NanoString Technologies, the maker of a machine that lets scientists digitally analyze how genes are turned on or off in a tissue sample, just won a glowing endorsement from one of the biggest names in biology—Eric Lander of the Broad Institute of MIT and Harvard.

The Seattle-based company has nailed down a three-year research collaboration with the Cambridge, MA-based Broad Institute to look at how networks of hundreds of genes work in concert to form immune defenses against foreign invaders. Financial terms aren’t being disclosed, but NanoString has sold the Broad a couple discounted nCounter machines that normally retail at $235,000 apiece, and will provide proprietary reagent chemicals to operate them, according to acting CEO Wayne Burns. In return, NanoString gets certain intellectual property rights from the collaboration, advice on how to improve its tool, and some golden word of mouth.

NanoString, a private company founded in 2004 with technology from the Institute for Systems Biology in Seattle, has been building stronger ties to the Broad over the past year as people there have started using one of the first commercially available machines, Burns says. The mounting enthusiasm at the institute was instrumental in helping NanoString nail down a $30 million venture capital round in June. The round was led by Clarus Ventures, which has an office just a couple blocks from the Broad. Word has spread to the point that 15 researchers at the Broad are now involved in 20 separate collaborations to see whether the NanoString technology can yield biological insights that couldn’t realistically be attained with competing instruments, Burns says.

“NanoString offers the ability to look at hundreds of genetic markers across many samples at relatively low cost and with high sensitivity. They have developed exciting technology with potential applications to a wide range of scientific problems,” said Lander, the director of the Broad Institute, in a NanoString statement. “We look forward to working together to explore new ways of using of this technology.”

That kind of endorsement is sure to carry weight in the biomedical research community, and can’t hurt a fledging company trying to increase sales. “If you’re in the industry you know exactly who Eric Lander is, the reputation he has, as well as that of the Broad. We have the best of the best endorsing our technology,” Burns says.

For those who are new to the NanoString story, the idea is to allow researchers to look at a large number of genes, with digital precision, to see the extent to which they are turned on or off in a given sample. It’s the sort of technology that’s supposed to help researchers do …Next Page »

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When Tom Clancy introduced a panel discussion yesterday at a forum on analytics software, the founder of San Diego’s Tao Venture Partners said the forum was “founded four years ago by people who had an interest in seeing San Diego get established as a leading cluster in the analytics space.”

The forum, which is sponsored by the San Diego Software Industry Council, offers an annual snapshot of local developments in a booming industry that has become crucial to business intelligence, data storage and management, and complex decision-making.

Since Robert Hecht-Nielsen founded HNC Software here in 1986, the number of companies that focus on analytics software in San Diego has mushroomed, with more than 100 companies specializing in neural networking, data mining, pattern recognition, and related algorithms and technologies for analyzing data. Yet Clancy and local experts who discussed “opportunities in analytics” lamented that San Diego’s standing as the birthplace of some key companies and technologies has gone largely unrecognized. Among the examples cited:

— HNC, which specialized in technology to analyze credit card transactions, was acquired for $810 million in 2002 by Fair Isaac and Co. and integrated with the Minneapolis, MN-company’s credit-scoring business.

—Urchin Software, a suburban San Diego Web analytics company that developed an assortment of tools for measuring website usage, page views, and other statistics, was acquired by Google in 2005 for an estimated $30 million. Seven months later, Google renamed its Urchin business Google Analytics, and made analytics tools available to Web users for free.

—WebSideStory, a San Diego company that developed website traffic analysis tools, rebranded itself as Visual Sciences in 2007 and was acquired later that same year for $394 million by Utah-based Omniture. (Last month, Omniture was itself acquired by San Jose, CA-based Adobe Systems in a $1.8 billion deal.)

—Carlsbad, CA-based analytics software developer Keylime Software was acquired for $9.5 million in 2003 by Pasadena, CA-based Overture, an advertising distribution network that was later acquired by Yahoo for $1.6 billion.

Such deals reflect a surging awareness of the value of data, says Stephen Coggeshall, a co-founder and chief technology officer for San Diego-based ID Analytics, which uses advanced analytics to search credit databases for telltale signs of identity theft. In terms of technology innovations that will likely lead to forming new companies, Coggeshall says …Next Page »

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Ion Torrent Systems, a company advised by Harvard University genomics pioneer George Church, has raised $23 million in new capital to develop what it calls on its website “groundbreaking and highly disruptive technology” and to hire people who “want to do what it takes to put a dent in the universe.”

The company, which has a location near Yale University in Guilford, CT, and one in San Francisco, has raised $23 million in equity out of a financing round that could be worth as much as $26 million, according to a regulatory filing released today.

The document doesn’t say who invested, and Ion Torrent didn’t immediately respond to a request for comment. But the new company is associated with some big names, including Church and Stanford University’s Ron Davis, who serve on the company’s scientific advisory board, and CEO Jonathan Rothberg, who was the founding CEO of 454 Life Sciences before that company was sold to Roche two years ago for $140 million in cash.

Ion Torrent Systems website is pretty vague about what it is really up to, although its job postings offer some clues. It says it is looking to hire molecular biologists and biochemists to do the aforementioned universe denting, and that it offers that it offers the opportunity to work with top scientists “and have a profound impact.” It is also looking to hire software developers and “evangelists” who want to “create the biotech software platform of the future and share it with the world. Build powerful tools and create a tight-knit community that will use and develop them for years to come.”

GenomeWeb speculated back in March, based on a patent application filed by Ion Torrent Systems, that it is working on new DNA sequencing technologies, although the company wouldn’t confirm that. Major players in the field—such as Carlsbad, CA-based Life Technologies, San Diego-based Illumina, and Roche—have been in a competitive frenzy to lower the cost of sequencing full human genomes. One Mountain View, CA-based startup, Complete Genomics, raised $45 million in venture capital earlier this year to support its new model for sequencing entire genomes for as little as $5,000 apiece or less.

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Carlsbad, CA-based Helixis, the startup maker of genetic analysis tools founded from the Caltech lab of Nobel Laureate David Baltimore, has raised $7.3 million out of a venture capital round potentially worth $10 million, according to a regulatory filing today.

Helixis reported back in July that it had raised $5.5 million, so today’s filing is an amendment to reflect the larger amount of capital (nearly $2 million more) being invested. The filing, like July’s document, doesn’t say who invested, although Domain Associates, Advanced Technology Ventures, and Okapi Venture Capital led an initial venture financing in the company of $10 million back in 2007. The founders include Baltimore and Axel Scherer, who is also a Caltech professor.

Helixis is developing products that attempt to make real-time polymerase chain reaction (RT-PCR) technology more accessible to the average researcher. This technology precisely measures individual units of DNA and mutations. Switzerland-based Roche and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) are a couple of the big players in this market and typically sell big, expensive pieces of equipment to perform this kind of analysis.

The startup from Caltech has a different view of how real-time PCR might be applied. Advances in biology depend on scientists being able to precisely measure DNA and compare it easily across samples, but largely because of cost the current technology for doing that isn’t accessible to enough scientists, Baltimore says in a video clip posted on the Helixis website.

“The idea might be to have on the desktop of every scientist a machine that works as well as the most high-tech machines, but is affordable at the bench level,” Baltimore says. “Helixis is a company devoted to doing that, and has produced such a machine. We’d like to make that machine available on the widest possible basis.”

Helixis CEO Alex Dickinson couldn’t immediately be reached for comment, although he did confirm the amount of the financing through a company representative.

The company has some big names on its five-member board of directors, according to today’s SEC filing. The group includes Dickinson; Caltech’s Scherer; Illumina CEO Jay Flatley; Jim Blair of Domain Associates; and Tom Rodgers of Advanced Technology Ventures.

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A quiet epilogue to last spring’s heated Amylin proxy battle was the lead story in an otherwise slow week for San Diego life sciences news.

—Eastbourne Capital, which won a partial victory in a proxy fight against Amylin Pharmaceuticals earlier this year, sold its entire stake in the San Diego diabetes company. The San Rafael, CA-investment firm owned 12.5 percent of Amylin (NASDAQ: [[ticker: AMLN]]) during the proxy contest. One of its three nominees, Kathleen Behrens, was elected to the Amylin board.

—San Diego ranked second last year to Cambridge, MA, in total venture capital investment in medical technology firms, according to a report from Ernst & Young. San Diego saw $151 million invested in 15 deals, compared to $169 million in nine deals for Cambridge. E&Y said 2008 was tough for medical device companies, in part because of the economy and concerns about health care reform. Southern California, which E&Y defines as San Diego and Orange County, has 82 venture-backed and 41 public medical technology companies, one of the highest concentrations in the country.

—Illumina (NASDAQ: ILMN) acquired worldwide rights to commercially develop Orchid Cellmark’s (NASDAQ: [[ticker: ORCH]]) single base nucleotide extension technology for forensics and diagnostics. Under the deal, Illumina paid Princeton, N.J.-based Orchid $850,000 up front and agreed to pay $150,000 in milestone payments.

—Avanir (NASDAQ: AVNR), which is located just across the San Diego border in Orange County, said its experimental drug for treating unprovoked emotional outbursts reached secondary endpoints in a clinical trial of people who had either multiple sclerosis or amyotrophic lateral sclerosis. Data presented at the annual meeting of the American Neurological Association in Baltimore showed that patients diagnosed with pseudobulbar affect experienced a statistically significant improvement in their mental states. Avanir previously announced that the drug dextromethorphan/quinidine, or DMQ, met the primary endpoint of reducing PBA symptoms—episodes of uncontrollable laughter or crying—by a clinically meaningful 30 percent. The drug could receive FDA approval during the second half of 2010.

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San Diego-based Illumina (NASDAQ: ILMN) and its Solexa subsidiary are countersuing Carlbad, CA-based Life Technologies (NASDAQ: LIFE) and Applied Biosystems in a patent dispute over gene sequencing technologies. In a statement today, Illumina and Solexa denied allegations that Life and Applied Biosystems raise in their Sept. 21 lawsuit, assert that Applied Biosystems’ patents are invalid, and allege that Life is infringing on four Solexa patents. A Life spokesman says, “We believe these claims are without merit and we will vigorously defend our intellectual property.”

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San Diego’s Illumina (NASDAQ: [[ticker: ILMN]]) has licensed worldwide rights to commercially develop Orchid Cellmark’s proprietary single base nucleotide extension technology for forensics and diagnostics. Princeton, N.J.-based Orchid (NASDAQ: ORCH) is one of the largest providers of forensic DNA testing services used by the criminal justice system. Orchid says Illumina agreed to pay $850,000 upfront and up to $150,000 in milestone payments. Although Orchid retains the right to use its patents, Illumina received exclusive rights to sublicense the technology. Orchid will receive royalties on any such deals.

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Sequenom had the big story for San Diego’s life sciences community this week. We have the latest developments about that, as well as other biotech news.

—Sequenom (NASDAQ: SQNM) now faces a long rebuilding process after the San Diego medical diagnostic company ousted president and CEO Harry Stylli and a senior vice president of research and development over mishandled data in the development of a prenatal test for Down Syndrome. Five others also left the company after a five-month internal investigation invalidated studies that said Sequenom’s test, which uses a simple blood draw from pregnant women, was 100 percent accurate at detecting Down’s in a developing fetus. Now those tests will have to be re-done.

—A legal dispute over genetic-sequencing technologies and products is beginning to look more like a free-for-all. Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) has filed a patent suit against San Diego rival Illumina (NASDAQ: ILMN) which is already engaged in similar litigation with Affymetrix (NASDAQ: [[ticker:AFFX) of Santa Clara, CA.

—San Diego-based Zogenix has collected $36 million in a $51 million equity financing round intended to fund the company’s January launch of its needle-free system for delivering a pain drug for migraines. Zogenix says its delivery system releases a quick increase in pressure to penetrate the skin and then injects liquid medicines—without needles.

—Fate Therapeutics CEO Paul Grayson says the San Diego biotech startup is in advanced talks about partnerships with several large pharmaceutical companies about partnerships. Luke says the fast-growing company is using genetically engineered proteins and small molecule compounds to nudge ordinary adult cells into becoming pluripotent stem cells, which have the potential to turn into any cell type.

—Juliet Singh knows how to rub it in. Singh, who oversaw efforts to Irvine, CA-based Allergan (NYSE: AGN) to get FDA approval for botulinum toxin (Botox), is now the CEO of Transdel Pharmaceuticals, a La Jolla, CA-based company. Transdel intends to develop ketoprofen, a common pain reliever used in pills, into a topical cream.

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In what is shaping up as the battle of San Diego’s biotechnology tools titans, Life Technologies (NASDAQ: LIFE) has filed a patent-infringement suit against rival Illumina, claiming that some of Illumina’s best-selling genetic-sequencing products violate Life Tech’s intellectual property.

The suit, filed in U.S. District Court in Delaware, claims that certain Illumina products, including the Genome Analyzer and the second-generation Genome Analyzer II, infringe upon three Life Tech patents. The suit seeks an unspecified amount in damages, and a permanent injunction restraining Illumina (NASDAQ: ILMN) from further infringement. If granted, the injunction would prevent Illumina from selling its equipment.

Telephone and e-mail messages to an Illumina spokesperson were not returned.

Illumina’s Genome Analyzer products are a mainstay of the company’s genetics analysis business, and are important to Illumina’s growth. The $50,000 whole-genome analysis that Illumina began offering to the public in June uses the Genome Analyzer. The company has stated that one of its corporate goals is to make the Genome Analyzer the industry standard for genetic analysis. Last year, the device accounted for the bulk of Illumina’s $64.8 million increase in instrument sales.

Life Technologies, formed last November through the merger of Invitrogen and Applied Biosystems, claims it is the leader in the genetic sequencing business. The Carlsbad, CA-based company had revenue of $3.1 billion in 2008, dwarfing Illumina’s 2008 revenue of $570 million.

Listed as plaintiffs along with Life Tech are patent owners Alexander Chetverin and Helena Chetverina, both of Russia; The Institute for Protein Research of the Russian Academy of Sciences; and William Hone of New York. According to the suit, the patents cover certain methods of amplifying and expressing nucleic acid, a building block of DNA. Applied Biosystems had an exclusive license to the patents, which issued in the late 1990s.

Illumina subsidiary Solexa is also named as a defendant.

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When Xconomy published its first analysis of the financial health of San Diego’s publicly traded biotech companies last November, half of the nation’s 248 unprofitable biotechs were running on fumes, with less than a year’s worth of cash in the bank. A lot of predictable, painful cuts have followed. Yet a majority of San Diego’s companies have still found ways to adjust, and most have maneuvered into stronger financial positions over the past six months.

That’s the surprising finding revealed by crunching publicly available data on cash balances, burn rates, and financial projections for 27 publicly traded life sciences companies that Xconomy watches in San Diego. Fifteen of those companies appeared to be financially stronger at the end of June than they were when they began the year, while 12 were in a weaker position, based on an analysis of the most recent quarterly reports filed with the Securities and Exchange Commission.

Of course, many of these companies improved their financial health did it by taking drastic actions that aren’t good for the life sciences community as a whole, such as cutting drug development programs, shedding employees, and terminating office leases. Just four of the 27 companies I analyzed are operating solidly in the black, and only eight of the 27 had more than $100 million in cash and investments in the bank at the end of June, giving them a sizable cushion to ride out the recession.

What follows is a rundown of the cash balances of all 27 companies, listed in alphabetical order. To purchase a much expanded version of this report, in PDF format, click the “Add to Cart” button below. The expanded version, available for $95,* includes an assessment of each company’s financial position at the end of June compared to six months earlier, the projected length of time it can survive on its existing cash reserves, and an analysis of the strategic moves it has made to stay afloat in the current environment. Click here to see a sample entry. *Price is subject to change without notice.

We intend to keep doing this analysis regularly to monitor the financial health of life sciences companies we follow in San Diego, Seattle, and Boston. All the cash figures listed below are current as of June 30. If you spot anything we should add or correct, let us know at editors@xconomy.com.

Acadia Pharmaceuticals (NASDAQ: ACAD)
Cash on hand: $66.2 million
Previous Xconomy coverage:
“Acadia Pharma Shares Crash After Lead Parkinson’s Drug Fails in Trial”

Amylin Pharmaceuticals (NASDAQ: AMLN)
Cash on hand: $644.4 million
Previous Xconomy coverage:
“Amylin, Dark Horse of the Obesity Drug Battle, Follows Fast Behind Arena, Orexigen”
“In Aftermath of Proxy Fight, Amylin Pharmaceuticals Investor Expresses Concern Over Empty Board Seat”
“Amylin’s Would-Be-Savior, Once-Weekly Diabetes Shot, Shows Two Year Benefit”

Anadys Pharmaceuticals (NASDAQ: ANDS)
Cash on hand: $30.6 million
Previous Xconomy coverage:
“Anadys, Biotech’s Roller Coaster Story, Gears Up For Next Big Step With Hepatitis C Drug”
“Investors Dump Anadys Shares on Report of Itchy Side Effect
“Anadys Shares Boom on Hepatitis C Finding”
…Next Page »

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[Update: 09/16/09, 11:15 am] Helicos Biosciences has gotten a lifeline, at least temporarily. The Cambridge, MA-based maker of genetic analysis instruments which hired an investment banker two weeks ago to seek “strategic alternatives” as it ran low on cash, has raised $10 million from new and existing investors and CEO Ron Lowy. [The deal includes new and existing investors, not just existing investors.]

Helicos (NASDAQ: HLCS) got the money from investors that include Atlas Ventures, Flagship Ventures, Highland Capital Partners, Versant Ventures, and Lowy. The cash infusion comes about a month after Helicos disclosed in its quarterly report, on August 14, that it was down to its last $5 million of cash. That meant it needed to raise money in the next four months, given the company burned $11.3 million of its cash to operate the first six months of this year.

The company is hopeful that its gene sequencing machines—which compete with those from industry heavyweights like Life Technologies, Illumina, and Roche—will gain acceptance in the market in a hurry after they were first introduced last year. Demand is encouraging so far, Helicos says. The company’s tools are used at the Broad Institute of MIT and Harvard, Mass General Hospital Cancer Center, and Dana-Farber Cancer Institute. Last week, Helicos sold four of its systems to a research institute in Japan.

But Helicos makes it sound like it’s not out of the woods, even after raising $10 million. The company hired Thomas Weisel Partners earlier this month to help consider “strategic alternatives,” like more financing, or partnerships, to make sure the company doesn’t run out of money.

“We believe that raising this level of funds is appropriate given the recent demand for the Helicos Single Molecule Sequencing System while we consider our strategic alternatives,” Lowy said today in a statement.

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San Diego is a major border city, tourism destination, and convention hotspot, so it should come as no surprise that the U.S. State Department recognizes 25 consular representatives of foreign governments in this area. But with a handful of exceptions, nearly all of them are honorary positions with no regular office hours.

Among the exceptions is the Canadian consulate, which operates with an unusually narrow focus on San Diego’s science and technology innovation scene, according to Sean Barr, who is Canada’s current consul here. Barr says that makes the consulate’s five-person staff in San Diego unusual even compared with Canada’s embassy in Washington D.C., and its consulates general, which provide full diplomatic and consular services in major U.S. cities, including Boston and Seattle.

Barr says the Canadian government made a commitment five years ago when it established the San Diego consulate, which does not provide diplomatic or full consular services. “We are the only full-time consulate presence in San Diego focused on science and technology,” Barr says. “So the Canadian government has sort of recognized that the opportunities here are significant enough to warrant a full-time presence that’s focused on the life sciences and biotechnology, cleantech, ITC (Information Technology and Communications), and defense and homeland security.”

Such opportunities have resulted in a number of cross-border collaborations between San Diego companies and Canadian firms, and Barr listed a number of examples:

—Gen-Probe, a San Diego medical diagnostics company, has been collaborating with Quebec-based DiagnoCure to develop a better method to screen for prostate cancer.

—San Diego’s Isis Pharmaceuticals, which has been developing drugs based on its RNA anti-sense technologies, has been working with OncoGenex Technologies of Vancouver, BC, on an experimental drug for prostate cancer. OncoGenex specializes in developing compounds that inhibit the production of proteins that promote resistance to drug treatments.

—San Diego-based Illumina is working with researchers at Montreal’s McGill University, Genome Quebec, and Genome Canada to create a special map of human genes. The map will serve as an important resource for researchers trying to identify genes that affect health and disease, and genetic responses to drugs and environmental factors.

—-Cubic Security Systems, a unit of San Diego-based Cubic Corp., intends to integrate radiological detection technology developed by Mobile Detect Inc. (MDI) of Ottawa, ON, under a purchasing, support and licensing agreement. Barr says MDI’s technology, which is capable of distinguishing between illicit radioactive agents and nuclear medicines, is intended for use in scanning systems Cubic has been developing for the transportation industry.

—ISE Corporation, a San Diego-based maker of hybrid electric drive systems and components for buses, trucks, and other heavy-duty vehicles, is working with New Flyer Industries, a bus manufacturer based in Winnipeg, Manitoba, and Ballard Power Systems of suburban Vancouver BC to deliver 20 fuel-efficient buses for use during the Winter Olympic Games that begin Feb. 12 in Vancouver.

Barr says the consulate cannot claim credit for all these collaborations, but he says, “It is our role to make those matches and to facilitate those relationships.”

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The buyout of Sepracor was probably the biggest piece of New England life sciences news this past week, but it certainly wasn’t the only one.

—Cambridge, MA-based Quanterix named David Okrongly its new CEO. Founding CEO Nicholas Naclerio will continue to server as chairman of the company, which is developing single-molecule analysis tools for diagnosing cancer and other diseases. Quanterix has its roots in the Tufts University chemistry lab of David Walt, the co-founder of Illumina (NASDAQ: ILMN).

—An FDA panel recommended that the agency approve romidepsin, a drug developed by Cambridge-based Gloucester Pharmaceuticals, as a treatment for a rare form of lymphoma. The agency has until November 12 to decide whether to clear the drug.

—Ryan had a fascinating chat with Richard Gliklich, CEO of Outcome Sciences, about his Cambridge-based firm’s efforts to track the real-world safety and effectiveness of drugs and other medical technologies. Gliklich also talked about how the company, a Harvard spinoff, is benefitting from the focus on such data spurred by the stimulus package pushed by President Obama.

—Thermo Fisher Scientific (NYSE: TMO) of Waltham, MA, acquired German diagnostics maker B.R.A.H.M.S. for €330 million (US $470 million).

—Marlborough, MA-based drugmaker Sepracor (NASDAQ:SEPR) said yes to a $2.6 billion buyout offer from Japanese drug firm Dainippon Sumitomo Pharma; the deal is slated to proceed via a tender offer to begin no later than September 15.

—Ryan profiled Cambridge-based Daktari Diagnostics, which just scored $2.8 million in Series A financing to support the development of cheap, portable technology for performing blood tests for HIV patients. The technology, based on work from Massachusetts General Hospital and Purdue University, could dramatically improve the treatment of HIV in places like remote African villages where standard lab techniques are impractical.

—A federal judge ruled that Irish drugmaker Elan breached its multiple sclerosis drug agreement with Cambridge-based Biogen Idec (NASDAQ: BIIB) by proposing a deal with Johnson & Johnson that would have given J&J an option to acquire Biogen’s stake in the drug, natalizumab (Tysabri), if some other company acquires Biogen.

—In other Biogen news, Redwood City, CA-based Facet Biotech (NASDAQ: FACT), rejected the Massachusetts firm’s $355 million hostile takeover bid.

—Bedford, MA-based Spire sold off its dialysis catheter business to Bard Access Systems for $15 million. Following the sale’s completion, Spire will focus exclusively on photovoltaics manufacturing.

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One of the Seattle biotechs that’s been flying low on the radar this year popped back up on the scene with news of an important partnership.

—Seattle-based Trubion Pharmaceuticals had its best day of the year last Friday, when it said it secured a partnership with Redwood City, CA-based Facet Biotech (NASDAQ: FACT) to co-develop a drug for chronic lymphocytic leukemia. The deal provides Trubion with $20 million in upfront cash, plus $10 million in equity investment from Facet. Shares in Trubion (NASDAQ: TRBN) shot up more than 40 percent on news of the deal.

—Bad news hit one of the stars of the Seattle medical device cluster this week as Redmond, WA-based Archus Orthopedics filed paperwork to dissolve the company. The company raised more than $60 million from a prominent group of venture investors since 2001, before it ran out of cash this year. Archus showed great promise, at least according to one patient who got its spinal implant in a clinical trial in 2006.

—Merck (NYSE: MRK) looked like it delivered a body blow to Seattle biotech last October when it said it was shutting down its Rosetta Inpharmatics division, sending 300 workers into an uncertain job market. It didn’t turn out to be as damaging to the region as first feared, as more than 110 Rosetta alumni will keep doing what they’re good at in local jobs at Covance, Microsoft, and Sage Bionetworks.

—Biotech companies haven’t had much progress to brag about toward a real treatment of the underlying cause of Duchenne Muscular Dystrophy, the crippling genetic disease in young boys, but Bothell, WA-based AVI Biopharma has a chance to be a trailblazer, University of Washington neuroscientist Jeff Chamberlain told me during an in-depth interview.

—UW’s entrepreneurial bioengineering professor, Buddy Ratner, organized a conference on campus last week that attracted one of the top life sciences entrepreneurs of the past decade, Tufts University chemistry professor David Walt. I caught up with Walt, the co-founder of San Diego-based Illumina (NASDAQ: ILMN), for an exclusive interview on where he thinks genomics is heading, and his next big idea for a company.

—The Seattle-based Infectious Disease Research Institute licensed some technology from an Israel-based company for “microneedles” that might be a less painful way to inject its experimental vaccines, and might have the added benefit of better stimulating powerful immune system cells just under the surface of the skin.

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Anyone compiling a list of the most successful life sciences entrepreneurs of the past decade would have to consider a soft-spoken academic named David Walt. He’s the chemistry professor at Medford, MA-based Tufts University who co-founded Illumina in 1998.

San Diego-based Illumina (NASDAQ: ILMN) found its niche in the past decade by boosting the efficiency of fiber-optic sensors to do high-speed analysis of genes, and the subtle ways they can get turned on or off. It’s one of the bigger success stories in San Diego’s biotech cluster, having grown to 1,600 employees and a stock market valuation of more than $4 billion.

I spoke with Walt last week when he was in Seattle to give a keynote presentation at a bioengineering entrepreneurship symposium organized by professor Buddy Ratner at the University of Washington. During his talk, Walt offered some valuable lessons learned from his Illumina experience to young scientists thinking about the entrepreneurial leap.

Walt, 56, urged the young scientists to align themselves with seasoned venture capitalists, who can introduce them to people with the best business skills to implement a new idea. His big break came one day when he gave a talk about his research at The Scripps Research Institute in San Diego, and venture capitalist Larry Bock was in the audience. Bock followed up with him to learn more, and ended up providing seed capital to Illumina, along with Arch Venture Partners and Venrock Associates.

“A lot of this has to do with human relationships, and the serendipity of who you bump into,” Walt said.

While Walt encouraged scientists to think about entrepreneurship, he warned them they have to be willing to accept the realities of business. “Decisions get made at a company for business. The goal is to make money, not to support your lab,” he said.

And, while starting a company that ultimately succeeds can pay off for years’ worth of royalty streams and the coolest new “widgets” to keep an academic lab doing groundbreaking science, there isn’t much glory in it, he said.

“Don’t do it for your ego,” Walt said. “If you’re successful, you will not be recognized. The only people who will know who you are on the board of directors and senior management. You need to prepare for that.”

I followed up with Walt after his talk to ask about some things he didn’t cover, including the race to make gene sequencing better, faster, and cheaper—and his thoughts on his latest idea for a company that he hopes will make it big, Cambridge, MA-based Quanterix.

Here are edited highlights from the exclusive interview:

Xconomy: There’s been a lot of talk lately about bringing down the cost of sequencing entire human genomes to $5,000. Is that really possible or realistic?

David Walt: Absolutely. I think the $5,000 genome is going to be here within a couple years. Right now, Illumina has announced it can do consumer sequencing for $40,000. The expectation is that there will be a decrease in the price in the next few years. That’s for raw sequence. People are still going to have to access bioinformatics to be able to interpret the genome. But for raw sequence, the scientific community is probably not going to be that far off from the $1,000 genome in three or four years.

X: Is there some peril in this race when people are trying to bring the cost down this quickly? Are we going to get a lot of errors, bad sequences from this?

DW: No. There’s a lot happening …Next Page »

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Complete Genomics, the Mountain View, CA-based company that says it can sequence entire human genomes for as little as $5,000, has pinned down a $45 million venture round which includes support from two of its founding backers—Kirkland, WA-based OVP Venture Partners and San Diego-based Enterprise Partners Venture Capital.

The rest of the capital is coming from Prospect Venture Partners, Highland Capital Management, and a pair of new life sciences investors with deep pockets—Essex Woodlands Health Ventures and OrbiMed Advisors. It’s the fourth round of financing for Complete Genomics since it was founded in 2006, and brings its financing total since inception to a little more than $90 million. The company plans to use the money to continue building what it says is the world’s largest commercial human genome sequencing center, in Silicon Valley.

The genome sequencing field has been on an audacious drive to get better, faster, and cheaper, and Complete Genomics has made some of the boldest predictions on how far it can push the frontiers. The company made headlines last October when it declared it intended to start sequencing full genomes this year for as cheap as $5,000, and deliver them in as little as four days. This would be an astounding leap forward in democratization of genome sequencing, which until recently has been so costly and time-consuming that only a handful of genomes have ever been completely sequenced. If the technology were made more widespread to do that, researchers say, it could shed valuable light on how small, individual variations in genetic code can lead to diseases.

Complete Genomics plans to make this possible partly through proprietary sequencing technology and with a different kind of business model. The established players—Carlsbad, CA-based Life Technologies, San Diego-based Illumina, and Switzerland-based Roche—make money by selling expensive equipment and supplies to researchers. Instead, Complete Genomics plans to establish its own in-house sequencing center in Silicon Valley, and ask researchers to send in their samples to get them sequenced for a fee. Complete Genomics just needed the latest round of financing to build its own proprietary machines to do the work at commercial scale.

“Our equipment is orders of magnitude better than anything the others guys make,” says Chad Waite, a managing director of OVP Venture Partners, and a founding investor in the company. “That’s the only way we can do it so cheap.”

Still, not everything has gone exactly according to plan. When I wrote about the company in October, Waite said Complete Genomics intended to start offering its commercial sequencing service starting in the second quarter of 2009, and pledged to deliver 100 full genome sequences to the Institute for Systems Biology in Seattle during calendar year 2009. The company fell behind on its schedule. Now Complete Genomics won’t be able to deliver all 100 sequences to the Seattle-based Institute this calendar year, Waite says.

Chad Waite

“We’re a bit delayed because the financing took a bit longer than we expected,” Waite says. “But we have already shipped a significant number of completed sequences to commercial customers.”

Skeptics have raised doubts about whether Complete Genomics really has superior technology, whether it can do the work so cheaply, and whether the data it produces will be full of errors. The company plans to answer these doubts in future scientific publications, Waite says. He wouldn’t say specifically how many sequences have been completed, or which customers have received them, although he noted that Leroy Hood of the Institute for Systems Biology and George Church of Harvard Medical School, a pair of giants in the genomics world, are scientific advisers to the company.

If Complete Genomics can show in a major scientific paper that it can do this many complete sequences at a high degree of accuracy, it will surely make headlines around the world. The actual number of genomes that have been sequenced is disputed, but at least according to a recent story in the New York Times, only eight have ever been completely done.

The latest financing should be enough to bring the company up to a commercial scale that can meet demand for many more sequences than that, Waite says, although it may not be the last financing for Complete Genomics. Waite raised the possibility of an IPO. I laughed out loud because I thought he was joking. He wasn’t.

“They’re probably bold enough to make an attempt in the not-so-distant future,” Waite says. “The question will be if it’s possible, and when.”

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[Corrected July 29, 10 a.m. See below.] Warren Buffett says he became one of the world’s most successful investors partly because he only invests in businesses he understands. But where do you find investors if your niche is in something called direct multiplexed measurement of gene expression? Last month, Seattle-based NanoString Technologies, the developer of this new way of analyzing genes, had the good fortune to find a couple investors at Clarus Ventures in Boston who actually do understand that field.

This was the interesting backstory I gathered on one of the bigger venture deals we’ve seen lately in the Xconomy network, the $30 million investment last month in NanoString by Clarus Ventures, OVP Venture Partners, and Draper Fisher Jurvetson. The company has invented a machine that provides a digital readout that can say precisely how much a given gene is dialled on or off in a biological sample. This digital technology has high enough bandwidth to enable large-scale genetic analysis experiments, which might, say, be used to compare 100 genes from 100 different patients with diabetes to see how the patients respond to treatment. The people who understood the technology well enough to write a critical check were Clarus managing director Nick Galakatos and Finny Kuruvilla, a young principal at the firm.

The initial seeds for this financing were planted when some of the world’s top geneticists, at the Broad Institute of Harvard and MIT, were among the very first customers of NanoString when it introduced its commercial product last July. They were raving about how the NanoString tool was simple to use, making it possible to digitally analyze the activity of hundreds of genes at a time without the cumbersome need to amplify biological samples using traditional tools like RT-PCR (real-time polymerase chain reaction). Some of the biologists there shared their enthusiasm for the new tool with Kuruvilla.

Kuruvilla knew what the people at the Broad were talking about. He’s got an MD from Harvard Medical School, a doctorate in chemistry from Harvard University, and a master’s in computer science and electrical engineering from MIT. Just before joining Clarus, he worked at the Broad Institute, where he led a collaboration with Santa Clara, CA-based Affymetrix (NASDAQ: AFFX) to develop novel tools and software to crunch huge volumes of genetic data. Essentially, the people at the Broad are trying to work on the frontier of turning the vast amount of genetic data pouring out of sequencers into something closer to knowledge that biologists can build on. When they said NanoString had made a significant advance in this field, Clarus, a fund with $1.2 billion in assets, decided to do more homework over the next year.

“There’s really no substitute for hearing good words from a happy customer,” says Nick Galakatos, the Clarus managing director who led the NanoString investment.

Months before Kuruvilla and his contacts at the Broad got excited …Next Page »

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

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

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

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

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

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

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

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San Diego-based Illumina, the maker of genetic analysis tools for biologists, said today that its second-quarter sales fell short of the company’s forecast. Illumina (NASDAQ: ILMN), in a preliminary, unaudited financial review, said it expects to report $161 million in second quarter sales—less than the $168 to $173 million it expected. It blamed the shortfall on reduced research funding from foundations, and delays as customers wait to see how their budgets are affected by the federal stimulus package.

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Center stage in Seattle life sciences moved to the waterfront this week, as 250 global movers and shakers in science, global health, and the pharmaceutical business gathered for the Pacific Health Summit.

—The Pacific Health Summit, an invitation-only event of global health stars, in its fifth year, focused this year on multidrug resistant tuberculosis, as I wrote in this preview story. Big names from global health came to brainstorm, including Margaret Chan of the World Health Organization, Anthony Fauci of the National Institutes of Health, and Chris Viehbacher, the CEO of Sanofi-Aventis, the world’s largest vaccine maker. Seattle’s Infectious Disease Research Institute is one of the players in this field, too, through work supported by Eli Lilly.

—Every good conference like the Pacific Health Summit needs power players competing for media attention. This year, we had two pieces of international news. Johnson & Johnson announced a deal to co-develop a new drug with the nonprofit TB Alliance; the deal could lead to the first new drug against tuberculosis in more than 40 years. Sanofi-Aventis also broke some news by announcing it will donate 100 million doses of flu vaccine to the WHO, to help poor countries cope with the swine flu pandemic.

—I profiled Beat Biotherapeutics, a Bellevue, WA-based company that envisions a way of generating stem cells that could perform the function of a cardiac pacemaker, or maybe someday even regenerate heart muscle that’s been damaged by heart attack. This company is built on years of research by UW stem cell scientists Chuck Murry and Michael Laflamme, and is married to bioengineering techniques from Buddy Ratner’s lab at the UW.

—Mukilteo, WA-based CombiMatrix (NASDAQ: CBMX) never captured much of the market for sophisticated gene chips used in modern biotech labs, which is now dominated by Santa Clara, CA-based Affymetrix and San Diego-based Illumina. But now CombiMatrix hopes to carve out an emerging niche by marketing its DNA microarray instruments as a diagnostics service to physicians, who are looking for accurate ways to diagnose the aggressiveness of an individual patient’s form of cancer, and to use genetic screening to catch malignancies earlier.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drugs, has been working hard to clean up its balance sheet the last few months. It faced a cash crisis earlier in the year, and then raised $7.25 million from Novartis, another $10.5 million from investors, and used some of the proceeds this week to pay off its $5.5 million debt to GE Capital.

—Seattle’s Infectious Disease Research Institute said it is offering up its immune-stimulating compounds known as adjuvants to the world’s major vaccine makers. With the right partnerships in place, these adjuvants have potential to greatly amplify the world’s supply of flu vaccine, says IDRI founder Steve Reed. This may come in especially handy if the swine flu pandemic takes a severe turn for the worse.

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