »

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Shire has got to be feeling a little extra bounce in its step, as one of its competitors (Genzyme) has wobbled recently, and today it’s continuing its bold push forward in the world of rare diseases in a big partnership with Cambridge, MA-based Acceleron Pharma.

Shire (NASDAQ: SHGPY), the U.K-based company that’s become an increasingly potent rival to Cambridge, MA-based Genzyme during that company’s recent manufacturing struggles, said today it has struck a deal in which it will pay Acceleron as much as $498 million to co-develop and co-market drugs that treat muscle disorders like Duchenne Muscular Dystrophy. Acceleron will get a $45 million upfront cash payment, and the two companies will move ahead with a mid-to-late stage development program. Shire gets the commercial rights outside North America, while Acceleron retains the commercial rights on this continent.

“The structure of this collaboration allows Acceleron to retain commercial rights in North America with the opportunity to build a highly valuable business while collaborating with an ideal partner,” said John Knopf, Acceleron’s CEO, in a statement. “Shire’s international presence and their proven leadership and dedicated focus on orphan diseases forms the basis for a successful collaboration.”

The key to the deal is Acceleron’s experimental protein drug, ACE-031, which is designed to build muscle by interacting with a receptor on cells known as activin receptor type IIB. The Acceleron drug is unusual, in that it’s a genetically engineered fusion protein that takes part of the receptor itself and combines it with a fragment of an engineered antibody that has targeting capability. While ACE-031 is the prime asset, Shire has also obtained rights to alternative molecules Acceleron has developed against the same target receptor, which could be useful for other muscle disorders.

The Acceleron drug has shown in animal studies that it can increase muscle mass and improve strength in animals, regardless of whether they have a specific genetic mutation. Other companies, like Bothell, WA-based AVI Biopharma and Netherlands-based Prosensa, have been pursuing RNA-based drugs to treat the disease in a different way. Genzyme, Shire’s main competitor, also formed a partnership two years ago with South Plainfield, NJ-based PTC Therapeutics which includes a treatment for Duchenne Muscular Dystrophy. That drug candidate failed in a mid-stage study last spring.

There is no FDA approved drug today that alters the course of muscular dystrophy, but all the biotech companies see big commercial potential in a treatment for this genetic disease. It primarily affects boys, and makes it difficult for them to walk, breathe, and otherwise play like normal kids. Duchenne Muscular Dystrophy is said to affect about one out of every 3,500 boys at birth.

For Acceleron, today’s deal isn’t the first validation it’s gotten from a big partner. The company, founded in 2004, has a partnership with Summit, NJ-based Celgene (NASDAQ: CELG) for a treatment against cancer-related bone loss. Waltham, MA-based Alkermes (NASDAQ: ALKS) has also invested $10 million in Acceleron to help it make a more convenient treatment for rheumatoid arthritis that could compete with Amgen’s multi-billion dollar hit drug etanercept (Enbrel). The financial support of its venture capitalists (Advanced Technology Ventures, Flagship Ventures, OrbiMed Advisors, and Venrock Associates to name a few), and corporate partners, has enabled Acceleron to build a staff of more than 150 employees and invest in manufacturing facilities at a time when few small biotechs can afford to pursue such bold plans. This new Shire deal certainly won’t discourage the company from thinking big.

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A lot of the Bay Area news this week sent ripple effects up and down the West Coast, to our other Xconomy network cities of Seattle and San Diego.

—Genentech, the U.S.-based unit of Roche, expanded an alliance with Seattle Genetics (NASDAQ: SGEN) to develop “empowered antibodies” against cancer. Genentech is paying $12 million upfront, and as much as $900 million in milestone payments to develop these more potent antibody drugs against a number of undisclosed targets on cells.

—Bruce Montgomery, the prolific drug developer and senior vice president at Gilead Sciences (NASDAQ: GILD) says he is leaving the company this month to consider his next career move, which could be at a startup. Foster City, CA-based Gilead paid $365 million in 2006 to acquire Montgomery’s most recent startup, Seattle-based Corus Pharma, and it spent another $50 million on a cutting-edge lab in Seattle devoted to respiratory drugs. This has been part of Gilead’s long-running effort to diversify its portfolio beyond its core franchises in HIV drugs. Gilead hasn’t yet named a successor to Montgomery.

—Cytokinetics CEO Robert Blum offered some revealing insights into how his company has stuck with a science-first, long-term growth strategy even while many biotech investors have been itching for lower-risk, quick-return business models. The South San Francisco-based company (NASDAQ: CYTK) has spent years working on the forefront of muscle biology, and expects to find out later this year whether it has “evidence of effect” in a Phase IIa study of patients with amyotrophic lateral sclerosis. Blum isn’t going so far as to brand this a “proof of concept” trial—the company plans to do more methodical trials over time to make sure they get it right, he says.

—BioMarin Pharmaceutical (NASDAQ: BMRN), the Novato, CA-based developer of drugs for rare genetic diseases, said this week it has pulled the plug on developing a new treatment for Duchenne Muscular Dystrophy. The company sought to counterbalance that downer with what it called an “encouraging” interim update on PEG-PAL, a new treatment for phenylketonuria (PKU).

—Complete Genomics, the Mountain View, CA-based company that is offering a low-cost gene sequencing service to researchers, released a prospectus that says it hopes to raise $86 million through an IPO. Complete Genomics’ list of backers runs up and down the whole West Coast, and includes Kirkland, WA-based OVP Venture Partners, San Diego-based Enterprise Partners Venture Capital, and Palo Alto, CA-based Prospect Venture Partners.

—My East Coast colleague Ryan McBride offered up an interesting story about SV Life Sciences, the VC firm with operations in both Boston and the San Francisco Bay Area. SV just raised a $523 million fund, and plans to start putting more of it to work in the health IT sector.

—And lastly, my colleague Wade Roush announced that we are having an open house at our new Xconomy San Francisco headquarters in the Potrero Hill/Dogpatch neighborhood. I’m planning to fly down from Seattle for this event from 5 to 9 pm on August 13, and would love for a few biotechies to stop by and say hello, and have a little wine and cheese on us. I will also have some time earlier in the day to do a few in-person interviews, so if you’re free then and would like to tell me your story about innovation in life sciences, shoot me a note at ltimmerman@xconomy.com.

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BioMarin Pharmaceutical (NASDAQ: BMRN) said today it has halted development of an experimental drug for Duchenne Muscular Dystrophy after an early-stage clinical trial showed it was unlikely to be effective. While the result was discouraging for BMN 195, the company said in a separate statement that another drug, PEG-PAL, is showing “encouraging trends” in a small trial of patients with phenylketonuria (PKU). Full results from that study are expected during the fourth quarter of this year, the company said. BioMarin also lowered its financial forecast for 2010, based on anticipated delays in the U.S. introduction of Firdapse, a drug for a rare autoimmune disease.

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There was more than the usual amount of carnage this week on the Seattle biotech beat.

—AVI Biopharma (NASDAQ: AVII) ousted CEO Les Hudson as part of a boardroom coup. The board installed chief financial officer David Boyle as the interim CEO, and a company spokesman says Boyle has the board’s confidence and is a candidate for the top job on a permanent basis. AVI is eagerly awaiting data this year on a novel drug for Duchenne Muscular Dystrophy, and is also developing specific RNA-based therapies for Ebola and Marburg virus.

—CombiMatrix (NASDAQ: CBMX), the Mukilteo, WA-based maker of genetic analysis instruments, said it is making a deep round of cuts at its local facility and betting the future of the company on its diagnostics unit in Irvine, CA. CEO Amit Kumar will stay at the helm until a replacement can be found sometime before the end of June.

—Seattle-based Targeted Genetics said it was eliminating three people from its board of directors as part of its ongoing efforts to conserve cash.

—Cell Therapeutics (NASDAQ: CTIC) said it is handing out pink slips to 36 workers in order to save money now that its lymphoma drug, pixantrone, has been rejected by the FDA.

—But not all the local biotech news was so grim. Seattle-based HemaQuest Pharmaceuticals said it nailed down the second half of a Series B venture capital round that totals $12 million.

—Seattle Genetics, the developer of “empowered antibodies” to fight cancer, said the Genentech unit of Roche has extended a partnership to continue using the smaller company’s antibody technology. Seattle Genetics (NASDAQ: SGEN) will get a $9.5 million payment as part of the extension.

—Mirabilis Medica, the Bothell, WA-based developer of ultrasound technology for treating uterine fibroids, has received $1 million in debt and options financing out of a round that could be worth as much as $2 million.

—We also reminded readers earlier in the week of a big event we are planning about the future opportunities in health IT on May 12. This event will bring together a stellar list of speakers, including Swedish Medical Center CEO Rod Hochman; Stephen Friend of Sage Bionetworks; Don Listwin of the Canary Foundation; and David Cerino, who oversees Microsoft’s HealthVault platform.

—I’m also happy to say Xconomy’s life sciences team just got a little bigger this week with the addition of new columnist Sylvia Pagan Westphal. Her first column raises some provocative issues about how things might be different if the world of finance were regulated to the same degree that the FDA oversees new medicines. She is based in Boston, but Sylvia’s column will discuss national issues and run regularly on the Seattle site. You can reach her at swestphal@xconomy.com

—Last, but not least around here, Xconomy made a little news of our own. Xconomy founder Bob Buderi announced the addition of our next new bureau, in Detroit. I will contribute occasional life sciences stories to the mix of stories that are percolating in the state of Michigan. Want to know one obvious Seattle to Michigan connection I’ve already found? Steve Gillis of Arch Venture Partners is a board observer at Lycera, a company founded by University of Michigan professor Gary Glick to treat autoimmune disease. I’m sure we’ll find more interesting connections like these over time.

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The Seattle biotech beat is about to get a dose of drama over the next week, as one of the oldest companies in town prepares for a make-or-break moment in suburban Washington, D.C.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC]) is getting ready for a critical decision next Wednesday, when a panel of cancer drug experts will advise the FDA on whether to approve pixantrone as a new treatment for relapsed, aggressive forms of non-Hodgkin’s lymphoma. I laid out what’s at stake in this preview story.

—AVI Biopharma (NASDAQ: AVII), a company that’s even older than Cell Therapeutics but a relative newcomer to Bothell, WA, has some important, albeit early-stage, clinical trial data to look forward to later this year. This story recaps what researchers, investors, and parents will be watching for from AVI’s lead drug candidate for Duchenne Muscular Dystrophy.

—Seattle-based HemaQuest Pharmaceuticals has raised $6 million in equity financing out of a round that could be worth as much as $12.7 million, according to a regulatory filing. This company, led by former Xcyte Therapies CEO Ron Berenson, is pursuing a new treatment for sickle cell anemia.

—NanoString Technologies, the Seattle-based maker of genetic analysis instruments, has added a big name to its board. William Young, the chairman of Biogen Idec and former chairman and CEO of Monogram Biosciences, has signed on as NanoString’s executive chairman. The company is still looking for a permanent CEO to replace Perry Fell, who stepped down last March.

—My colleague in Boston, Ryan McBride, wrote a story last week about Millennium: The Takeda Oncology Company has big ideas for how to capitalize on its new partnership with Bothell, WA-based Seattle Genetics (NASDAQ: SGEN]). This week, we saw one example of the strategy in action, as the two companies started a clinical trial of brentuximab vedotin for patients with newly-diagnosed Hodgkin’s disease, beyond the smaller group of patients with relapsed forms for whom the drug was initially developed.

—Bill Gates made some big biotech news this past week in Davos, Switzerland. His namesake foundation is pledging $10 billion over the next decade to research, develop, and deliver new vaccines against global health scourges. Biotech entrepreneurs on the fundraising trail, are you listening?

—Every March, the Washington Biotechnology and Biomedical Association tries to bring in big-time national investors for a conference where they can to scope out the local life sciences scene. And every year, they struggle. This year could be different, as Steve Burrill, the biotech jack-of-all-trades, is putting his money, organizational horsepower, and Rolodex into raising the profile of this year’s event, called Life Sciences Innovation Northwest.

—We published a thoughtful guest editorial from Richard Gayle about how to create an environment where people get out of their cubbyholes and start real, meaningful scientific collaborations. Just as a reminder, the space in the Xconomist Forum is open for you, our readers, not for me. So if you have an idea, an insight, or something you want to get off your chest that you think may have some value to other members of the local innovation community, just ping Greg and I at editors@xconomy.com

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AVI Biopharma, the Bothell, WA-based developer of RNA therapies, said today it has raised another $30 million through a stock offering. The company (NASDAQ: AVII) said it sold 21 million new shares of common stock, in addition to 8.5 million warrants to buy shares, in an offering underwritten by Jefferies & Company. AVI, which recently moved its headquarters from Portland, OR to Bothell, has raised money from a variety of foundations, and government agencies to support its experimental treatments for Duchenne Muscular Dystrophy, and Ebola virus.

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Some of the lesser-known names in Seattle life sciences made some noise this week, just when we here at the Xconomy biotech desk thought things might slow down a tad in the dog days of summer.

—AVI Biopharma (NASDAQ: AVII), the Portland, OR-based maker of RNA-based therapies, is now getting a new tagline as the Bothell, WA-based maker of RNA-based therapies. This company, led by CEO Les Hudson and chairman Christopher Henney, decided to move its headquarters to the Seattle area to tap into this region’s deeper biotech talent pool as it advances drugs through clinical trials for Duchenne Muscular Dystrophy, Ebola and Marburg virus, and other tough-to-treat conditions.

—Seattle-based Dendreon (NASDAQ: DNDN) has one of the most avid fan bases in the biotech industry, but few people realize it has a low-key neighbor across the lake in Bothell, WA, that has also produced some very impressive results against prostate cancer this year. Scott Cormack, the CEO of OncoGenex Pharmaceuticals (NASDAQ: OGXI) told me this week in an exclusive feature that he’s fielding “competitive” partnership proposals from a number of Big Pharma companies that want a piece of its action.

—Sometimes you have to strike while the iron is hot in biotech, and that’s what Seattle-based Oncothyreon did this week. The company (NASDAQ: ONTY) said on Monday that some follow-up data suggests its immune-boosting therapy for lung cancer was able to generate long-term tumor responses without causing any serious side effects. This boosted the stock 26 percent on Monday. One day later, Oncothyreon CEO Bob Kirkman seized on the newfound demand for his shares by selling some more shares, and refilling the company coffers with $15 million.

—Scientists over at PATH, the Seattle-based nonprofit that works to improve health in poor countries, were pumped up about a new formula they developed that was shown to protect hepatitis B vaccine from getting damaged by hot or cold temperatures. This work, financed by the Bill & Melinda Gates Foundation, only adds one-tenth of a penny to the cost of a vaccine dose, and PATH says it ought to work just as well for a wide range of vaccines.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) said this week that second-quarter sales started to pick up, as expected, for its sole marketed product for surgical bleeding. The company reported $6 million in sales of recombinant thrombin (Recothrom), which puts it on pace to reach its full-year sales forecast of $25 million to $35 million.

—Buddhists and biotechies don’t usually go hand-in-hand, but this sort of unlikely alliance might yield some big future opportunities for biomedical entrepreneurs in mental health, according to Seattle’s Ben Shapiro. He’s the former executive vice president of worldwide research at Merck, who has been exposed to these ideas through serving on the board of the nonprofit Mind & Life Institute in Boulder, CO.

—Does the laid-back Northwest lifestyle keep this region from reaching its full potential as a dynamic hub of innovation and entrepreneurship? Janis Machala, the champion of startup creation at the UW TechTransfer office, stirred the pot last week with some thought-provoking comments about this idea at an event hosted by the Washington Biotechnology & Biomedical Association. This generated a lot of comments, many of them quite thoughtful, at the tail end of the story.

—Seattle-based Amnis, the maker of an instrument for high-speed imaging of cells, said it closed on the first $839,000 out of a $1.5 million round of financing. The company, which has seen rising demand for its second-generation product, raised the cash from CVF LLC, MedVenture Associates, and OrbiMed Capital, and angel investors.

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AVI Biopharma, the developer of RNA-based drugs, is moving its headquarters and part of its scientific operations north a couple hundred miles from Portland, OR, to Bothell, WA, in an effort to mine the Seattle area’s bigger biotech talent pool.

The company, which has about 85 total employees, plans to keep its biodefense research and manufacturing facility in Corvallis, OR, while moving executive offices, administration, discovery research, chemistry, clinical and regulatory operations to new offices in Bothell, CEO Les Hudson told Xconomy yesterday in an exclusive interview. AVI plans to move into its new 19,000-square-foot office and lab space in August.

AVI (NASDAQ: AVII) is one of the oldest companies in biotech, having sputtered around since 1980 without ever developing an FDA-approved drug, burning through more than $250 million in investor cash at last count, and never becoming profitable, as I pointed out in this profile back in September. But the company has gotten some new life lately, as it has found creative new sources of capital, and has more than tripled its stock price this year from 66 cents to $2.29 at yesterday’s close. Since Hudson joined in February 2008, he has pushed forward its technology for precisely blocking specific strands of RNA as a new mode of developing drugs. AVI is using this science to work on experimental treatments for Duchenne Muscular Dystrophy, and against really dangerous potential bioterrorist agents that conventional drugs can’t stop—Ebola and Marburg virus.

All of these programs are going to require skilled, and experienced people to take forward, and Hudson says it will be easier to recruit them to Seattle than to Portland, where AVI is one of the very few biotech games in town.

“It’s important for us to be in Seattle because the competitive environment in life sciences is important to the tone and productivity of a company, and, if you’re looking to recruit someone, it’s important to be in a labor pool of significant size like there is in Seattle,” Hudson says.

AVI considered another site on the East Coast, but rejected that because … Next Page »

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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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AVI Biopharma, the Portland, OR-based developer of RNA-based therapies, said today it has secured $1.2 million in funding over the next year from Action Duchenne, a U.K.-based charity that supports research into Duchenne Muscular Dystrophy. The agreement has an option to be extended for additional years, AVI said. The company (NASDAQ: AVII) is developing a drug called AVI-4658, which is supposed to allow patients to produce a functional copy of a protein called dystrophin. The company has tested an injectable version of this drug in boys with the disease, and is now working on a version that can be delivered throughout the body.

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This is definitely not in sync with the economic theme of 2009, but surprisingly, there was a lot of good news in Seattle biotech the past week.

—Dendreon CEO Mitchell Gold fielded a lot of questions at the company’s annual shareholder meeting yesterday, and the biggest one of all is whether he’s looking to sell the company. He said all the right things a CEO is supposed to say. But afterwards, when I asked him to elaborate, he went further—saying that not only does he want Dendreon (NASDAQ: DNDN) to remain independent, he wants it to become the next big anchor for Seattle biotech, like Immunex in the late 1990s and early 2000s.

—Seattle-based NanoString Technologies pulled in a whopping $30 million round of venture capital to continue building momentum for its marketed genetic analysis tool, nCounter. The company had the unfortunate timing to introduce this product last July, right before the economic crisis, but it raised the new capital anyway, partly because rave product reviews trickled in to Clarus Ventures, one of the largest biotech venture investors in the U.S.

—Bothell, WA-based OncoGenex Pharmaceuticals (NASDAQ: OGXI), the developer of a new prostate cancer drug, doesn’t seem to be very well known in its backyard, but this company has been on an amazing bull run on Wall Street, and it has made some serious money for Vancouver, BC-based Ventures West. I dug through the regulatory filings to show that Ventures West, which had almost 17 percent ownership in the company last fall when it traded down in the $2 range, has cashed out all its shares. The stock closed yesterday at $25.90.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC) has run dangerously low on cash this year, and is performing a “tight-wire” act to hold everything together. Yesterday I discovered in the regulatory filings that the company’s compensation committee decided to reward the company’s senior executives with $250,000 of bonuses that had been deferred until they considered the company “sufficiently liquid” to make the payments.

—MDRNA, the Bothell, WA-based developer of RNA interference drug technology, had two bits of good news this week. The company (NASDAQ: MRNA), ran extremely low on cash earlier this year, but has recovered enough to raise $10.5 million in a stock sale to existing investors. The company also said that a generic calcitonin nasal spray it developed for osteoporosis was approved by the FDA and introduced to the market by Par Pharmaceutical. MDRNA sold the product to Par back in March, but it can still receive an undisclosed profit share from the product over the next five years.

—Bothell, WA-based Alder Biopharmaceuticals, the developer of targeted antibody drugs, expanded its partnership with pharmaceutical giant Schering-Plough, in which it will develop a number of antibody drug candidates for a major neurological disease, says Alder CEO Randy Schatzman. Yes, that’s cryptic, but the understated Schatzman said this deal provides “significant” upfront cash to his company, milestone payments for success in development, and royalties on future sales. Since Alder raised $40 million in venture capital in January 2008, I’m going to surmise this new deal pulls in at least $5 million upfront.

—Seattle-based Calistoga Pharmaceuticals is starting to build a preliminary, but impressive, body of evidence for its experimental drug candidate for blood cancers. Two weeks ago, the company showed an earlier slice of data that showed its CAL-101 drug was at least partially shrinking tumors for 6 of the first 12 patients who enrolled in a clinical trial, even when given at lower-than-optimal doses. As more patients enroll in the clinical trial, the data is holding up, with 12 of the first 24 patients now reporting partial tumor shrinkage.

—Portland, OR-based AVI Biopharma (NASDAQ: AVII), the developer of RNA-based therapies, said last week that it will receive $3 million from Charley’s Fund to continue testing a treatment for Duchenne Muscular Dystrophy.

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AVI Biopharma (NASDAQ:AVII), the Portland, OR-based developer of RNA-based therapies, said today it will receive another $3 million from Charley’s Fund to further develop an experimental drug for Duchenne Muscular Dystrophy. AVI’s contract with the foundation is now worth a total of $5 million to develop AVI-5038, with a goal of taking the drug into clinical trials. This is AVI’s second drug candidate against Duchenne Muscular Dystrophy, and is designed to affect a different genetic variation than the first, the company said.

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Biotech is a volatile business, and this week hammered home that point. Seattle had layoffs at one important device company (Pathway Medical), a hiring boom at another (Dendreon), and a national report that had some humbling stats about the local life sciences scene.

—Dendreon is moving ahead fast to make the most of its good fortune with a new drug for prostate cancer. Xconomy broke the news that the Seattle-based biotech company (NASDAQ: DNDN) is going on a hiring binge (64 new job listings and counting) to do all the manufacturing, marketing, and logistics work it will need to turn Provenge into a hit drug. We also discovered in the company’s quarterly report that it is looking to raise more capital to do the job. That may be good for shareholders, although they may be less thrilled with SEC filings that show Dendreon executives sold a bunch of their stock after the good news came out.

—Pathway Medical Technologies, the Kirkland, WA-based maker of a device that clears out blockages in leg arteries, said it is eliminating 39 jobs, or about one-fifth of its workforce. The company made the moves because its product isn’t living up to the aggressive sales projections it laid out, and the company fell short of its goal of raising $55 million in venture capital for the launch (although it still pocketed a tidy $42.3 million, says CEO Paul Buckman).

—ZymoGenetics is continuing to brace itself for a long, hard downturn. The Seattle biotech company (NASDAQ: ZGEN) cut one-third of its staff last week, and followed that up by unloading eight drug candidates that were sitting on its shelf, handing them over to a startup called Seattle Life Sciences. Zymo also reported first-quarter financials, which showed its lone marketed product, recombinant thrombin (Recothrom), is still struggling to get momentum in the marketplace. The drug is still expected to reach its sales goal of $25 million to $35 million this year, CEO Doug Williams said.

—The traditional biotech business is “unsustainable” in the current downturn, accounting firm Ernst & Young declared in its annual report on the biotech industry, Beyond Borders. Digging deeper into the regional statistics, I found that some regional biotech clusters are holding up better under the pressure than others, and the numbers aren’t pretty for the Pacific Northwest.

—The same day of that grim report, Seattle biotech got a dose of some serious good news from Calistoga Pharmaceuticals. The developer of drugs for cancer and inflammation raised $30 million in a Series B venture round, which attracted all four investors that got the company going two years ago, including Seattle-based Frazier Healthcare Ventures.

—Even though the headlines say it’s nearly impossible, it’s still pretty easy to find scientific entrepreneurs pursuing biotech startup dreams around Seattle. One of these stories came out this week from Arrowsmith Technologies, a company with a novel idea for using antibodies to help improve treatment of brain cancer. Arrowsmith was founded by Jefferson Foote, a former scientist at the Fred Hutchinson Cancer Research Center.

—Acucela, the Bothell, WA based maker of drugs for macular degeneration, passed an early safety test with a drug for the “dry” form of this disease that causes blindness in millions of elderly people. I got the rundown on what this means to the company, and to the field of ophthalmology, from founder and CEO Ryo Kubota, before he presented data at a scientific meeting.

—AVI Biopharma, the Portland, OR-based maker of RNA-based drugs, said it won part of a $2.5 million defense contract to develop a treatment for Duchenne Muscular Dystrophy. The company (NASDAQ: AVII) is hoping to cultivate relationships with the military for years to come, as it is angling for a more lucrative defense contract to make drugs to combat Ebola and Marburg viruses.

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The first five minutes of digging on Portland, OR-based AVI Biopharma turns up some jaw-dropping facts. It’s been in business since the dawn of biotechnology in 1980. Never has it developed an FDA-approved drug. Never has it become profitable. It has burned through $243 million in investor capital in its history, according to its most recent quarterly report with the Securities and Exchange Commission.

As you can imagine, AVI Biopharma (NASDAQ: AVII) has to reinvent itself to stay in business. I spoke with new CEO Leslie Hudson, who began his turnaround effort in February. He comes to the company after stints as a CEO at two small-cap biotechs, Nabi Biopharmaceuticals and DOV Pharmaceutical.

The aim here, Hudson says, is to dedicate the company to developing new drugs instead of just honing its technology. AVI is now putting its resources into a wide variety of therapies: RNA-based drugs against Duchenne Muscular Dystrophy, a treatment to stop excessive scarring around stents that prop open clogged arteries, and drugs that might save people’s lives after being exposed to the deadly Ebola and Marburg viruses. He’s going to show off his new plan to investors at an event in New York today to lay the groundwork for raising some more capital. The company had about $18.8 million in cash and investments at the end of June, and 85 employees working to make it happen.

“We are re-positioning an antisense pioneer as an RNA-based therapeutics company,” Hudson says. “The technology is superb. The challenge was in leadership and business planning. So many companies limp around with old drugs that never get around to crossing the finish line. Our job is to bring two or three of these to fruition.”

Hudson makes it sound like he’s been dealt a great hand at AVI. His company’s drugs can bring the kind of specificity seen with drugs that work by gene-silencing, or RNA interference, like those being developed by Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY). AVI thinks its drugs have an edge because its drugs are easier to deliver to tissues throughout the body, easier to manufacture because they are conventional small-molecule chemicals, and can remain active for longer periods in the body.

Wall Street sees this all a little differently. The scoreboard says Alnylam’s market capitalization is $1.1 billion. AVI Biopharma’s is $82 million. … Next Page »

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