The threat of global infectious disease was already a significant humanitarian concern when Ken Stuart set up his independent research lab in 1976. Now known as Seattle Biomedical Research Institute, Stuart’s lab directed the research spotlight on tropical diseases, such as malaria, at a time when few others had shown interest.

Fast-forward more than 30 years later: the Seattle region and Washington State have become known throughout the world as a nexus of global health innovation and entrepreneurship.

Original efforts decades ago by SBRI, PATH and the University of Washington have been joined by Fred Hutchinson Cancer Research Center, the Institute for Systems Biology, the Infectious Disease Research Institute, Seattle Children’s Research Institute and its Global Alliance for the Prevention of Prematurity and Stillbirth program, Battelle/Pacific Northwest National Laboratories, Washington State University and, most significantly, the Bill and Melinda Gates Foundation. These groups together now form a regionally based, yet powerful, alliance in the interest of global health. And as a result of their collaboration, this state has become the symbol of the United States’ compassion and goodwill to millions of people whose lives have been improved or saved.

This is not a statement we make lightly. It takes more than personal anecdotes of success to paint an accurate picture. So, we have created a map—a preliminary but precise accounting for the broad and deep impact that our state’s health research organizations have on global disease.

Researchers and health care workers in Washington state directly run 480 health projects in 92 countries, according to a study commissioned by the Washington Global Health Alliance, which examined nine of the state’s global health institutions.

These organizations are responsible for, among others, 183 different projects focusing on emerging and epidemic diseases and 105 vaccine and immunization programs. They work with 593 unique partners, including 44 foreign government entities, 60 corporate partners and 245 hospitals and universities.

To catalyze more effective and successful collaborations, researchers will leverage this study data to increase efficiencies and create new opportunities in their work. Businesses and philanthropists can see the direct impact of their investments and partnerships. Policymakers can use this information to demonstrate the strength of our state’s global health sector in the face of increasing competition. We will make the case for more federal funding and recruiting new global health researchers and organizations to the state, boosting our economy in the process.

This study measured data from all the organizations mentioned above with the exception of the Gates Foundation, which funds projects, but does not implement programs. Not included in those figures are the significant education and training programs spearheaded by our universities and community colleges, other state research organizations and humanitarian and relief organizations, such as World Vision or Mercy Corps. We expect to broaden the scope in future studies mapping global health efforts.

All told, it is clear the magnitude of Washington State’s impact on infectious disease and suffering is significant and exceptional. Ultimately, we hope this study leads to even greater progress toward our common vision-improving health for people regardless of where they may live. You can see the more detailed survey results at www.wghalliance.org.

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This was the week that a little biotech company in Bothell that few of the locals have ever heard of, burst onto the national stage.

—Bothell, WA-based Alder Biopharmaceuticals had its breakout moment this week when it pulled in $85 million in upfront cash, and stands to gain more than $1 billion over time from a partnership with Bristol-Myers Squibb to co-develop a new drug for rheumatoid arthritis. Clinical trial data on this drug hasn’t yet been released publicly, but CEO Randy Schatzman says it’s good enough to give market-leading drugs from Amgen and Abbott Labs a “run for their money.” Seattle Genetics CEO Clay Siegall, an Alder director, says it is now a “force” in regional biotech.

—Over in Seattle’s South Lake Union, another little-known private company called Kineta said it is splitting a little more than half of a federal contract with the University of Washington worth $13 million over the next five years. The goal will be to develop new chemical compounds, called adjuvants, that can boost the effectiveness of a wide variety of vaccines.

—The Institute for Systems Biology is continuing to net a lot of grant money, this week announcing that it has pulled in $8 million from the National Institutes of Health to contribute to The Cancer Genome Atlas. This is a genomic effort to identify potential new targets for cancer drugs.

—The battle between Seattle-based ZymoGenetics (NASDAQ: ZGEN) and Bristol, TN-based King Pharmaceuticals is heating up in federal court in Tennessee. If you’ve missed any of the back-and-forth, or how this ball really got rolling back in August, here’s a quick summary.

—Bellevue, WA-based Light Sciences Oncology, another private company that keeps a low profile, revealed in a regulatory filing that it has lined up another $35 million to support its drug-device combination therapy for cancer. The money is available in the form of a line of credit, and if investors choose to exercise warrants.

—Bothell, WA-based Verathon, the maker of a simple ultrasound tool for diagnosing bladder disorders, was acquired by Sarasota, FL-based Roper Industries (NYSE: ROP) as part of a pair of transactions valued at $356 million. The companies aren’t saying how much of that is going to the Verathon shareholders.

—Seattle-based Dendreon (NASDAQ: DNDN), the king of the moment in Seattle biotech, issued a pretty vanilla quarterly report with the Securities and Exchange Commission. One point worth noting was that it burned $28 million of its cash reserves in the three-month period ending September 30. It ended that quarter with $259.6 million in cash and investments left in the bank as it prepares to manufacture and market sipuleucel-T (Provenge) next year for men with terminal prostate cancer.

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The Institute for Systems Biology, a Seattle-based nonprofit research center, said today it has secured an $8 million grant from the National Institutes of Health as part of The Cancer Genome Atlas, an effort to identify new targets for cancer drugs based on deeper genomic understanding. ISB professor Ilya Shmulevich is the co-primary investigator on the grant along with Wei Zhang of M.D. Anderson Cancer Center in Houston. Other centers receiving federal grants for the cancer genome include the Broad Institute of Harvard and MIT; Lawrence Berkeley National Laboratory; and Memorial Sloan-Kettering Cancer Center.

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The local life sciences scene was pretty quiet this week, although we heard more than usual from medical device companies.

—Paul Yager, the University of Washington’s chair of bioengineering, offered a detailed status update on a tool called the DxBox his lab has been developing the past four years in collaboration with Redmond, WA-based Micronics, Seattle-based PATH, and Bothell, WA-based ELITech Group, all with the support of the Bill & Melinda Gates Foundation. They are seeking to develop a portable, fast, accurate, and rugged diagnostic tool to help doctors in the developing world, and while there’s been a lot of progress, it’s entered the “put up or shut up” phase, Yager says.

—Seattle-based Dendreon turned in its complete application to the FDA for clearance to start marketing its first drug, sipuleucel-T, (Provenge) in the U.S. This filing came a bit earlier than Dendreon had forecasted, but it’s also a lot later than the company originally hoped when it first asked the FDA for approval, which you can read more about in this Dendreon history piece I did back in April.

—The Institute for Systems Biology said it has commissioned Mountain View, CA-based Complete Genomics to sequence the full genomes of 100 individuals as part of a Huntington’s disease experiment. This experiment is said to be the largest ever to use full human genome sequences.

—We’ve seen a few medical technology companies that are seeking to repair damaged tissues without leaving behind any implantable devices, and Bothell, WA-based QuantumCor is the latest. CEO Vern Dahl described his company’s plan to do this for a form of heart failure known as mitral valve regurgitation.

—Seattle-based Calypso Medical Technologies, the maker of a device to pinpoint radiation therapy for prostate cancer to minimize side effects, formed a collaboration with Siemens Healthcare. The companies will seek to develop the technology for pancreas and lung tumors.

—We also had an insightful guest editorial from Anthony Rodriguez, a Ph.D. bioengineering student at the University of Washington and an aspiring entrepreneur. He contends that it takes a village to raise an entrepreneur, and that while a few organizations have made some effort to cultivate young entrepreneurs at the UW, the business community could be doing much more.

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The Seattle-based Institute for Systems Biology and Mountain View, CA-based Complete Genomics said today they are planning to gather full human genome sequences from 100 individuals to study Huntington’s disease. The experiment, the largest complete human genome disease association study ever conducted, will examine samples from patients with Huntington’s, family members, and matched controls to look for genomic differences linked to how the disease presents itself and progresses. Complete Genomics, which we profiled in August, is best known for its effort to sequence entire human genomes for $5,000 apiece, far cheaper than is currently possible with other technologies.

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What is the single best thing that has happened in Seattle life sciences in the past five years? How might that make a difference over the next two decades as this region strives to become a more vibrant cluster for life sciences innovation?

These are the kinds of questions you don’t see explored much in the real-time frenzy of news headlines, the grind of quarterly earnings reports, or election seasons. But this long-range view of the future will be the central theme of an event Xconomy is organizing for Monday night here in town, under the name Seattle Life Sciences 2029.

We’re excited to have pulled together a unique mix of some of the most accomplished life sciences visionaries in the world, who have rarely, if ever, appeared together on the same stage. They are Steve Gillis of Arch Venture Partners; Ben Shapiro, former executive vice president at Merck and now a partner with Boston-based PureTech Ventures; and Stephen Friend, co-founder and CEO of Sage Bionetworks and formerly of Merck and Rosetta Inpharmatics. Carl Weissman, the chairman and CEO of Seattle-based Accelerator and a managing director with OVP Venture Partners, will be the moderator. We also expect to have a special video message from Leroy Hood, the president of the Institute for Systems Biology.

After the panel discussion, we will introduce four Seattle companies with the potential to transform their respective fields of biotech—Calistoga Pharmaceuticals, Immune Design, VLST, and VentiRx. Executives from those companies will deliver “bursts,” or brief introductions of their work, right before the networking portion of the evening.

The event will be held from 5:30 pm to 8 pm this coming Monday, Oct. 19, at the Seattle Biomedical Research Institute in Seattle’s South Lake Union neighborhood. You can get more information on how to register here. Only a few tickets are left. We expect this to be a highly interactive conversation with the audience, so if you have a question for this group, we want to hear from you. We look forward to seeing you there on Monday night.

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Lee Hood, the legendary researcher and entrepreneur who invented machines that made the Human Genome Project possible, has secured $30 million in venture capital for a startup that aims to detect cancer and neurodegenerative diseases like Alzheimer’s in their earliest and most treatable stages.

The new company is called Integrated Diagnostics, or InDi for short (not Integrative Diagnostics, as previously reported in government filings). The company has secured the first of three tranches of financing in a $30 million commitment from Menlo Park, CA-based InterWest Partners, the U.K.-based Wellcome Trust, and Germany-based dievini Hopp Biotech holding, which is part of a collaboration with the government of Luxembourg, according to a statement.

Integrated Diagnostics, which we first reported on more than a year ago—and again last month when the first public financing document appeared—is working to create a new generation of precise diagnostics. These tests are being designed to take a pinprick of blood and spot signature proteins that are associated with tumors, or Alzheimer’s disease. If successful, this work has the potential to shake up the healthcare system in three big ways, Hood says. It will make it possible for doctors to diagnose diseases much earlier; it will open the door to more individually tailored therapies that will have much greater odds of success; and it will allow doctors to follow up with patients to see if treatments they prescribe are really working at the molecular level, Hood says.

The dream for this company is as bold as anything Hood has done before at more than a dozen companies he has co-founded.

Leroy Hood

“This is going to transform medicine,” Hood says. “My view is that P4 medicine—predictive, preventive, personalized, and participatory—will emerge over the next five to 20 years, and this is the first step. This is going to be the platform in the initial days.”

The science behind this vision—which Hood and others call systems biology—seeks to go beyond the traditional study of one gene or one protein in isolation. Instead, Hood and his colleagues use high-powered computers to look at full networks of genes and proteins, and how they interact.

“We are optimistic that systems biology will become a critical tool in the development of personalized medicine and believe that Integrated Diagnostics is at the leading edge in this field,” said Julie Eskay-Eagle, head of The Wellcome Trust Health Care Investments, in a statement.

The founding intellectual property for Integrated Diagnostics comes from two main places—Hood’s lab at the Institute for Systems Biology in Seattle and Jim Heath’s lab at Caltech …Next Page »

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I am quite often asked, in some form or another, “What can [STATE][LOCAL] government do to spur on an innovation-based economy in [SEATTLE][WASHINGTON]?”

Well, as I said on a panel at the Technology Alliance meeting in Leavenworth yesterday, the single biggest correlate to the strength of an innovative biotechnology industry in any geography is the quality of the major research institutions. The two heavyweight biotech hubs are Boston and the San Francisco Bay Area. No surprise there:

—in Boston, there are Harvard, MIT, Tufts, Boston University, and various smaller but world-renowned research institutes such as the Whitehead and the Broad; and,

—in the Bay Area, there are Stanford, UC Berkeley, and UC San Francisco.

Seattle and San Diego probably represent the next tier, with UW, the Hutch, Institute for Systems Biology, and others in Seattle, and UC San Diego, The Scripps Research Institute, Salk Institute, and others in San Diego.

If the quality of the major research institutions is the critical correlate, then anything that can be done to bolster the quality of that research would represent at least one highly fruitful way in which to improve Seattle’s competitiveness as a biotechnology center. One way to bolster research is to create additional funds for researchers already in place, and the state of Washington has already done that with the creation of the Life Sciences Discovery Fund. However, I would argue that an even better use of these or any funds brought to bear in this effort should be utilized instead to attract and endow chairs for “rockstar” researchers who have made their names elsewhere. Doing this is a highly-focused, high-profile activity that will have the ripple effect of bringing with them:

—already established quivers filled with grant funding;

—high-profile reputations, raising the profile and reputation of our research institutions (with many additional ripple effects like future recruitment of faculty and top students); and,

—top-notch students and post-docs.

Done right, this focused approach will do far more, with its continued “ripple-on-a-ripple” effect in the long term to solidify and bolster the productivity and profile of our research institutions than almost anything I have seen that is currently being done here or elsewhere.

One fantastic, if not polarizing, example of this involves Lee Hood’s recruitment to the University of Washington. Without saying much about the who’s and where’s of the people and money behind recruiting a superstar of Lee’s stature from Caltech to start a new department of Molecular Biotechnology at the University of Washington in 1992, nobody can dispute the huge positive effect Lee’s presence has had on biotech in Seattle, reaching well beyond the entrepreneurs and scientists who trained under Lee at UW, the faculty that he played a part in recruiting, and the companies that he and those students and faculty have gone on to start.

If we the people of Washington want Seattle to be a sustainable and robust world center of biotechnology, then we need to let our state and local governments know that they should consider committing long-term funding (endowment) of prestigious chairs and professorships at our research institutions which those institutions can use to attract true impact-making superstars of basic life science research. A handful or two of such hires will go far further to cement and grow the innovation-based biotechnology industry here for decades to come.

[Editor's note: this editorial is also running on the OVP blog.]

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[Update: 09/21/09, 6:27 pm. See below.] Leroy Hood’s new idea for a company that detects cancer at its earliest, most treatable stages in the bloodstream has gotten some venture capital after a year of effort. Seattle-based Integrative Diagnostics has secured $7.5 million out of a $30 million equity round, according to a filing with the Securities and Exchange Commission.

The filing doesn’t say who invested in the company, and when I reached Hood by phone late this afternoon, he said the company was preparing a press release and not yet ready to make that disclosure.

Xconomy first described Integrative Diagnostics almost exactly a year ago, when Hood declared in an interview that “this company is going to transform medicine, I guarantee you.” Hood, the inventor of high-speed gene sequencing machines and founder of 13 biotech companies, said he was enthused by the potential for Integrative Diagnostics to usher in the era of what he calls P4 medicine—shorthand for predictive, preventive, personalized, and participatory medicine.

The idea is to create a new generation of more precise diagnostics that can look at a pinprick of blood and spot cancer cells at their earliest, most treatable, stages of development before people even have symptoms. The company is co-founded by Hood, his fellow faculty member David Galas at the Institute for Systems Biology, and Jim Heath, a chemist at Caltech who is the inventor of two technologies that improve measurement of blood proteins. One is a microfluidic chip that “will do for proteins what DNA chips did for messenger RNA or DNA fragments,” said Hood. The other is a set of simple chemicals Heath has developed to replace antibodies in diagnostic tests, which are hard to make and too unreliable, Hood said.

An earlier version of this technology was incubated starting in 2005 at the Accelerator, the Seattle-based venture-backed startup machine that’s affiliated with Hood’s Institute for Systems Biology. The company, called Homestead Clinical, was one of the companies that didn’t “graduate” from the Accelerator with venture rounds, like VLST, Allozyne, and Theraclone Sciences did.

Hood said at the time, about a year ago, that he thought it would take a couple months to get funding for Integrative Diagnostics, but that obviously stretched to a full year during the recession. He was bullish enough during that earlier interview to say he expected Integrative Diagnostics to give birth to at least five or six companies in the future. I expect to hear more details from the biotech pioneer tomorrow, and will be quick with updates when I know more.

[Additional comment from Carl Weissman, CEO of Accelerator, 09/21/09, 6:27 pm.]

“Integrative Diagnostics, or InDi, is partially based upon technology that was developed at Homestead Clinical Corp. while within Accelerator, or was the subject of an option agreement between Homestead and Caltech. So this is our fourth graduate,” Weissman says. “We always believed in the conceptual basis of the company at Accelerator, but we needed discovery technology to advance to a level that would enable the concept. InDi also disproves a long-held belief that no company could graduate from Accelerator without the financial support of Accelerator investors. We at Accelerator are very gratified with this outcome and fully support the company.”

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One of Seattle’s biotech companies showed it’s willing to stick its neck out to see whether the IPO window is really going to open this fall or not.

—Omeros, the Seattle biotech company developing a treatment to help people recover faster from knee surgery, has been getting its ducks in a row to go public for weeks, and this week it formally tipped its hand. Omeros issued an updated prospectus that says it wants to sell 6.8 million shares at a range of $10 to $12, which could generate almost $82 million if it can sell shares at the high end of its range.

—The medical device industry is fuming over a proposal in the U.S. Senate to set up a 10-year, $40 billion tax on medical devices. I got an earful about it this week from David Auth, a local medical device industry leader. He compared this action to the government’s behavior toward General Motors, and concluded, “our government rewards dummies and punishes geniuses.”

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) disclosed some disappointing news late last week, in which its atacicept drug candidate failed to work in a pair of clinical trials for rheumatoid arthritis. ZymoGenetics still has a stake in this product, although it has handed off development work to its partner, Merck KGaA.

—Seattle-based Uptake Medical provided a small bright spot in the local medical device field when it disclosed in a filing that it raised about $3.4 million out of an equity offering worth more than $13 million. Uptake is developing a way to seal off damaged parts of the lung for patients with chronic obstructive pulmonary disease, without leaving any implantable device behind that might cause complications.

—We had a little announcement of our own at Xconomy when we revealed our next event in Seattle, which will focus on the 20-year outlook for life sciences in Seattle. This event on Oct. 19 will feature a stellar lineup of speakers, including Leroy Hood, Steve Gillis, Ben Shapiro and Stephen Friend. They will be followed by executives of Seattle biotech startups with disruptive potential: Calistoga Pharmaceuticals, Immune Design, and VLST. For more information on how to register, click here.

—Autism makes a lot of headlines for its rising incidence, but it has stumped scientists for generations and nobody in pharma or biotech has ever had much to brag about in terms of new therapies. But Gordon Brandt, a former executive at Bothell, WA-based Nastech Pharmaceuticals (now MDRNA) has licensed an intriguing nasal spray compound that he thinks has potential, and he told me all about his quest to raise the capital he needs to put this idea to the test at a company he’s calling Anatrope Pharmaceuticals.

—Gov. Chris Gregoire would, of course, beg to differ with David Auth’s commentary about punishing geniuses. The Life Sciences Discovery Fund, which Gregoire pushed through the legislature in 2005, gave out another batch of state research grants worth a collective $5.1 million to researchers at the University of Washington, Washington State University, the Institute for Systems Biology, and Pacific Northwest National Laboratory.

—Mukilteo, WA-based CombiMatrix (NASDAQ: CBMX) said this week it has secured a $1.5 million contract from the U.S. Air Force to develop automated tools that detect biological, chemical, and environmental hazards that may affect the health of soldiers.

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The state’s Life Sciences Discovery Fund announced today that six new research projects will receive $5.1 million combined in funding. The projects will finance research into bone healing, improving limb amputation procedures, enhancing cancer treatment, and generating a wheat variety that’s safe for people with celiac disease. The grants are going to scientists at the Institute for Systems Biology, University of Washington, Pacific Northwest National Laboratory, and Washington State University.

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Complete Genomics, the Mountain View, CA-based company with a goal of sequencing full human genomes for $5,000, is announcing today that it has completed 14 full human genome sequences for commercial customers like March. The company says it has a dozen customers, including Pfizer, Duke University, the Institute for Systems Biology in Seattle, and the Broad Institute of MIT and Harvard. Last month, we reported on how Kirkland, WA-based OVP Venture Partners joined a syndicate that invested $45 million in Complete Genomics.

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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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NanoString Technologies, a Seattle-based maker of genetic analysis tools, has nailed down $30 million in a third-round venture financing to boost sales of its first product, just as it was running low on cash while it tries to prove itself in the marketplace.

The round was led by Clarus Ventures, and was joined by NanoString’s two founding investors, OVP Venture Partners and Draper Fisher Jurvetson. NanoString, founded in 2004 from the lab of biotech pioneer Leroy Hood at the Institute for Systems Biology, has now raised $47 million since its beginning. This round ties NanoString with Calistoga Pharmaceuticals for the second-biggest fundraiser in the Seattle life sciences industry this year, behind the $42 million round raised by Kirkland, WA-Pathway Medical Technologies.

NanoString’s new money will be used to help the company boost U.S. and international sales of nCounter, an instrument that’s supposed to give biologists a digital readout that says to what extent a given gene is dialed on or off in a tissue sample. The technology had a coming-out party in the pages of the journal Nature Biotechnology a year ago, and booked its first commercial sale last July. It is now competing against some heavyweights in the market for gene expression tools—Santa Clara, CA-based Affymetrix (NASDAQ: AFFX), Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), and San Diego-based Illumina (NASDAQ: ILMN).

Machines that usually do this sort of precise gene expression analysis, known as real-time PCR, make up a market worth $1 billion a year that’s growing at a 20 percent annual rate, NanoString’s top executive at the time, Perry Fell, told me in this feature story last July. It’s the sort of technology that’s supposed to help researchers do a new kind of large-scale genetic experiment, where they might compare 100 genes from 100 different patients with diabetes to see how they respond to certain therapies.

“It’s a great company, the product is terrific, it answers a lot of important questions and gives you better results than competing technologies,” says Chad Waite, a managing director with OVP Venture Partners, who helped seed the company. But he’s quick to add, “We’ve still got work to do.”

Nanostring isn’t profitable, and it ran into bad timing …Next Page »

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A little company on Vancouver Island has its sights set on one of the big challenges of the day in healthcare software. It is trying to piece together the vast puzzle of data on human health—everything from patient medical records, tissue or blood sample readings from the lab, and genomic data—and package it all in a coherent way so biologists see patterns they might otherwise never see.

The company, Victoria, BC-based GenoLogics, has been on my list to check on since February, when it raised $5 million in venture capital from Kirkland, WA-based OVP Venture Partners and a pair of Vancouver, BC-based firms—GrowthWorks Capital and Yaletown Venture Partners. I got an update on the company’s progress over the phone from CEO Michael Ball.

The challenge here would be hard to overstate. All of the data GenoLogics has in mind is stored at different institutions, in different proprietary formats, without obvious ways to link them into a coherent whole. And GenoLogics certainly isn’t the only company trying to solve this problem, or parts of it: Microsoft has recently given this a shot with its Amalga program, designed to get the typical 80 different hospital IT systems to talk to each other, and it has followed that up recently by rolling out Amalga Life Sciences, a program it hopes will do the same for biologists’ labs. Even as cheaper genome sequencing leads to great volumes piling up in hard drives, many biologists continue to be notoriously slow adopters of new IT programs, clinging to their homemade programs, or outdated versions of Excel spreadsheets that were never made to help show patterns in vast data sets like this.

It’s little wonder that drugmakers still struggle to improve on a 90 percent failure rate for drugs that enter clinical trials, and that it takes more than a decade and hundreds of millions of dollars to develope every new one. Some top biologists, like Leroy Hood of the Institute for Systems Biology, have been seeking ways to find clues in those medical records, blood samples, lifestyle questionnaires, and genomic readouts that might help drugmakers predict which patients will be helped by a drug, and which won’t.

That’s the opening that GenoLogics hopes to exploit, by selling its product to Big Pharma and biotech companies that desperately need to improve their batting average in product development.

“It’s clear to everybody now that the next Lipitor mass market drug won’t happen, and now you’re going to have to target subsets of the population to get through the FDA,” Ball says. “We find that the paradigm is changing.”

Some of this may be wishful thinking, because at least on my radar there are a lot more companies that aspire to market drugs across broad patient populations than there are companies that zero in on narrowly customized drugs to fit patients with certain genotypes—like Genentech’s trastuzumab (Herceptin) for about one-fourth of breast cancer patients.

But GenoLogics appears to have some momentum behind it. The company was founded in 2001 based on …Next Page »

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The big headline from the OVP Tech Summit last week came when UW computer science professor Ed Lazowska called on everyone to quit being so smug, and get serious about turning Seattle into a major league innovation cluster. But later that day, I was lucky to be the only journalist in the room, along with a couple dozen VCs and entrepreneurs, for a fascinating 90-minute conversation on how biology is going digital and what it means for society. Two world-class biologists, Leroy Hood and Irv Weissman, weighed in on the profound questions this technology raises for science, medicine, politics, and, yes, religion.

OVP managing director Carl Weissman, son of the above-mentioned Stanford University stem cell researcher, got the ball rolling. He asked about when full human genomes will be sequenced for as little as $1,000, and for the participants to comment on the implications. Hood, a pioneer in the field of high-speed gene sequencing, said he sees the $1,000 genome coming within five years—and that it could cause a lot of trouble if not handled correctly.

If the goal is to gain a far deeper understanding of what causes diseases, and what makes us human, then simply having cheap genome sequencing doesn’t necessarily mean scientists will get the answers they need, the researchers said. There’s a risk that people could put too much weight on the idea that genes determine who we are, rather than serve as one important piece of the puzzle in combination with environmental factors, Hood said. Scientists will face a huge challenge of trying to integrate genetic data with information on a person’s surrounding environment, to understand how it all adds up to the person’s current condition, or phenotype, he said.

It sounded like a replay of the old debate about nature versus nurture, which most scientists acknowledge is really all about a complex interplay of the two factors.

“One danger is in if we don’t integrate the two data sets,” Hood said. “The genome is one big piece of data, but there are other big pieces. Integrating them all is essential.” He added that this is a staggeringly complicated notion, because genome sequencing, with 3 billion DNA data points on every human, already creates a limited amount of valuable data amid a sea of noise.

“How do you do experiments that put together genotype and environment to equal phenotype?” Hood asked rhetorically. Funding agencies like the National Institutes of Health aren’t really set up to tackle the kind of experiments to answer these kind of questions, because they embrace what Hood calls “small science”-the sort of incremental advances, building on the work of peers, that tends to get published in top journals. The pharmaceutical industry won’t do it either, “because they invest in things that run a year or two out at most,” Hood said.

Still, with technology marching forward and making the $1,000 genome a possibility, Carl Weissman wanted to know what sort of experiments this will enable in the lab and how it will change scientists’ jobs.

The $1,000 genome will probably lead to a bigger opportunity to do experiments on the genetic profiles of people with common neurodegenerative diseases linked to multiple genes being out of whack instead of just one, Irv Weissman said. Stem cells grown in a lab dish …Next Page »

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Accelerator’s latest company has a vision of turning the world of antibody drug development upside down. The tenth company to roll out of the Seattle-based biotech startup machine, Xori, aims to turn lab dishes of chicken cells into factories for making better, faster, cheaper antibody drugs. Xori also represents the fulfillment of a sort of romance, but we’ll get to that later.

The company (pronounced Chore-ee) is founded on technology developed by Nancy Maizels, a professor of immunology and biochemistry at the University of Washington. The usual crew of Accelerator’s investors are backing it—Alexandria Real Estate Equities, Amgen Ventures, Arch Venture Partners, OVP Venture Partners, PPD, and WRF Capital. I heard the gist of this story during a group interview with Maizels, Accelerator president David Schubert, and Accelerator’s chief scientific director, Patrick Gray. (The exact amount wasn’t disclosed, but Accelerator usually invests less than $5 million in new companies.)

Antibody drugs that can specifically seek out diseased cells, while sparing healthy ones, are one of the biggest advances in the 30-year history of the biotech industry. Genentech became the industry’s most valuable company, worth more than $100 billion, largely because of three of these targeted medicines for cancer—marketed as Avastin, Rituxan, and Herceptin. The antibody drug market is expected to generate $30 billion in worldwide sales in 2009, with an annual growth rate of 14 percent through 2012, according to Datamonitor.

With that much money on the line, there’s a huge interest in coming up with more efficient ways of creating and selecting more antibody drug candidates. There are literally hundreds of specific targets scientists have identified on cells for these kinds of “smart bomb” therapeutics. But it’s time-consuming and expensive work—it can take a year’s worth of effort in the lab, and $10,000 or more—just to come up with a new antibody to begin the gauntlet of experiments, Maizels says.

Current industry standards require scientists to inject mice with a certain protein target, wait for them to develop antibodies against it, and then collect antibody drug candidates. One of the problems is these antibodies need to be made to incorporate more human DNA, so that when they are given to humans, they aren’t rejected by the immune system as foreign invaders.

Xori sees its edge in using genetically modified chicken cells in petri dishes, instead of going through the arduous process with mice. The chicken cells are loaded with human DNA from whatever target scientists want to hit, and the chicken cells can start pumping out antibodies in a matter of hours. If Xori is successful, it could yield antibodies that can be effective at far lower doses, which will work with fewer injections, and which might be able to hit targets on cells that mouse-derived antibodies never could, Maizels says.

“It’s a wonderful idea, and I’m excited to see how it will work,” said Leroy Hood, president of the Institute for Systems Biology, and a director of Accelerator.

Like all Accelerator companies, Xori will have to hit certain milestones over the next 24 months if it wants to win another round of funding. Maizels is keeping her day job at the UW, and the day-to-day work …Next Page »

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Maybe it’s not such a bad time to be an investor after all. OVP Venture Partners, based in Kirkland, WA, held its sixth annual Technology Summit today at the Four Seasons Hotel in downtown Seattle, and the mood was decidedly upbeat. The crowd was a real who’s who of the technology and life sciences industries; some notables in attendance were Rogers Weed from Washington state’s Community, Trade & Economic Development department, Werner Vogels of Amazon, Dan Ling from Microsoft Research, Jeremy Jaech of Verdiem, Matt O’Donnell of the University of Washington, and Leroy Hood of the Institute for Systems Biology.

Luke and I will be posting our takeaways from the meeting in the next day or so. I thought it would be useful first to frame the whole discussion using a few remarks from the introductory talks given by OVP managing directors Rick LeFaivre and Gerry Langeler this morning. LeFaivre pointed out that the OVP summit has historically tackled the prevalent technology issues of the day—from “utility computing” and mobile in 2004 to open source, IT security, digital media, and cloud computing in subsequent years.

This year’s keynote topic was “digital energy”—the convergence of information technology with cleantech and renewable energy. (LeFaivre spoke with Xconomy on this topic in detail back in March.) Langeler, who’s based in Portland, OR, and helps lead OVP’s efforts in this arena, gave an overview of both the digital energy space and the venture capital industry more broadly.

Here are a few key points I took away from Langeler’s talk:

—The venture capital market is like the 1980s all over again. “What we have is a cyclical industry,” Langeler said. “And [the cycle] is almost the opposite of the buyout industry. So roughly next year, when we all come out of this environment, there will be an incredible amount of pent-up energy for innovation.” (That sounds pretty optimistic to me. Others think the situation is less rosy. A couple months ago, Seattle-based investor Andy Sack called this recession the “World War II” of our lifetimes. It’ll be interesting to see who’s right.)

—In the information technology space, VCs have to be picky. OVP has seen its percentage of investment deals that are in IT shrink from around 90 percent for its fifth fund to around 50 percent for its current (seventh) fund. The IT space “is maturing,” Langeler said. “You can’t just shoot a shotgun in there, you have to be selective.” (Part of the reason for the shrinking IT space for VCs is probably also that it costs a lot less to start software companies these days, so angel investors and entrepreneurs themselves are taking on more of the early-stage costs.)

—Digital energy follows a proven model, but the exits are far from proven. OVP is looking to “uncover high-growth segments with low capital intensity” in cleantech, said Langeler, and is more or less following its biotech-meets-IT playbook. In the energy generation space, it is looking for startups that make tools that can be sold to more capital-intensive and price-sensitive industries like solar-panel makers, wind farms, and ethanol producers. In energy storage and distribution, OVP looks for startups that can sell materials and software to utilities and government organizations. (This strategy seems a tad conservative to me, but the road to cleantech exits has been littered with dead-end, high-capital investments in biofuels and solar, to name a couple, so it’s understandable. But still, who will finance the more expensive projects?)

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Is it still possible to have a long, successful career doing research at a biotech company in the Seattle area? A young scientist today has only a slim chance of working for the next Immunex or Icos. Companies that last even 10 or 15 years are very rare. Yet a closer look at some of Seattle’s vigorous non-profit research organizations reveals some opportunities in surprising places.

Stewart Lyman wrote in February about the dismal picture regarding biotechnology in Puget Sound. Few companies are hiring. Most are not successful by almost any measure. Xconomy’s Luke Timmerman has reported in detail on the dire financial circumstances of so many biotech companies in the area, which has led to layoffs and other cutbacks in recent weeks.

It got me thinking about a very basic question.

Can a newly minted PhD spend their life working on fundamental research problems in biology here in the Puget Sound region? I’m focusing on basic research, which is the necessary driver for anything associated with biotechnology. A robust biotech environment cannot survive without a local nucleus of biomedical research.

Before the late 1970s, there were really only two career tracks for a young biologist interested in working on the critical problems affecting human health: get onto a tenure track path at a research university or go to work for a large pharmaceutical company.

However, there were only a limited number of tenure track positions available at universities. And pharmaceutical companies were much more interested in chemists than biologists for research.

The early biotechnology companies offered a third way, one where new technologies could be coupled with entrepreneurial spirit to create vertically integrated organizations that were involved in all aspects of therapeutic intervention in human health. There were lots of jobs available for researchers wanting to discover and develop products for medical purposes.

I moved to Seattle in the early 1980s to begin working at one of these early biotech companies, Immunex, as a research scientist. Since then, I have worked on a wide variety of basic science problems in corporate settings, helped create novel therapeutics, designed research protocols, written papers and submitted grants. Some of the molecules I worked on were developed into products that went through clinical trials and ended up being given to patients. I’ve worked at the bench as a staff scientist and as a vice-president in charge of research. My time here in Seattle has become a career.

How about research today in Seattle? The University of Washington is one of the top universities in the country, based on the amount of grants its scientists receive from the National Institutes of Health. According to numbers compiled by the Federation of American Societies for Experimental Biology (FASEB), in 2006 there were over 14,000 students just starting in a biomedical doctorate program. The total number of people attempting to get a PhD in biomedical science is over 70,000. About 7,000 new PhDs are awarded each year in biomedicine. Yet for the last 30 years, the number of tenured biomedical scientists in the US has been steady at about 20,000. The UW only has about 1,200 tenured professors total on the entire campus. Making a career in academia is still tough.

Are biotechnology companies a viable alternative for a research career? Biotech companies today are generally smaller and geared more towards development …Next Page »

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