Experts agree that electronic medical records can lower costs and improve care. Yet just 10 percent of U.S. hospitals keep any computerized records, according to a survey in the New England Journal of Medicine last year. The biggest reason is cost: depending on the size of the hospital, the price of a digitized record system can run from $20 million to $100 million.

Carlsbad, CA-based Medsphere Systems is marketing what it bills as a cost-effective solution. The company has taken the electronic medical record system developed by the Veterans Health Administration and adapted it for commercial use.

Developed over two decades with more than $8 billion from taxpayers, the source code for the VA system is in the public domain. This means software developers and startups like Medsphere are free to use and modify the code known as the Veterans Health Information Systems and Technology Architecture, or VISTA. (The acronym is sometimes confused with Microsft’s unrelated Vista operating system.)

Rick Jung

Medsphere Chief Operating Office Rick Jung says the private, venture-backed company offers its version of the software, called OpenVista, on a subscription basis, which minimizes the upfront costs for hospitals and healthcare facilities. The system manages clinical and health information, laboratory tests, pharmacy, radiology, and nutrition and food service applications. In exchange, Medsphere provides OpenVista subscribers regular software updates, maintenance, and technical support. Customers also get tools that connect OpenVista to legacy systems that handle specific functions, like billing.

OpenVista also is available without a paid subscription for users to install and operate on their own enterprise networks, without support from … Next Page »

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We’re at the end of one of the most challenging years in recent memory for life sciences companies. However, a broad transformation is under way in the industry, and profitable new opportunities are on the near-term horizon. From my perspective, there are three major trends worth considering and focusing on as the new year unfolds.

—Big Pharma Reaches Out to Biotech for Pipeline-and Deals

For strategic reasons, large pharmaceuticals continue to look outside their walls for much-needed new pipelines-largely because their own are drying up and generics are making increasing inroads. I noted this trend last spring, but now it’s really playing out, with serious and significant ramifications.

In an effort to expand product portfolios, bring new products to market sooner, and hasten a return on investment, big pharma is aggressively looking to collaborate with biotech on a number of levels in the hope that this will provide them access to innovative technologies. Eli Lilly, for example, recently joined with technology companies and universities and opened up a large R&D center in San Diego to identify and capture innovative biologics that have commercial promise.

The major thrust, however, will likely be big pharma’s acquisition of cutting-edge biotech companies. Indeed, we believe 2010 will be a big deal year in life sciences. Unfortunately for big pharma, however, biotech valuations are rising, and strong state-of-the-art innovators won’t come cheap.

When it comes to capital-raising in the biotech sector, we’re also seeing a good amount of activity in the private and public markets.

But there’s also an interesting dynamic that’s worth mentioning. We’ve seen some IPO filings that are followed a short time later by a big M&A deal; we’re watching a host of M&A transactions close these days in biotech, yet not all IPOs presage a deal. A number of biotech companies appear to be filing for IPOs as a way to strategically validate a higher valuation. To put it simply: They want to be acquired, and they really don’t want to go public and have to navigate excessive red tape and regulatory hurdles from legislative measures like Sarbanes-Oxley. What’s more, the cost of raising capital to get to the next level in the valuation cycle is daunting.

I’ve also noticed how many of the best biotech companies are increasing their focus on innovative technologies and raising plenty of venture capital money in the process. A good example is San Diego’s Fate Therapeutics, which has made rapid progress in advancing its pipeline of stem cell modulators and in establishing a leading industrialized platform for induced pluripotent stem cell technology. Thanks to its fairly strong track record, Fate recently completed a $30 million Series B financing led by OVP Venture Partners. Joining … Next Page »

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U.S. Energy Secretary Steven Chu said today the Department of Energy is awarding $620 million for smart grid projects around the country, but a San Diego coalition that sought $100 million was not on the list. The coalition, which included San Diego Gas & Electric, Cleantech San Diego, and UC San Diego, sought the DoE funding to integrate emerging smart grid technologies in the San Diego regional power grid. April Bolduc, a spokeswoman for SDG&E, told me in an e-mail, “While we are disappointed with today’s announcement, San Diego’s smart grid development will move forward, just at a slower pace than it would have with a stimulus grant.”

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The San Diego-based Cannon Power Group says it has received $19.4 million in federal renewable energy grants to help fund construction of a 400-megawatt wind farm in Klickitat County, WA, about 110 miles East of Portland, OR. Total investment in the project will be more than $1 billion. When completed, the Windy Point/Windy Flats project will be one of the largest wind farms in the nation, producing enough electricity for more than 250,000 homes per year. The project power has been designated for use by California municipalities.

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[Updated 10/27/09 12:55 pm. See below.] The Department of Energy has released a list of utilities that are getting federal grants to spur energy innovations under the $787 billion economic stimulus package, and San Diego Gas & Electric is getting $28.1 million to help build out its “smart grid” system.

Additional details are expected to follow President Obama’s speech at a solar facility in Florida, where he is expected to announce grants totaling $3.4 billion—the largest award made under the stimulus package in one day. The grants, which range from $400,000 to $200 million, are intended to help utilities build smart grid systems (which help consumers save money by providing real-time monitoring of their energy use), upgrade local power grids to reduce blackouts, and boost use of renewable energy.

The $3.4 billion is being allotted through 100 government grants in 49 states that will be matched by $4.7 billion in private investments.

[Updates below with new information from SDG&E and clarifies that the utility formed the coalition as part of a second grant application] SDG&E, a utility operated by San Diego’s Sempra Energy, said in September it has formed a coalition with the non-profit group Cleantech San Diego, UC San Diego, and major companies like Qualcomm, IBM, Cisco, and Intel. The coalitions was formed as part of a separate grant application that seeks $100 million for a regional demonstration system to help SDG&E manage the increasing demands on its power grid from electric vehicles as well as fluctuations in energy supplied to the grid by wind, solar and other renewable energy sources.

“It’s all part of the broader smart grid funding that the federal government has put aside,” says Chris Baker, a senior vice president for shared services and chief information officer for SDG&E and its sister utility, Southern California Gas. “You can’t do a smart grid without an enabling communications infrastructure.”

Baker says the $28.1 million DOE grant will enable the San Diego utility to address a variety of wireless communications needs with a more comprehensive plan. For example, while the utility has installed about 130,000 smart meters so far, Baker says the grant will enable SDG&E to establish a dedicated 700 megahertz “takeout point” for transmitting data from the smart meters’ wireless mesh network. The $28.1 million grant to SDG&E from the DOE will cover almost half of the $60 million project. The funding also enables the utility to install high-bandwidth wireless capabilities at its substations and certain corners of its grid.

SDG&E is working to integrate 1.4 million wireless “smart meters,” which the utility has been installing, with an advanced IT system that will allow increased monitoring, communication, and control of a regional power grid that spans 4,100 square miles.

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Former BAE Systems executive Walt Havenstein takes over today as SAIC’s new CEO, but the big question is if the new boss will move the company’s headquarters from San Diego to McLean, VA. Get our roundup of San Diego’s biztech news here.

—San Diego defense contractor SAIC (NYSE: SAI), which has been shifting some key executives and corporate functions to Northern Virginia since 2006, appears poised to announce the relocation of its headquarters from San Diego to McLean, VA. If SAIC moves its HQ, San Diego’s roster of Fortune 500 companies would go from four to three. It only increased to four in August when CareFusion (NYSE: CFN), the Cardinal Health spinoff, established its HQ here. The other two are Qualcomm (NASDAQ: QCOM) and Sempra Energy (NYSE: SRE).

—How unique is your company’s culture? Xconomy asked the CEOs of startups in Seattle, Boston, and San Diego to use one word to describe their company’s corporate culture. We got 21 different answers. San Diego’s CEOs said Innovative, Love, Open, Entrepreneurial, and Speechless. Actually, “speechless” is my word. VMIX CEO Mike Glickenhaus was the only one who said, “I wish I could come up with one but I can’t.”

—At a time when rapid changes in technology are bringing Internet TV closer to reality, DivX CEO Kevin Hell says he is positioning the San Diego-based digital media company to be the friendly and agnostic technology provider. Hell says he wants the DivX format to be the “any-to-any-solution” that plays video content on any device from any manufacturer.

—Corporate buyout executives from Qualcomm and Google voiced cautious optimism about the economic climate for M&A deals involving venture-backed companies during a panel discussion organized last week by the San Diego Venture Group. Qualcomm’s Duane Nelles and Google’s Karim Faris also said it’s becoming more important for startups to secure an early corporate partner with a vested interest in developing the technology.

—San Diego Gas & Electric is leading a coalition of 28 companies, academic institutions, and other organizations to integrate emerging “smart grid” technologies in the regional power grid—and are bidding for $100 million in matching federal stimulus funds to help pay for it.

—Connect, the San Diego non-profit group that promotes technology and entrepreneurship, issued its second-quarter report on San Diego’s innovation economy. The study found 102 new technology companies were created during the three months that ended on June 30. That’s more than the 66 startups during the first three months of the year and better than the 76 companies launched during the same quarter in 2008.

—In its fifth edition of the “Venture Impact” report, the National Venture Capital Association found that venture-backed companies employed more than 12.1 million Americans in 2008. These companies generated $2.9 trillion in revenue in 2008, roughly one-fifth of U.S. gross domestic product. San Diego attracted $1.2 billion in venture investment across biotechnology, software, and information technology, among other areas, according to the NVCA report.

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If there was a theme in the first session of the Cleantech Capital Summit that convened in San Diego yesterday, it’s that government spending on cleantech projects in 2009 will easily dwarf whatever investments in “green” deals the VC industry can muster.

No surprise there. As we reported over the weekend, total U.S. venture investing in energy and environmental startups plunged by 84 percent during the first quarter—to $154 million from $971 million in the first quarter of 2008. Meanwhile the federal economic recovery and stimulus package calls for spending nearly $33 billion in direct grants for energy-related projects and more than $100 billion in loans for projects related to energy and the environment.

So one topic that arose at the summit was where venture investors fit into the ecosystem for cleantech funding.

To Brian Fan, senior director of research for the Cleantech Group, the U.S. economic stimulus plan amounts to “the largest government spending project in history.” The Cleantech Group, previously known as the Cleantech Venture Network, has played an influential role in developing cleantech as an investment category. The San Francisco-based firm provides research, cleantech news coverage, executive recruiting, and other services.

In an opening presentation yesterday morning, Fan said that while cleantech venture funding has declined sharply, global stimulus spending is soaring. He says the U.S. and other countries have earmarked $400 billion in worldwide stimulus spending for cleantech programs—and about half of that amount is expected to be invested this year.

William Lese, a managing director of Braemar Energy Ventures, which has offices in New York and Boston, indicated that VCs will welcome federal spending. “The federal government is not terribly competitive,” Lese said during a panel discussion on cleantech venture financing. “That money is not going to be directed at early stage companies, and the government funds will fill in, hopefully, where the later-stage funding has disappeared.”

To Lese, a more challenging problem in funding cleantech startups is the enormous amount of venture capital that’s required to take many cleantech innovations from the laboratory to full-scale projects. “It is a big problem,” he said. Matt Horton, a principal of @Ventures in Menlo Park, CA, agreed. “You’re going to hear a lot today about the capital requirements for project finance, and the private equity part of (project development) has been hit especially hard,” Horton said.

That’s true for some cleantech startups, but not all, said Marianne Wu, a partner at Mohr Davidow Ventures in Palo Alto, CA. It’s true, Wu said, “If you have to generate power at utility scale, or if you have to build a chemical plant or a fuel plant. But there are other portions (of the cleantech sector) that are not at all capital-intensive, such as some of the green building plays, and energy efficiency plays.”

Victor Westerlind of RockPort Capital Partners, which has offices in Boston and Menlo Park, CA, agreed that many big cleantech projects that require debt financing ran aground, especially among the ethanol-based biofuels projects. “But with good teams and good projects, you can get it done, whether it’s through government financing or partnerships.”

Some other familiar VC themes emerged during the cleantech discussion:

—Innovative technology is often less important than the entrepreneurial team building a cleantech startup. “Sometimes I think we get a little too carried away with the technology innovation,” Lese said.

—With the recession still exerting financial strain on venture firms and their portfolio companies, Horton said it’s critical to be form syndicates with other VC firms that will remain committed to future funding rounds.

—The recession and financial crisis are forcing venture capital firms to return to their core strength, which is identifying promising innovations and funding early stage companies. As Wu put it, “It’s back to basics in venture capital.”

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