Applied Proteomics hasn’t exactly been operating in stealth mode since it was founded five years ago. Co-founders David Agus, a cancer specialist at USC, and Danny Hillis, the MIT-trained computer scientist, gave TedMed talks about the startup’s technology, which provides a 40-gigabyte snapshot of all the proteins circulating in a drop of blood. By pure coincidence, I watched John Stewart’s Feb. 2 interview with Agus last night on “The Daily Show.”

“Danny and David had the foresight to build the tool before trying to use the tool,” says John Blume, a molecular biologist who joined API in 2008 as chief scientific officer. “Although the company wasn’t in stealth mode, the first several years were spent in taking the time to make it right, and then to use it and avoid some of the stumbling blocks.”

Now Applied Proteomics is raising the curtain on several steps that mark its progress beyond a seed-stage startup that was incubating at Applied Minds, an industrial think tank that Hillis founded in Glendale, CA, with a colleague from Disney Imagineering. After moving the headquarters to San Diego late last year, Applied Proteomics is today naming a new CEO—Peter Klemm, a veteran in molecular diagnostics and the former CEO of Lexington, MA-based Predictive Biosciences.

Danny Hillis

The company known as API says it also secured $22.5 million last June in Series B funding from Domain Associates (San Diego partner Jim Blair joined the board), Seattle’s Vulcan Capital, and returning angel investors. Klemm tells me the company raised $4 million from angel investors (who prefer to go unnamed) in what amounted to API’s Series A round in 2007.

David Agus

API’s goal, Klemm says, is nothing less than to “elevate molecular diagnostics to another level beyond the genome” by measuring the proteins made by genes—a long-sought technology that is expected to help doctors improve medical care for individual patients. Because proteins carry out most cellular functions, the company says a snapshot of all the proteins circulating in the body at a given moment represents “the most powerful source of information” in terms of understanding a patient’s health status.

Quantifying all the proteins in the body, Klemm says, can help doctors optimize the course of treatment for individual patients by making it easier to identify the specific drugs that would have the greatest effect on blocking specific proteins or signaling pathways, which can vary dramatically from person to person.

In a statement from the company, Hillis says, “For the first time, we can look at all the proteins in the body with remarkable specificity and sensitivity and use proteomic technology to create … Next Page »

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…or really just one great one: Xconomy needs your help. We’re busy cranking out terrific tech and life sciences journalism and putting on stellar events across the six cities in our network, and we’re looking for a kick-ass marketing coordinator to help us get the word out about all of it.

Full details are here, but in a nutshell: This is a full-time position in our Cambridge, MA, headquarters, ideal for somebody who is happiest when juggling a bunch of diverse projects. We need a person who enjoys figuring stuff out as s/he goes along, and has just enough of the old OCD to pull it off without too many embarrassing typos. Some main areas of focus will include marketing our events, managing our social media efforts, and marketing reprints and premium products.

If doing all that in an extremely collegial, slightly wacky startup environment sounds like your idea of a good time we want to hear from you at jobs@xconomy.com.

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—San Diego’s Amylin Pharmaceuticals says Bydureon, its new once-a-week drug for treating Type 2 diabetes can hit the market as early as next month, after the FDA cleared Bydureon. The FDA rejected the Amylin’s drug twice before. An estimated 26 million people in the United States, or roughly 8 percent of the population, have type 2 diabetes.

—San Diego’s life sciences sector has expanded since 2009, with employment increasing by more than 5,550 jobs, or 15 percent, over the past two years, according to a new economic report from Biocom, the local industry group. The comprehensive study counted more than 1,700 life sciences companies with a total of 41,937 employees throughout San Diego County in 2011, and says those numbers are expected to grow over the next two years.

—The FDA gave its approval to Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX), which has substantial operations in San Diego, for a new drug called Ivacaftor (Kalydeco), developed to treat a rare form of cystic fibrosis. The twice-a-day pill targets about 4 percent of the 30,000 patients in the U.S. with cystic fibrosis.

—Johnson & Johnson’s reorganized R&D operation in San Diego, now known as Janssen Healthcare Innovation, is trying an experiment in innovation by creating an incentive prize challenge. Janssen is offering a total of $250,000 for technology that helps improve care for patients who have just been discharged from a hospital.

—The folks who produce the quarterly MoneyTree report on venture capital funding just released a deeper dive into the details of life sciences investments. The survey shows that VC funding for life sciences increased 21 percent nationwide in 2011, with a total of $7.5 billion going into 785 deals. San Diego ranked third among metropolitan regions in terms of capital invested in the fourth quarter. The top five are Bay Area ($498 million), Boston ($384 million), San Diego Metro ($193 million), NY Metro ($98 million), and Orange County ($97 million

—Optimer Pharmaceuticals (NASDAQ: OPTR) CEO Pedro Lichtinger outlined his plans for expanding the market for the company’s first product, the antibiotic fidaxomicin (Dificid), as a preventative therapy for hospital patients at risk for a nasty intestinal infection called C. difficile. San Diego-based Optimer is planning a clinical trial to prove the drug can help prevent severe diarrhea in patients undergoing bone-marrow transplants.

—A tweet from Bob More of Frazier Healthcare Ventures prompted Luke to delve into the importance of character among life sciences leaders in his BioBeat column. “Politics pretty similar to backing CEO’s,” More said. “Newt may be smart and a good debate guy. But Newt=Smug. Never back smug,”

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—Peter Clarke of EE Times reported that San Diego’s Qualcomm (NASDAQ: QCOM) has acquired Andover, MA-based Pixtronix, a startup founded in 2005 to develop Microelectromechanical systems (MEMS) display technology. Qualcomm, which confirmed the deal with EE Times but provided no details or press release about the deal, reportedly spent between $175 million and $200 million for Pixtronix. The Massachusetts company founded by Nesbitt Hagood raised more than $53 million in venture funding, athough the Pixtronix technology has not yet been introduced to the market. Qualcomm has spent years working to refine its own MEMS-based display technology—known as Mirasol.

—More than 200 entrepreneurs turned out to hear TechStars founder and CEO David Cohen talk about the startup accelerator program he helped to launch in Boulder, CO, in 2007. Cohen told the rapt audience during a San Diego Tech Founders meetup that the Internet software community in Boulder “is just totally on fire” compared to five years ago. This was the night after Cohen met with local tech leaders to discuss the steps that helped boost the entrepreneurial ecosystem in the Colorado college town. Xconomy San Diego arranged the dinner discussion, and I plan to have more about our conversation later this week.

—Meteorologist Stephen Bennett and investor John Plavan founded San Diego’s EarthRisk Technologies in mid-2010 with the idea of creating predictive analytics technology that could extend the range of weather long-term forecasts from two weeks to 30 or 40 days. They are now providing their Web-based technology to commodities and energy-trading firms on a subscription-basis. Bennett told me the core business at EarthRisk Technologies is focusing on extreme weather events—heat waves, frigid cold snaps, and storms because extreme events are the ones with the highest impact.

—Mark Heesen of the National Venture Capital Association gave a good-news, bad-news presentation to the San Diego Venture Group last week. Among the interesting bright spots: Corporate venture capital is growing and San Diego-based Qualcomm now ranks as the nation’s second-largest corporate venture outfit. The bad news? U.S. VC firms invested $28 billion in startups last year, but only … Next Page »

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[Updated, Jan. 18, 2012---The Xconomist Report on the Future of Education is live---click here.]

As the presidential race picks up steam, you know that we will be hearing a lot—a lot more, that is—about the need to create jobs. But where will those jobs come from, and what fields are really likely to spur growth over the next decade? These are questions that anyone interested in the country’s economic well-being wants answered. And they might be especially on the minds of millions of college students contemplating an uncertain job market, and millions of high school students who just finished their college applications for next fall.

There are a lot of places to turn for answers. But Xconomy decided to look no further than its own advisors, the Xconomists. This group includes some of the world’s leading innovators, entrepreneurs, scientists, technologists, and investors across an array of fields, who have a unique eye on the future. Their attention is largely on the innovation that leads to exponential growth and, ultimately, jobs. So we asked them one question designed to cut through the worry and haze:

What should students be studying now to prepare for 10 years from now?

The result, which will debut tomorrow morning, is our Xconomist Report on the Future of Education. It includes insights from the likes of Vinod Khosla, Esther Dyson, Nathan Myhrvold, and Nobel Laureate David Baltimore, along with 18 other of the nation’s leading thinkers—and doers—in innovation.

I don’t want to give too much away, but Khosla, co-founder of Sun Microsystems and now an internationally known venture capitalist, asserts that an “updated curriculum should eclipse the archaic view of liberal education still favored by institutions like Harvard and Yale based on a worldview from the 1800s.” He recommends that schools (and students) put their efforts into economics, statistics, mathematics, and programming while making areas such as history and literature “optional subjects.”

For her part, Dyson, a renowned angel investor and tech guru, suggests pursuing new tools for extracting meaning from the vast amount of data being collected about a wide range of subjects. She envisions putting that data and knowledge to work to do things like inventing 3D personal printers or terraforming asteroids.

U.S. Department of Health and Human Services CTO Todd Park, another of our contributors, says flatly, “Students should be studying how to start things—how to create and grow new products, initiatives, ventures, and enterprises—a skill set that never goes out of style.”

We hope you’ll check back tomorrow to read the full report and join in the debate and discussion it’s sure to inspire. We think the Xconomists have provided some valuable insights about where the future is headed—and how students can prepare themselves to make the most of it.

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CEOs, investors, and board members frequently complain about ineffective board meetings. Steve Blank, Jeff Bussgang, Brad Feld, and Fred Wilson each have suggested board meetings could be improved by changing the format, process, or content.

Having good meetings starts by having the right people in the room (as discussed in the first installment of this series) and in having a good chair or facilitator for the discussion (as highlighted in the second). The board then can create the right agenda with a relatively simple, three-step process.

First, the chair and CEO should circulate the key questions and proposed agenda a week prior to the meeting, or even start collecting agenda items at the end of the prior board meeting. Most importantly, this helps everyone avoid wasting time creating dozens of slides that the board doesn’t value. It also allows time for reflection and input from other board members.

Some of the most effective CEOs and chairs I’ve seen call each board member in advance to get their input. Doing so also helps them build and maintain political clout with the board by encouraging board members to be heard, seeking their input, and avoiding nasty surprises at the meeting.

Second, in creating the agenda, the chair and CEO must reflect on what key questions are vital to the company’s success, as opposed to what are the most obvious. In the dozen years I have been on boards, I have seen too many stuck in the same routine. It’s easy—and a bit too comfortable—to review how sales were since the last board meeting, how many leads marketing generated, how the product has developed, and when the company might need more money.

All but the last question are like driving by looking in the rear-view mirror. Looking ahead to the next quarter’s sales or to the next release of the product at least focuses on the future, but only in the low-visibility fog of short-term goals. These are good questions, but more tactical than strategic. Of course companies need to address tactical questions, but too much attention there can lead to greatly missed opportunities.

Strategic discussions always start with tough questions that aren’t being asked. There are five areas for the board to have on its strategic checklist, with an optional sixth that should be reviewed at least twice per year (sometimes more frequently).

• Team. Does the company have the right people in the right roles? Are they the right ones for where it wants to be in six months or a year? Veteran entrepreneur and venture capitalist Bob Metcalfe once said that in big … Next Page »

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I set off for five straight days at the annual JP Morgan Healthcare Conference last Monday, but on the way drove the carpool to my daughter’s high school that morning in a last ditch attempt to act like a responsible and caring parent. My poor daughter gets completely abandoned during JP Morgan week every year and, as she so aptly put it, it is a mixed blessing. When I arrived home finally Friday afternoon she said to me that she likes that I am not there to tell her what to do, but not that I am not there to act as her personal assistant and laugh at her jokes. I must admit, she is pretty funny. Especially that part about the personal assistant.

Anyway, during my last parental act of last week, my daughter’s friend, who also happens to be a JP Morgan orphan (her dad is also a healthcare venture capitalist), asked me from the back seat, “So, are there many women at this conference?”

It was interesting to get that question from a 15 year old, as it certainly wasn’t the kind of thing I worried about at her age, probably to my detriment. In response I told her that I estimated that about 10 percent of the people who attend the JP Morgan conference and the associated three-ring circus of meetings and parties are women, about the same percentage of women that are represented in the venture capital profession generally. She was not impressed, nor should she be. In a field where women hold many senior positions in actual US healthcare corporations, they are drowned out at this conference by the advancing horde of finance guys in red ties and the CEOs that love them.

The JP Morgan conference and the fanfare that surrounds it bring thousands of people to San Francisco each year. They fill every hotel lobby, taxi cab, bathroom stall and barstool within a 10 block radius of Union Square. Many people don’t even go into the JP Morgan conference venue itself, using the occasion of the event to set up one-on-one meetings with everyone they ever met or wanted to meet in the healthcare industry. I attended so many 30-60 minute meetings in so many different hotels that I suspect people are wondering about my true profession. If you were recruiting for “The Bachelor” TV show, you could simply stand among the hundreds of men sitting in the sun with their ties loosened in Union Square Plaza and it would take you 10 seconds to find your candidate.

Given the ample supply of men and the fact that the conference is conveniently situated at the exact center of the 10 best shoe departments in the city, you would think more women would be in attendance, particularly given the after-Christmas sales. However, like so many professional situations in which I find myself, not so much. Nevertheless, there were a few standout moments that gave one hope, particularly if one were of the lipstick-wearing persuasion.

I was invited to attend a Pfizer breakfast and what stood out from it was the number of women who held virtually all of the senior Pfizer positions. Almost all of the 100+ attendees were men, but the speakers and leaders, representing Pfizer’s venture capital, innovation and other key corporate functions, were mostly women. You gotta love a room filled with men in rapt attention as the ladies told them how it was going to be.

I also attended a great women’s VC dinner along with about 28 or so others. What was particularly notable about the dinner was that I knew so few of the people there. I thought I knew most of the women in my profession, but apparently not. It was great to meet so many new and accomplished people and I can tell you that the banter was notably different from the other dinners I attended. The funniest part was the creative self-deprecating humor that people used when we went around the room each introducing ourselves. That is not often the way that men make their first impression on a room, at least not intentionally. It is a marked difference between men and women, I believe, in that men are more comfortable publicly touting their accomplishments by and large, while women too often … Next Page »

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2011 has been a big year for health sciences technology and, specifically, mobile health. Venture capital investors, looking for the next big thing, are beginning to invest in companies developing mobile applications in the health and wellness sector. Smartphones are making new health care applications feasible, and one doesn’t have to look far to see tangible examples of companies creating some buzz. Fitbit, Lark, Zeo, and Jawbone (UP) have all raised capital and developed hardware solutions often tied to Apple’s iOS or Android based phones. Hundreds of companies are targeting weight loss, wellness/ fitness and women’s health with software-only applications. Incubators like Rock Health are popping up, bloggers are beginning to write about the sector, and gamification has become a term commonly used in healthcare. As cleantech investing predictably dies, mobile health and Health 2.0 are taking its place.

Many of these startups, however, are targeting rather niche applications. These applications can often get a large number of downloads when they are offered for free, but never generate big dollars or recurring revenue. So what kind of companies are venture capitalists looking for in the mobile health sector? Here are some of our criteria for what can make a mobile health company a viable, stand-alone business.

Make the output measurable and actionable. Many mobile health products capture data, but what’s important is that one’s progress is measurable and the information provided to the user is actionable. Sure, it’s OK to measure and track someone’s pulse or activity, but what does the user do with that data? What’s important for these products is that they lead to an actual lifestyle change, improve a person’s health, or lower healthcare costs. Startups should think about partnering with companies like WiThings, which has products that wirelessly track progress by capturing data like blood pressure, weight and body fat percentage.

Seamless and easy to use. Data must be transferred to the cloud in a seamless manner. Use Wi-Fi or Bluetooth but, for heaven’s sake, don’t make users connect a device to a USB cable to download data. On a similar note, the user experience must pass the Apple test. It’s got to be easy enough for your three-year-old daughter or 75-year-old grandmother to interpret and use.

Have some defensibility. Sure, if you get enough traction, users, or eyeballs you can monetize later, right? That’s true if you reach tremendous scale. But by and large, if you are not developing something that is inherently or legally difficult to copy, you’ve lost some value.

Address a large, no huge, market. Part of the success of Facebook and Twitter is that anyone in the world can use them. The obesity and weight-loss markets are large but their products are often fads and short-lived. Many mobile application companies addressing niche markets such as brain workouts, pregnant women, or hard core athletes are inherently limited.

Have the ability to monetize long term. Few venture capitalists want to invest in a one trick pony. If the application costs $.99 and you get 10 million downloads, that sounds cool and would be great for an individual founder, but it does not make an independent, sustainable company. Mobile health applications need to have a long-term development path and quick release cycle to add features and capabilities that:

1. Maintain stickiness and reduce churn, getting people to continue to use and pay

2. Increase initial premium uptake or conversions to a paid subscription from freemium.

Plan to work with the healthcare system. Yes, direct-to-consumer sounds cool and seems like a great approach, but it’s important to realize that consumers expect other people to pay for their health care. Certainly weight loss and some wellness markets are large, but … Next Page »

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

In both of my fields of distributed renewable energy infrastructure and environmental composites, I would throw a punch at corporations and/or public sector entities, agents, or elected officials who have an environmentally destructive agenda, yet make no real effort to alter that agenda—and to add insult to injury, lie about their activities in the interest of power or profits. “Greenwashing” is rampant in most industries and sectors and needs to be targeted. It is a particularly disingenuous form of false advertising.

Plundering our environment is a type of crime, and in most cases it is done, not out of ignorance, but out of a singular focus on profit above all else. This is unacceptable by any standard.

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In short order, startup incubator Rock Health has become one of the Bay Area’s hubs for entrepreneurs working on technology ideas that could change healthcare delivery.

Formed last year to test whether the startup accelerator model pioneered by organizations like Y Combinator and TechStars will work in the healthcare industry, Rock Health has already graduated its first class of 13 startups and assembled a high-powered group of entrepreneurs, investors, and other advisors to mentor the early-stage companies in its network. (A second group of startups enters the program this month.)

Rock Health drew on this community to fill a banquet hall at Farallon in downtown San Francisco this Sunday, on the cusp of the annual JP Morgan Healthcare conference, which draws much the leadership of the U.S. biotech and pharmaceutical communities. Loosely designed to recognize the 50 leading influencers in digital health, the dinner also served as a prime networking opportunity—and, for some entrepreneurs, a chance to show off their wares. AliveCor chief medical officer David Albert, for example, gave live demonstrations the company’s portable cardiac monitor, which is built into an iPhone case (see the third image in our slide show below).

“We organized the event to recognize and celebrate the leaders making things happen in digital health,” says Leslie Ziegler, creative director at Rock Health. “We hope the format of the evening allowed these diverse minds to talk freely about the future of the space, meet and support newcomers, and find new ways to collaborate.”

San Francisco-based photographer Toni Gauthier was on hand to document the event, and Rock Health has shared some of the resulting images with Xconomy, which was a media sponsor of the event. The dinner’s main supporters were Rock Health partners Silicon Valley Bank and Fenwick & West.

	NEXT IMAGE >>
	L to R: Michael Esquivel (Fenwick & West), Leslie Ziegler (Rock Health), Jackson Wilkinson (WeSprout).
	Photo by Toni Gauthier

… Next Page »

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

The FDA is the easy target for those of us who are in drug development. But what I am most mad about is the unwillingness of our industry to focus and invest in innovative, high-impact drugs instead of “me too” knockoffs. Thus, my “anger” is focused on institutions that myopically insist on investing in low-risk, copycat ideas that undermine the true strength of our industry over the long term.

Risk-taking and innovation in drug discovery are critical to our field. Aspiring merely to be fast followers instead of striving for innovation is putting our competitive advantage at risk. The entrepreneurial spirit has been key to America’s success in many industries, especially biotech, but there have been several recent events that are stifling innovation.

The downturn in the economy has obviously dampened the financing of new ideas. Changes to patent law arguably encourage long, drawn-out opposition hearings that could be detrimental to the smaller inventor. However, my key concern for our industry is the lack of new and innovative drugs, despite the stunning pace of scientific progress over the last several decades. Not enough companies are focused on innovation and not enough people in charge are taking the right level of risk to actually come up with a new idea that can have a substantial impact on human health. Innovation is the alpha and the omega of our industry and should always be cherished as a way to create valuable and meaningful high-impact drugs.

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

Regulatory overkill. We spend so much time and resources in the USA due to regulations that, while well-intentioned when conceived, are set into law due to a crisis. They are driven by emotion and the desire to protect future occurrences or to punish a minority of wrongdoers. However, in hindsight, they are usually overly burdensome, lack risk/benefit analysis, and therefore stifle innovation. The real problem is that once they become law they are nearly impossible to roll back. I would love to see an approach that identifies the most stifling of these regulations in the USA and that requires the stakeholders (regulatory body, industry, and users) to draft a completely new and modern approach to regulation every 10 years. That could help ensure that innovation can thrive and that risks and benefits are balanced.

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Boston area software and life sciences startups are starting off the new year right with a slew of financing, acquisitions, and partnerships news.

—Marlborough, MA-based Physicians Interactive Holdings received a $17 million pledge from Merck Global Health Innovation Fund to develop Web and mobile apps for connecting physicians and life sciences companies.

—Repeat biotech entrepreneurs Bob Langer and Omid Farokhzad founded a new startup, called Blend Therapeutics, along with Stephen Lippard. Blend is backed by $2.8 million from Flagship Ventures, New Enterprise Associates, and NanoDimension, according a FierceBiotech report.

—Last Friday saw a number of financings, some for quirkily named startups: $4 million more for Cambridge-based GrabCAD and $4.5 million for Cambridge-based Krush, $6 million for Boston- and Nashville-based Moontoast, $8.3 million for Linkwell Health, and $4 million for Novogy.

—Safari Books Online, a joint venture between O’Reilly Media and Pearson Education, acquired Threepress, a Boston area company focused on digital publishing tools. The price tag of the deal wasn’t disclosed.

—Woburn, MA-based LogMeIn (NASDAQ: LOGM), which makes remote access and customer support software, paid $16.5 million to acquire Kansas-based Bold Software, a developer of technology for live-chat systems and click-to-call customer service.

—A cluster of area digital marketing startups inked deals: Newton, MA-based Neolane raised $27 million, Boston-based … Next Page »

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

It takes a lot to get me riled-up—I’m overly rational, if anything. Outside of the bad behavior we were supposed to outgrow in kindergarten—dishonesty, disrespect, etc.—there are few professional issues of sufficient emotional magnitude. One of the most frustrating issues today is the FDA situation. While easy to say, “The FDA is at fault and needs to be reformed in order to speed the approval of new medicines,” that is a dramatic oversimplification of the problem. All parties in the ecosystem are at fault to some extent, and it will take concerted efforts and change by each in order to fix it.

For example, the FDA has absolutely been more/overly safety conscious in recent years, but I believe we all would act that way if faced with being hauled in front of Congress to justify the risk-benefit of a drug approval that positively impacts more than 99.99 percent  of the people who use it. Why should we, as a country, require or expect that medicines be as safe as clean water? At the core, sick people, whether with cardiovascular issues, autoimmune disease, or other afflictions, are taking a medicine in order to improve their condition, so while absolutely safe drugs would be wonderful, a level of risk is warranted based on the improvement in the disease. If we can cross that bridge and accept that medicines will have risks, then we have the tools to deal with the safety vs. speed of approval conundrum. We can shorten commercialization timelines while dramatically improving safety monitoring if we test for efficacy and major safety during development, while tracking long-tail safety issues in the commercial setting—perhaps the first 100,000 people prescribed a new product?

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What issues would you be willing to throw a punch over?"]

There are two.

The first is the state of the patent system, particularly as it affects computing hardware and software (broadly construed). Just about everything about the system is broken. In my view it is working strongly against real innovation. Major companies amass enormous portfolios of questionable patents that they can use to bludgeon one another (until they sign cross-licensing agreements, at which point only the little guys are left to be bludgeoned). Organizations that are not in the innovation business acquire portfolios that they assert for profit alone. I have absolutely nothing against the licensing of substantive innovations by those in the innovation business, whether by major companies or little guys . But much of what goes on today does not fall into this category, and something needs to change. I am not sufficiently expert to make appropriate detailed proposals, but I am sufficiently expert to smell a rat.

The second is our “blame the teachers and the teachers unions” approach to improving K-12 education. Yes, K-12 education is a mess, more of a mess in the U.S. than in most industrialized nations, and more of a mess in Washington than in almost all other technology states. (For some facts to support the latter assertion, see this.)

But blaming teachers and unions is a cheap way to avoid confronting the many real problems that plague our K-12 education system and are leading us rapidly down the road to an ever-more-stratified society of haves and have-nots, threatening the raw material upon which the innovation economy depends. Here, too, I don’t have an easy or quick solution—there isn’t one. But we are not going to make progress by sitting around playing the blame game.

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[Updated 1/11/12 5:15 pm. See below.] “Sermo has been my baby, my blood and tears,” its former CEO Daniel Palestrant told me in a phone call last week.

So it was pretty shocking last week when news surfaced that the founder of the Cambridge, MA-based online community for doctors was moving onto a new Web startup, along with Sermo chief medical officer Adam Sharp. It wasn’t always going to be that way, Palestrant said, but more on that later.

Par8o, the new startup, began as a research project within Sermo. Drawing on the insights of its large online physician community (more than 130,000 people strong now), Sermo had formed the opinion a few years ago that the healthcare bill would not achieve its goals of improving patient care and lowering costs, Palestrant said. Among other things, the community thought the bill (signed into law March 2010) needed greater reform to medical malpractice policy and ways to improve patient engagement.

The research team at Sermo hypothesized that to achieve these goals, what’s needed is “the introduction of Pareto dynamics,” where efficiency is created through better matching supply and demand, said Palestrant. The idea comes from the Italian economist Vilfredo Pareto.

So what exactly does that look like and how can a new health Web startup help? Palestrant explains that in Par8o’s case, it’s about improving the patient referral process. Referrals, he said, are “a critical moment in a patient’s healthcare journey, either a change in diagnosis or an escalation in care.”

Often, this means the general practitioner sees a new health problem in a patient and needs to bring in a specialist to really tackle it, said Palestrant. That should work fine, right? Not exactly, according to Palestrant. Of the tens of millions of patient referrals per year, somewhere between 20 percent and 40 percent never actually result in another appointment or handoff to a new doctor. “The patient never … Next Page »

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[Editor's Note: We asked selected Xconomists a series of questions designed to zero in on the big issues of the year, including "What would you be willing to throw a punch over?"]

The most important issue facing Aastrom and many other companies in biotechnology is the lack of adequate funding to support innovative new companies, technologies and therapies. The challenges in drug development, especially in the early stages, are only compounded by the current regulatory environment with a primary focus on risk reduction.

Unfortunately, with this combination there isn’t one punch we can throw to rapidly improve the situation. But, the current situation has to change if the United States is going to remain the global leader in the discovery, development, and commercialization of innovative new therapies in the next two decades. If we don’t improve the current conditions, we will continue on a path to increasing irrelevance in biomedical research and innovation, especially given the fact that other countries are rapidly recognizing the potential of our industry to improve human health and create jobs, and they are in many ways ahead of the U.S. in supporting these companies.

To address the problem in the U.S., NIH funding has to be re-directed to focus less on support for early-stage research and discovery and more on the critical translational phase of new product development. This period is often referred to as the “valley of death” in new product development in healthcare—the period between early preclinical promise and clinical proof of concept. In a risk-averse environment, funding for products at this stage is very limited, and many will not move forward even though they could represent important advances in patient care. We need to introduce more funding sources that are positioned to accept the inherent risks at this stage.

As we work to introduce new funding sources, the FDA should also consider opportunities to recalculate the risk/benefit equation for many products. Working more as a supportive partner with industry, the FDA can work to make faster decisions. To protect both patients and industry, the FDA can also introduce mechanisms to more rapidly respond to post-marketing issues related to approved products. In this way, the FDA can balance the benefits of bringing new therapies to market quickly with the risks associated with the decision and a plan to take action post-approval if necessary. The ability to review and approve new therapies with great speed and, equally importantly, the ability to “disapprove” and remove therapies from the market or alter the product indication post approval, could significantly improve the competitive position of the U.S. in biotechnology in the years ahead. Industry will have to accept the fact that FDA decisions might not mean approval forever. They will build a model where marketing can begin while additional data is collected to provide further confirmation that benefits outweigh risks.

Finally, venture capital investors need to return to their roots—funding truly innovative companies, technologies, and therapies at the early stages. They need to lose their recent aversion to risk—seemingly honed over the past decade. Importantly, they may be more willing to move in this direction if the FDA takes steps to establish a more receptive and less uncertain regulatory environment.

A reflection of the current funding environment: a partner with a prominent venture capital firm recently told me that his firm is only funding companies that have an already approved product (the historical province of private equity and growth capital firms) or very early-stage “science-based” companies. The level of regulatory uncertainty has reached critical levels. When very smart and successful venture capital firms cannot accept the level of regulatory uncertainty, the alarms have clearly sounded—and changes in Washington and within industry seem essential to address these problems successfully.

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Marlborough, MA-based Physicians Interactive Holdings announced today that it has formed a deal with Merck Global Health Innovation Fund, a unit of the Whitehouse Station, NJ-based drug giant. Merck (NYSE: MRK) has pledged $8.5 million up front and another $8.5 million in milestone payments to Physicians Interactive, which was founded in 2008 and makes a range of mobile and Web-based tools for healthcare professionals and life sciences companies.

The company will use the money to further the development of four product lines: digital marketing tools, data analytics, online platforms for selling drug samples, and mobile products such as MedAlert—a service that sends news, research updates, and drug information to doctors’ cell phones. Donato Tramuto, CEO of Physicians Interactive, says the funding will also help the company explore new market opportunities.

This marks the second large financing of a Boston-area company by Merck in the last month. In December, Merck led a $10 million funding of Cambridge, MA-based HIV diagnostics developer Daktari. Merck’s $250 million Global Health Innovation Fund was set up in 2010 to fund startups pursuing several health-related endeavors, including health informatics.

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Founders of Sermo, the Cambridge, MA-based provider of an online community for physicians, are off to a new health-focused Web startup. The news was first reported today at online publication Pharmalot, which noted Sermo CEO Daniel Palestrant’s departure.

Sermo founder and chief medical officer Adam Sharp is also a founder of the new startup, Par8o, according to its website. Par8o seems to be an outgrowth of Sermo, with Palestrant and Sharp stating on the Par8o website that “having built the largest physician community in the world, we’ve seen first-hand what is happening to our profession and understand what it is doing to our colleagues, and most importantly, our patients.” The new startup says it is focused on enabling patients and physicians to collaborate directly on patient care, and is apparently leveraging concepts of efficiency and the allocation of goods from the Italian economist Vilfredo Pareto.

Sermo was founded in late 2005 and hoped to make money by charging financial services firms for access to the doctors in its online community (it stayed away from ads and subscription fees for the physician users). But it struggled to bring cash in that way, and later pivoted to focus on medical device and drug makers as paying customers, as we reported in December 2009. Two days after that report, news surfaced that Sermo laid off about 30 of its employees, reducing a workforce that was previously between 60 and 80 people.

We last heard from Sermo in August, when the company announced a new mobile app that enabled doctors to snap pictures of findings, X-rays, or lab results, and send them to others in the Sermo community for real-time advice. The company also took in another $3.5 million in growth financing from MMV Financial last February. We hope to get more details from Palestrant about the new gig, so stay tuned.

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[Editor's note: As a New Year's exercise, we asked a select group of Xconomists to answer this question: "What's the craziest idea out there that just might succeed?"]

Drugs for type 2 diabetes have the potential to become effective therapies for certain types of cancers. Tumor cells have increased energy needs, and starving them of their natural energy sources, impairing their ability to generate energy from glucose, or altering their metabolics, could successfully stop cancer cells from growing. The key will be to determine which tumor types are most sensitive to metabolic and energy imbalances.

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