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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The Ebola virus made a big appearance on the Northwest biotech scene this week, but it wasn’t nearly as ominous as that sounds.

—Tekmira Pharmaceuticals, the Vancouver, BC-based developer of drugs that silence specific stretches of RNA, said it has nailed down a U.S. defense contract that could be worth as much as $140 million over time to develop an RNA-based treatment for Ebola virus. News broke the next day that Tekmira wasn’t alone. Bothell, WA-based AVI Biopharma (NASDAQ: AVII) said it also secured a defense contract worth as much as $291 million over time if it can hit a series of milestones in development of an RNA-based Ebola treatment. While I’m sure the companies are happy to cash the checks, these are drugs that everybody hopes will never need to be used for biodefense.

—While Tekmira and AVI are going to enjoy living off Uncle Sam’s contracts for a while, many other biotech companies are having to adjust to a new stingy reality since the Wall Street-fueled housing bubble burst in 2008. Accelerator’s Carl Weissman offered some specific examples of how some companies have been pinching their pennies ever since.

—Here’s an interesting startup profile of a medical device company finding a way forward in this new era of austerity. Seattle-based Mirador Biomedical, armed with just $1.1 million in financing, has developed a simple device designed to prevent a common error in the hospital—when a catheter gets placed in an artery instead of a vein. With a little luck, Mirador could have an FDA-approved product before the end of 2010.

—A familiar name in Seattle biotech, Tom Ranken, has found a new mission as the head of the Washington Clean Technology Association. He’s been feeling some déjà vu lately, given that cleantech as an industry is in those heady early days like biotech was in the 1990s when he played a pivotal role in building the Washington Biotechnology & Biomedical Association.

—Bothell, WA-based MDRNA (NASDAQ: MRNA) delivered some news that’s sure to irritate a few shareholders. It announced a reverse stock split, in which shareholders will get one share for every four they own today. The company said this move was authorized by its board at the 2009 annual meeting, so it could be timed at the right moment in the future. MDRNA was worth 75 cents a share at yesterday’s close.

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The Northwest might just be an emerging cluster for Ebola.

Research, anyway.

Bothell, WA-based AVI Biopharma (NASDAQ: AVII) said today it has been awarded a contract from the U.S. Department of Defense to develop treatments for the deadly Ebola and Marburg viruses, in case they were ever used as bioterrorism agents. AVI stands to receive as much as $81 million in the first of four installments under the contract, which could be worth as much as $291 million total over time if the military keeps renewing the contract.

The AVI contract is the second big local deal for a biotech company with an Ebola treatment, after Vancouver, BC-based Tekmira Pharmaceuticals said it won a contract worth as much as $140 million from the U.S. military for its experimental Ebola treatment. Both companies are pursuing strategies of silencing specific stretches of RNA, which hasn’t been possible with conventional pills, vaccines, or protein therapeutics.

Shares of AVI Biopharma climbed 15 percent to $1.88 at 10:30 Eastern time after the announcement.

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Score one huge U.S. defense contract for the Canadians. Vancouver, BC-based Tekmira Pharmaceuticals (TSX: TKM), a leading developer of technology for RNA interference drugs, said today it has secured a contract from the U.S. military worth as much as $140 million to make a drug that can effectively combat the deadly Ebola virus.

This is all part of the U.S. military’s biodefense effort, to fight against any effort to turn Ebola into a bioterror weapon. Tekmira is eligible to receive $34.7 million over the next three years in the first phase of the contract, with a goal of developing an RNAi-based treatment for Ebola that passes animal tests and the first phase of human safety testing. The U.S. Department of Defense, through its Transformational Medical Technologies program, has the option to finance further development required for FDA approval, which could bring the total budget for the program to $140 million.

Tekmira won the contract two months after it published results in The Lancet which showed that its RNAi candidate was able to offer 100 percent protection to primates who were exposed to an otherwise lethal dose of Ebola virus.

“This contract is a significant accomplishment for Tekmira and a proud moment for our team,” said Tekmira CEO Mark Murray, in a statement.

Mark Murray

RNAi is one of the hottest concepts in biotech, especially since its discoverers won the Nobel Prize in 2006, which I noted in this feature on Tekmira in May 2009. RNAi drugs are designed to specifically hit targets on cells that other drugs can’t, and to silence the genetic root cause of disease. The problem is that small interfering RNA drugs can get chewed up by enzymes in the body, or flushed through the kidneys long before they ever get to the diseased cells. Some leading RNAi companies, like Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY), have tried to work around this with locally-delivered drugs that don’t have to circulate through the body, but only a limited number of diseases can be treated that way. Tekmira’s approach uses lipid nanoparticle capsules that are designed to protect the drug in the body until it gets to the intended cells.

Besides Alnylam, Tekmira has found a number of prominent supporters for its delivery technique, including pharma giants Bristol-Myers Squibb, Pfizer, and Roche.

The new deal with the U.S. military will certainly help strengthen Tekmira’s cash balance and enable it to continue pushing the R&D edge with what’s possible in RNAi. But Tekmira was careful to point out that not all of Uncle Sam’s money will go north of the border. The company notes that it has a subsidiary in Washington state, Protiva, and it estimates that more than 15 percent of its award will go to subcontractors in the U.S.

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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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AVI Biopharma doled out an interesting little morsel of news on its muscular dystrophy drug right before Christmas that showed encouraging results in three boys. This year, the Bothell, WA-based biotech company is eagerly awaiting more meaningful follow-up data that could show it is on track with what could be the first treatment to fix the underlying molecular abnormality in boys with Duchenne Muscular Dystrophy.

I got the update on AVI’s game plan for 2010 when I met with a few senior executives, including chief financial officer David Boyle and chief medical officer Steve Shrewsbury, a couple of weeks ago in San Francisco. We talked a little bit about the company’s RNA-based treatments for hemorrhagic viruses like Ebola, as well as a new government-funded flu program. But there’s no doubt the main event this year will be what happens with the company’s treatment for Duchenne Muscular Dystrophy.

AVI Biopharma (NASDAQ: AVII) wants to be the first company to make a drug that silences a specific strand of RNA, and enables the body to produce a protein called dystrophin. This is a protein that’s essential for enabling muscles to rebuild themselves, and is lacking in boys with a birth defect known as Duchenne Muscular Dystrophy. This is a crippling disorder that affects about one out of every 3,500 boys born worldwide.

“Duchenne Muscular Dystrophy is certainly our lead program, and we think it has significant value,” Boyle says.

The AVI approach made some medical news in The Lancet last year, when the company showed that its RNA-based treatment was able to restore production of dystrophin proteins when injected directly into a foot muscle. That prompted the next step, in which AVI developed a version of the drug that could be delivered intravenously, and circulate throughout the body, where it could presumably have a much broader impact on muscles.

The first peek at data from this trial of the intravenous version came out in December. This initial slice of data was from the first nine patients who were enrolled in the four lowest dose groups. Researchers found that in three patients who got doses on the high end of that range, the molecular abnormalities dissipated. One boy was able to produce five-fold higher amounts of dystrophin. “These results suggest that we are on the right path,” said Francesco Muntoni, the trial’s lead investigator at University College London, in a statement.

I wanted to know about the next steps to watch for in the clinical development of this drug, called AVI-4658. It turns out that AVI has two major data releases planned for 2010, and both will be closely watched by parents, researchers, and shareholders.

The first release will be before the end of June. The trial, for those unfamiliar … Next Page »

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AVI Biopharma, the Bothell, WA-based developer of RNA-based therapies, said today it has won an expanded $11.5 million contract from the U.S. Defense Department to develop its drug candidate for Junin virus infection. The new contract means AVI has received $45 million in combined contracts to develop treatments for Ebola, Marburg, and now Junin viral infections. AVI (NASDAQ: AVII) said the cash comes from the Defense Threat Reduction Agency’s Transformational Medical Technologies Initiative for a therapy called AVI-7012. Shares of AVI climbed 28 percent to $2.01 at 9:46 am Eastern time on the news.

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The day I stopped by to visit Seattle’s newest biotech company, the building was chilly on one side and hot on the other. An assistant wasn’t sure at first where the light switch was in the conference room. Nobody answered right away when I called from the security phone outside.

“Hopefully the next time you come out here, we’ll figure out how the building works,” joked Les Hudson, the CEO of AVI Biopharma (NASDAQ: AVII).

AVI has reason to be a little disorganized since it just moved its headquarters from Portland, OR to Bothell, WA last month, as part of its strategy to grow into a more serious player in the field of RNA-based drugs that can treat underlying causes of disease in ways that traditional therapies can’t. The company (which is keeping some labs in Corvallis, OR) has gone through a metamorphosis this year, seeing its stock shoot up from 45 cents in the past year to $1.61 at the last close, on some progress with its first-in-class experimental treatments for Duchenne Muscular Dystrophy and Ebola and Marburg viruses. AVI, which entered the year with $11.4 million in cash in the bank, has seized on that momentum to raise another $50 million from Wall Street this year.

This is a pretty remarkable shift for a company founded in 1980, that has burned through $271 million of capital, and never in its history developed an FDA approved drug. The transition has happened under Hudson, 62, an immunologist who previously led Nabi Biopharmaceuticals, and DOV Pharmaceutical, after spending longer stretches of his career at Pharmacia and GlaxoSmithKline.

AVI moved in to space on Monte Villa Parkway in Bothell that used to be occupied by MDRNA (NASDAQ: MRNA). About 14 people at AVI had moved to the Bothell office on Sept. 17, the day I met with Hudson and AVI’s chief medical officer, Steve Shrewsbury. They have now posted 11 job openings to help boost the company’s capabilities in a number of areas, notably regulatory affairs.

Hudson was due to personally scope out a new apartment in Bellevue, a town which he says he likes because it’s close to the office and has “bright lights at night.” Hudson and Shrewsbury are still getting the lay of the land, and figuring out how to network to take advantage … Next Page »

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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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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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This week, Seattle biotech got some of the best news it has seen in years. One local biotech company, Dendreon, scored a major coup by generating results that show its immune-boosting drug for prostate cancer can prolong life with minimal side effects. But there was a lot more happening in the local lab scene than that.

—Dendreon dominated the headlines this week during its appearance at the American Urological Association meeting in Chicago. The Seattle biotech company (NASDAQ: DNDN) said that its immune-booster for prostate cancer, sipuleucel-T (Provenge) was able to extend lives by a median time of 4.1 months, with side effects including fever and chills. I did a detailed primer on what to expect in the hours before the data, covered the quick breaking news, and then followed up by combing through the details. The company finished the day with a party.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) had some bad news just a couple days after Dendreon’s celebration. Zymo said it is cutting 161 jobs, or about one-third of its staff, to conserve it cash, in the hopes that it will be self-sustaining without the need for any more funding from Wall Street.

—Gov. Chris Gregoire’s biotech fund will still exist after the latest round of budget cuts, although it took a 41 percent cut. The Life Sciences Discovery Fund will get $19 million annually over the next two years to continue investing in research with commercial potential in the state.

—I had the good fortune to hear a great talk last week by Paul Farmer, the physician famed for his work in the developing world, at a fundraiser for Seattle Biomedical Research Institute. He thanked this audience of Seattle global health boosters for performing CPR on this field, which was pretty depressed when he got into it 26 years ago.

—Microsoft (NASDAQ: MSFT) is starting to make its life sciences strategy much more clear. The Redmond, WA-based software firm said this week it is introducing Amalga Life Sciences, a program that’s supposed to help lab scientists make sense of all the data that’s been piling up in disparate programs over the years, including old-fashioned Excel.

—Portland, OR-based AVI Biopharma (NASDAQ: AVII) is gearing up for what it hopes will be a big contract for drugs to combat RNA-based drugs for Ebola and Marburg viruses. The company could hear a verdict on whether it gets this military contract sometime this summer.

—Seattle-based Geospiza, a maker of software to help biologists analyze loads of genomic data, got some love this week from Carlsbad, CA-based Life Technologies. Life (NASDAQ: LIFE) a leading maker of instruments for high-powered gene sequencing, agreed to a partnership with Geospiza and Amazon Web Services to help scientists store all this massive data through cloud computing, which means they can keep the data on someone else’s servers, and not have to hire a bioinformatics expert in-house to manage all the data.

—The latest effort by industry and state officials to convince the public that biotech matters is again hanging its hat on the hope for creating jobs. I challenged this assertion, and showed that the industry hasn’t created many local jobs in recent years.

—Bothell, WA-based Sonosite (NASDAQ: SONO) said it is having a hard time selling its portable ultrasound machines to hospitals in the current economic downturn. It forecasts overall sales this year will be flat to down 10 percent compared with 2008.

—PATH, the Seattle-based nonprofit that works to reduce global health disparities, said it has received a pair of grants to improve HIV treatment. The grants are worth a combined $52 million over three years.

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AVI Biopharma has got Ebola virus on its mind. This horrifying bug from central Africa would only have to infect a few people in the U.S. to cause a real bioterror scare, because it’s so deadly and there’s no cure. The federal government would like to get an effective treatment stockpiled just in case a terrorist gets his hands on Ebola virus, and now Portland, OR-based AVI thinks it might have the inside track on the federal contract to deliver an effective treatment.

AVI (NASDAQ: AVII) has been reinventing itself over the past year as a developer of RNA-based drugs. I got an update recently from CEO Leslie Hudson about the latest on the Ebola treatment program.

This month, the U.S. Department of Defense plans to conclude a public solicitation for business opportunities to get a contract to make RNA-based drugs for Ebola and Marburg viruses, Hudson says. The contract specifically states that it must be an RNA therapeutic ready for clinical trials, not a different kind of treatment like a vaccine or a monoclonal antibody, Hudson says. RNA-based therapies, sometimes known as next-generation antisense or gene-silencing drugs, are thought to hold great potential to block the underlying mechanisms of disease in ways that previous therapies can’t. Cambridge, MA-based Alnylam Pharmaceuticals, a leader in RNA-based therapies, has said it is operating a biodefense program that includes Ebola, although it hasn’t said the Ebola treatment is ready for clinical trials like AVI has.

If AVI can secure this contract, which is expected to be awarded later this year, possibly as soon as the summer, it would bring in a total of $50 million, Hudson says. This would be a significant boon to the company, which had $11.5 million in cash entering 2009 year and raised another $16.5 million from Eastbourne Capital and other institutional investors in late January.

“Thus far, we have the only therapeutic approach with sufficient data to be allowed into man,” Hudson says.

As a reminder, AVI got to this point after showing that 100 percent of monkeys who were exposed to Ebola or Marburg lived if they were taking the company’s experimental drugs, AVI-6002 and AVI-6003, respectively.

Of course, that’s a really compelling way to design an experiment, but not ethical to do in people. So what AVI needs to do in a clinical trial is just give healthy volunteers the drug and see if it’s safe, without exposing anybody to Ebola or Marburg. The combination of effectiveness in animals and a pair of safety studies in humans could lead the federal government to purchase bulk stockpiles of the drug for use in case of a scare, Hudson says. He didn’t say how long it would take to get enough convincing data for the Department of Defense to buy a stockpile.

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AVI Biopharma (NASDAQ: AVII), the Portland, OR-based developer of RNA interference drugs, said today it has gotten the second of two patents needed for its drug that treats infections with Ebola Zaire virus. The patents cover composition of matter and methods for treating Ebola with a range of compounds, and they expire Oct. 31, 2025, AVI said.

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

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

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

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

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

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

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

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

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AVI Biopharma, a Portland, OR-based drug developer, said it has “verbal clearance” from the FDA to start clinical trials against the deadly Ebola and Marburg viruses. AVI expects to get a formal written go-ahead from the FDA in early 2009, the company said. Shares of the company (NASDAQ: AVII) shot up 63 percent to 80 cents shortly after the opening bell.

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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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Spaltudaq has never really said a whole lot publicly about what it’s doing. So I was eager to get an update this week from CEO David Fanning about what’s percolating at the Seattle biotech company, particularly since he’s just down the hall from Xconomy’s Seattle office on First Hill.

The basic idea hasn’t changed much since Spaltudaq got started in 2005 as one of the early companies born at Accelerator, the biotech incubator affiliated with the Institute for Systems Biology. Spaltudaq’s scientists look at blood or tissue samples from patients, and identify antibodies that are made by people’s immune systems against foreign invaders like viruses, bacteria, or cancer cells. Mother Nature has evolved pretty efficient defense mechanisms against these troublemakers, so it seems like a good idea to sort through critical antibodies with broad potential uses, and make genetically engineered copies of them as drugs. It was compelling enough for the company to raise $29 million in March 2007 from Arch Venture Partners, Canaan Partners, HealthCare Ventures, Amgen Ventures, MPM Capital, and Alexandria Real Estate Equities.

Originally, Spaltudaq looked at developing antibodies for cancer. Then, a realization hit. “Choosing cancer is like choosing Mt. Everest for your first mountain climbing class,” Fanning says. So Spaltudaq has broadened its efforts to include infectious diseases and autoimmune diseases.

Fanning spent most of his time in the interview talking about infectious diseases. Spaltudaq’s scientists are looking for clues in tissue samples from rare individuals who have developed “universally relevant and effective” antibodies, he says. He’s thinking of individuals who survived exposure to the wicked Ebola virus, or those infected with HIV in sub-Saharan Africa who somehow never get sick, possibly because they developed certain antibodies to keep the virus in check. Such antibodies for influenza, if turned into a drug, could be stockpiled as a backup treatment in case of a pandemic. The company has two antibody candidates for flu, which have been able to protect animals from getting the virus after being directly exposed to seasonal flu, or bird flu, Fanning says.

None of the programs have advanced far enough yet to reach clinical trials. Fanning, a former chief operating officer of Seattle-based Corixa, got plenty of experience there in doing deals to keep research and development alive through the long years needed to show a drug works. He wants to do it again. “We’re reasonably confident we’ll see partnerships in place in six months,” he says.

One totally extraneous point. Since I get asked this a fair bit about Spaltudaq, I had to ask Fanning whether he’s keeping the name of the company. “We have the discussion internally from time to time” about changing the name, he says. For now, it’s staying. Founder Johnny Stine came up with the name, which stands for an Indian healing ceremony to ensure that people don’t die before their time. “It’s a neat name, and really links to our goal of developing drugs for patients,” Fanning says.

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