Vertex Pharmaceuticals went from king of the hill in the treatment of hepatitis C to yesterday’s news in about six wild months. But while many on Wall Street say Vertex’s big drug will soon become obsolete, Vertex and its small partner in South San Francisco have quietly put themselves in position to defend a big share of this future multi-billion dollar market.

Cambridge, MA-based Vertex (NASDAQ: VRTX), which has significant operations in San Diego, is running a series of small clinical trials this year that will mix and match combinations of antiviral medicines against hepatitis C. These trials will help determine whether Vertex and its partner, South San Francisco-based Alios Biopharma, have hit upon a combination of drugs that can raise the cure rate, and reduce side effects, for millions of patients with this liver-damaging virus.

While Vertex’s new drug has been a huge step forward in the past year, the ultimate way to fight the fast-mutating virus, many scientists believe, will be by putting together a cocktail of antivirals that attack hepatitis C from multiple angles like with HIV.

“There isn’t one magic pill that will solve the problem,” says Vertex CEO-to-be Jeff Leiden. “It’s clear the HCV space will evolve into different combination treatments for different patients. It’s not yet clear what the best combination is going to be. What you want is to have the component parts in your company so you can put them together.”

Vertex's Jeff Leiden

The hepatitis C world saw dramatic upheaval in the past year as researchers learned more about antivirals in development. Vertex won FDA approval in May for its new protease inhibitor, telaprevir (Incivek), which doubled the cure rate to about 80 percent for new patients when given in tandem with standard pegylated interferon alpha and ribavirin. About 25,000 people rushed in to get treated with the new combo regimen in its first seven months on the market, generating hundreds of millions in cash flow per quarter for Vertex, and pushing it into the black.

Exciting as it all was for physicians, patients, and Vertex shareholders, the company was soon upstaged. Researchers have long been looking for a way to get rid of the injectable interferon part of the regimen, which causes nasty flu-like symptoms that people must endure for months. To go beyond combo therapies (like the one from Vertex and another from Merck that include injectable interferon), the next step is to hit the hepatitis C virus with not just protease inhibitors, but also drugs from other classes—nucleotide polymerase inhibitors, and non-nucleotide polymerase inhibitors.

Princeton, NJ-based Pharmasset (NASDAQ: VRUS) stole the show last November at the American Association for the Study of Liver Disease when it said its nucleotide polymerase inhibitor cured all 40 patients with certain hepatitis C genotypes in a small study—a result that led to its $11 billion acquisition by Foster City, CA-based Gilead Sciences (NASDAQ: GILD). A few weeks later, another maker of drugs in that class, Alpharetta, GA-based Inhibitex (NASDAQ: INHX), got bought by Bristol-Myers Squibb for $2.5 billion. Separately, Bristol-Myers Squibb released some more promising clinical results from its own pipeline just last week.

Those developments got everyone talking about a new paradigm in hepatitis C, which many on Wall Street believe will leave Vertex in the dust. Jason Kantor, an analyst with RBC Capital Markets in San Francisco, said in a Dec. 19 note to clients that “the consensus view is that Vertex’s HCV franchise will essentially go to zero beyond 2015.” Vertex stock has dropped almost 40 percent in the past year, down from its 52-week high of $58.87 to $35.86 at yesterday’s close.

While Leiden has spent much time talking with investors about Vertex’s other drugs in development—particularly one expected to hit the market this year for cystic fibrosis—he says the company isn’t about to surrender in the hepatitis C market. He has a plan intended to allow Vertex to compete beyond 2015, when the first all-oral, interferon-free regimens are expected to could come along and replace today’s standard of care.

Sometime before the end of March, Vertex expects to see results from an early-stage study of an all-oral combo regimen of telaprevir (a non-nucleotide polymerase inhibitor called VX-222 that it acquired from a Canadian company in 2009) and the usual ribavirin. If Vertex can cure about 75 percent to 80 percent of patients with this cocktail, and reduce side effects by eliminating interferon, Leiden says the company would be ready to go to pivotal clinical trials this year with its own all-oral combination.

“If we can do that, it will be a very exciting result. If you take that regimen into pivotal trials, now we’re talking about 2014 to finish those trials,” Leiden says.

And that isn’t the only combo Vertex has in mind. Within weeks … Next Page »

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Alan Frazier has been on record for a long time saying that the traditional biotech venture model is broken, and in severe need of updating. He’s been working on a new strategy for the past seven years or so, but the approach is facing its biggest test ever as Frazier prepares to raise his first fund in the wake of the Lehman/Fannie/Freddie/AIG financial calamity of 2008.

Frazier is the founder and managing partner of Frazier Healthcare Ventures, a 20-year-old Seattle and Menlo Park, CA-based venture firm that has $1.8 billion under management. The firm’s last fund, Frazier Healthcare VI, assembled $600 million in November 2007 to put to work in biotech, medical device, and healthcare growth equity opportunties. Frazier hasn’t formally initiated a fundraising process with pensions, endowments and other institutions, but on average he has raised new venture funds roughly every three years. “It’s time for us to raise a new fund,” he says.

The big story this year in biotech venture capital is the sheer number of funds—most estimates are between one-fourth and one-half—that are thought to be slowly winding down as they struggle to show the returns that are needed to keep raising new funds. Frazier, during an interview at the JP Morgan Healthcare Conference last week, said he expects many peer firms—but not his—to “go into hibernation.” He’s forecasting his fund will be one of the survivors because it decided back in 2005 that it no longer made sense to build biotech companies that intend to go public, and that they needed to be tailor-made to be acquired by Big Pharma and Big Biotech companies.

“For a long time, we in the venture business created the wrong companies for [big companies] to buy,” Frazier says. “We’d build something with 150 employees and four projects, when what they want are 25 people and one project.” The payoff, he says, “has been pretty dramatic. Obviously, it takes a while for that kind of strategy to evolve.”

Like any firm that’s been around for a while, Frazier has its share of wins and losses (and it obviously prefers to talk about the wins). Seattle-based Calistoga Pharmaceuticals represented a 3.74x return on Frazier’s investment when it was acquired by Gilead Sciences last year for $375 million up front, although the return could rise to 6x Frazier’s investment if certain milestones are met. Other portfolio companies like Oakland, CA-based Cerexa, San Diego-based Calixa Therapeutics, Carmel, IN-based Marcadia Biotech, and Cambridge, MA-based Alnara Pharmaceuticals all ended up getting acquired in the last two years at multiples between 3.39x times original investment on the low end (Alnara) through 10.67x times investment on the high end (Marcadia), according to data published in a Frazier newsletter. There was even one rare IPO in the portfolio, from Boulder, CO-based Clovis Oncology (NASDAQ: CLVS).

Of course, there were less-happy events for Frazier in the past year, too. Seattle-based Calypso Medical Technologies—which raised more than $175 million in venture capital since its founding in 1999—was sold for $10 million last year, plus undisclosed milestones. And just a few months after … Next Page »

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Japan-based Takeda Pharmaceuticals, which has its cancer drug development operations in Cambridge, MA, said today it is acquiring San Diego-based Intellikine to get ahold of the startup’s portfolio of cancer drugs.

Takeda said it has agreed to pay $190 million upfront, plus another $120 million in future milestone payments, to acquire privately held Intellikine. Through this deal, Takeda is getting its hands on a portfolio of small-molecule drugs that are made to block many of the different variations of a hot target in cancer biology-the PI3 kinase pathway.

This move inserts Millennium:The Takeda Oncology Company into one of the most competitive fields in the cancer drug business, pitting it against GlaxoSmithKline, Roche, Novartis, and Gilead Sciences, among others. Intellikine has long said it differentiates itself through its in-depth understanding of the four common variations of the PI3k pathway, and marrying that biology with a prolific chemistry team that created more than 1,500 different drug candidates to block those various targets. Two drug candidates in particular, dubbed INK218 and INK1117, were singled out in today’s statement by Takeda as having potential to be best-in-class compounds.

“As single agents or in different combinations with novel molecules within our robust pipeline, we anticipate that these assets will be able to deliver transforming therapies to cancer patients,” Millennium: Takeda’s CEO, Deborah Dunsire, said in a statement.

Intellikine, founded in September 2007 with a $12.5 million venture financing, grew out of science from the lab of Kevan Shokat at the University of California San Francisco. The company raised a $28 million Series B venture round in July 2009, from a syndicate that included Novartis Bioventures, Biogen Idec, FinTech Global Capital, and US Venture Partners, as well as previous investors Sofinnova Ventures, Abingworth Management, and CMEA Ventures. In July 2010, Intellikine pulled in another $13.5 million upfront through a collaboration with Cambridge, MA-based Infinity Pharmaceuticals (NASDAQ: INFI).

The Intellikine takeover marks the second time this year that a maker of PI3kinase inhibitors has been acquired. Back in February, Gilead Sciences acquired Seattle-based Calistoga Pharmaceuticals for $375 million upfront, plus another $225 million in potential milestone payments.

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Bruce Montgomery, the prominent Seattle biotech entrepreneur, has raised $5 million for his latest startup, Xconomy has learned.

Cardeas Pharma has pulled in $5 million in equity financing, in the first of two planned closings, Montgomery said in an e-mail. The syndicate is being led by Novo Ventures, and includes San Diego-based Avalon Ventures, Seattle-based WRF Capital, and Wayne, PA-based Devon Park Bioventures, according to Thong Le, a managing director with WRF Capital. The deal will be worth $7.5 million to Cardeas once the second part of the financing is complete, Le says.

The company plans to use the money to run both preclinical experiments and initial clinical trials of what Montgomery calls “a novel therapeutic to be used in hospitals.” Montgomery, who said he is traveling in Europe, didn’t immediately respond to a request for more information about where the drug comes from, and what disease it is being designed to treat. But Le says Cardeas is licensing technology for a drug/device combo from a company Montgomery used to work with. Montgomery, whose track record includes stints at Gilead Sciences, Corus Pharma, and PathoGenesis, is joined in the new venture by chief operating officer Melissa Yeager, a regulatory affairs expert he worked with at his last three companies.

“They are tried-and-true entrepreneurs who have worked together before and have had some good successes,” Le says.

Montgomery has been scoping out this next move since August 2010, when he left his job as senior vice president of respiratory therapeutics at the Seattle branch of Gilead Sciences (NASDAQ: GILD). At Gilead, Montgomery oversaw the development and FDA approval of aztreonam lysine (Cayston) as a new inhalable antibiotic for patients with cystic fibrosis. That program was started by Seattle-based Corus Pharma, which Montgomery founded and sold to Gilead for $365 million in 2006. Montgomery, a pulmonologist by training, previously developed another inhalable antibiotic for cystic fibrosis at Seattle-based PathoGenesis, which was acquired by Chiron for $700 million in 2000.

Cardeas Pharma reported in a regulatory filing back in February that it had raised $1 million in equity financing from a group of 18 investors.

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[Update: 10:40 am ET] Vertex Pharmaceuticals is getting a new CEO, as it faces tough new competition with its flagship hepatitis C drug and prepares to roll out a second new medicine for cystic fibrosis.

Cambridge, MA-based Vertex (NASDAQ: VRTX) said today that Jeff Leiden, a member of the company’s board and a managing director at Clarus Ventures in Boston, will replace Matt Emmens as president and CEO on Feb. 1. Emmens plans to remain a full-time executive chairman until May, when Vertex says he will retire from a full-time role at the company, but remain a member of the company’s board.

[Update with Emmens's age] Emmens, 60, is the former Merck executive who took over from founder Josh Boger as CEO in May 2009, as the company was finishing up clinical trials and preparing for the commercial push of a groundbreaking new therapy for hepatitis C, telaprevir (Incivek). The drug was cleared by the FDA in May, and although analysts expect it to be a billion-dollar seller, it quickly surpassed Wall Street sales expectations in its first couple quarters, allowing Vertex to report its first product-driven quarterly profit in its 22-year history.

But the hepatitis C landscape has changed in just the past couple months, as Gilead Sciences moved to acquire a competing drugmaker for $11 billion, and Vertex’s stock has plunged amid fears that it will soon be upstaged in the marketplace.

Shares jumped as high as $58 a share earlier this year, then plummeted all the way to $30.54 at yesterday’s close, leaving Vertex with a market valuation of $6.3 billion. Most of the value is based on the prospects for Incivek, although Vertex also has an application in to the FDA to start selling a new cystic fibrosis drug, ivacaftor (Kalydeco). That drug is getting a faster-than-usual six-month regulatory review, which the FDA sometimes grants to groundbreaking new medicines. The FDA deadline to finish its review is April 18.

“Under Matt’s leadership, Vertex established itself as a company capable not only of discovering important new medicines, but of successfully bringing those medicines to patients,” Leiden said in a statement. “As a member of the Vertex Board, I have been extremely impressed with the company’s ability to retain its clear focus on both groundbreaking science and improving the lives of people with serious diseases. It will be a privilege to lead Vertex at this exciting time and to further build the organization as we prepare for the global launch of our second new therapy, advance our diverse pipeline and build value for shareholders in the years ahead.”

Leiden, 56, is the former president and chief operating officer of Abbott Laboratories, where he gained experience in the highly competitive rheumatoid arthritis drug market with adalimumab (Humira).

Emmens, in a company statement, added: “I am proud of the accomplishments we have made during my almost three years at Vertex and believe the company is well-positioned to bring forward additional innovative new medicines. Jeff brings significant and broad leadership experience to Vertex, and I am confident that his understanding of the company, combined with his unique blend of scientific, commercial and financial expertise, will help Vertex deliver on its goals in the future.”

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Biotech rivalries are sometimes a bit like boxing matches, where you have two lone fighters vying for the prize. But the hepatitis C market is turning into a battle royal that’s more wide open and unpredictable, with all the competitive maneuvering, surprise crashes, and comebacks you might expect from the Daytona 500.

The medical advances in hepatitis C have been dizzying this year, especially in what it means in terms of multi-billion dollar business implications. The safest thing to say is that there’s plenty of good news for patients this year, but that shareholders in the major hepatitis C drug developers had better hold on tight as a new standard of care gets established.

Some commentators figured that Gilead Sciences (NASDAQ: GILD), the world’s biggest maker of HIV drugs, had essentially locked up the dominant position in this new drug class through its $11 billion acquisition last month of Princeton, NJ-based Pharmasset (NASDAQ: VRUS). But it’s still too soon for anyone to declare victory over the wily and fast-mutating virus that causes hepatitis C. Given the way drug development is going now, it’s possible we could have dueling antiviral drug cocktails that cure almost 100 percent of patients within five years. And before we get there, we’re going to see some fascinating chess moves—and probably a few surprising collaborations—from companies like Vertex Pharmaceuticals, Merck, Roche, Johnson & Johnson, Bristol-Myers Squibb, and Abbott Laboratories, as well as several smaller biotech startups like Alpharetta, GA-based Inhibitex (NASDAQ: INHX).

The Pharmasset compound that prompted Gilead to write such a big check, PSI-7977, is “certainly not a panacea, not the lone answer,” says Kleanthis Xanthopoulos, the CEO of San Diego-based Regulus Therapeutics, and the co-founder of another hepatitis C drug developer, Anadys Pharmaceuticals.

Regulus Therapeutics CEO Kleanthis Xanthopoulos

Xanthopoulos says Gilead was “taken to the cleaners,” and that the hepatitis C market is still up for grabs. “It’s going to take some time before people figure out how it plays out,” he says. The Pharmasset drug “is a powerful player, but you will need other direct-acting antivirals. You want to go to a 100 percent cure rate. I can guarantee the Pharmasset compound isn’t going to do it alone.”

Hepatitis C has never really captured big headlines in the U.S., as it has never benefitted from massive awareness boosting campaigns that have supported research for, say, HIV, or breast cancer. But hepatitis C has clearly emerged as one of the biggest opportunities in pharmaceuticals over the past few years. There are more than 3 million people in the U.S., and an estimated 170 million worldwide, with this liver infection that can lead to cirrhosis and liver cancer. Most people have never bothered to get treated, partly because the infection takes years to fully wreak havoc. The other reason is the standard of care with a combination of drugs—pegylated interferon alpha and ribavirin—causes flu-like symptoms that last for almost a year, and usually cures only 30-40 percent of patients. Essentially, most people figure the treatment is worse than the disease.

Vertex Pharmaceuticals changed the equation back in May. The company won FDA approval for a direct antiviral drug, a protease inhibitor called telaprevir (Incivek), that is added to the usual two-drug combo regimen. By adding the Vertex drug, researchers saw the cure rate boom to almost 80 percent of patients, while cutting the treatment time with the other drugs in half. The Vertex drug also significantly raised … Next Page »

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Theraclone Sciences has been searching for more than a year for a new CEO, and it found one close to home in Cliff Stocks.

The Seattle-based biotech company is announcing today that Stocks, a veteran biotech dealmaker with experience at Icos and Calistoga Pharmaceuticals, is taking over as CEO at Theraclone. Stocks is replacing Steve Gillis, the company’s chairman, who had been interim CEO since Dave Fanning died suddenly in June 2010.

Even without a full-time CEO, Theraclone has made significant strides this year. It raised a little more than $10 million in venture capital, made a splash with the discovery of some broadly neutralizing antibodies for HIV, formed a sizable partnership with Pfizer, and moved its first new drug candidate into clinical trials against the flu. Now the company is looking to continue its growth, partly by leveraging its technology through working with partners that Stocks surely knows well from his many years in business development.

“The idea is to do some select collaborations,” Stocks says. “We’re not going to do a lot and become a service entity. We’re going to have a few partnerships with strong partners, and structure them to allow Theraclone to maintain or keep a substantial portion of the value we develop with our partner.”

Theraclone, founded in 2005 at the Seattle-based Accelerator, specializes in the discovery of novel antibodies. The company works by starting with blood or tissue samples from patients, and identifying 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 rogue cell types, so Theraclone’s scientists figured it was a good idea to listen to what nature is saying, and then make genetically engineered copies of these antibodies as drugs.

Besides the flu antibody program, Theraclone is moving ahead toward its first clinical trial with an antibody for another infectious disease—cytomegalovirus. And further in the future, the company has its sights on the most lucrative market for today’s antibody drugs—cancer.

Stocks, 53, was previously … Next Page »

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Carol Gallagher, the former CEO of Calistoga Pharmaceuticals, is glad to see Gilead Sciences spending billions on acquiring a new drug for hepatitis C, rather than spending billions on stock buybacks. And Jason Rhodes, the chief business officer of Epizyme, borrowed a line from Hillary Clinton, on how “it takes a village” to raise a biotech company.

These were a few of the nuggets I took away from yesterday’s live chat on Twitter about the state of biotech startups. This was the third life sciences “Tweetchat” that we’ve done this fall, in which readers have been invited to fire off their questions about what’s new in RNA interference, biotech venture capital, and startup survival strategies. Here are some of the highlights from the afternoon:

—Gallagher on how to get by in a period of scarce biotech venture capital: “Absolutely need to demonstrate efficient use of capital and clear value inflections to get $$ and creativity to alternatives.”

—Gallagher on the role of Big Pharma partners, and other ways to finance R&D: “Pharma budgets under pressure. Disease specific foundations can be great partners e.g. Multiple myeloma, CF.”

—When asked about the effect the biotech venture capital crisis has had on entrepreneurs, Gallagher replied, “It’s more challenging but some was a needed contraction–still believe good companies get funds but challenging for early cos.”

—On the key to success with Calistoga (it was acquired by Gilead for up to $600 million). “Calistoga had a very clear and well-differentiated hypothesis that at each step the card turned over favorably and a Gr8 team,” Gallagher said.

—When Laura Strong, president of Madison, WI, Quintessence Biosciences asked Gallagher about whether “lean/virtual” biotech companies are appealing to people accustomed to raising lots of money, Gallagher jumped on it. “Agree–efficiency a must—if virtual can get it done, then Gr8. Calistoga began registration trials with 23 employees,” Gallagher wrote.

Rhodes pointed out the interesting bind that pharma partners have found themselves in. These companies are hungry for innovation to replace aging blockbusters losing patent protection, but by cutting R&D budgets, they have made it tougher on themselves to form research collaborations with small biotech companies that might plug their gaps.

—As Rhodes @JasonPaulRhodes put it on Twitter, “Hurdle for research collabs high as big pharma R&D budgets under pressure despite need for innovation.”

—While the hurdles are high, Rhodes added they aren’t insurmountable. “Even now, pharma co’s willing to collab if believe partner can deliver (and quickly) w/clear Rx target & patient groups defined,” he wrote.

—When I asked Rhodes if Epizyme is building a “diversified portfolio” of funding sources like pharma companies and disease foundations, to cushion it from the ups and downs in biotech venture capital, he took it a step further: “Creative financing a must, not Series A, B, C, then IPO. It takes a village to build a company, VCs, partners, & founds (foundations.)”

—And, in what might be the first use of Latin I’ve seen on Twitter, Rhodes essentially said there’s an essential ingredient for success in biotech: “Track record of successful execution by leadership & org sine qua non for investors, partners and recruiting.” Another way to put it: talented and driven novices are going to find some hard sledding.

Thanks to all those who tuned in to the conversation, and especially those who entered the fray with questions. I’m intrigued by how these chats bring readers together from all over the map to discuss key topics we write about regularly. For those of you in the biotech business just exploring Twitter or relatively new to it, I’d suggest you “follow” the Tweets from the people below, who asked some good questions during today’s chat.

@LifesciNYC

@jrkelly

@scientre

@PearlF

@BiotechStockRsr

@DavidASteinberg

@Rob_Carlson

@BayBio

@karls_mlab

@BioBenj

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[Update: 10:50 am PT] Biotech VCs had their chance to vent on Twitter last week about the sad state of affairs in financing startups, and now it’s time for the entrepreneurs to take their turn. So we’re bringing together a couple of top biotech startup executives, Carol Gallagher and Jason Rhodes, to share their thoughts (in 140 characters or less) on how to navigate these tough times.

This edition of the Xconomy Tweetchat will start at 3 pm Eastern/Noon Pacific on Monday, Dec. 5. As usual, I’ll get the ball rolling by sending questions from my personal account @ldtimmerman and @xconomy. I’ll plan to ask these two for their thoughts on alternative financing strategies and new business models in a period where venture capital is increasingly scarce. As always, you’re welcome to weigh in at any time with your questions or comments for these two guests. The searchable hash tag to keep track of the conversation will be #biostartups.

Carol Gallagher

Both Gallagher and Rhodes bring some great inside perspective on what startups have to do to survive these days.

Gallagher (@carol_gallagher) is the former CEO of Seattle-based Calistoga Pharmaceuticals, and currently the executive chair of San Diego-based AnaptysBio. Calistoga, the developer of treatments for blood cancers and inflammatory diseases, raised $90 million of venture capital in its five-year history before being sold earlier this year to Gilead Sciences (NASDAQ: GILD) in a deal worth $375 million upfront, plus another $225 million if Calistoga reaches certain goals.

Jason Rhodes

Rhodes (@JasonPaulRhodes) is the chief business officer of Cambridge, MA-based Epizyme. This cancer drug developer raised $54 million in venture capital in its first couple years, but it has continued to support its drug discovery effort through deals with GlaxoSmithKline and Eisai Pharmaceuticals, and via philanthropic support from the Multiple Myeloma Research Foundation and the Leukemia & Lymphoma Society.

I’m looking forward to seeing you all there in the Twittersphere on Monday, Dec. 5.

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Seattle-based Theraclone Sciences is enjoying a moment in the national biotech spotlight today, just as it happens to be on the prowl for some new cash.

Theraclone was honored today as one of the Fierce 15, an annual award that the trade publication FierceBiotech gives out to 15 emerging biotech companies around the world. In a profile of the company today by FierceBiotech editor John Carroll, Theraclone acting CEO Steve Gillis says he wants to put together a new $10 million financing round for the company in the next few weeks and then complete the search for a permanent CEO. Theraclone has been without a permanent CEO since Dave Fanning died unexpectedly in June 2010.

Not very many Seattle biotechs end up garnering the national spotlight, although Fierce has typically recognized one or two companies a year from the Northwest. Last year, Bothell, WA-based Alder Biopharmaceuticals and Seattle-based VentiRx Pharmaceuticals made the cut, while Seattle’s Calistoga Pharmaceuticals (recently acquired by Gilead Sciences) took home the prize the year earlier.

Theraclone gained some visibility in the past year when it struck a partnership with Pfizer, and got some important work published in Nature about how its antibody-drug discovery technology can be used to potentially help develop an AIDS vaccine.

Gillis and Theraclone’s chief financial officer, Russ Hawkinson, didn’t immediately respond to e-mailed requests for comment about the financing.

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Earlier this year the FDA approved telaprevir (Incivek) from Vertex Pharmaceuticals and boceprevir (Victrelis) from Merck for the treatment of hepatitis C. Both agents are protease inhibitors and represent the first approvals of direct acting antivirals for hepatitis C. Direct acting antivirals are a broad class of agents that act to block the growth of viruses by directly disrupting essential viral functions. The benefit of these drugs for hepatitis C follows the dramatic success of this class over the last 15 years in HIV. Now the future advances of direct acting antiviral therapy for hepatitis C is expected to follow a central theme of their use in HIV: that combination of multiple antivirals in a single treatment regimen will provide greater benefit than use of any one antiviral drug alone.

The new protease inhibitors were approved for use only in combination with two previously approved agents, pegylated interferon and ribavirin. The addition of either protease inhibitor increased clinical cure rates, known formally as sustained viral response (SVR) rates, by 30 to 40 percentage points over control groups receiving the standard pegylated interferon and ribavirin alone. As dramatic as these improvements are, there is a good chance for even more dramatic improvements if all-oral regimens, assembled by combining multiple direct acting antivirals, are able to maintain high cure rates while eliminating injectable interferon and its associated flu-like side effects that patients have long sought to avoid.

Next in the development queue are three agents that entered Phase III development this year, including two additional protease inhibitors (TMC435 from Johnson & Johnson’s Tibotec unit and BI201335 from Boehringer Ingelheim) and a cyclophilin inhibitor that disrupts a host function required for viral replication (alisporivir from Novartis). All three Phase III programs are exploring a modality similar to the approved agents, i.e. addition of a single new agent to the standard pegylated interferon/ribavirin. The ongoing Phase III programs will hope to demonstrate one or more advantage over the recently approved agents, potentially including better tolerability, further increases in cure rates, shorter duration of therapy and/or an increased proportion of patients successfully treated with shortened therapy. While such improvements may well be achieved, they may become less important or even irrelevant if the rapidly expanding number of direct acting antiviral combination trials leads to identification of new regimens that surpass all regimens that are based on a single antiviral drug added to the old standard regimen.

Investigation of direct acting antiviral combination regimens has exploded in the last 12 months. This advance has become possible because of the diversity of antiviral mechanisms distinct from protease inhibitors that are now represented in the pipeline of hepatitis C drugs in Phase II development across the industry. Diverse mechanisms are important because they typically provide distinct resistance profiles, and antiviral combinations are being assembled using new compounds with non-overlapping resistance profiles to provide a greater barrier to the development of antiviral resistance. Additional factors that are considered important in assembling optimal combinations include the safety and tolerability profile of each agent, compatible pharmacokinetic profiles and a low potential for unfavorable drug-drug interactions. The more extensively characterized each individual antiviral drug is, the lower the risk of … Next Page »

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Scientists have never been able to make an effective AIDS vaccine, largely because the HIV virus is crafty, always finding ways to mutate and escape the body’s immune defenses. But now a national team of scientists has found antibodies that zero in on newly identified weak spots in the virus, potentially opening up promising new pathways for the development of an AIDS vaccine.

Researchers are reporting today in the journal Nature that they have discovered 17 novel antibodies that are all capable of neutralizing a broad spectrum of HIV strains, by hitting precise regions on the virus that are genetic common ground, no matter how many wily mutations the virus may make. The findings are being published by a team of scientists from Theraclone Sciences, a private biotech company in Seattle; The Scripps Research Institute in San Diego; South San Francisco-based Monogram Biosciences, a unit of Lab Corp of America (NYSE: LH); and the New York-based International AIDS Vaccine Initiative (IAVI).

The latest findings build on work this same team published two years ago in Science, when they identified two genetically engineered antibodies to hit two weak spots on the HIV virus. By finding so many more structural vulnerabilities in the virus, researchers now hope to take the next step by crafting compounds that can spur the body to make these antibodies, hitting the viral equivalents of Achilles’ heel. If this idea can be proven in future clinical trials, it could pave the way for the first vaccine against a disease that still kills an estimated 1.8 million a year around the world, according to UNAIDS.

“The more you understand the virus and characterize it, the better you can do at designing immunogens [ingredients for vaccines],” said Kristine Swiderek, the vice president of research at Theraclone. “It’s very exciting.”

Dennis Burton, a professor of immunology at Scripps and a lead author of the study, added in a statement that, “because of HIV’s remarkable variability, an effective HIV vaccine will probably have to elicit broadly neutralizing antibodies. This is why we expect that these new antibodies will prove to be valuable assets to the field of AIDS vaccine research.”

Theraclone's Russ Hawkinson and Kristine Swiderek

The far-flung collaboration of scientists got its start in a pretty basic observation from sub-Saharan Africa, where AIDS causes the most damage. Scientists there have long noticed that a few rare people can get infected with HIV, yet somehow retain robust immune defenses so they never get sick. IAVI and its collaborators have worked on clinical protocol to identify these special people and collect blood samples from them, which served as the essential raw material of this research collaboration.

IAVI, a global nonprofit supported by the Bill & Melinda Gates Foundation, provided the financial support for the collaboration with Scripps, Theraclone, and Monogram. Each of those parties played a distinct role, Swiderek says. Theraclone used its proprietary technology to produce the novel antibodies that could bind specifically with regions on the virus known as epitopes. The team at Monogram ran the screening tests of those antibodies against various strains of HIV in the lab. And the scientists at Scripps and IAVI worked together on characterizing those precious regions of the virus that are now thought to have potential as vaccine targets.

In the early days of the collaboration, Swiderek says the team worked on samples from just one individual donor, which yielded the first two antibodies described two years ago in Science. Emboldened by that progress—which marked the first time in a decade that any broadly neutralizing antibodies had been discovered—the team continued … Next Page »

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San Diego’s life sciences community was teeming with news over the past week. We’ve got it all cultivated for you.

—Shares of San Diego’s Adventrx Pharmaceuticals (NYSE Amex: ANX) plunged by more than 55 percent after the biotech company said the FDA refused to approve its new lung-cancer drug vinorelbine injectable emulsion (Exelbine) until a key bio-equivalence trial is repeated. Adventrx CEO Brian Culley has said the company has enough capital to shift its focus to other drugs in its pipeline.

—Qualcomm’s (NASDAQ: QCOM) wireless health team hit the halfway mark today in an eight-week fitness challenge that has equipped 32 employees with wireless monitors and weight scales to help increase their activity and lose weight. I posted a Q&A with Qualcomm’s Don Jones, who also posted this update today on the Qualcomm blog. A Qualcomm spokesman tells me the 32 participants have burned a total of roughly 1.9 million calories and lost a total of 48.5 pounds.

—Pfizer added UC San Diego Health Sciences to its network of drug discovery innovation centers that includes prominent research institutions in Boston, New York, and San Francisco. UC San Diego Health Sciences’ partnership agreement with Pfizer could be worth as much as $50 million over the next five years.

—The La Jolla Institute for Allergy & Immunology officially opened a new center today that is focused on RNA interference technology, and is intended to operate as a collaborative and open resource for the scientific community in San Diego and elsewhere. The RNAi Center was funded by a $12.6 million grant from the National Institutes of Health. If scientists make discoveries of potential clinical benefit, “the natural next step would be to seek partnering opportunities for clinical translation and potential drug development,” said Steve Wilson, the center’s executive director and chief technology officer.

—Former SKY MobileMedia CEO Naser Partovi introduced a year-old startup that provides outpatient management software called Wellaho. Partovi told me that Wellaho operates a HIPAA-compliant social media network around the chronically ill, and which is tailored to the needs of that patient. “You can’t just join Wellaho,” Partovi says. “It must be prescribed for you by your doctor.”

—San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN) and Japan’s Takeda Pharmaceuticals said they are halting further development of pramlintide/metreleptin for the treatment of obesity. Their program was in mid-stage development as a … Next Page »

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Gilead Sciences (NASDAQ: GILD), the world’s largest maker of HIV drugs, said today that the FDA has approved a new once-daily pill the company has developed for patients with HIV. The drug is a combination of three antivirals—emtricitabine/rilpivirine/tenofovir disoproxil fumarate—that will be marketed under the name Complera. This is the second once-daily HIV pill from Foster City, CA-based Gilead, following a combination of efavirenz/emtricitabine/tenofovir disoproxil fumarate (Atripla), which Gilead markets in partnership with Bristol-Myers Squibb.

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Gilead Sciences (NASDAQ: GILD) of Foster City, CA, has agreed to purchase a clinical biologics manufacturing facility from Genentech in Oceanside, CA, about 36 miles north of San Diego, according to a statement today. The company says it plans to offer jobs to 55 Genentech employees now working at the 70,000 square-foot plant, which Genentech calls its Oceanside Clinical Plant. Terms of the deal, which includes certain plant assets, were not disclosed. Most of the drug candidates Gilead has under development are targeting hepatitis C, HIV, cancer, cardiovascular, and respiratory disorders.

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The people in San Diego who discovered a multi-billion dollar asthma drug for Merck have captured the attention of Big Pharma once again.

Amira Pharmaceuticals, a privately held company in San Diego, has agreed to be acquired by New York-based Bristol-Myers Squibb (NYSE: BMY) for $325 million in cash upfront, plus additional milestone payments of $150 million, meaning the deal could be worth up to $475 million for Amira shareholders. Bristol said in a statement that it plans to retain Amira’s scientists, and keep them in San Diego. Amira had 25 employees at last count, in November.

The key asset in the deal is Amira’s drug for pulmonary fibrosis. This is the disease that damages and scars the lungs, and is probably best-known for the high rate of incidence among first responders to the 9/11 terrorist attacks. There isn’t currently an effective FDA-approved treatment, and the disease makes it hard for people to breathe and ultimately kills an estimated 40,000 people a year. While this is a relatively small patient population, Amira CEO Bob Baltera has pointed out this is a “grievous illness,” which means anybody who comes up with a good drug could have a pretty sizable market opportunity.

Amira’s drug has passed the first phase of clinical trials to demonstrate safety, and is now being prepped for the second stage, in which researchers will get a better sense of its effectiveness.

“Bristol-Myers Squibb has identified fibrotic diseases as an area of high unmet medical need that complements our research efforts in several of our therapeutic areas,” Elliott Sigal, Bristol’s president of R&D, said in a statement.

The acquisition is clearly a big win for Amira and its shareholders. The company was started in 2005 by a trio of scientists-Peppi Prasit, Jilly Evans, and John Hutchinson-who worked together at Merck until that company shut down its San Diego operation. Their biggest accomplishment there was the development of montelukast sodium (Singulair), an asthma drug that generated about $5 billion in sales in 2010. Based partly on that track record, Amira raised more than $28 million in venture capital, most of which came from Novo A/S, Avalon Ventures, Prospect Venture Partners, and Versant Ventures in March 2007.

But money has been tight since then, at Amira, just like many biotech companies with products in the early stages of development. Amira has been supported in most recent years by an asthma drug collaboration with GlaxoSmithKline, although that wasn’t enough to cover all of the company’s R&D expenses. Amira cut half its workforce last November, and its scientific founders left the day-to-day operation as the company sought to conserve cash in a tough climate for early stage biotech financing.

Amira’s lead drug, AM152, is designed to block a novel biological target on cells, known as the LPA1 receptor. That biological pathway’s relationship to pulmonary fibrosis was described by Andrew Tager and colleagues at Massachusetts General Hospital in a paper in Nature in 2008. Scientists said that mice who lack LPA1 were protected from fibrosis and death after being exposed to likely environmental triggers of the disease.

Brisbane, CA-based Intermune (NASDAQ: ITMN) has helped blaze the trail here. Its experimental drug for pulmonary fibrosis failed to win FDA approval, but was cleared for sale in the European Union, which has been enough to boost the company’s market valuation to more than $2 billion. Others, like Gilead Sciences and Novartis have R&D programs against pulmonary fibrosis as well.

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Given what investment bankers did to the financial system just a couple years ago, it surprises me how many people still accept what they have to say at face value. But quite a few people in biotech are still lapping up all sorts of short-sighted, destructive advice from the financial powers that be.

The latest bit of wisdom passed down from Wall Street came in a Reuters story this past week. It speculated about 11 publicly traded biotech companies that various investment pros consider to be takeover candidates. These companies have the kind of novel drugs that Big Pharma needs to replenish its empty pipelines. If you’re a shareholder in one of these little companies, this sounds exciting. Just hold onto your shares a little while longer, or buy some now while you can, and wait a couple quarters for a suitor to pay a 30, 40, or 50 percent premium. Instant returns! That will make everybody happy, right?

What stories like this usually fail to mention is who really stands to gain, and who loses, in these deals. Investment bankers, C-level executives, lawyers, accountants, certain consultants—they all pocket big money. Bench scientists, lower-level management, and entire regional economies can get whacked as hundreds or thousands of people lose their jobs.

The so-called winners in these deals often end up with a pyrrhic victory. While the quarterly and annual financial reports of the acquiring company might look good for a while, they often are left with an organization that is too bloated to really do the innovative work of developing new drugs. What happens a year later? These same fee-seeking investment bankers start whispering in the ears of executives, and reporters, about the next crop of biotechs that need to be harvested to fill up Big Pharma’s empty hopper.

Don’t get me wrong, some acquisitions can work out well for everybody involved. This tends to be true with small, private, venture-backed biotech companies that are essentially built to create a single drug, or maybe two, with a small team that can be easily integrated. Recent examples that made sense were Daiichi Sankyo’s purchase of Berkeley, CA-based Plexxikon; Gilead Sciences’s buy of Seattle-based Calistoga Pharmaceuticals; and Amgen’s takeover of Woburn, MA-based Biovex. These were cases of little companies that needed the resources of a bigger enterprise to make the most of their drug candidates. They also were able to provide healthy returns to their venture backers. And because the little company didn’t have many employees, the acquirer had fewer integration headaches and didn’t need to make mass layoffs.

What’s more problematic is when the bankers aren’t satisfied with the puny fees they get from those $500 million to $1 billion acquisitions. So they start beating the drum for multi-billion dollar mega-mergers. These are the kind of deals that can generate monster fees, like the potential takeovers listed in the Reuters report. The target list includes Biogen Idec (NASDAQ: BIIB), Vertex Pharmaceuticals (NASDAQ: VRTX), Dendreon (NASDAQ: DNDN), Seattle Genetics (NASDAQ: SGEN), Exelixis (NASDAQ: EXEL), and Intermune (NASDAQ: ITMN), along with some smaller players.

Most in the financial crowd sees these companies as nothing more than any other liquid security, like a pork belly or a securitized mortgage. They don’t care … Next Page »

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Gilead Sciences (NASDAQ: GILD), the world’s largest maker of HIV drugs, said today it has expanded its global access program to offer HIV/AIDS drugs at low prices in poor countries. The Foster City, CA-based company said four Indian partners and the Medicines Patent Pool Foundation will get access to the experimental drug elvitegravir, the experimental “Quad” that combines four antiviral meds into a single daily pill, and an antiretroviral boosting agent. Partners will have the rights to sell generic versions of the new Gilead medicines, if they are approved by regulators, the company said.

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Two years ago, I caved in to the pressure and signed up for a Twitter account. I had been resisting for months. Millions of people were flocking to the 140-character microblogging service, but from what I could see then, it looked like a time-wasting fad.

Hardly anybody in the business I write about, biotechnology, was using it. Since no one in my niche was there, who would care to read my writing? Worse, it seemed like a good way to fragment my attention span into a million little pieces by consuming gossip and trivia, diluting the focus needed to produce in-depth biotech news and feature stories on tight deadlines.

Wrong, wrong, wrong. While I do still have some concerns about what real-time connectivity is doing to humanity, which Bill Keller voiced recently in the New York Times, I’ve come around to the idea that Twitter, used wisely, has potential to be a great force for good in biotech. I’ve been careful to follow people that have valuable and relevant information to report and share, while unfollowing everything else. I’ve expanded my professional network around the world by having conversations with readers I never would have met any other way. I’ve gotten story tips. And this is all happening even while I surmise that fewer than 1 percent of all U.S. life sciences professionals are using the service.

Given how biotech usage of Twitter is still so small, I’ve become convinced that as it grows it will help make the industry much better connected, and maybe even more effective at tackling hard problems like new drug development. It’s already getting to the point where biotechies who aren’t paying attention are putting themselves a few steps behind everyone else who uses it.

The latest example of Twitter’s rising prominence in biotech came from the American Society of Clinical Oncology conference. Last week at this huge gathering in Chicago, there were thousands of real-time bursts of information and commentary on the latest in cancer drug R&D. No one person can keep up with all the details from simultaneous presentations around McCormick Place. And if you rely on major media outlets for coverage, you’re really only hearing about the top dozen or so stories that ASCO’s PR machine doles out to hundreds of reporters there who are writing different versions of the same stories.

With Twitter, the information exchange is real-time, continuous, and comes from a much richer variety of sources than that. It can be overwhelming and messy. But because so many people from various rooms at the conference were filing Tweets in real-time, and funneling them into one place by using the signature #ASCO11, I was able to monitor what was happening at ASCO in real-time from 2,000 miles away. And these dispatches came from an amazing array of people with different kinds of expertise. There were doctors on handheld devices tapping away like @DrAnasYounes and @teamoncology. There was the indefatigable cancer consultant @maverickny. There were stock analysts, like @biotechstockrsr. There were top biotech journalists like @matthewherper and @adamfeuerstein. There were a few pharma companies like @roche_com, @novartis, and @genentechnews who have social media people getting the word out about their products, sometimes in a more thoughtful way than the average press release. If you followed the #ASCO11 topic, you ended up getting some noise, but also a lot of signal. For me, it provided a pretty broad and deep appreciation for what was going on at the conference—like how people were talking about cost-effectiveness of cancer drugs much more this year than in years past.

I’ve talked to a handful of biotech executives about this, and I’ve heard all kinds of objections to signing up to this service. Most of it boils down to fear of the unknown, like I felt two years ago. Biotech is a highly regulated business after all, so executives can’t just go around firing off missives on a smartphone about how wonderful their drugs are if they want to stay on the good side of the FDA. Beyond that, everyone’s busy. I don’t know anybody who feels they have extra … Next Page »

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Conventional wisdom a couple years ago said that the era of the independent biotech giant was over.

Nobody would ever again build a multi-billion dollar, fully integrated independent biopharma company on the scale of an Amgen (NASDAQ: AMGN), or even a Gilead Sciences (NASDAQ: GILD). Drug development is too risky, time-consuming, and expensive. Investors, tired of execs who overpromise and underdeliver, were thought to no longer have the patience or the stomach for the whole messy ordeal.

Sure, the occasional feisty little biotech could raise money for a promising R&D project, and every once in a while, they might succeed in getting an FDA approved product. But it was only a matter of time before the little biotech would see an opportunity to cash out, and get acquired by a Big Pharma company that needed to feed its beastly appetite for new surefire moneymakers. Jobs would be lost, a company culture would die, and often, a region’s economy would be wounded.

This still occurs, but I’ve started to doubt that this is the grim destiny of all biotechs. There’s no question most biotech startups today have slim hope of ever going public at a decent valuation, and they are being built with an eye toward getting bought by a Big Pharma. But there are also signs that biotech drug developers in 2011 can stand on their own two feet as long as they want, maintain control over their company culture, and continue to grow while discovering, developing, and marketing their own products.

There are a few companies of the past couple years that are in position to blaze this trail once again. Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX), Seattle-based Dendreon (NASDAQ: DNDN), Cheshire, CT-based Alexion Pharmaceuticals (NASDAQ: ALXN), South San Francisco-based Onyx Pharmaceuticals (NASDAQ: ONXX), and Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI) could all be placed in this next category. They all have potential to stay independent, and profitable, for the long haul.

Taken together, these companies are still not quite in the same “Big Biotech” class that is dominated by Amgen, Gilead Sciences, Biogen Idec, and Celgene. Those big four have multiple products on the market, thousands of employees around the world, and a track record of consistently generating big profits.

The next tier of companies down still has a ways to go before they reach that status. If you add up the market capitalization and employee headcounts of all five companies—Vertex, Dendreon, Alexion, Onyx, HGSI—you get $34 billion of market value, and about 5,530 employees. Taken together, those companies add up to about one Gilead—and they aren’t even close to Amgen.

Still, the next group of companies have room to grow. Vertex just won FDA approval of its first homegrown drug last month, and has another one on deck. Dendreon is just now moving into position to start manufacturing enough of its drug to … Next Page »

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