Some powerful people in the pharmaceutical industry would like to see Brian Overstreet and his startup fall flat. Big pharma companies, on a few occasions, have told him to stop his spiel immediately, because they were afraid they could be put in a legally and ethically dubious position by hearing one more word.

When I told a Bay Area venture capitalist about Overstreet’s startup concept last week, it triggered a gut reaction. “I’d like to put that one out of business!” the VC said (I think half-jokingly. I think).

All the nervousness is coming from a new company called AdverseEvents.com, a Healdsburg, CA-based startup that seeks to bring order to the notoriously sloppy world of reporting on adverse events, the bad reactions people have to prescription drugs. The company, which emerged from stealth mode yesterday at the Health 2.0 conference in San Francisco, has devised a 17-step “data refinement process” to help doctors and health officials gather meaningful insights from the FDA’s adverse event records database known as Medwatch.

The current system—in which doctors voluntarily fax or e-mail forms about bad reactions they suspect are drug-related—has numerous well-documented flaws. Only about 500,000 reports are sent to the FDA each year, about one-tenth of the estimated number of actual bad reactions. And once reports get entered, they are littered with misspellings, misclassifications, incomplete entries, and incompatible file formats that make it extremely difficult to search the database. Those barriers have made it tough for the FDA, or anyone else, to spot the early warning signs of a dangerous drug until millions of people have been exposed, creating front-page scandals and highly litigious cases like the ones with the pain reliever rofecoxib (Vioxx) and the diabetes drug rosiglitazone (Avandia).

If AdverseEvents.com can iron out the problems in the Medwatch database, and become an online repository for simpler side effect reporting, it’s conceivable this little startup could someday become an essential online resource for tracking side effects of $1 trillion worth of prescription meds sold around the world. It’s the kind of data source that could make or break multi-billion dollar products, and in some cases, entire companies.

Brian Overstreet

“The FDA is making labeling decisions, product withdrawal decisions, post-market safety decisions based on raw data and it’s very clear there’s no way they can accurately do that,” Overstreet says. “It was a very scary moment when we realized that, but from an entrepreneurial standpoint, it’s a great opportunity.”

AdverseEvents.com, like a lot of health startups, got its founding inspiration from a personal experience. Overstreet, previously the co-founder and CEO of Sagient Research, became interested in the issue in January 2010 when a partner’s wife got sick from a bad drug reaction and ended up hospitalized. He and his partner did some basic Internet searches to find out data on rates and severity of side effects linked to the drug in question, and came up empty-handed. The only useful information came from the drug’s FDA-approved prescribing information, which is based on results from small, controlled clinical trials—not from real-world experience with the tens of thousands or even millions of people who may have been prescribed the drug.

The partner’s wife ended up … Next Page »

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At the first DC to VC health IT forum organized by Morgenthaler Ventures last fall, Aneesh Chopra, the chief technology officer of the United States, called for more prize-based competitions to encourage innovation in healthcare and other sectors of the economy. So it’s pretty appropriate that this year’s edition of DC to VC is all about competition. The main event at the invitation-only showcase on Microsoft’s Silicon Valley campus on September 22 will be a face-off between 11 startups at the seed and Series A stages. They’ll all be vying for the judges’ approval and—even more importantly—the attention of investors.

“The best way to ensure that investments are made in this space is to show people the high-quality companies that are being formed,” says Rebecca Lynn, the Morgenthaler partner who leads the firm’s health IT investing team. “A competition lets us have access to a wide range of entrepreneurs and lets the best bubble to the top.”

On August 24, Morgenthaler published the list of 11 finalists culled from 117 entries, including six seed-stage finalists and five seeking Series A funding. Below we’ve got exclusive in-depth material on each company, including video summaries. They range from a company developing a mobile-phone attachment for inexpensive eye diagnostics to a mobile social network for surgeons to an online platform for cognitive behavioral therapy.

There’s no monetary prize at stake on September 22, but a panel of judges will rank their top choices based on quality of the startups’ presentations. The seed-stage judges include Enoch Choi, an urgent care physician at Palo Alto Medical Foundation; Robert Fassett, chief medical informatics officer at Oracle; Chaim Indig, CEO of Phreesia; Aydin Senkut, managing director of Felicis Ventures; and Jeff Tangney, CEO of Doximity. Series A judges include Brian Ascher, a partner at Venrock; Isaac Ciechanover, a partner at Kleiner Perkins; Tim Chang, a partner at Mayfield (and formerly with Norwest Venture Partners); Alex de Winter, a partner at Mohr Davidow Ventures; and Lynn herself.

“This competition is not so much about winning as it is having the opportunity to present your thoughts and ideas in front of a key audience,” says Lynn. “Even though you might not win first prize, you might be just the thing that some VC or angel investor in the crowd is looking for. Or there might be somebody who could be a great teammate or senior executive or advisor. It’s really all about the exposure and the connections.”

Lynn was part of a five-person committee from event sponsors Morgenthaler, Silicon Valley Bank, StartUp Health, and the Health 2.0 conference who sifted through the original entries in the competition, which was restricted to US entrepreneurs seeking seed or Series A funding. She says she was excited to see the entrants offering genuinely new solutions to old problems in medicine. “I was blown away by the quality” of the entries, Lynn says. “Everyone is talking about ‘How do we pay for healthcare?’ and that’s just the wrong question. What these companies focus on is how to fix healthcare, and that’s a very different question from how to pay for it. A lot of that is driving out the cost inefficiencies and the procedural inefficiencies, but if they can get these tools in the right hands—in some cases doctors, in some cases payers, in some cases patients—then we can actually fix it.”

On to the finalists. The text summaries, videos, and graphics were provided by the finalists themselves and are used by permission.

SEED STAGE

Careticker

Careticker is the world’s first platform that help patients plan in advance for a hospital or outpatient procedure. Patients on Careticker can register with providers, provide advance notice of their visit and coordinate all of the people, medical supplies and services they need to have a safe recovery at home. With Careticker’s web and mobile application, patients also can create group messaging accounts for receiving and sending messages from doctors, nurses and providers. Patients can coordinate with providers, schedule delivery of medical equipment and supplies, and receive pending status updates. Once at home, Careticker helps patients to manage all aspects of their follow-up care.

EyeNetra

Coming from MIT Media Lab, EyeNetra is the most affordable mobile eye diagnostic ever made. A combination of a mobile phone and a clip-on eyepiece, NETRA allows anyone to quickly measure their own eyes and get a prescription for glasses as well as a diagnosis for cataracts. Through mobile connectivity, our system allows users to easily access back end service providers and caregivers for consultation and treatment, enabling a complete solution from awareness to treatment. Our aim is to empower hundreds of millions around the globe by democratizing access to eye care.

Skimble

Skimble is powering the mobile wellness movement with a cross-platform ecosystem of fun and dynamic social coaching applications. Their latest title, Workout Trainer, is ranked top 10 in health & fitness on iPhone/iPad, and helps members get fit with multimedia workouts led by expert trainers. Skimble’s GPS Sports Tracker allows members to keep track of all their sports activities and share accomplishments with friends.

Surgichart

SurgiChart is a mobile, cloud-based, social-clinical network for surgeons to exchange relevant perioperative, case-centric information.

Telethrive

Telethrive provides patients an instant connection to doctors for a medical consultation using any telephone or computer with complete audio and video conferencing. With no appointments, no waiting, and 24/7 availability,Telethrive eliminates existing and systemic barriers to health care access. Telethrive provides its highly scalable and customizable platform to a variety of healthcare organizations looking to cut cost, improve patient access to care, and better manage the time of the healthcare professionals providing services. A prototype of the platform is currently available direct to consumers in 18 states through Ringadoc (www.ringadoc.com).

Viewics

Viewics is an analytics and business intelligence software company focused on hospitals. The Viewics Health Insighter cloud based platform caters to ancillary departments such as the laboratory, radiology and pharmacy which are key drivers of cost and clinical decision making within a hospital. Our solutions enable hospitals to drive enhanced operational, financial and clinical outcomes.

SERIES A STAGE

AbilTo

Started in 2008, AbilTo creates and delivers set-price, fixed-duration behavioral health programs – via videoconference – that address prevalent, treatable conditions – e.g., depression occurring after a heart attack. The company currently offers programs addressing conditions, such as depression, anxiety and ADHD, as well as life transitions – e.g., career return at the end of family leave. AbilTo’s unique approach has clear advantages over traditional approaches. First, providing remote service, improves access and attendance. There are no office visits. Second, quality service is assured. AbilTo recruits its own network of licensed therapists who utilize proprietary manuals that are based on best practices of cognitive therapy and allow for consistent progress tracking. Third, participants make rapid, positive behavioral changes because each participant works worth both a therapist and a behavioral coach. AbilTo currently offers Cardiac Health Forum to Aetnamembers and Momentum (family leave to career transition) as recently reported about in Forbes.

Axial Exchange

When a patient transitions between care settings, information gaps can drive up both costs and patient safety issues. The Agency for Healthcare Research and Quality has cited care transition as the single biggest risk in patient safety today. Axial solves this problem by providing proactive clinical summaries for patients that move into and out of hospitals — from ambulance transport arrivals at the emergency room to patients arriving at a primary care physician’s office for post-discharge treatment. Axial’s technology-approach bears more similarity to that of a modern consumer web startup than to that of traditional health IT vendor. Axial has a cloud-native, open source infrastructure that translates data and presents it via a consumer-like experience that accommodates virtually any device with a Web browser.

Empower Interactive

Empower’s online services deliver proven psychotherapy methodologies via an e-learning platform to greatly improve the economics and accessibility of solutions for mental and behavioral health, starting with depression and anxiety. The underlying Empower platform generates customized learning experiences for each user based on Cognitive-Behavior Therapy (CBT) with content including videos, text, quizzes and interactive exercises. Clinicians can be assigned various levels of access to each user, as appropriate, to track individual progress. Overall, the program’s structure ensures that end users will benefit from cost-effective, evidence-based methods to help them improve their psychological well-being.

Jiff

Jiff, which plans to remain in stealth mode until September 22, has created the first HIPAA-compliant iPad platform for patient communication and education—used by doctors, nurses, patients and more. Jiff chairman James Currier is a serial consumer Internet entrepreneur who co-founded WonderHill, a social gaming company, which registered over 30 million people and was acquired in late 2010. In 1999, James founded Tickle, which became the world’s largest self-assessment company, registering 100 million people. Tickle became the 18th largest website in the world and was acquired by Monster.com in 2004. James also co-runs Ooga Labs, an investment and incubation company in Palo Alto.

YourNurseIsOn.com

YourNurseIsOn.com is a health care staff communications company that allows the health care industry to instantly allocate staff and providers where and when they are needed by two-way phone, text and email messaging. Instead of calling staff one by one, 30 people per hour, YourNurseIsOn.com can contact dozens of providers, and have answers in seconds, saving both time and money while improving patient outcomes. CLICK: Instantly contact and confirm your staff by multiple communication methods, including 2-way text, phone and email on any device. CONTACT: For open shift coverage, routine and emergency communications, compliance communications and continuity of operations. CONFIRM: The YNIO communications platform recognizes staff members’ responses and responds appropriately. RESULTS: YourNurseIsOn.com saves time and money while improving patient outcomes and staff satisfaction

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Qualcomm, the San Diego wireless technology giant, launched an internal “wireless fitness challenge” almost four weeks ago for a group of its employees—testing the idea of using similar workplace competitions to promote awareness of wireless health technologies.

When vice president Don Jones kicked off the challenge on July 14, he wrote in a Qualcomm blog that 32 employees were organized into four teams for the eight-week challenge to increase activity and lose weight. Contestants got an armband monitor from Pittsburgh, PA-based BodyMedia or an Internet-connected wireless weight scale from Withings of Issy-les-Moulineaux, France, (or both) to capture weight loss, calories burned, sleep, and overall activity levels.

“These devices wirelessly send our health data to the cloud, where we have built a platform that seamlessly ‘mashes up’ our information from both devices and leverages the BodyMedia analytics,” Jones writes in his blog. The results will be weighed, so to speak, to determine the winners, who also happen to be the biggest losers. (In an aside, Jones tells me by e-mail, “I doubt the Fortune 500 would get behind the ‘biggest loser’ branding.”)

While the challenge looks a lot like a publicity stunt, Matthew Holt of San Francisco-based Health 2.0 said during a mobile health and social networking conference in San Diego last week that there has been a big explosion in employer-based health, wellness, and fitness initiatives that rely on emerging mobile health and social networking technologies.

“We will also be posting follow up blogs, videos, check-ins with some of the team members, etc.,” Qualcomm spokesman Garrett Ponder told me recently by e-mail. Ponder, who also has been participating in the challenge, tweeted on July 29 that he burned 4,715 calories the previous day. On July 31, another participant tweeted: “Just 2 weeks & already over 1 Million calories burned by the 32 peeps in the Qualcomm Wireless Fitness Challenge!”

You get the idea.

Ponder also routed a few Xconomy questions to Don Jones, and provided these answers:

Xconomy: After two weeks, how would you describe the progress so far, both for the team and you personally?

Don Jones: So far, the progress has … Next Page »

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Palo Alto, CA-based HealthTap said today that it has collected $2.35 million in convertible-note seed financing from Mohr Davidow Ventures and a collection of individual investors including Esther Dyson, Stanford professor and former Veritas CEO Mark Leslie, and Mint.com founder Aaron Patzer. Founded by Ron Gutman, who previously founded health information portal Wellsphere, HealthTap is building a website that will combine personalized medical information, game mechanics, and social networking to help consumers manage their own health. The website is currently in private beta testing; the company said it will use the funding in part to expand the network of doctors creating tailored information for the site.

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A couple of major M&A deals that involve some of San Diego’s biggest tech companies are in the works. We’ve got the details, along with the rest of our Monday morning roundup.

—San Diego-based Websense (NASDAQ: WBSN), which provides Internet security software that companies use to limit employees’ access to business-related websites, has retained Frank Quattrone’s Qatalyst Partners to explore the idea of putting itself up for sale. The trial balloon was floated last week in The Wall Street Journal, which said the San Diego Web-filtering company could be worth about $1 billion in a sale.

—Kishore Seendripu, the chairman and founding CEO of Carlsbad, CA-based MaxLinear, told investors and analysts at the Roth Capital Partners small cap growth conference that he expects annual sales will continue to grow between 30 percent and 50 percent over the next three years. MaxLinear is a fabless wireless chip design company that went public just over a year ago.

—The two-day Health 2.0 Spring Fling conference that begins today in San Diego will focus on three themes: making health care cheaper; the evolution of healthcare research; and prevention, wellness, exercise, and food. Officials from the West Wireless Health Institute in San Diego are set to make presentations on new models for care delivery, new technologies that cut costs, and alternate funding models tailored for a faster and lower cost approach to health technology innovation.

—San Diego’s Maxwell Technologies (NASDAQ: MXWL) is finally beginning to show growth in its sales of ultracapacitors, after spending more than a decade trying to develop the global market for the rechargeable energy storage devices. Maxwell CEO David Schramm attributed Maxwell’s increasing ultracapacitor sales to wind turbines and automobiles in a presentation to analysts and investors last week at the Roth Capital Partners conference.

—Qualcomm co-founder Andrew Viterbi has joined the strategic advisory board at San Diego-based On-Ramp Wireless. The startup has been developing wireless network technology to connect very large networks, such as electric utility “smart grids.”

—San Diego’s Fallbrook Technologies signed a joint venture agreement with China’s Ningbo Shentong Group to develop and market Fallbrook’s continuously variable planetary (CVP) transmissions for electric-powered passenger cars and light trucks. Fallbrook says the China-based joint venture will initially focus on developing the market for Fallbrook’s NuVinci CVP transmissions and electric vehicle drive train systems in China.

—Shareholders of San Jose, CA-based Atheros Communications voted Friday to approve San Diego-based Qualcomm’s $3.1 billion buyout offer. The deal, which ranks as Qualcomm’s biggest acquisition, is expected to be completed during the first half of this year.

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“In the Obama Administration, entrepreneurs are welcome.” So said Aneesh Chopra, chief technology officer of the United States, in a keynote speech yesterday at “DC to VC,” a summit on healthcare IT investing organized by Morgenthaler Ventures partner Rebecca Lynn in San Francisco and co-sponsored by Silicon Valley Bank and Venrock. Speaking to a group of venture capital partners, entrepreneurs, and media representatives at the posh St. Francis Yacht Club, Chopra argued that under Barack Obama’s leadership, the federal government is doing more than ever before to adopt the latest infotech innovations coming out of Silicon Valley, and to shape federal regulation to encourage entrepreneurial solutions to big challenges like improving public health and nutrition.

I had a chance to delve into the specifics of the administration’s pro-entrepreneurship policies with Chopra in a one-on-one interview after his speech (see below). But the big picture, for the charismatic New Jersey-born son of Indian immigrants, is that the government sorely needs the ideas of its citizens—especially programmers—and that it can best stimulate those ideas by making the government’s vast troves of data more accessible to outside developers, and then getting out of the way to see what they build.

As a case in point, he cited the story of Dave Augustine, Bob Burbach, and Andrew Carpenter, three developers from San Francisco-based non-profit WestEd Interactive who came up with a new way to search the antiquated Federal Register as part of the Sunlight Foundation’s “Apps for America” contest. “The Archivist of the United States found out about Bob and Dave and Andrew in March, and said, ‘You guys have built the best killer app I’ve seen, can you rebuild the Federal Register website?’ and they said, ‘Sure,’” Chopra recounted. The new FederalRegister.gov, launched this summer, makes it easy to browse the once-impenetrable collection of government notices, rules, procedures, and documents by topic or date. “These were just random dudes who didn’t have lobbyists or procurement departments, but just smart ideas—’cognitive surplus,’ as Clay Shirky would say.’”

President Obama named Chopra as the nation’s first CTO in April 2009. As an associate director within the Office of Science & Technology Policy, Chopra’s formal assignment was to work with chief information officer Vivek Kundra to set federal technology policies that would make government more efficient and more transparent. “The goal is to give all Americans a voice in their government and ensure that they know exactly how we’re spending their money,” the President said when he appointed Chopra.

But Chopra has gone far beyond that initial charge, becoming known as an outspoken advocate for making government databases more accessible to developers of consumer software applications, using open source software more widely within government, and spurring innovation through prize-based competitions. Obviously, those are all causes dear to the hearts of most private-sector innovators and entrepreneurs, and Chopra has become a popular figure in Silicon Valley and other innovation hubs. Even before joining the Obama Administration, Chopra, the former secretary of technology for former Virginia Governor Tim Kaine, had been labeled a “venture governmentalist” for his efforts to invest in high-risk internal technology projects. Bay Area technology guru Tim O’Reilly has gone so far as to call Chopra a “rock star,” saying that he “understands that government technologists need to act more like their counterparts in Silicon Valley.”

In his speech at the Morgenthaler summit, Chopra gave numerous examples of the way the Obama Administration is opening government data to entrepreneurial uses. One was the Apps for Healthy Kids competition, a part of First Lady Michelle Obama’s campaign to reduce childhood obesity; the winners of the contest, which challenged entrants to create computer games or tools that make “fun and engaging” use of USDA nutrition data on 1,000 commonly eaten foods, were announced by the White House last month. Chopra said the developer of “Smash Your Food,” one of the winners of the $60,000 competition, got so excited about the power of software to help people eat better that he … Next Page »

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Sermo, the company that created the country’s largest online community of doctors, informed about 30 workers this morning that they will be laid off, according to a source familiar with the matter. The source says that the company employed 60 to 80 people prior to the cutbacks. We reported that layoffs were coming in our story yesterday about Cambridge, MA-based Sermo’s struggles to make money in the financial services sector.

In a voice mail message today left in response to my query about the layoffs, company CEO Daniel Palestrant declined to confirm or deny that the firm is making cuts. But when I spoke to Palestrant yesterday, he said the company had experienced a tough year, and that after reviewing its strategy, Sermo has decided to focus more narrowly on the pharmaceutical market, with less emphasis on financial services. That meant the company had different needs for people on staff, he said.

“We have to look at ourselves less as a startup company and more as an operating company,” the CEO said yesterday. “That has all sorts of ramifications in the kinds of people you leverage.”

Sermo, which has raised more than $39 million in venture capital since forming in 2005, has been one of the fastest growing of the new breed of Web-based companies focused on healthcare, or so-called Health 2.0 startups. More than 110,000 doctors have joined its online community, where they can pose questions about how to diagnose certain diseases and get feedback from their peers. But the big drug companies and financial institutions that pay Sermo to gain insights into how physicians use new medical technologies have had major layoffs and other financial struggles of their own, making it more difficult for Sermo to get them to adopt a new research tool, Palestrant told me yesterday. He added that drug companies are the startup’s largest source of revenue.

Despite its troubles, Sermo has attracted offers from venture investors that want to invest in the company, Palestrant said, but he declined to provide any details about the startup’s financing plans. At least one of the firm’s previous investors, Paul Margolis, a partner at Longworth Venture Partners, and a director of Sermo, said that his firm would continue to back the company.

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Sermo, provider of the nation’s largest online community of doctors, has had a tough year in getting financial services firms to pay for access to its physician network and has decided to shift its strategy more toward serving drug and medical devices manufacturers, CEO Daniel Palestrant tells Xconomy. The change comes amid talk of layoffs circulating at Cambridge, MA-based Sermo, according to a source familiar with the matter.

Xconomy has learned, from a source who asked to remain anonymous, that Sermo could be letting go more than one-third of its staff as soon as this week. Palestrant would neither confirm nor deny the possibility of layoffs, or say how many workers the firm employs. He did say, however, that Sermo has had to adjust its plan because the company has been affected by turmoil in the financial services sector and widespread consolidation and staff reductions in the pharmaceutical industry.

“We have to look at ourselves less as a startup company and more as an operating company,” Palestrant said. “That has all sorts of ramifications in the kinds of people you leverage, making cash flow-positive and profitability a tremendous priority.” He noted that Sermo is doing better than many other Web startups focused on health care—or so-called Health 2.0 firms—some of which have either folded or have been consolidated.

Sermo, which has raised more than $39 million in venture capital since its founding in 2005, allows physicians to circulate questions among their peers about how to best diagnose and treat patients with certain symptoms. The insights from this professional social networking are thought to be valuable not just for the physicians themselves, but for investors and drug companies that want to better understand how physicians use certain medical technologies. Sermo aims to sell subscriptions to those clients who want access to its database, but evidently, Wall Street wasn’t in a position to widely adopt this new tool for research this year.

Sermo’s online community has grown to more than 110,000 physicians. Last year, Sermo vastly expanded the access of financial analysts to its physicians-only community with the firm’s highly publicized partnership with New York-based financial information giant Bloomberg LP. Palestrant said the Bloomberg partnership remains intact, but he declined to provide details on whether it’s been a moneymaker … Next Page »

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Who says consumer websites are dead? Maybe you don’t need the ridiculous traffic of, say, Seattle-based Cheezburger Network (LOLcats) to survive on advertising revenues. Maybe user-generated content around a targeted niche, especially where there are purchasing decisions being made, can work well after all.

That’s the sense I got after talking with Tom Seery, the founder and president of Seattle-based RealSelf. Launched in 2006, RealSelf.com provides information about cosmetic treatments in an online community format that includes user reviews, doctor listings, and expert advice from cosmetic surgeons, dentists, and dermatologists. The treatments in question—a multibillion dollar market worldwide—run the gamut from nose jobs and tummy tucks to orthodontic braces and breast implants.

RealSelf is particularly interesting because it sits at the intersection of a number of fast-growing (but also challenging) areas for startups—social and community review sites, health 2.0, and ad-supported media sites. The company has gained some traction, growing 150 percent year over year in Web traffic; it now gets more than 700,000 unique visitors per month, Seery says. In terms of local startups with a similar strategy for capturing niches of Internet content (but these are not competitors), I’d mention Avvo, TeachStreet, Raveable, Redfin, Urbanspoon, and Zillow.

Like most promising startups, the story of RealSelf began with some important personal and business observations. Seery was a longtime employee of Bellevue, WA-based Expedia (NASDAQ: EXPE), and he saw the competing startup TripAdvisor plug away at hotel reviews and other user-generated ratings until 2004, when IAC (which then owned Expedia) had to buy it. “That was the ‘aha,’” Seery says. He thought, “Where else can we take this empowerment of consumers?”

Around the same time, Seery’s wife was researching a laser cosmetic treatment, and was having a hard time finding trustworthy reviews. So he thought, “Let’s create TripAdvisor for the cosmetic space.” The key adjustment he made was to introduce medical experts to the user community. The challenge there, as with most e-health sites like WebMD and Revolution Health, is that doctors are … Next Page »

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Several of New England’s life sciences firms had good news to report this week.

—Ryan gave a run-down of the key insights to emerge from our Xconomy Forum on pharma innovation. Sirtris CEO Christoph Westphal, for example, offered insight into one of the biggest biological mysteries around the Xconomy office: how Luke manages to eat so much and stay so thin.

—Cambridge, MA-based Gloucester Pharmaceuticals won FDA approval for romidepsin (Istodax), a treatment for a rare cancer called cutaneous T-cell lymphoma. Gloucester expects to begin marketing the drug in January.

—Noah Beerman took the reins of RXi Pharmaceuticals (NASDAQ: RXII), a developer of RNA interference drugs. Previous president and CEO Tod Woolf will remain on the Worcester, MA-based company’s scientific advisory board.

—Lexington, MA-based Concert Pharmaceuticals started human testing of an anti-HIV drug called CTP-518. Reaching the milestone will trigger a $12 million payment from Concert’s partner, GlaxoSmithKline.

—After announcing earlier this year that it was considering strategic options, including a sale, Cambridge-based Helicos Biosciences (NASDAQ: HLCS) took itself off the block, citing “improving standalone prospects and its current market valuation.”

—Cambridge-based Ironwood Pharmaceuticals inked a $75 million-plus deal with Japan-based Astellas Pharma. The agreement gives Astellas rights to market Ironwood’s lead drug candidate, the constipation treatment linaclotide, in Japan, Indonesia, the Philippines, Korea, Taiwan, and Thailand.

—Aileron Therapeutics, also of Cambridge, published research in the journal Nature indicating that its “stapled peptide” technology can be used to block the production of a protein called Notch that’s implicated in uncontrolled growth of cancer cells. Luke put the news in the context of Aileron’s efforts to develop drugs that hit previously unreachable targets.

—Ryan checked in with Cambridge-based electronic health records provider Dossia. After launching to much fanfare in December 2006, the non-profit is making slow progress in getting its system adopted, but it has recently solidified its leadership team and made other changes it hopes will help.

—Cambridge-based Alnylam Pharmaceuticals (NASDAQ:ALNY) announced the formation of an internal group called Alnylam Biotherapeutics focused on applying the company’s RNAi technology to increase the output of biomanufacturing processes.

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American Well, the Boston-based company that provides a Web-based system in use by several large health plans to let their members consult with doctors over the Internet, has raised $10 million in new equity funding, according to a regulatory filing today. The documents don’t name the funders in the round, continuing the company’s track record of secrecy around the amount of financing it’s raised and the identities of its investors.

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The role of information technology in healthcare reform is such a huge, sprawling topic that it’s hard to make any real progress in just an hour or two of discussions. Yet that’s just what transpired at a stellar event last night called “Healthcare-IT—Innovations That Will Transform Healthcare Now and in the Future.” It all took place at the Herban Feast in Sodo Park, South Seattle, and it was organized by the Washington Technology Industry Association.

Over some fancy appetizers, a distinguished panel of technologists, executives, and entrepreneurs debated everything from the technical and cultural issues of privacy and security in electronic medical records to who’s going to get a piece of the $19 billion in federal stimulus funding for digital healthcare; everything from whether consumers really want e-health enough to drive regulatory changes to—and this was particularly interesting to Xconomy—what the real opportunities are for startups in the space. The panel showcased some of the first-rate expertise we have here in the Seattle and Portland regions.

Moderator Joel French, the founder and managing director of Nephalios Group, a management consultancy, kicked things off by saying the whole healthcare debate boils down to four things: a cost problem, quality variability, access and coverage, and wellness. In each of these issues, IT plays an important role. “You can’t really share information if it’s not digital,” French said.

With that, it was open season on the panelists:

—Henry Albrecht, CEO of Bellevue, WA-based Limeade, an online health and productivity startup making software-as-a-service for employers (we reported Limeade raised money in July).

—Carla Corkern, CEO and chairman of Bellevue, WA-based Talyst, a company that makes software and systems to help pharmacies manage medications in hospitals and long-term care facilities (we reported on Talyst’s broader strategy and funding in June).

—Luis Machuca, CEO of Hillsboro, OR-based Kryptiq, a maker of collaborative software that lets healthcare providers share information with patients, labs, and physicians (we’ve reported on some of Kryptiq’s deals and customers, including NASA).

—Mohan Nair, executive vice president and chief marketing executive of Oregon-based Regence, the largest health insurer in the Northwest (he has a background in tech entrepreneurship).

—Michael Raymer, global market strategist and general manager for Microsoft’s Health Solutions Group (we’re reported on HealthVault, the company’s Web platform for medical records).

For the next hour, some tough questions flew out from the audience, and among the panelists. Here are my takeaways from the discussion:

1. “The magic pill is data liquidity.” That was from Luis Machuca, who argued that patients need to be able to own and access their own digital health information and use it to get better healthcare. “Universal health will fail, everything will fail, if we don’t have data liquidity and digitization,” Machuca said.

2. An open market, human behavior, and connectivity are important too. Nair argued that the present closed marketplace for healthcare services encourages entitlement instead of earned rewards. Albrecht noted that we should pay more attention to behavior, and less to technology. Raymer added, “Data liquidity needs to be coupled with tools to empower people to make changes, and connect people together.”

3. If you want better healthcare, go to jail. “We see the best compliance for … Next Page »

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If you’re the kind of person who needs a little help remembering to take your prescription meds, Cambridge, MA-based Vitality might have just the technology you need. It’s a wireless, Internet-connected medicine bottle cap that blinks and plays a tune when it’s time to down your pills.

The company’s “GlowCaps” system, which goes on sale today for $99, is designed to appeal to baby boomers looking for ways to keep their aging, forgetful parents out of expensive nursing homes or assisted care, says Vitality founder and CEO David Rose. But eventually, users might not have to pay for GlowCaps at all, because Vitality thinks the technology will also appeal to health insurers—and to pharmaceutical companies that want to recover the billions they lose in revenues when prescriptions aren’t used as directed or refilled on time.

The GlowCaps system is available exclusively through Amazon. It’s intended for people with hypertension, diabetes, and other chronic problems that can only be controlled through regular daily medications. In one beta test involving 50 Boston-area residents, Rose says, the system prompted patients to take their medicines on schedule 86 percent of the time, compared to the average adherence rate of about 50 percent.

And that’s bound to interest a couple of big constituencies. “There are really two primary customers for our company,” says Rose. “One is pharmaceutical companies that want to sell 25 pills a month rather than 15. If you’re a company like Novartis and you have a $2.5 billion drug like Diovan [a blood pressure medication] and it costs $4 a pill, that’s a lot of revenue you should be getting.” There’s also plenty of literature, Rose says, showing that high adherence rates lower the overall cost of care. “The other path to market, then, is the companies who pay for healthcare—both insurance companies and large self-insured employers.”

For now, though, Vitality is trying to build a market beachhead by selling the GlowCaps system directly to consumers. Inside the box are three components—a GlowCap, a reminder nightlight, and a small Wi-Fi router.

The GlowCap is the key component. It fits on top of a standard plastic pill bottle, and contains an LED light, a tiny sound chip, a wireless chipset, a watch battery, and a sensor that can detect when the bottle is opened. Most of the time, the LED emits a cool blue light, but when it’s time to take a pill, it switches to a pulsing orange light and plays a little electronic ditty. If the bottle isn’t opened, the ditties get longer and more insistent.

After two hours, the cap sends a wireless message to the patient’s home Wi-Fi router, which relays it to Vitality’s servers via the Internet. (For the system to work, the user’s household needs a broadband Internet connection with an available Ethernet port—and obviously, the cap needs to be within range of the router.) Vitality’s system can then initiate an automated phone call to remind the patient to take their medicine.

Vitality keeps records of each time the GlowCap is opened, and uses this information to produce a weekly “adherence report” that can be e-mailed to the patient or an appointed caregiver or loved one. The data can also be shared with doctors via online personal health record systems like Google Health, Microsoft HealthVault, and Dossia.

Then there’s the nightlight, which plugs into a kitchen or bathroom outlet and connects wirelessly to the router. It shines orange or blue in synchrony with the GlowCap, providing an extra reminder.

The whole system is about creating “persuasive feedback loops” that start with unobtrusive lights and electronic sounds, and escalate to … Next Page »

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Todd Park, co-founder of Watertown, MA-based Athenahealth (NASDAQ: ATHN) and San Mateo, CA-based Maria Health, has been tapped to serve as chief technology officer of the U.S. Department of Health and Human Services, Athenahealth announced. To satisfy government requirements, Park will resign this month from his post on the board of Athenahealth, a provider of  Web-based tools used by medical practices to managing billing, electronic medical records (EMRs), and other functions.

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Phase Forward (NASDAQ: PFWD), the Waltham, MA-based maker of software used by pharmaceutical companies to manage data collection and analysis during clinical trials, said today that it has acquired Indianapolis, IN-based Maaguzi for $11 million in cash. Maaguzi operates a Web-based service used to collect data reported directly by patients. Phase Forward also reported today that its second-quarter revenues of $52.5 million were up 29 percent over Q208 levels.

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When Merck recalled its arthritis drug Vioxx on September 30, 2004, Connecticut-based online pharmacy FamilyMeds wasted no time notifying customers. Within three hours after the recall was announced, an automated telephone system began calling Vioxx users to inform them about the change. But there was a twist—to comply with the federal healthcare privacy law known as HIPAA, the system had to verify that the person on the other end of the line was actually the patient taking the drug. If the answer was yes, the system would go on to explain the recall. If it was no, the system would leave a phone number and passcode so that the patient could call back later.

That kind of interactive voice response technology is all fairly standard today—but in 2004 it was brand new. The company that made it possible was Burlington, MA-based Silverlink Communications. And from this single application—HIPAA-compliant automated phone communications—Silverlink has since built a major consulting and service operation designed to help healthcare providers reach patients with behavior-related messages of all sorts.

Say a big health plan with millions of members wants to nudge members who take a certain drug toward buying a new, cheaper formulation at twice the dose, then splitting the pills before taking them. Silverlink can not only figure out the most cost-effective way to convey that message, but it can follow up by combing pharmacy claims data to see how many people actually switched.

Though I first met Silverlink CEO Stan Nowak at a local conference on “Health 2.0,” the movement to apply Web-based automation and communication to many aspects of the healthcare system, Silverlink doesn’t fit snugly into that category. The company is really about two things: communication—via whatever mechanism, even the old-fashioned telephone or snail mail—and analytics, to find out what effect each message is having and craft more effective ones.

Because Silverlink’s customers have so many customers of their own, the company is able to package each message in many ways, deliver the variants over many channels, and quickly determine which combinations are most effective for each group. For example, if you want to encourage members who are in the 40-to-55 age group to switch from name-brand drugs to generic ones, is it better to emphasize the cost savings, the convenience, or the fact that everyone else is doing it (in other words, applying a bit of peer pressure)? “Effectively, we’re running multiple simultaneous controlled experiments at scale across populations and measuring the results within microsegments of that population,” says Nowak. “It works in a dramatic way to improve communication yields”—meaning real changes in patient behavior.

Founded in 2002, Silverlink has about 100 employees, and has increased its headcount by 40 percent in the past year. The company has raised about $14 million in venture backing, including a $2.1 million Series A round in 2003 led by Sigma Partners, a $5.6 million B round in 2004 led by HLM Venture Partners, and a $6 million Series C round in 2006, also led by HLM. Kaiser Permanente Ventures, the investment wing of the giant California HMO, joined for the C round. Customers include the nationwide health insurer Aetna and leading pharmacy benefit manager Pharmacare. The company doesn’t share financial figures, but it does say that 2008 revenues were up 47 percent over 2007, and that it recently passed the 200 million mark—meaning that many healthcare consumers have received communications administered by Silverlink.

Nowak says Silverlink’s market is still growing, thanks to some big, long-term shifts in the way health insurance works. “The role of the consumer in healthcare has expanded pretty dramatically since 2003, and looks to expand even more as we … Next Page »

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The idea that a computer authentication system might be watching not just for the content of your username and password, but to the way you type them—that is, the exact amount of time your fingers linger on each key, measured to the millisecond—may sound a little spooky. But that’s the premise of Delfigo Security‘s new “DSGateway” software, introduced today. The company says its biometric verification and fraud detection technology could transform the way large organizations manage computer access, perhaps permanently eliminating such awkward contrivances as the one-time password tokens that many corporate employees must carry everywhere in their pockets or on their keychains.

In a second announcement today, Boston-based Delfigo also revealed the identity of its first paying customer: the cardiology department at Boston’s Children’s Hospital. The department will use the system to control access to a new patient record management system that it plans to extend to a number of partner hospitals and clinics, according to Ralph Rodriguez, Delfigo’s founder and CEO. James Lock, the chair of cardiology at Children’s, said in the announcement that Delfigo’s technology meets the department’s needs for security and compliance with privacy regulations “while integrating into our current technology.”

Indeed, the whole point of Delfigo’s system is to provide what computer security professionals call “multi-factor authentication”—identity verification measures that go beyond the traditional username and password—without forcing users to adopt additional technologies such as tokens, fingerprint scanners, and the like. The Children’s cardiology department “experimented with everything from physical tokens to digital certificates to proximity cards, but they all broke down for a variety of reasons, one of them being ‘supply chain’ issues when someone loses their token or card,” Rodriguez tells Xconomy. “We went in and showed them that we could, in fact, tell two things: one, we can know that it’s you logging in, but we can also know if someone else tries to use your password.”

Delfigo opened last fall with venture backing from Stage 1 Ventures in Waltham, MA. Rodriguez is an inventor and serial entrepreneur who was formerly chief security officer at Burlington, MA-based Excellon Corporation and chief technology officer at Chelmsford, MA, semiconductor automation firm Brooks Automation. He says he’s been developing the company’s proprietary keystroke measurement technology for several years, putting on the finishing touches while working as a research fellow at the MIT Media Lab under renowned artificial-intelligence expert Marvin Minsky.

Here’s how Delfigo’s system works: Delfigo adds a bit of Javascript code to the Web page for an organization’s login screen that listens to the electrical signals coming from a computer’s keyboard. The code measures both the “dwell time” (the amount of time your fingers spend on each key) and the “flight time” (the amount of time between keystrokes). When you hit the return key or the login button, the timing information is first transmitted to Delfigo’s servers via HTTP, the standard Web data transfer protocol. Delfigo’s software then compares the incoming timings to historical information stored for each user. (Users have to train the system before it kicks in, Rodriguez says, by typing their usernames and passwords six to 10 times.)

Using sophisticated neural-network algorithms, the software calculates a “confidence score”—in essence, the likelihood that the person who’s trying to log in is the real account owner. It’s all a matter of statistics, Rodriguez explains, since the timings of each new login attempt will never match the training information exactly. If the confidence score crosses the threshold set by the organization, Delfigo … Next Page »

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The healthcare industry is facing a shakeup in the way it uses information technology, and this is creating all sorts of opportunities for entrepreneurs in New England. This was the take-home message from some of the top minds in the Health 2.0 field, who we gathered together last week for a jam-packed panel discussion at the XSITE event at Boston University.

We heard from expert panelists on the front lines of this transformation in healthcare—such as John Halamka, chief information officer of both CareGroup Health System/Beth Israel Deaconess Medical Center and Harvard Medical School, and Joseph Kvedar, the director of Partners HeathCare’s Center for Connected Health—about how their respective organizations are changing the way they use the Web and other technologies to improve the delivery of medical treatment, among other aspects of healthcare. And IBM’s Bruno Nardone, the company’s national segment leader for state and local healthcare, filled us in on how Big Blue is working in the Boston area on such initiatives as a virtual radiology theater to enable new ways for radiologists and their colleagues to interact online.

It’s no mistake that there was a big crowd of more than 100 people for the Health 2.0 panel; there’s a lot doing at the crossroads of IT and healthcare these days. For one, President Obama is calling for nationwide adoption of electronic health records to help control the rising costs of healthcare in the U.S., and his administration tucked $19 billion into the historic $787 billion stimulus package this year to cover some of the costs of the major undertaking. That’s a potential boon for Boston-area companies that provide electronic health records such as Athenahealth (NASDAQ:ATHN). Locally, we’ve seen a recent surge in startup activity in the Health 2.0 arena, including the launches of young firms like Connected Health and Life Image. (For details on more startups in this field, Wade delineated Boston’s growing Health 2.0 cluster about a year ago.)

Here are some of the bigger themes covered during the Health 2.0 discussion:

—Leveraging technology to reach patients wherever they need care. At Partners’ Center for Connected Health, Kvedar says, his team of doctors and innovators are searching for ways to … Next Page »

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San Diego-based Concerro, the developer of Web-based software that enables nurses in 200 U.S. hospitals to bid for shifts, says it has acquired all the assets and intellectual property related to CommandAware, a hospital-incident management system, from Los Angeles-based PortBlue. The deal means a new line of business for Concerro, which has 50 employees and has received approximately $10 million in funding.

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Boston-based American Well, in a one-two punch of advances announced this week, has added substance to its dream of giving consumers with health problems a way to consult with doctors over the Web and avoid more costly office visits. On Tuesday, the company said it was upgrading its Web-based “Online Care” platform to provide doctors guidance tailored to specific patients. And yesterday, a division of the UnitedHealth Group, the Minneapolis, MN-based company that is the largest private health insurer in the U.S., said it would begin deploying American Well’s platform to hospitals, practices, and patients across its huge network of more than 70 million members.

That’s a big win for the three-year-old startup, which introduced its Web-based patient communications platform last summer and, up to now, had signed up only two customers—the Blue Cross-Blue Shield plans in Hawaii and Minnesota. The deal with the division of UnitedHealth (NYSE: UNH), called OptumHealth, does a couple important things. It gives American Well access to that company’s so-called “clinical analytics” technology—which mines patient records for examples of gaps in care that can then be highlighted to physicians—and also clears the way for the platform to be made available to millions of people in all of the states where OptumHealth and UnitedHealth do business.

After the OptumHealth announcement, I reached Roy Schoenberg, CEO of American Well Systems, and asked him to explain both developments in more detail. (American Well Systems is the operational side of the venture; Roy’s brother and co-founder Ido Schoenberg is CEO of American Well Incorporated, the business side.) He talked about how the OptumHealth agreement will speed up deployment of American Well’s technology. And he differed with my own diagnosis about the slowness of the rollout so far, saying that he believes the platform is being adopted at a “staggering, unbelievable pace” considering the conservative (some would say anti-technology) nature of the healthcare industry, which still relies heavily on old-fashioned paper records.

Here’s a full writeup of our interview, which was conducted Wednesday.

Xconomy: Before we talk about your agreement with OptumHealth, can you explain the core of the news you released yesterday, about an upgrade to your own Online Care platform?

Roy Schoenberg: The release that came out yesterday was about the unveiling of what we call internally Version 3.0 of the Online Care platform. It has better, broader administrative capabilities and other things that improve the experience based on what we’ve learned from users in Hawaii and Minnesota. But probably the most important feature that has been added is a thing called Online Care Insight. It’s very possible that a patient [using our system] will be seen by a provider with whom they have not had a previous encounter. Which means that anything we can do to equip the provider with insights—not only about who the patient is, in terms of their medical record, which has been there from the very first release, but really what needs to be done for the patient, what are the gaps in care, the appropriate medication changes—will go a long way to make sure the encounter represents a higher quality of care.

The way this is done is by taking advantage of expert systems, called clinical analytics systems in the business, which are very large computer systems typically deployed by large organizations like health plans to review the current healthcare activity of patients to identify such gaps. A typical example would be if a patient has diabetes and they haven’t had an eye exam, which is very important to prevent blindness. These systems will pick that up and drive communication to a physician or a care manager to say, “Listen, you really need to do an eye exam.”

Many such insights are generated by these systems, but until today, typically the results of those insights are, in the best case, the plan would send a letter to the physician saying that when you see the patient next you need to advise them about this thing. But as you can imagine, physicians typically don’t read mass mail, and don’t necessarily follow them. What we have now is the opportunity to engage those [expert] systems in real time when the patient is about to come together with a physician on our system. It brings them directly to the console. So the first time we are literally harvesting the immense computer power of these systems and bringing them into the care encounter.

X: From what I’ve read about OptumHealth’s eSync platform, it sounds like the expert systems or clinical analytics that you’re talking about is a big part of what they provide.

RS: ESync represents the front end of all of these analytics systems that Optum has developed and put in place. They have the ability to generate all of these messages about what needs to be done for the patient. But the big change is to be able to inject that information into the right place at the right time, so the physician can take advantage of it with the patient they are encountering right now. That ability is unique to Online Care. Before Online Care, when a patient was seen by a physician, there was no computer between the two.

X: Well, actually, there has been a computer in the room during almost every medical encounter I’ve had in the last several years.

RS: There is a computer. The question is whether the physician is going to log onto a system and read what that system is telling them about … Next Page »

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