A noninvasive diagnostic test for fetal Down syndrome is the hoped-for outcome a deal announced today under which Sequenom, the genetic testing vendor, will obtain tools from Illumina, which develops large-scale systems for genetic analysis. No dollar value was put on the three-year agreement, which calls for Sequenom and its subsidiaries to purchase sequencing equipment and consumables from Illumina. The goal is to develop a noninvasive way to detect an overabundance of chromosome 21 in pregnant women, a possible sign of Down syndrome in the fetus. The two San Diego firms say they will collaborate to seek regulatory approval.

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It’s the beginning of the year—an opportune time to forecast how 2011 will unfold in healthcare. We are likely to see some surprises, such as the sharply rising importance of primary care physicians.

Here are some predictions about the new year:

• More consolidation is on its way in healthcare under Obamacare, which heightens the pressure to improve the efficiency of healthcare delivery. As part of this, more and more healthcare provider groups, even the small ones, will feel compelled to go electronic once and for all.

• Valuable new, cost-effective medical tools will begin to be widely embraced. One is telemedicine. Just imagine how much more effective doctors can be if they interact with patients remotely via cameras. The technology exists now, has been successfully used in a number of situations, and is not expensive. Soon insurance reimbursement models will permit and remunerate physicians for telemedicine “visits,” and then this will take off.

• The use of genetic testing to segment patient populations and better target therapies will be one of the fastest growing segments of healthcare as a new wave of accurate, clinically actionable tests hits the market.

• As health reform increasingly kicks in, there will be heightened emphasis on the importance of primary care physicians—a sharp contrast to the elevated importance of specialists for so many years. They will become the lynchpins of health care and make more pivotal care decisions as more than 30 million more people enter the healthcare system and require access to them.

• Time-saving technologies that lead to measurably better outcomes—such as shorter hospital stays, faster surgeries, and fewer complications—will fare well in 2011.

• Contrary to the opinion of countless skeptics, new California Governor Jerry Brown will be surprisingly effective and will fix many of the state’s woes. Under Brown, taxes will rise and spending will be far more controlled, and much of the crisis will finally be resolved. Why? Brown has been governor before and knows the ropes. And at the age of 72, he cares primarily about his legacy. What better legacy could he leave than being the man who fixed California’s seemingly insurmountable problems?

• I gleaned additional insight into Jerry Brown shortly after he was elected mayor of Oakland. He came to a reception hosted by Nat Goldhaber and to celebrate the IPO of startup Cybergold. Nat is another founder of Claremont Creek Ventures. I brought one of my children, then a baby, and asked Brown to pose with him for a picture. “I don’t do babies,” he responded. That was telling, and in a very good way. Brown is iron-willed man who does what he wants and what he thinks is best, not what he is told. He won’t be dissuaded from fixing California.

[Editor's Note: This is part of a series of posts from Xconomists and other technology and life sciences leaders from around the U.S. who are weighing in with the top surprises they've seen in their respective fields in the past year, or the major things to watch for in 2011.]

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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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PerkinElmer has recently struck a deal that it hopes will fuel its growth in the human and environmental health markets, among other things. Rob Friel, the chairman and chief executive of the Waltham, MA-based maker of lab analytical tools, gave me his personal take on his firm’s (NYSE: PKI) sale of its illumination and detection solutions (IDS) business in an interview last week.

The company took in $482 million from the sale of IDS to the New York-based private equity firm Veritas Capital. The deal works well with its strategy to invest more money into growing its core businesses that serve customers in the diagnostics, biotech/pharma, and environmental health markets. (Read on for more on what Friel said to Xconomy about using some of the proceeds from the IDS sale to fund acquisitions.)

While shedding IDS, which made specialty lighting and sensor components, PerkinElmer has been buying up firms in the diagnostics market—where the company sees high growth potential as healthcare dollars move toward preventive measures, Friel says. In July, the firm bought VisEn Medical, a Bedford, MA-based maker of in vivo florescence imaging technology, for $29.8 million. (Friel talked to us about the potential of that technology both in lab experiments and potentially downstream for clinical use in patients.) And back in May, PerkinElmer acquired Signature Genomic Laboratories of Spokane, WA, and its genetic testing technology for finding chromosomal abnormalities behind unexplained developmental disabilities, in a $90 million buyout deal.

In our interview, PerkinElmer’s chief also gave his take on where he sees the global economy heading. The poor economy has been cited for the company’s rounds of layoffs over the past two years. It has let go 452 workers through three layoff plans since early 2009. Also, there are 3,000 people in PerkinElmer’s IDS business that will no longer work for the company after its sale to Veritas. But Friel talked about his expectation that his company, which had 2009 sales of $1.8 billion and 8,200 employees at the end of last year, would get larger as it acquires new businesses and expands existing businesses.

Here’s an excerpt from my interview with Friel about how his company plans to grow through acquisitions and organically, as well as how talented workers and internal innovation play an important part at PerkinElmer. Also, read further for his expectation for the role of software and IT systems in advancing the firm’s offerings for human health and environmental safety customers.

Xconomy: Regarding PerkinElmer’s sale of its illumination and detection business, why is this an important deal for the company?

Rob Friel: It was a good business and well respected for what it did. But I think we wanted to be a little more focused. So this deal allows us to sell a … Next Page »

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A new 7,000-square-foot genetic testing laboratory is under construction at Sequenom’s San Diego headquarters. The San Diego Union-Tribune says today the new lab will open later this year, as the company begins to process samples in its “start-over” clinical trial intended to demonstrate the accuracy of its non-invasive test for Down syndrome. Sequenom (NASDAQ: SQNM) had to toss test results it had collected before April 2009, when the company scrubbed the launch of its test for Trisomy 21, the scientific name for Down syndrome, due to “mishandled data.” The clinical trial is being led by researchers at Women and Infants Hospital in Providence, RI, which is affiliated with Brown University. Sequenom hopes to introduce the Down syndrome screening test by late 2011. The test is sensitive enough to identify fetal DNA circulating in the pregnant mom’s blood.

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The pace of life sciences news slowed in the past week, but we know from experience the lull is temporary. You can catch up on the headlines here.

—A raft of studies from provided additional evidence that a urine test from Gen-Probe (NASDAQ: GPRO) might help eliminate the need for additional biopsies in men with positive PSA tests. The results of clinical tests of PCA3 prostate cancer test were presented at the annual meeting of the American Urological Association.

—Syndax Pharmaceuticals, a biotechnology company co-founded by scientists from the Salk Institute for Biological Studies, said a small clinical study suggested its experimental drug entinostat might be effective in combination with hormone therapies against breast cancer. The Waltham, MA-based company plans a mid-stage trial.

—Alan Raffensperger was named CEO of BeneChill, which is working on a device to reduce the risk of brain damage after cardiac arrest. Raffensperger formerly headed Amgen’s nephrology franchise.

—Arena Pharmaceuticals (NASDAQ: ARNA) raised $35.5 million through an equity financing from Deerfield Management. An FDA advisory panel will consider Arena’s obesity drug lorcaserin on Sept. 16.

—It turns out the undisclosed investment in San Diego’s Synthetic Genomics by Life Technologies (NASDAQ: LIFE) of Carlsbad, CA, was $10 million. That was based on a regulatory filing made after Life made its announcement.

—San Diego-based Illumina (NASDAQ: ILMN) has lowered the cost of sequencing a person’s entire genome from $48,00 to $19,500. The genetic diagnostics company also is offering a discounted price of $9,500 to sequence the genomes of individuals with serious medical conditions—which could potentially enable doctors to tailor their treatment.

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Pathway Genomics’ plan to take genetic testing to the people continues to go badly awry.

A House panel disclosed yesterday that it is investigating personal genetic tests sold over the Internet by San Diego-based Pathway and two other companies. Rep. Henry Waxman, D-Calif., sent the companies letters seeking information about the accuracy of the tests and how they are conducted. The House panel also wants to know what the firms do with the genetic material they collect from consumers. The Wall Street Journal has the story here.

Pathway Genomics test kit

The move came after Pathway announced plans last week to sell its genetic tests in drug stores operated by Walgreen. Subsequent to the announcement, the FDA released a May 10 letter that questioned Pathway’s decision to market the test without agency approval. It told Pathway that it should explain why it believes the test does not need prior approval before it could be sold.

Walgreen and CVS, which had also planned to offer the tests, decided against doing so until the regulatory issues were addressed.

Besides Pathway, the House Energy and Commerce Committee wants information from Navigenics and 23and Me. The three companies sell tests that analyze saliva to determine genetic ancestry or genetic links to certain health conditions.

The House panel said its investigation was motivated by Pathway’s attempt to market the kits in retail stores “despite concern from the scientific community regarding the accuracy of test results.” The letter to Pathway CEO Jim Plante is here.

In a commentary in the Philadelphia Inquirer on Sunday, … Next Page »

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Buying that personal genetic test kit from the drug store is going to take longer than expected. Walgreen says it has postponed its planned sale of kits from San Diego-based Pathway Genomics, after the FDA told company its test needed regulatory approval before it could be sold in stores. Amid a proliferation of companies planning to sell similar genetic tests and services, the FDA is now considering the legality of selling such tests directly to consumers, according to The San Diego Union-Tribune. Pathway had planned to sell a $20 kit through retailers, enabling consumers to send a sample of spit in for tests that range from $79 to $249.

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San Diego’s Pathway Genomics, which announced plans last July to offer consumers a personal genome test for $250, says it will begin selling its genetic test this week at about 80 percent of Walgreens stores nationwide, according to a front page story in today’s Washington Post.

“We believe the market is ready for this,” Jim Woodman, a Pathway Genomics vice president of corporate strategy, told the newspaper. “We think there’s more awareness of genetics these days.”

For $249, a prospective patient can get a suite of tests to determine whether they carry 23 specific genetic conditions, including diabetes and polycystic kidney disease, as well as their genetic risk for 23 health conditions, including heart attack, high blood pressure, lung cancer, and multiple sclerosis. Or, for $179, the company will test for either the 23 specific genetic conditions or test their risk for 23 health conditions.

While Pathway Genomics’ over-the-counter test represents the first widespread availability of an inexpensive genetic test directed at consumers, some ethicists criticized the move and a FDA official characterized the test as an illegally marketed device. The Post quotes Alberto Gutierrez, director of the Food and Drug Administration’s office of in-vitro diagnostics, as saying, “They are making medical claims. We don’t know whether the test works and whether patients are taking actions that could put them in jeopardy based on the test.”

David Becker, Pathway’s chief science officer, says the test does not have to have FDA approval, based on the company’s understanding of current regulations. Walgreens is expected to begin selling the kits, beginning Friday, at 6,000 of its 7,500 stores.

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San Diego-based Sequenom (NASDAQ: SQNM) says it has obtained rights to develop and commercialize a diagnostic test from New Haven, CT-based Optherion to predict a patient’s genetic predisposition to late-stage, age-related macular degeneration, a progressive eye disorder that can lead to a loss of central vision. Financial terms of the licensing agreement were not disclosed. Once the test is developed, Sequenom says it plans to market the new test next year under its SensiGene brand for genetic tests.

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San Diego’s Sequenom, which postponed release of its prenatal test for Down syndrome, disclosed in a filing that the Securities and Exchange Commision has initated an investigation into the company’s mishandling of data supporting the genetic test. The company says it received written notification of the probe from the SEC on June 29. The value of Sequenom’s shares plunged by 70 percent on April 29, when the medical diagnostics company said it had found inconsistencies in research and development data for its SEQureDx technology. The company says it plans to cooperate with the SEC and its own internal investigation is continuing.

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A suburban healthcare group began selling personal DNA testing kits in San Diego this week, enabling ordinary people to buy an over-the-counter test to determine their predispositon to genetic disease.

The Personal Genome Service packages, which retail for $399, were previously only available online. The first DNA kits ordered by San Diego’s Palomar Pomerado Health (PPH), the largest public healthcare district in California, were quickly purchased by PPH CEO Michael H. Covert and other employees, according to Andy Hoang, a PPH media relations manager. “This truly interests people,” Hoang said. The healthcare district, which operates two hospitals and provides a variety of other medical services, has received hundreds of inquiries about the kits, Hoang said. Making the DNA kits available to the public, he added, puts PPH at the forefront of preventive personalized health care.

The diagnostic kit was developed by 23andMe, a startup based in Mountain View, CA, that received $8.9 million in Series A venture funding in 2007 from Google, MDV, Genentech, and New Enterprise Associates. The CEO, Anne Wojcicki, is married to Google co-founder Sergey Brin. To perform the test, a customer spits into a test tube (23andMe maintains a blog called, The Spittoon) and sends the sample to 23andMe for diagnostic screening that uses a machine developed by San Diego-based Illumina. Customers are sent information about their genetic makeup and whether they are genetically prone to certain diseases or characteristics.

The San Diego Business Journal pointed out that California regulators last year questioned the accuracy and validity of the tests. 23andMe was cleared to do business again. Some experts have warned that genetics is much more complex than a quick do-it-yourself test.

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It was almost exactly a year ago that Microsoft launched its HealthVault service, a secure online database for users to store and manage their medical records. And in recent months, we’ve reported on the software giant’s increasing efforts in health care, including its new partnerships with prescription drug provider CVS Caremark and Boston, MA-based health startup American Well. Now, Microsoft is teaming up with San Diego-based Scripps Health to study the long-term effects of personal genome testing on health and lifestyle.

The study, which is co-sponsored by the Bay Area firms Affymetrix and Navigenics, seeks to do genetic scans on as many as 10,000 people affiliated with the non-profit Scripps Health system. The scans and analysis will tell participants about their genetic risk for health conditions like diabetes, obesity, heart attack, and certain types of cancer. But the point of the study is to follow what happens after that: will participants change their lifestyle to combat their newfound health risks, and if so, how? The plan is to track their behaviors over 20 years using detailed questionnaires and periodic health surveys. To protect the privacy of users, the identifying information on their saliva samples and questionnaires will be “encrypted and kept in a secure database,” according to Scripps.

What’s in it for Microsoft? Participants will be able to store their clinical and lifestyle information in a Microsoft HealthVault account, and access it or share it with health care providers. “This collaboration is a significant step forward in empowering people to proactively address their specific individual health needs, as well as give clinical researchers access to a broader pool of genetic data to develop new disease treatments,” said Peter Neupert, corporate vice president of Microsoft’s health solutions group, in a statement.

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