After Carlsbad, CA-based Verdezyne disclosed last month that it plans to raise more than $15 million in venture funding, I arranged to sit down with Damien Perriman, the company’s vice president of business development.

As it turns out, the startup that was founded in 2005 as CODA Genomics has essentially re-engineered itself over the past 18 months. The company overhauled its core business strategy, recruited a new CEO, E. William Radany, along with a new management team, changed its name, and moved its headquarters from Orange County to Carlsbad, CA, about 28 miles north of San Diego. In changing its name to Verdezyne, the company created an identity that is better aligned with its revised focus on the “green design” of biofuels and industrial chemicals.

The company initially was focused on technology spun out from UC Irvine that used specialized computer algorithms to design synthetic DNA. The company offered its services in Computationally Optimized DNA Assembly, or CODA, to help drug discovery teams at pharmaceutical customers like Eli Lilly and Genentech design synthetic genes that could be used to maximize the production of certain proteins for their biotech drug manufacturing processes.

Perriman, who joined Verdezyne in February, tells me, “Our investors made a decision in 2008 that we could make a lot more money by doing the production ourselves.”

With its extensive experience in computational biology and bioinformatics, Verdezyne saw the value in creating high-diversity libraries of genes, so that various genes could be inserted into fast-dividing yeast cells (and other micro-organisms), essentially programming the microbes to produce enzymes it would not otherwise produce. Verdezyne landed a federal grant last month to help build out its genomic library.

“We prefer to work with yeast,” Perriman says, “but we can work with any fungi or bacterial organism.”

The company, which now has 26 employees, has identified three primary markets for its technology.

The first and most obvious target is an …Next Page »

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NanoString Technologies, the maker of a machine that lets scientists digitally analyze how genes are turned on or off in a tissue sample, just won a glowing endorsement from one of the biggest names in biology—Eric Lander of the Broad Institute of MIT and Harvard.

The Seattle-based company has nailed down a three-year research collaboration with the Cambridge, MA-based Broad Institute to look at how networks of hundreds of genes work in concert to form immune defenses against foreign invaders. Financial terms aren’t being disclosed, but NanoString has sold the Broad a couple discounted nCounter machines that normally retail at $235,000 apiece, and will provide proprietary reagent chemicals to operate them, according to acting CEO Wayne Burns. In return, NanoString gets certain intellectual property rights from the collaboration, advice on how to improve its tool, and some golden word of mouth.

NanoString, a private company founded in 2004 with technology from the Institute for Systems Biology in Seattle, has been building stronger ties to the Broad over the past year as people there have started using one of the first commercially available machines, Burns says. The mounting enthusiasm at the institute was instrumental in helping NanoString nail down a $30 million venture capital round in June. The round was led by Clarus Ventures, which has an office just a couple blocks from the Broad. Word has spread to the point that 15 researchers at the Broad are now involved in 20 separate collaborations to see whether the NanoString technology can yield biological insights that couldn’t realistically be attained with competing instruments, Burns says.

“NanoString offers the ability to look at hundreds of genetic markers across many samples at relatively low cost and with high sensitivity. They have developed exciting technology with potential applications to a wide range of scientific problems,” said Lander, the director of the Broad Institute, in a NanoString statement. “We look forward to working together to explore new ways of using of this technology.”

That kind of endorsement is sure to carry weight in the biomedical research community, and can’t hurt a fledging company trying to increase sales. “If you’re in the industry you know exactly who Eric Lander is, the reputation he has, as well as that of the Broad. We have the best of the best endorsing our technology,” Burns says.

For those who are new to the NanoString story, the idea is to allow researchers to look at a large number of genes, with digital precision, to see the extent to which they are turned on or off in a given sample. It’s the sort of technology that’s supposed to help researchers do …Next Page »

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The work leading to Brent Gaylord’s dissertation on using light-emitting polymers to detect bits of DNA was more far more than an academic exercise. His initial paper, and the intellectual property that was subsequently generated, directly lead to the creation of San Diego’s Sirigen.

Gaylord co-founded Sirigen six years ago to enter a business plan competition at UC Santa Barbara, where he earned his doctorate in materials science. Sirigen won the contest, and has been moving forward ever since. Today the venture-backed diagnostics technology startup has 15 employees and formal collaborations with five companies. Gaylord, the company’s chief scientific officer, says it is too soon to identify the collaborators but assures me that “they are names you’ve heard of.” The first product using Sirigen’s technology is expected to reach the marketplace sometime next year, he says.

Sirigen has no intention of producing its own line of complete diagnostic kits or detection devices. Instead the company is pursuing an “Intel Inside” strategy of getting its technology into diagnostic products made by others. Sirigen’s polymers use high-sensitivity fluorescence (HSF) to enhance the ability of conventional assays to detect specific antigens, proteins or bits of DNA. Gaylord says the technology can detect smaller quantities of target substances than conventional tests.

Also, the technology can offer improvements over conventional immunoassays—tests that commonly use an enzyme linked to an antibody to detect the presence of drugs or pathogens, such as the viruses that cause AIDS or hepatitis. Gaylord says existing immunoassays can detect just one target at a time, but an assay that alternatively incorporates Sirigen HSF technology can sense multiple targets with little loss in accuracy.

The result is faster, and potentially cheaper, testing.

Gaylord says the technology is generating interest because it has numerous applications, ranging from biological threat detection to drug discovery. With funding from the Army, for instance, Sirigen successfully demonstrated the ability of its technology to detect …Next Page »

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It may be that TEDMED founder Richard Saul Wurman is the Brett Favre of emcees, or perhaps he’s like Al Pacino in Godfather III, who proclaims in exasperation, “Just when I thought I was out—they pull me back in!”

But after a five-year hiatus, TEDMED has returned this week (opening last night at San Diego’s Hotel del Coronado), and Wurman, who is both the TEDMED chairman emeritus and lead master of ceremonies, stepped back onstage for what must be a familiar role. He is the folksy glue that brings the sometimes-esoteric show back to Earth as leading thinkers in medicine, health care, and life sciences deliver 15- to 20-minute talks about their work and big ideas.

So, for example, after J. Craig Venter, a leader in genomic sequencing and synthetic biology, ended his presentation last night, Wurman took the stage and reassured the crowd by saying, “I’ve heard Craig speak a number of times. And I don’t understand it all…”

The four-day TEDMED symposium, which costs $4,000 per person to attend (and is sold out), follows a format similar to the first conference in Technology, Entertainment, and Design (TED) that Wurman established in 1984. Chris Anderson acquired rights to that TED business in 2001 and Boston entrepreneur (and Xconomist) Marc Hodosh got rights earlier this year to TEDMED and its focus on health care. Wurman told us he had agreed to help Hodosh out this year, and between sessions he often helped the audience by identifying themes they would likely see emerging in presentations to come.

“Maps are also patterns, and patterns are the threads that run through this conference,” Wurman said. “They are the constructive tissue that holds ideas together.” Those emerging ideas include:

—J. Craig Venter, the co-founder and CEO of San Diego-based Synthetic Genomics, said about 21 million genes have been discovered since the first genome was sequenced in 1995—“and over 20 million have been taken from the deck of my sailboat.” (Venter’s sailboat, the Sorcerer II, embarked from San Diego in March on an expedition to collect and sequence marine organisms.) Venter also outlined synthetic biology research that aims to transplant a chromosome from one cell into another cell—and turn it into a different species. Venter says, “I think it’s possible we’ll have the first species powered by a synthetic chromosome by the end of this year, although that’s something I’ve been saying now for two years.”

—Anthony Atala, a urologist and director of the Wake Forest Institute for Regenerative Medicine, showed how researchers are using “smart biomaterials” to patch damaged organs and grow new heart valves, blood vessels, liver, muscle, skin, ears, and even fingers. Still, Atala said, “90 percent of patients on transplantation waiting lists are waiting for kidneys.” He also noted that the organs with lots of blood vessels—the heart, liver, and kidney—are the hardest to grow.

—Bill Davenhall, who leads the health and human services marketing team at ESRI, the Redlands, CA, company that specializes in geographic information systems, argued for the creation of new programs and training in “geo-medicine”—and for ensuring that GIS data can be included in electronic health records. He demonstrated his point with a map that shows geographical areas in mid-Atlantic and Midwestern states where heart attacks occur far more frequently than other parts of the country. Davenhall, who said he suffered a heart attack in 2001, associates environmental factors in the places where he has lived with the higher incidence rate. He grew up with high levels of sulfur dioxide in Scranton, PA, before moving to Louisville, KY, with high levels of chloropene and benzene. He now lives east of Los Angeles in Redlands, CA, which has high levels of airborne particulates, carbon dioxide, and ozone. He told the audience, “Doctors never ask me about my place history. But if I wanted to have a heart attack, I’ve lived in the right places.”

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Amgen, the world’s largest biotech company, which has operations in Seattle and Cambridge, MA, said today that its drug for colorectal cancer slowed the spread of tumors for patients with a certain genetic profile, in a clinical trial of 1,186 patients. Despite slowing down tumors, the drug failed to show that translated into helping patients live longer. Still, it’s the second major prospective trial to suggest Amgen’s panitumumab (Vectibix) may work for patients with normal forms of the KRAS gene, and offer no benefit for patients with a more aggressive, mutated gene.

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Two scientists walked into Leroy Hood’s office in Seattle a little more than five years ago with a burning question about the genomes of dogs. They had sequenced the entire string of DNA in the canine genome for biomedical researchers, and sought out the high-speed gene sequencing pioneer for business advice. They wondered what it would take to build a business that sells information to pet owners, who might be curious about what breed their dog is.

This conversation in the summer of 2003 led to the formation of Seattle-based Argus Genetics, a spin-off company from the Fred Hutchinson Cancer Research Center. The technology has since been licensed to Mars Inc., the $21 billion-a-year candy and pet food giant in McLean, VA, which has turned it into a test called the Wisdom Panel MX. I heard the story of how this idea evolved into a product from Carl Weissman, a venture capitalist at Seattle-based Accelerator (and OVP Venture Partners), and Neale Fretwell, a business development manager for Mars’s veterinary division.

The original idea from Elaine Ostrander and Leonid Kruglyak at the “Hutch” intrigued Weissman when he got the referral, even if it made some of his investing partners roll their eyes because it wasn’t their usual swing-for-the-fences-to-treat-cancer kind of bet. Weissman and Kristina Burow, a Kauffman Fellow now with Arch Venture Partners, started their research. They learned there are 60 million dogs in the U.S., and half are purebred, while half are from mixed-breed heritage. They talked to breeders and purebred owners, and found out they didn’t want the test because it might disqualify purebreds from shows. That left mixed-breeds. There are 30 million of those dogs, and the test could be developed and sold for $100. That meant if Argus could capture at least 11 percent of the market, it could have a $330 million opportunity.

“Dog people are serious,” Weissman says. “It looked like an interesting business to us.”

It also seemed like something that could take off quickly, Weissman thought. It was an application of cutting-edge science that didn’t need to pass the strict scrutiny of the FDA, or go through hassles with reimbursement from health insurers. He negotiated for the rights to the technology from the Hutch, and set up the company in a structure that left what he calls “significant ownership stakes” for Ostrander, Krugylyak, and the Hutchinson Center, who get royalties on sales from Mars. (Ostrander has since left for the National Institutes of Health, and Krugylak is now at Princeton University.)

Mars got an early bead on this technology because it has sponsored some of Ostrander’s research in the past, Fretwell says.

Here’s how it works. A pet owner comes into a veterinarian’s office, curious about what breed their dog is. They provide a blood sample, …Next Page »

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Illumina (NASDAQ:ILMN), a San Diego-based provider of genetic and biological research tools, says it has formed an commercial alliance with Oxford Nanopore Technologies, an Oxford, England, developer of a single-molecule DNA sequencing system. Illumina will invest $18 million in Oxford as part of the deal, under which Illumina will exclusively sell and distribute Oxford’s experimental system worldwide.

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Geospiza, a Seattle-based maker of software to help researchers analyze reams of genomic data, said today it has sold its FinchLab product to the Molecular Genetics Core Facility shared by Children’s Hospital Boston and Harvard Medical School. Terms of the transaction weren’t disclosed, although Geospiza president Rob Arnold said it June that it typically charges $30,000 for software, or about $2,500 a month.

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San Diego’s Illumina has a pretty amazing story to tell about exponential growth. The maker of genetic analysis tools has beaten or matched Wall Street earnings forecasts for a dozen quarters in a row. It has grown from 239 employees in 2004 to an estimated 1,604 by the end of this year. But when it invited investment analysts to its headquarters yesterday for an in-depth rundown on the state of the company, Illumina’s stock fell 5 percent on another lousy day for the markets.

The Wall Street crowd apparently thinks it’s a tough economy for selling super-sophisticated genome analysis machines, which cost more than $450,000 fully-equipped, plus as much as $200,000 a year in consumable supplies to keep them running. Since Illumina (NASDAQ: ILMN) did a 2-for-1 stock split on Sept. 23, its value has sunk 33 percent, to $27.71 at the close Thursday.

CEO Jay Flatley painted a broad picture of what Illumina does in his opening remarks at analyst day, which I watched on a webcast. It makes tools for high-speed DNA sequencing, genotyping of a segment of an individual’s genetic code, and tests that examine to what extent an individual’s genes are dialed on or off. By bringing down the cost of full genome sequencing to less than $100,000, Illumina is one of the companies that has been ushering in the era personalized medicine, along with its competitors, Foster, City, CA-based Applied Biosystems, Roche, and Cambridge, MA-based Helicos Biosciences. Illumina’s new goal is to bring that price down to $10,000, Flatley said.

“It’s within our sights,” he told analysts.

Getting there isn’t easy. Illumina has had struggles to manufacture its arrays to keep up with demand, mostly from government, academic, and hospital labs, Flatley says. It placed special emphasis—unusual for a Wall Street presentation—on its initiatives to recruit and develop enough talented workers to keep up with its rapid-fire growth.

To give a sense of where that growth is coming from, Illumina brought in Peter Gregersen of the Feinstein Institute for Medical Research on New York’s Long Island. Gregersen, who does genetic research for autoimmune diseases like rheumatoid arthritis, gave a fascinating talk about how the new tools are enabling him to ask new questions.

Autoimmune diseases are a bunch of conditions in which the immune system goes haywire and starts attacking healthy tissue instead of foreign invaders like viruses and bacteria. These diseases affect millions of people—about one in 20 people in the country—with rheumatoid arthritis, lupus, multiple sclerosis, Type 1 diabetes, and inflammatory bowel disease, to name a few, Gregersen said. Their causes aren’t really known, although researchers suspect multiple genes play a role. For rheumatoid arthritis, about 10 genes are thought to be responsible, and for lupus it’s 20, he said.

By looking broadly at the genetic profiles of patients with these diseases—and with costs coming down to the point where large numbers of patients can feasibly be sequenced—new sequencing tools will lead researchers to much deeper understanding of these diseases. “This is an engine of hypothesis generation,” Gregersen said. …Next Page »

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Illumina, the San Diego-based maker of genetic analysis tools, said today its board has authorized a plan to buy back $120 million worth of the company’s stock. Illumina shares fell $7.51 a share since the beginning of the week, until the repurchase plan was announced, even after the company raised its financial forecast for the year. Shares recovered a bit on the news, climbing 85 cents, or 3.6 percent, to $24.16 at 11:34 am Eastern time. “Given the underlying strength of Illumina’s business and the recent turbulence in the equity markets, we think our current stock price is undervalued,” said Jay Flatley, Illumina’s CEO, in a statement.

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[Updated July 23, 2008, see editor's note below.] Nanostring Technologies, a company born in the lab of biotech pioneer Leroy Hood, has grown up and is starting to sell a product in the real world. The privately-held maker of gene-analysis tools in Seattle has booked the first sale of its commercial product, and is planning to deliver it within weeks.

Nanostring hopes it’s the first step in a plan to shake up the world of genetic analysis with its instrument, called nCounter. The machine is designed to enable large-scale genetic analysis experiments, that might, for example, compare 100 genes from 100 different patients with diabetes to see how the patients respond to treatment. The system, which provides a digital readout that can say precisely how much a given gene is dialled on or off, is meant to compete with Foster City, CA-based Applied Biosystems’ TaqMan 7900 instrument, known in biology lingo as a reverse-transcriptase PCR test.

The market for such RT-PCR machines is worth an estimated $1 billion a year, and is growing at a 20 percent annual clip, says Perry Fell, Nanostring’s CEO, previously a co-founder of Bothell, WA-based Seattle Genetics (NASDAQ: SGEN). So far, Nanostring has booked one order from an unnamed customer for its new system at $235,000, and is doing test runs for many more potentially interested buyers from academia, pharmaceuticals, and diagnostics companies, Fell says.

Even though the machine costs about four times as much as the TaqMan, the disposable component of Nanostring’s device is much cheaper and more automated, saving a bundle on time and labor, Fell says. Like most technologies associated with Hood, who co-founded Applied Biosystems (NYSE: ABI), the Nanostring machine can enable a new kind of audacious experiment, providing a digital readout on many more genes and many more cell samples than was possible before.

Fell used this analogy to compare his company’s machine to the TaqMan, which costs $60,000:
“It’s a bit like asking a farmer to compare the cost of his lawn mower to his tractor,” Fell said in an e-mail. “The 7900 can run a maximum of 1,500 data points a day, whereas the nCounter Analysis System is currently generating over 40,000 data points a day and we expect that to almost double within the next six to nine months.”

So there. The company has gotten a bounce in its step since March, when its machine was featured on the cover of the journal Nature Biotechnology. The article led to numerous requests for test runs from potential customers, Fell says.

The road hasn’t always been so smooth. The company, founded in 2004, has raised about $17 million in venture capital from Kirkland, WA-based OVP Venture Partners and Menlo Park, CA-based Draper Fisher Jurvetson. Some technical snags probably set the company back six to 12 months, including the departure of technical founder Krassen Dimitrov, said Chad Waite, a partner with OVP.

“It definitely set us back, but we’re happy where we are now,” Waite says. “We made the cover of Nature Biotechnology, and not a lot of other companies around here can say that.”

[Editor's note: After this article appeared, Nanostring technical founder Krassen Dimitrov contacted Xconomy to dispute the company's assertion that his departure had contributed to a delay in development of a high-throughput screening product. Dimitrov left the company in 2005 and is now working in Australia, but said delays in Nanostring's product development were caused by the board's initial opposition to pursuing a high-throughput product. According to Dimitrov, he was fired for advocating such an approach, but continued to advocate for it among the investors even after his termination. (For more on Dimitrov's point of view, see his comment below.) Nanostring CEO Perry Fell disputes Dimitrov's contention that prolonged board opposition delayed the high-throughput approach, but declined to comment on the circumstances of Dimitrov's exit from the company.]

Fell is starting to think about raising a third round of venture funding, of about $15 million to $20 million, which he says will be the last time he seeks capital before the company turns profitable. The cash will be used to build up manufacturing, sales and marketing, and development, he says. The staff will grow from about 41 to 70, so the company is already looking to move from its offices along Elliott Bay to a new building at Fairview and Mercer Streets.

“We are really focused on two things,” Fell said during a visit to his office last week. “Customer satisfaction, making sure our customers are happy. Then getting to profitability. Those are our key goals.”

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