In October, New York-based investment firm Miller Tabak launched the Health Care Transformation Fund (MTHFX), which invests in managed care, biotech, pharmaceuticals, and medtech companies. Its top holdings include New York area pharma giants Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK), as well as Boston-based biotech Momenta Pharmaceuticals (NASDAQ: MNTA).

The fund’s manager, Les Funtleyder, is the author of the book Health Care Investing (McGraw Hill 2009), which is part of the curriculum at Columbia and other universities. Funtleyder isn’t shy about predicting that investors in 2013 are going to look back and wish they had invested more in healthcare today.

Funtleyder took some time recently to talk with Xconomy about why he believes the upsides in healthcare outweigh the downsides.

Xconomy: Why the name “Health Care Transformation?”

Les Funtleyder: The overlying theory of this fund is that we want to invest in companies that can improve quality, lower costs, increase access, or innovate in healthcare. That’s what we’re looking for on the long side. On the short side we’re looking for companies that do the exact opposite of that. Anybody who causes damage to the system—like increasing costs or making me-too drugs—we’re looking to short.

X: In what sectors of healthcare have you increased your presence recently?

LF: The action this year in terms of upside has been in biotech, and in particular in the anti-infectives like drugs to treat hepatitis. And there has been a little action in oncology, too. Investors are moving back into healthcare in general, but they seem to be a little bit more optimistic about biotech companies, whereas in the last two or three years they really hadn’t been.

X: What are some off-the-radar companies in biotech you like?

LF: I point to Opko (AMEX: OPK) and BioCryst (NASDAQ: BCRX). BioCryst is in gout, Opko is in a number of areas. They haven’t worked yet. They’re going to take time to develop. But we go and look at asset values. We’re looking for a collection of assets that’s trading below what we call the private market value. So if we wanted to go out and … Next Page »

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San Diego’s Ardea Biosciences (NASDAQ: RDEA) appears to have stubbed a toe in its development of RDEA 594 as a first-line treatment for gout. Data presented at a medical meeting in Philadelphia today showed the Ardea drug was no better at controlling gout than existing medications, including allopurinol, a cheap generic. During a conference call with investors today, CEO Barry Quart says Ardea’s chief focus is on developing RDEA 594 as an add-on or alternative for patients who do not respond adequately to existing drugs. Quart says the potential market for RDEA 594 remains quite large since 60 percent of gout patients do not fully improve on the mainstay drug allopurinol.

Ardea is testing its drug in combination with allopurinol and in combination with febuxostat, a newer drug marketed by Takeda under the name Uloric, Quart said. A mid-stage trial pitting RDEA 594/allopurinol against allopurinol alone in gout patients is now underway, with data expected by the end of the year. Development of the febuxostat/RDEA 594 combination is not as far along; an early-stage study is being conducted in 54 healthy volunteers to look at the safety of the drug combination. If results are good, Ardea will test the drug combination in people with gout. Quart said animal studies to date have supported the safety of the drug combinations.

Adrea still believes RDEA 594 may be useful as a standalone treatment for people who can’t tolerate or don’t benefit from allopurinol. However, developing RDEA 594 as a monotherapy is not a major focus, according to the company. “We have to be realistic,” said Ardea spokesman John Beck, noting the company has been shifting the focus of its development program for “the last couple quarters.”

Quart’s comments came as Ardea presented fresh data from clinical studies of RDEA 594 at the annual meeting of the American College of Rheumatology/ Association of Rheumatology Health Professionals. Data from a small trial of 21 gout patients shows … Next Page »

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We all look for milestones in life, but several San Diego biotechs are approaching important junctures where they’re expected to report positive results from their drug development studies. Read on to find out which ones, and to catch up on the rest of San Diego’s life sciences news.

—San Diego’s Ardea Biosciences (NASDAQ: RDEA) reported some encouraging results last week for the drug it is developing to treat gout. A small number of patients found the drug lowered the amount of uric acid in their blood to acceptable levels within eight days. Still, Ardea is facing increasing competition, since the FDA approved Takeda Pharmaceutical’s gout drug in February and an FDA advisory panel recommended Savient Pharmaceutical’s gout treatment earlier this week.

—Trius Therapeutics CEO Jeff Stein told Luke the company plans to present full results from its recent clinical trial of a new antibiotic for treating MRSA at a conference in September. The startup also is working on a pivotal clinical trial strategy, and it is searching for a potential partner.

—San Diego’s Biocom, the life sciences industry trade group, hosted the CalAsia conference for the first time this week, and more than 300 representatives of the international biotech community attended. In a Q&A with Xconomy, Dr. Hui Cai of Inflexion BioPartners discussed the concerns that U.S. companies have about doing business in China—and China’s concerns about doing business with U.S. companies. In an e-mail yesterday, she adds, “A consensus out of CalAsia is [that] the line between U.S. and Asia certainly is becoming fuzzy. Gaps we see today in knowledge, processes, and other aspects will eventually disappear, and global standards will be established.”

—San Diego’s Lpath is nearing a make-or-break milestone in its development of sonepcizumab, an experimental cancer drug. The biotech stands to receive up to $8 million from Merck Serono for achieving performance targets related to the clinical trial Lpath is wrapping up, and an additional $31 million if the Swiss pharmaceutical company exercises an option to develop the drug.

—San Diego-based aFraxis, which is focused on developing treatments for Fragile X syndrome and autism, has raised $750,000 in early stage funding, according to a recent SEC filing. The startup is backed by San Diego’s Avalon Ventures, and Avalon’s Jay Lichter is listed as chief executive and director.

—Illumina, the San Diego biotech that provides DNA research tools for scientists, plans to offer a service that will enable consumers to get their DNA sequenced—at a cost of $48,000. As expensive as that may sound, it is half as much as the DNA sequencing service offered by Cambridge, MA-based Knome. The idea is to give patients access to comprehensive, personalized information about their vulnerability to disease.

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Ardea Biosciences, the San Diego-based developer of a treatment for gout, has shown in a small clinical trial that a treatment its scientists stumbled upon by accident just might work.

Ardea (NASDAQ: RDEA) said today that 6 of the first 7 patients who got its lead drug candidate for gout were able to bring their uric acid levels down to a medically acceptable target level in the blood after eight days. That’s an indicator that uric acid shouldn’t build up in the joints and cause intensely painful crystals. None of the four patients on a placebo so far achieved that benchmark, and two out of three did on a standard dose of allopurinol, Ardea said in a statement. The Ardea drug was well-tolerated, and no patients dropped out because of side effects, the company said.

The latest findings add to some encouraging, albeit preliminary findings, the company released in April. Those results showed that the Ardea drug, RDEA594, a once-daily oral pill, passed a safety study of 60 healthy volunteers, and a mid-stage study in patients showed a 45 percent drop in uric acid levels after 10 days. The drug was initially studied for HIV, until researchers noticed its surprising effect against gout. Now if these findings can be confirmed in larger trials, it could provide a new treatment option. This disease affects 3 million to 5 million Americans, most of whom don’t respond to the standard allopurinol.

The early results “are very encouraging and provide a strong basis for moving RDEA594 into larger Phase 2b studies,” said John Sundy, an inflammatory disease expert at Duke University Medical Center and a member of Ardea’s scientific advisory board, in a company statement.

Ardea stock has climbed from $9.30 a share the day it released preliminary results of the first two trials on April 20, to $15.24 at yesterday’s close. The company plans to complete major parts of a larger, Phase 2b clinical trial of the drug before the end of the year, said Barry Quart, Ardea’s CEO, in a statement.

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San Diego’s Ardea Biosciences (NASDAQ: RDEA) said today its experimental gout drug performed no better than existing drugs in an early stage study, but CEO Barry Quart nevertheless said he’s happy with the result.

“This is the first stage of drug development and we have not yet optimized the dose,” Quart said. “We have demonstrated equivalence and that’s a good start.”

As Luke recently reported, Gout is a form of arthritis caused by the build up of uric acid in the joints. The condition affects 3 million to 5 million Americans, most of them men. A decades-old drug called allopurinol is mainstay therapy for gout, but an estimated 60 percent of patients do not respond to it.

A new drug for gout, Takeda’s Uloric, received Food and Drug Administration approval in February. Its highest 80 milligram dose was found to be superior to allopurinol, but it costs significantly more. According to one expert, Dr. Peter Simkin of the University of Washington, allopurinol remains the first treatment choice for patients.

Ardea’s early stage study evaluated doses of 5 milligrams to 600 milligrams of RDEA594, a once-daily oral drug, in 60 healthy volunteers. The company reported those who received the 400-milligram dose experienced a 45 percent drop in uric acid levels after 10 days. The result was similar to what was seen in early stage studies of Uloric, Quart said.

Ardea said no serious side effects were observed in its study. Quart said the relatively safety of the drug means it might be possible to use larger doses to further reduce uric acid levels, although he was pleased with the results. “A 45 percent reduction in healthy volunteers is damn good,” he said.

Ardea is pursuing plans to develop RDEA594 as a first-line therapy over allopurinol—a potentially difficult path. The company expects data from such a study by the end of the year.

The company also is planning another set of clinical studies that will examine RDEA594 as an additional treatment for patients receiving the mainstay therapy. One will study the combination of RDEA594 and allopurinol, and another will test RDEA594 in patients who cannot tolerate or respond to allopurinol.

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Perhaps the week before Easter was a good time for San Diego’s technology innovators to be taking stock. Amylin is busy weighing how best to fend off dissident investors Carl Icahn and Eastbourne Capital before next month’s annual shareholder meeting. Other San Diego startups, such as Trius Therapeutics and Sangart, are considering how best to move forward in their development of new biopharmaceutical products. So read on!

—San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN)  is preparing for a proxy battle with billionaire investor Carl Icahn and Eastbourne Capital Management at next month’s shareholder meeting. The two dissident shareholder groups have each nominated a slate of five candidates for the company’s 12-member board of directors, although fielding so many candidates could simply ensure that Amylin’s candidates get elected.

—San Diego wireless chipset provider Qualcomm and Verizon, one of its biggest customers, seem to be on different pages when it comes to deploying the fourth generation mobile phone technology known as LTE, for Long-Term Evolution. Verizon has said it will have LTE in 20 to 35 markets by the end of 2010. But a Qualcomm marketing director said he expects the commercialization of LTE devices won’t happen until 2012 or later.

—The venture purse strings loosened a bit last week in San Diego. Nirvanix, a startup providing “data storage in the cloud,” added $5 million in a secondary round of venture funding. Nirvanix said it previously had raised $18 million in venture funding from Intel Capital, Valhalla Partners, Mission Ventures, Windward Ventures, and the European Founders Fund. Ethertronics, which develops embedded antennas for wireless devices, got an additional $4 million in a secondary round of venture funding. A spokeswoman told me Friday that its investors include Bank of America, Sevin Rosen Funds, and Ridgewood Capital.

—In an interview last week, Trius Therapeutics CEO Jeff Stein said the biotech firm is assessing the best way to move ahead in its development of a new anti-bacterial drug. In mid-stage clinical trials, Stein told me the San Diego company’s drug candidate torezolid cured 96 percent of the patients who had nasty-looking skin infections. But to get to the next stage in clinical trials, Stein says Trius will either have to raise more venture capital or find a strategic partner.

—San Diego-based Sangart is at a crossroads in developing an oxygen-carrying compound called MP4, which is made by purifying and chemically modifying … Next Page »

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Biotech companies like to talk up the discipline it takes to move a drug through years of development, but discovery sometimes depends on plain serendipity. I got an interesting reminder of that the other day from Barry Quart, the CEO of San Diego-based Ardea Biosciences.

Back in late 2007, Ardea (NASDAQ: RDEA) scientists were looking through some of the data from the company’s lead drug candidate for HIV, including the various blood measurements taken to see if the drug is being metabolized. They found a curious effect. The drug reduced the amount of uric acid in the blood. This is the stuff that can accumulate in the joints of some people, creating intensely painful crystals there, and ugly bumps. It’s the disease known as metabolic arthritis, or gout.

The unexpected finding in the HIV trial sparked the curiosity of Ardea’s scientists and management. Digging into the data, they saw the anti-uric acid activity was caused by a byproduct of the HIV drug, a so-called metabolite. That was important because it showed this wasn’t some kind of clinical trial fluke. Plus, the byproduct also had been safely excreted by more than 150 patients in HIV trials, which meant it would likely be a safe drug. The company got more interested when looking at the business opportunity. About 2.1 million people, mostly over age 40, have gout, according to the National Institutes of Health. Incidence has more than tripled in the past 20 years, as the disease is correlated with being overweight, drinking too much alcohol, or having diets too high in meat or fish. ( Gout was once known as the “Disease of Kings,” thought to afflict leaders like Henry VIII and Benjamin Franklin.)

Then came the best part if you’re a drug developer. Only one new drug for treating gout has been approved by the FDA in the past 40 years, and there was really only one other competitor on the horizon (East Brunswick, NJ-based Savient Pharmaceuticals). It was quite a contrast to the competition Ardea was sizing up for HIV, in which there are already 33 FDA approved drugs setting a high bar for anything new.

“When we first noticed this effect in the HIV trial, I was intrigued, but figured it was probably not going to be of much consequence,” Quart says. “I definitely didn’t see building the company up as a gout company.”

Now he does. Ardea expects to report results from a small pilot study of gout patients this month, Quart says. It ought to be able to move quickly into a Phase II clinical trial of gout patients this year, and then into the final stage of clinical trials in 2010, Quart says. “Unlike a lot of drugs, you can get an answer on this product’s efficacy very quickly,” he says.

Ardea in its current form was started in December 2006. Quart, formerly the president of Napo Pharmaceuticals and an executive vice president of Pfizer’s Global R&D, took over the shell of a dead public company (IntraBiotics). The company had $48.5 million left in cash, and Ardea combined that with about 50 scientific staff and some drug candidates acquired from Valeant Pharmaceuticals, Quart says. The original labs were in Orange County (Costa Mesa, CA), until the company moved to San Diego in March 2008.

Ardea’s gout drug got its start, … Next Page »

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San Diego-based Ardea Biosciences announced today it has entered into a securities purchase agreement with institutional investors to raise about $30.6 million from the private placement of newly issued shares of its common stock. Ardea (NASDAQ: RDEA) is focused on the discovery and development of small-molecule drugs to treat HIV, gout, cancer, and inflammatory diseases.

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