Progress on the drug development front dominated the headlines in the past week, although one company, Phenomix, also had some bad news. Get those details and more here.

—Phenomix announced that diabetic patients who took its experimental drug dutogliptin in a clinical trial saw statistically significant drops in their blood sugar. But the company is looking for a new strategic partner to help develop dutogliptin after New York-based Forest Laboratories said it had terminated its alliance with the San Diego biotech.

—My end-of-flu-season wrap up showed some San Diego companies received a temporary revenue boost from sales of products related to swine flu, and at least one company garnered enough funding to continue work on a H1N1 vaccine.

—Luke profiled Amplyx, a startup that is working on redesigning existing drugs to make them more effective or tolerable. The company’s first project is to develop improved protease inhibitors for H.I.V.

—Anadys Pharmaceuticals (NASDAQ: ANDS) reported promising interim clinical trial data for its experimental hepatitis C drug ANA598. The results were announced at the European Association for the Study of the Liver meeting in Vienna, Austria.

—Luke chatted with Nobel laureate Roger Tsien of UC San Diego about his startup company, Avelas Biosciences, which is working on fluorescent molecular tags that surgeons may use to distinguish tumors from healthy tissue.

—Ligand Pharmaceuticals (NASDAQ: LGND) earned a $6.5 million milestone payment from Switzerland-based Roche for advancing its experimental hepatitis C drug RG7348 into clinical trials. Ligand obtained the drug through its acquisition of Metabasis Therapeutics; Metabasis shareholders will receive $2.7 million from the milestone payment.

—The Sanford-Burnham Medical Research Institute promoted Kristina Vuori to president from her previous position as executive vice president of scientific affairs. John Reed will continue as CEO of the institute.

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As swine flu raced through colleges and communities last summer and fall, at least five San Diego companies with flu-related products or research programs saw their share prices surge. Investors were betting that swine flu, the predominant circulating flu virus in the U.S., presented a real opportunity for these companies.

Now comes the reckoning. The influenza season, which normally runs from October through May, is winding down. An update issued April 9 by the national Centers for Disease Control and Prevention said influenza cases were declining or stable throughout the country, and the percentage of all doctors’ visits by patients with flu-like symptoms had fallen to 1.1 percent—well below the seasonal norm—from a high of 7.8 percent last October.

Last September, I looked at San Diego companies with stakes in swine flu. The time has come to see how they have actually performed since the World Health Organization declared a global H1N1 swine flu pandemic in June.

—I’ll begin with Quidel (NASDAQ: QDEL). The diagnostic-test maker received special government clearance last summer to market its QuickVue rapid flu test for swine flu. The company told investors last summer it expected a revenue bump from sales of the tests.

And how. Quidel reported a 38 percent increase in 2009 net sales of infectious disease-related products. Total revenue jumped 28 percent for the year, driven by global sales of influenza products. Quidel’s shares are up about 12 percent since last June.

However, Quidel has already warned investors not to expect a repeat of its 2009 financial performance. “We do not plan for or expect the influenza pandemic of 2009 to recur in 2010. Accordingly, we expect a significant decrease in our influenza test sales, related earnings, and cash flows during 2010,” Quidel said in its annual filing with the SEC.

—Life Technologies (NASDAQ: LIFE) produces equipment that runs a diagnostic test, developed and distributed by the CDC, that can determine if patients are infected with the specific strain of the influenza A virus that causes swine flu.

The test has become the de facto standard in H1N1 detection, which makes Life’s equipment a must-have for public health labs. Life experienced an equipment-buying frenzy last spring, followed by an increase in sales of reagents to run the swine flu tests. The products contributed … Next Page »

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It’s been a year since Andrin Oswald took over as CEO of Novartis Vaccines and Diagnostics, the 5th-largest vaccine business in the world, headquartered right here in Cambridge, MA. I met up with Oswald before he gave a keynote speech at a recent MIT Enterprise Forum event, and he took a few minutes to give me his perspective on innovation in the vaccine industry—and, of course, on swine flu.

Novartis is on the front lines of the effort to combat swine flu, aka H1N1, which the World Health Organization classified as a pandemic in June. The U.S. Department of Health and Human Services (HHS) has contracted Novartis to produce 90 million doses of H1N1 vaccine for the U.S. population by the end of November.

In Cambridge, the Novartis now has more than 100 researchers dedicated to the development of future vaccines for multiple types of infections, Oswald told me. Globally, the vaccines unit of the Swiss drug giant employed 4,774 people and reported $1.8 billion in revenue in 2008 (accounting for only 4 percent of sales at Novartis). But the vaccines unit hired about 1,000 new employees over the summer, mostly in manufacturing, to enable the firm to answer swelling demand for flu vaccine.

The company is also building its first cell-based vaccine manufacturing facility in the U.S., in Holly Springs, NC, where the raw material for the vaccine will be grown in cultured cells rather than chicken eggs, as has been the practice for some five decades. HHS is contributing $486 million to the development of the North Carolina vaccine plant in return for priority access to it in the event of another pandemic like H1N1, according to Oswald.

Andrin Oswald

Here are some excerpts from my brief yet informative chat with Oswald before he took the podium at MIT:

Xconomy: What makes Novartis’ technology and process for developing vaccines differen from what other companies have?

Andrin Oswald: I think what makes us unique is … Next Page »

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Enigma Diagnostics, a UK-based medical diagnostics startup, plans to close its current U.S. office in San Francisco and open a new office in San Diego as its U.S. headquarters, according to chairman and CEO John McKinley.

McKinley outlined Enigma’s development of rapid molecular diagnostic technology in a presentation yesterday at the annual investor conference organized by Biocom, the San Diego life sciences industry group. The company has developed a desktop-size instrument based on advances in PCR (polymerase chain reaction) technology, which McKinley says can identify certain pathogens in less than 45 minutes. Amid concerns over the H1N1 swine flu outbreak and other infectious disease, McKinley says, “There currently is nothing in the market like our pending technology.”

Enigma expects to make an official announcement about its new San Diego office next month, McKinley says, and he estimates the company will have 30 employees here by mid-2010. He tells me he decided to establish an American beachhead for Enigma Diagnostics in San Diego because, “It’s a diagnostics center for the U.S. The pool of labor is certainly here.”

Among the factors that McKinley cited is the presence of Life Technologies (NASDAQ: LIFE), the Carlsbad, CA, company that was formed in last year’s merger of Invitrogen and Applied Biosystems, as well as Quidel (NASDAQ: QDEL), and Stratagene, a San Diego business that is now part of Santa Clara, CA-based Agilent Technologies.

Enigma ML device

McKinley says Enigma, a venture-backed company founded in 2004, first developed a rugged military version of its diagnostic machine for field detection of biological agents under funding from the UK’s Defence Science Technology Laboratory. The company’s investors include the UK’s Porton Capital Group, GlaxoSmithKline, and the UK Government Science Technology Laboratory.

The company intends to first win approval for its automated Enigma ML “mini laboratory” in Europe by next September. Following that, McKinley says Enigma intends to ask the FDA to waive requirements under CLIA, or Clinical Laboratory Improvement Amendments, which would enable the device to be operated in U.S. hospitals, clinics, and other point-of-care facilities.

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As the flu season nears, it’s still unclear how severe the H1N1 strain of swine flu will be. But several San Diego companies are nevertheless riding a wave of investor enthusiasm for the public companies that could benefit. Get that and other biotech news here.

—The financial health of San Diego’s public life sciences companies appears to be improving, according to Luke’s recent analysis of available data about the companies’ cash balances, burn rates, and financial projections. Luke concluded that 15 of the 27 public biotechs in the San Diego area are in stronger financial shape now than they were at the end of 2008.

—After presenting highlights of a clinical trial that enrolled more than 4,000 patients, San Diego’s Arena Pharmaceuticals (NASDAQ: ARNA) says its obesity drug candidate meets at least one FDA benchmark for effectiveness and is “safe and well-tolerated.” Arena CEO Jack Lief said the company has “accomplished what we set out to accomplish.”

—San Diego-based Ambrx, which has drug development partnerships with Merck, Eli Lilly, and Merck KGaA of Germany, has signed up another major partner—Wyeth. Ambryx will work with Wyeth to create new engineered antibody drugs against multiple diseases, and since New Jersey-based Wyeth (NYSE: WYE) is in the process of being acquired by Pfizer, it means Ambryx will continue to work on the antibody partnership with Pfizer—as long as the buyout goes through.

—San Diego’s Quidel (NASDAQ: QDEL) is among five San Diego biomedical companies that have benefitted from investor interest in swine flu-related products or services in recent months. But as Denise found, not all five companies will generate much additional business if the H1N1 flu season proves to be as serious and some health officials have predicted. The official start of the flu season is Oct. 4.

—Soon after Denise’s profile of San Diego “virtual” biotech Tioga Pharmaceuticals, Luke visited virtual company VentiRx, which has employees in Seattle and San Diego. VentiRx co-founder Rob Hershberg says VentiRx has enrolled 18 patients in its first clinical trial of a drug for cancer, and so far it appears safe.

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San Diego’s Quidel, which signaled it would report better-than-expected quarterly results on Sept. 10, isn’t the only San Diego biomedical company to get a boost from worries about swine flu. At least four other companies with flu-related products or research programs also have seen their share prices surge since June 11, when World Health Organization Director-General Margaret Chan declared the H1N1 swine flu pandemic had begun. So does swine flu present a real opportunity for these companies?

Whether the investor reaction is warranted depends in part on the severity and spread of the swine flu, which right now is far and away the predominant flu virus circulating in the United States, according to the weekly flu update issued by the national Centers of Disease Control and Prevention. With the official Oct. 4 start of the flu season less than three weeks away, here is a quick look at some San Diego companies with a stake in swine flu.

Quidel flu test

—I’ll start with a recap of recent news from Quidel (NASDAQ: QDEL). The diagnostic-test maker said last week the government has granted a special marketing clearance that allows Quidel to revise the packaging inserts for its QuickVue rapid flu test to say the test can detect the H1N1 swine flu strain. But Quidel also said its test can’t differentiate between influenza subtypes, and the company hasn’t established exactly how well QuickVue performs in detecting the specific H1N1 virus.

In the previous week, Quidel, which laid off 10 percent of employees earlier this year, said it has been working seven days a week since April to meet demand from doctors and hospitals for its rapid flu test. Quidel’s shares have leaped 25 percent since … Next Page »

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The pharmaceutical industry has set its sights on winning a huge new market, with four life sciences companies (three of them in San Diego) in a race to develop the next big obesity drug. Get the latest news as that story unfolds and other developments in San Diego’s life sciences sector.

—Business has been surging for San Diego-based Quidel (NASDAQ: QDEL), which says it went to seven-day-a-week manufacturing of its diagnostic flu test kits last April. The company says it’s experienced an unprecedented volume of orders in anticipation of a worsening global flu pandemic.

—San Diego’s Tioga Pharmaceuticals, which was founded in 2005 and has received about $24 million in venture funding, has been developing a drug for irritable bowel syndrome as a virtual company. As Denise reported, Tioga’s team—which officially consists of only one full-time employee—has seldom been in the same room. Instead, they connect through email and conference calls that can last up to two hours.

—Luke profiled a new entry in the race to develop a new obesity drug. In addition to San Diego’s Arena Pharmaceuticals (NASDAQ: ARNA), crosstown rival Orexigen Therapeutics (NASDAQ: OREX), and Vivus (NASDAQ: VVUS) of Mountain View, CA, San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN) is developing an obesity drug that combines its pramlintide diabetes drug with metreleptin, a genetically modified version of the leptin hormone.

—Gen-Probe (NASDAQ: GPRO), the diagnostic test maker based in San Diego, plans to spin off a new business called Roka Bioscience that will use Gen-Probe technology to develop tests for industrial uses such as food safety and pharmaceutical production. Roka, which will be based in San Diego, will have 18 former Gen-Probe employees and be headed by former LifeCell CEO Paul G. Thomas.

—Celladon, a San Diego life sciences company focused on gene therapy , has raised another $2.8 million in recent weeks. The latest financing will keep Celladon operating until the company completes its clinical trial of a groundbreaking treatment for congestive heart failure.

—Denmark’s Santaris Pharma has recruited former Isis Pharmaceuticals (NASDAQ: ISIS) drug development executive Art Levin to open a U.S. subsidiary in San Diego. The six-year-old Danish company plans to hire 8 to 10 employees in San Diego as part of its quest to develop new drugs based on microRNA technology.

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We had a mixed bag of bad and good news from the San Diego life sciences industry this week heading into the holiday weekend.

—At least 11 shareholder lawsuits have been filed against San Diego’s Sequenom (NASDAQ: SQNM) since the medical diagnostics company disclosed on April 29 that four employees were suspended for “mishandling” research data supporting a noninvasive prenatal test for Down syndrome. (A Sequenom spokesman told me last night the four employess are still suspended). The SEC also has launched an investigation into the mishandled research data that goes as far back as June 2008, according to regulatory filing from Sequenom earlier this week.

—Some documents filed by Hayward, CA-based Questcor (NASDAQ: QCOR) show that it is the source of an experimental drug now under development by stealthy San Diego biotech Evoke Pharma for treating gastroparesis, a serious digestive ailment. Questcor stopped its development of metoclopramide, which has significant side-effects, in mid-2001, when British drugmaker Shire Pharmaceuticals withdrew from their drug development partnership.

—After raising more than $47,000, a cancer diagnostics startup founded by UC San Diego grad student Raj Krishnan, was one of 16 finalists this week in a global business plan competition sponsored by Cisco Systems and the Draper Fisher Jurvetson venture capital firm. Alas, the top prize—$250,000 in investment capital—was awarded to a team from the University of Virginia who founded Husk Power Systems, a startup developing miniature power plants for rural India.

—San Diego’s Vical (NASDAQ: VICL) says the DNA vaccine it quickly developed for the H1N1 Swine Flu produced “robust immune responses” in animal tests. While the U.S. Navy has supported Vical’s work so far, the company has not been successful in landing additional government funding needed to move to the next stage of vaccine development.

—San Diego respiratory drug developer Amira Pharmaceuticals reported encouraging results from animal tests of its experimental drug for reducing fibrotic lung scarring in mice with pulmonary fibrosis. The biotech hopes to begin human tests of its oral medication during the first half of next year. Andrew Tager, a pulmonologist at Massachusetts General Hospital and adviser to Amira, told Denise that the drug also shows promise against other fibrotic conditions, such as cirrhosis of the liver and some forms of kidney disease.

—Illumina (NASDAQ: ILMN), the San Diego-based maker of genetic analysis tools, said its second quarter sales fell short of the company’s forecasts. It generated about $161 million in sales during the quarter, compared with the expected range of $168 million to $173 million.

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An experimental swine flu vaccine from San Diego’s Vical (NASDAQ: VICL) produced “robust immune responses” in animal tests, the company reports. Vical says it can proceed to large-scale manufacturing and human tests if it receives funding. Getting regulatory approval of the prototype vaccine is another matter. Nevertheless, the company’s shares surged 50 cents, or more than 20 percent, to close at $2.70 in Nasdaq trading that was 14 times Vical’s recent average daily volume.

The biotech says at least 75 percent of mice and rabbits reached or exceeded the protection threshold after a single dose. All animals achieved or surpassed the threshold after two doses. Vical is developing its vaccine under an agreement with the Navy.

Vical produced its DNA-based vaccine after receiving a swine flu sample from the Centers for Disease Control and Prevention on April 30. The vaccine was produced on May 11 and animal tests began May 15. CEO Vijay Samant noted in a statement that Vical was ahead of conventional vaccine developers, which are still working on their initial supplies of swine flu vaccine. Flu vaccine is conventionally made in chicken eggs.

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For a lesson in surviving tough times, look no further than San Diego’s Vical. (NASDAQ: VICL) The vaccine developer has endured two decades of red ink and by any sort of business logic should have folded its tent long ago. Instead, Vical is slowly but steadily advancing its “naked DNA” technology for use as a cancer vaccine (and with much fanfare against swine flu.) Last month, the company received a fresh $20 million infusion from investors, providing enough added cash for Vical to continue operations though the end of 2011.

By then, Vical will know the results of two key clinical studies. One is a late-stage trial of a therapeutic vaccine for metastatic melanoma to be completed in 2010. The second is a mid-stage test of a vaccine to prevent life-threatening cytomegalovirus infections in bone marrow transplant patients; interim results are expected this month. Positive outcomes from either trial would bring Vical a giant step closer to delivering a product while validating its faith in a pioneering technology.

When I recently asked CEO Vijay Samant for insight into Vical’s staying power, he first informed me that 20 years isn’t a long time to spend on something entirely new. He reminded me that one of San Diego’s most successful biotechnology companies, Idec – now Biogen Idec – worked on its first drug, a cancer medicine called Rituxan, for nearly 18 years.

“It takes time to understand the applications of the technology; it takes time to optimize the technology; it takes time to for regulatory agencies to understand the technology so they are comfortable with it; it takes time for clinicians and physicians to feel comfortable enough with the technology to inject people with it,” he said.

Traditional vaccines, such as those for flu, use actual virus to trigger an immune response. Vical instead uses genetic engineering techniques to produce sequences of virus DNA, which are injected into the body. Muscle cells take up the DNA and use it to produce virus proteins that stimulate the immune system. In essence, the body’s own muscle cells become vaccine mini-factories.

The beauty of Vical’s approach is that it can also be used for therapeutic cancer vaccines. Instead of virus DNA, the company’s experimental melanoma vaccine uses a genetic sequence that rarely occurs in Caucasians, who have a high incidence of skin cancer. Development partner AnGes of Japan wants to test the vaccine in head and neck cancer because the gene sequence is seldom seen in native Japanese, Samant said.

The early promise of Vical’s technology made it a biotech darling. The company’s market cap hovered around $1.5 billion in early 2000 — during what Samant calls the “rah-rah days” before the dot-com crash in April of that year. Vical’s current market cap approaches … Next Page »

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Vical (NASDAQ: VICL), the San Diego biotech developing a vaccine for the H1N1 swine flu, says it has raised about $20 million in private stock sales arranged with several institutional investors. The overall deal includes a $4.6 million commitment announced today from Special Situations Funds, a New York institutional investor.

The company says it is raising approximately $15.4 million from two other institutional investors, including the Pittsburgh, PA-based Federated Kaufmann Fund, through a related stock-and-options deal. Vical says Federated Kaufmann and Special Situations Funds are among the biotech’s largest stockholders, but the company did not identify its third investor.

Vical says it expects to receive net proceeds of approximately $18.9 million from the total offering after deducting fees and expenses from the deal. The company plans to use proceeds for ongoing programs and other general corporate purposes.

Vical said recently it has completed development of a prototype H1 vaccine, and taken the preliminary steps necessary to begin human clinical trials. Assuming that animal testing is successful, the company says it is ready to advance to large-scale manufacturing of the vaccine for human clinical trials to be conducted by the U.S. Navy. In a statement, Vical CEO Vijay Samant said, “The ongoing H1N1 influenza outbreaks remain a focal point of international discussions regarding the need for and feasibility of producing an H1 vaccine. We have already demonstrated the speed of our technology by producing an H1 vaccine and initiating animal testing while others are still assessing the situation.”

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San Diego’s Vical (NASDAQ: VICL) said today it has the necessary genetic sequence and plans to produce a prototype vaccine for the H1N1 influenza, aka Swine Flu, “within the next few days.” Yesterday, Vical announced it has entered into an agreement with the U.S. Naval Medical Research Center (NMRC), a biomedical research organization within the U.S. Navy, for the expedited development of a Swine Flu vaccine. The goal is to get the vaccine into clinical testing as quickly as possible.

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