Gene chip pioneer Affymetrix is continuing its push into becoming more of a diagnostics player, through a sizable acquisition announced today.

Santa Clara-based Affymetrix (NASDAQ: AFFX) said today it has agreed to acquire San Diego-based eBioscience for $330 million in cash. Through this deal, Affymetrix is getting eBioscience’s flow cytometer instruments (which count cells in biological samples) and chemical reagents that are used in diagnostics for immune disorders and cancer. The deal is expected to close before the end of the year, Affymetrix said.

Affymetrix has seen its revenues decline over the past couple years, as its traditional gene expression microarray tests have faced fierce competition. The company reported $310 million in sales a year ago, and notes that eBioscience, a private company, is expected to generate about $70 million in sales this year. By acquiring eBioscience, Affymetrix said it will now be able to crack into significant new revenue streams “in the key post-genomic applications of immunology, oncology, cell biology, stem cell biology, and diagnostics.”

“Affymetrix’s proposed acquisition of eBioscience represents a major step in transforming the company and specifically moving it away from a microarray business and into areas like translational diagnostics,” said Quintin Lai, an analyst with Robert W. Baird, in a note to clients this morning. “While we view as positive that the deal has an attractive financial profile, the price appears full and could limit the company’s flexibility in the near term for future deals.”

Affymetrix has secured a $190 million financing commitment to help it complete the deal, by tapping GE Capital, Healthcare Financial Services, Silicon Valley Bank, CIT Healthcare, and CIT Bank.

Affymetrix said in today’s statement it plans to keep eBioscience’s management team and operations in San Diego.

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NanoString Technologies has pulled in another $20 million to capitalize on its genetic analysis instrument for researchers, and to pursue the lofty goal of creating a workhorse diagnostic tool that enables more personalized medicines.

The Seattle-based company is announcing today it has raised $20 million in its Series D venture financing, which includes new investors GE Healthcare, BioMed Ventures, and Henri Termeer, the former CEO of Cambridge, MA-based Genzyme. NanoString’s existing investors, Clarus Ventures, Draper Fisher Jurvetson, and OVP Venture Partners, also participated. Founded in 2003 with a technology license from the Institute for Systems Biology in Seattle, NanoString has now raised a total of $67 million in its history.

The investment from GE is the industrial heavyweight’s first as part of a new five-year, $1 billion R&D initiative to beef up its cancer diagnostic and molecular imaging capabilities. The technology it’s betting on provides scientists with a digital readout on the extent to which genes are dialed on or off in a sample-what’s known as gene expression analysis. The tool has gained popularity the past couple years with academic customers, especially those at The Broad Institute of MIT and Harvard, because of its ability to help spot patterns in complex diseases like cancer where 50 or 100 genes might be perturbed instead of just one.

Once researchers identify more of these complex signatures, and learn what they mean to various types of cancer, NanoString says its machine could help physicians craft individualized strategies about what types of drugs to use, and how aggressive to be, with individual patients.

“I think we could end up being as big a molecular diagnostic company as there is, and will be,” says CEO Brad Gray. “Our technology is perfectly tuned to where medicine, in particular, cancer, is going.”

NanoString CEO Brad Gray

The investment by Termeer is the second big check he has written in the past couple months to support R&D in personalized cancer medicine, after he and his wife Belinda donated $10 million to start a new program at Massachusetts General Hospital. Gray, a former vice president of Genzyme Genetics, says he re-connected with his former boss over the summer to tell him about the potential applications of NanoString’s tool for personalized medicine.

“Henri is incredibly passionate about personalized medicine. He was a leader in genetic medicine, before it was in fashion,” Gray says. From a business standpoint, Gray says Termeer was drawn to the idea of NanoString selling its machine around the world as a diagnostic tool used by physicians and technicians in clinical settings, instead of the traditional model in which diagnostic firms set up centralized labs and have physicians ship in their samples.

“Henri immediately became intrigued with the potential of nCounter to enable a distributed version of personalized medicine,” Gray says. “We’re talking about taking very high complexity molecular diagnostics out of the central lab, and into a globally scalable business, where these tests can be run in any lab in the world.”

NanoString introduced the first commercial version of this tool, called nCounter, in the summer of 2008, for research purposes only. Last month it rolled out a second-generation product that’s supposed to have 50 percent higher bandwidth (known as throughput in the genetics business); more flexible software for analyzing the data from the instrument; and hardware that can be used by basic researchers, but that is manufactured in sync with more rigorous, consistent diagnostic industry standards.

Major life science tool companies like San Diego-based Illumina (NASDAQ: ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) and others have struggled this year amid uncertainty about cuts to federal research budgets that are the lifeblood of their customer base. NanoString is privately held and doesn’t disclose its financials, but Gray did say the company has … Next Page »

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Pacific Biosciences saw its sales flatten in its second quarter on the market with a new breed of DNA sequencing instrument, and now it’s shuffling things around a bit on the org chart to see if it can kickstart its growth.

The Menlo Park, CA-based company (NASDAQ: PACB) said today it generated $10.5 million in total revenue in the quarter ended Sept. 30, just a smidge lower than the $10.6 million in revenues it reported in the prior three-month period, which was its commercial debut. PacBio’s net loss widened to $29.3 million in the most recent quarter, up from $22.5 million in the prior quarter.

Separately, the company announced that board member Mike Hunkapiller is taking on a more active role as executive chairman of the board. Hunkapiller, a general partner with Alloy Ventures, is best known as the co-founder and former president of Foster City, CA-based Applied Biosystems during that company’s rise to prominence in the sequencing instrument market. Hunkapiller will come in to work three days a week, and work with president and CEO Hugh Martin, according to PacBio spokeswoman Nicole Litchfield. Martin will not scale back his duties at the company, and is “doing fine” physically, Litchfield says. (Martin has multiple myeloma, a cancer of the bone marrow. He looked fine when I saw him Monday at an Xconomy genomics event.)

PacBio’s slowing sales performance shouldn’t come as a surprise. The company is selling a new $700,000 DNA sequencing instrument during a shaky economy, at a time when scientists are nervous about potential cuts to the National Institutes of Health—the principal agency that allows researchers to buy fancy new tools. The company cut 130 jobs, about 28 percent of its staff, in September when it became more clear that sales were going to be slower than hoped. PacBio is also slugging it out in a fast-moving, competitive field with Illumina (NASDAQ: ILMN), Life Technologies (NASDAQ: LIFE), and Complete Genomics (NASDAQ: GNOM) all pushing for a growing piece of mindshare and revenue in this new wave of sequencing.

Hugh Martin

“I have spent much of my career on the leading edge of sequencing technology and I believe PacBio’s single molecule, real-time technology will disrupt the sequencing market,” Hunkapiller said in a PacBio statement. “I am delighted that Hugh and the Board asked me to take on this newly created role and look forward to devoting more time to advising the company on how to accelerate adoption of their products in important applications.”

The company, which went public a year ago at $16 a share, began life as a public entity with an $800 million valuation. Today its stock closed at $4.07, giving it a valuation of about $207 million.

PacBio’s valuation suggests that Wall Street is assigning almost zero value to its technology. The company closed September with about $193.7 million in cash reserves, down from $216.6 million in cash it had at the end of June.

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[Updated: 6:45 am, 10/26] San Diego-based Illumina is doing some restructuring to make up for third-quarter sales that fell way short of investors’ expectations.

The market-leading maker of DNA sequencing instruments (NASDAQ: ILMN) said today it is going to restructure (i.e., make job cuts) that will add up to a $15 million to $17 million charge on the company’s income statement, mostly in the fourth quarter. The disclosure was part of the company’s third-quarter financial report, in which Illumina said it generated $235.5 million in revenue—a 1 percent drop compared with the same period a year ago. The company’s quarterly profits plunged to $20.2 million, a 43 percent decline from $35.4 million a year earlier.

[Updated layoff numbers] Illumina didn’t provide details of its restructuring plan in today’s financial release, although it did say in a subsequent filing it is eliminating 200 jobs, or about 8 percent of its workforce. It also declined to offer a specific revenue forecast, although the company did say it expects sales to be higher this quarter than last quarter because of the commercial rollout of a new desktop sequencing instrument called MiSeq.

News of cutbacks shouldn’t come as a surprise. The company first reported that its sales were falling short—about $40 million short of Wall Street expectations—in an announcement on Oct. 7. Researchers who buy Illumina products are still uncertain about how they will be affected by the possibility of budget cutbacks at the National Institutes of Health.

“We view the move as likely prudent, although the expectation points to a bearish outlook on HiSeq,” said Tycho Peterson, an analyst with JP Morgan, in a note to clients this morning, that referred to the company’s flagship instrument.

Illumina had 2,100 employees as of January 2, according to its annual report filed with the Securities & Exchange Commission.

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The Seattle biotech community got an energetic new leader this week, but there was also some more grim news about budget cuts coming at one of the biggest local life sciences employers.

—Amgen (NASDAQ: AMGN), the Thousand Oaks, CA-based biotech giant, is looking to “improve focus” and “re-allocate resources” in its $2.9 billion R&D budget, according to a company spokeswoman. The company will have more to say in its quarterly earnings report on Oct. 24. Sounds like there will be some long days of grim speculation for the people at Amgen’s Seattle R&D operation.

—Seattle-based NanoString Technologies rolled out the next-generation version of its genetic analysis instrument at a big scientific conference in Montreal. The new tool is supposed to be able to churn out 50 percent more data, and it’s paired with a more flexible software program. The Broad Institute of Harvard and MIT, one of the world’s leading centers for genomics research, has signed on as the first customer for the Version 2.0 tool from NanoString.

—For the first time, I made an early morning call to Iceland for a story. This was to talk with Kari Stefansson, the prominent geneticist and CEO of deCODE Genetics. The company made the news this week by announcing by announcing a partnership with Pfizer to look for new lupus drug targets. The Seattle angle here is that Arch Venture Partners and its indefatigable managing director Bob Nelsen helped rescue deCODE from bankruptcy in 2010 in a wager that deCODE could thrive in the era of ultra-fast, ultra-cheap gene sequencing.

—Seattle-based Qliance Medical Management, the company that provides direct primary care services on a monthly subscription basis, said this week it has done some management shuffling. Co-founder Erika Bliss, a primary care physician, is stepping up to become president and CEO, while co-founder Norm Wu is stepping aside to serve as a “strategic advisor” working on partnerships. Qliance probably has the investment syndicate with the highest television Q-rating in town—Jeff Bezos, Drew Carey, Michael Dell, and Nick Hanauer are among its backers.

—This week in BioBeat, I offered up a list of five things that the pharmaceutical industry could (and should) do to help the FDA reform itself and restore public confidence in the agency. There are some good comments piling up at the bottom of this story, and you’re always welcome to add your own two cents there.

—Thong Le, the well-wired venture investor at WRF Capital, is going to take on a higher profile in the community next month when he becomes chairman of the Washington Biotechnology & Biomedical Association. Le is replacing Tom Clement, the founder of Pathway Medical Technologies, who is now working to get a couple new startups off the ground—Aqueduct Neurosciences and Cardiac Insight.

—Drew McUsic, a University of Washington graduate student in bioengineering, offered up his view of the opportunity for biotech startups in the world of stem cell R&D. This post was based on a WBBA event in which officials from Geron and Fate Therapeutics offered their view from the trenches.

—Lastly, we had a guest post for the biotech crowd inspired by the life of Steve Jobs, the Apple co-founder who died last week at 56. Christopher Bowe, a healthcare analyst with Informa, sees some lessons in Jobs’ life that might be healthy for a life sciences industry that’s starving for some really exciting new innovations.

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[Update: 7:45 am Pacific 10/13] NanoString Technologies has spent much of the last year talking about its foray into diagnostic applications for its basic genetic analysis tool, but today it’s talking to researchers simply about getting some more oomph out of the machine.

Seattle-based NanoString said today, in an announcement at the International Congress of Human Genetics and American Society of Human Genetics conference in Montreal, that it has begun selling its second-generation tool called nCounter. The instrument provides a digital readout on the extent to which genes are dialed on or off in a sample—what’s known as gene expression analysis. The company said the next-generation instrument is supposed to have 50 percent higher bandwidth (known as throughput in the genetics business); more flexible software for analyzing the data from the instrument; and hardware that can be used by basic researchers, but that is manufactured in sync with more rigorous, consistent diagnostic industry standards.

The tool was first released for commercial use in 2008. Last December, NanoString showed where it is going with this tool, by acquiring intellectual property for a 50-gene signature that provides information on breast cancer prognosis. Rather than with simpler single-gene disorders that are already easy to spot, NanoString is hoping to find its niche in these kind of complex “multi-factorial” diseases, in which researchers might want to look at patterns of 50 or 100 genes in hundreds, or thousands, of patients.

The Broad Institute of Harvard and MIT in Cambridge, MA, one of the world’s leading genomics hothouses and an early adopter of the NanoString technology, will be the first customer to get a second generation machine, the company said. The Broad Institute will get two of the new NanoString machines, meaning it will have a total of five. The Broad Institute said it is using the company’s tools for its work on infectious disease, metabolic diseases, and cancer.

“We are looking forward to the next generation nCounter system to accelerate some of our larger projects,” said Nir Hacohen, a senior associate member of the Broad Institute, in a NanoString statement.

[Update with comment from NanoString CEO Brad Gray, and correction on his location.] NanoString originally started selling its first nCounter for $235,000, and it plans to charge the same amount for the new instrument, NanoString CEO Brad Gray says. Here’s more of what he had to say in e-mail: [An earlier version said Gray wrote the e-mail from the genetics conference in Montreal. He was actually in Seattle, coordinating with employees in Montreal.]

As we had hoped, the attendees of the ASHG meeting have given us a very positive response to the introduction of our second-generation nCounter system. During the first few hours of the show this morning booth traffic was heavy, and our sales team members were presenting to groups of two or three customers at once. We also ran a symposium on the use of the nCounter system for measuring copy number variations (CNVs), which had very high quality and engaged attendees. Attendees as far away as Europe are now in the process of discussing pilot projects for CNV, which bodes well for future system installs driven by this application.

The first generation nCounter system measured gene expression on up to 800 genes simultaneously, with unparalleled data quality and ease of use. Our second-generation system, coupled with our new nSolver software, will allow researchers to quickly run even larger studies, and manipulate the large data sets they generate even more easily. The nSolver software, included with the system, will allow export of data to the industry-standard visualization software packages such as Ingenuity Systems pathway analysis software. This further extends the advantages of using nCounter for large translational research studies of hundreds and thousands of samples. In addition, the diagnostic-quality hardware will provide researchers with both superior reliability, and with confidence that NanoString is committed to collaborating with our customers to translate their gene signature “content” into nCounter-based in vitro diagnostic products.

To answer the question on pricing that you posed in today’s Xconomy article, we are introducing the second generation nCounter at the same price as we had sold our first generation system. With the additional performance and features at the same price, we feel great about the value we are providing our customers.

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Illumina shareholders are having a rough day today.

The San Diego-based maker of genome sequencing tools (NASDAQ: ILMN) fell $12.85 a share, or 32 percent, to $27.08 at 11:45 am Eastern time today. The drop came after Illumina released a dismal third-quarter sales report, in which it reported $235 million in revenue on an unaudited basis. That performance fell about $40 million short of expectations, said Tycho Peterson, an analyst with JP Morgan, in a note to clients today. Even worse, Illumina withdrew its 2011 sales forecast “due to the many market uncertainties.”

Illumina, the market leader in high-speed gene sequencing instruments, primarily blamed the shortfall on the continued uncertainty around government budgets in the U.S. and Europe. Those government research budgets, particularly at the National Institutes of Health, enable most of Illumina’s scientific customers to buy instruments, and consumable chemical reagents to run them. Illumina also said its existing customers are using fewer reagents, and that fewer than expected chose to upgrade their instruments.

“We are highly disappointed with our revenue for the third quarter,” said Illumina CEO Jay Flatley in a statement. ”In the quarter, we saw what we believe to be an unprecedented slowdown in purchasing due to uncertainties in research funding and overall economic conditions, as well as a temporary excess of sequencing capacity in the market. We expect these conditions to continue through at least the fourth quarter, while the 2012 – 2013 U.S. budgets for NIH and other related agencies are determined.”

JP Morgan’s Peterson lowered his price target on Illumina stock from $67 to $44, but he cautioned investors that the selling today could just be a short-term blip.

“We remind ourselves that this is a company with a rich tradition of innovation, that the sequencing markets are nascent and ripe for expansion, and that the competitive dynamics continue to swing in its favor,” Peterson said. “Illumina is now a “show me” story with limited near-term visibility, but it is hard to ignore the long-term potential altogether in our view.”

Illumina said it plans to provide its full third-quarter financial report after markets close on Oct. 25.

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Last night, I was in a room with 200 women and, oh, about five guys. I’m sure most men have never been to an event quite like this, especially in the typically male-dominated world of the biotech business.

This was the founding meeting for the Seattle chapter of Women in Bio, an international networking organization that seeks to help women advance their careers in biotech. It’s about building professional networks, seeking out mentorship, and building the confidence it takes to advance in management, ask for a raise, or to start a company.

From the minute I walked in to the Maxwell Hotel lobby on Roy Street, it was obvious there was pent-up demand for a group like this in Seattle. Positive energy was all over the place. Even the organizers seemed surprised at the magnitude of interest. It seemed like three or four women told me something along the lines of “We got 224 RSVPs! Can you believe it?”

The Women in Bio group got started about 10 years ago in the Washington D.C./Baltimore area, and Seattle is now the first West Coast chapter. There’s a 20-person working group of volunteers here that made it happen. I got such enthusiastic invitations from three of them—Cynthia Adkins of Adkins, Plant, Elvins & Black, Adriana Alejandro of Alejandro Consulting Group, and Stacie Byars of the WBBA—that I figured I had to at least stop by.

So for those of you who were there, and other women out there curious about networking with other women in biotech, here are some of the photos I snapped there last night. You can click on the thumbnail file to see a larger version. I’m looking forward to seeing what comes next.

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Ask Jonathan Rothberg a few questions about his new venture in DNA sequencing, and, ever the showman, he find references to a pivotal event in world history while delivering what amounts to a “no comment.”

The questions were basic enough: How many employees do you have in San Francisco and Guilford, CT? How much has your R&D budget grown? How many customers have you signed up in the past nine months? Have you hit any of the milestones outlined in your 2010 merger agreement with Life Technologies?

“Come on, I’m not going to give that information out. This is like 1948 and we’re the Israelis,” Rothberg said with a laugh in a recent phone interview. “We’re still the underdog. Look at how good the other guys are. I respect my competitors too much to give out that information.”

Rothberg and his colleagues at Ion Torrent, the new unit of Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) may be tight-lipped about internal matters at the moment, but they are cutting an increasingly high profile in the world of superfast/cheap genome sequencing. The company introduced its first-of-a-kind DNA sequencing machine based on semiconductor technology in December. Demand has been strong almost right off the bat, as it rang up $13 million in sales in the most recent quarter ended June 30, a 50 percent increase over the prior three-month period. That performance has come even while Ion Torrent has been swimming upstream against government research budgets that are getting nothing but tighter.

The early sales performance is certainly a small sum to a company like Life Technologies, which had $3.6 billion in revenue last year. But there’s undoubtedly a lot more potential for the Ion Torrent machine to drive growth at Life Tech and in the biomedical research world. The earliest version of the machine costs about $49,000, fits on a lab desktop, and reads individual units of DNA in a new way, through semiconductor chips that pick up distinct electron charges from each chemical base of DNA. It’s the first commercial machine of its kind, in an industry where large and heavy sequencing instruments often cost $500,000 or more, and generate their genomes by using fluorescent tags and sophisticated cameras to read the DNA code that varies from species to species and person to person.

San Diego-based Illumina (NASDAQ:ILMN), Menlo Park, CA-based Pacific Biosciences (NASDAQ: PACB) and Mountain View, CA-based Complete Genomics (NASDAQ: GNOM) are a few of the companies deeply invested in fundamentally different kinds of technology for reading DNA at breakneck speed and low cost. Ion Torrent’s Rothberg previously founded another sequencing company, 454 Life Sciences, that was sold to Roche in 2007. There’s no doubting that Rothberg has set some lofty goals for his operation, particularly since he sold Ion Torrent to Life Technologies for $375 million, plus another $350 million in milestone payments, a year ago. Rothberg says the company’s technology is going to bring genome sequencing down to $1,000 per person by 2013; it’s going to continue to help public health officials identify pathogens within hours of outbreaks; it’s going to pave the way for a $100 billion new market.

Jonathan Rothberg

Yeah, Rothberg was quoted in a Forbes story last December saying this would become a $100 billion market. Nine months in to the product launch, he didn’t flinch, making the same prediction.

“It’s like the race to the South Pole 100 years ago,” Rothberg says. “The guys that win now will change healthcare forever. We’re at an amazing point in history.”

No question, a lot has happened for Ion Torrent since it rolled out its first commercial semiconductor sequencer, called the Personal Genome Machine, in December. The original microchip had 1.2 million accessible sensors, which was surpassed in a couple months by a new chip with 6.1 million sensors. The next iteration—expected to come out later this year—is designed to boost capacity to 11 million sensors. After only a few months on the market, the component cost of the mid-range chips dropped in price from $500 to $99. Rothberg isn’t saying yet how much the newest chips will cost.

While capacity is booming and price is falling, scientists are starting to think about experiments that couldn’t have been dreamed of a year or two ago. Ion Torrent isn’t saying how many machines it has sold so far, but, thanks to the global distribution of Life Tech, Ion Torrent’s machine is now established in labs in 40 countries, Rothberg says. The instrument, along with a rival instrument from PacBio, played a starring role in the German E.coli outbreak, helping researchers identify … Next Page »

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Scary headlines about the E.coli outbreak in Germany have faded, but scientists are still looking to learn about the DNA sequence of this new bacterial invader, and how it evolved to become deadly. Super-cheap, superfast sequencing has made it easier than ever to dig into these kinds of questions, and today, researchers will have an interesting new set of data to pore over from machines made by Menlo Park, CA-based Pacific Biosciences (NASDAQ: PACB).

A global team of scientists, including researchers from PacBio, the University of Maryland, and Harvard Medical School, is reporting today that after sequencing the deadly strain of E.coli and comparing it with the sequences of 11 other strains, they were able to zero in on certain regions of the bacterial genome where mutations occurred that are thought to hvae made the new pathogen so dangerous. The findings are being published online today in the New England Journal of Medicine.

The German E.coli outbreak first came to public attention in late May, when news broke that 300 people had become seriously ill and 14 had died from the pathogen, which is usually far less virulent. Scientists, as usual, sprang into action to identify the bug and its source. Almost immediately, one German researcher, using a fast new tool from Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), appeared to identify the virulent new strain of pathogen. That finding was quickly followed by sequencing information put in the public domain by BGI (formerly known as Beijing Genomics Institute).

The initial conclusions, though, had their limits, according to Eric Schadt, PacBio’s chief scientist. The initial reports about the pathogen were based on a comparison to just one E.coli genome as a reference in the public domain, leaving a lot of unanswered questions that PacBio and its collaborators felt could be tackled by sequencing a dozen different E.coli genomes, according to Schadt, a senior author on the new paper.

Eric Schadt

“This paper is important because it compares [the] outbreak strain to 11 others. It enables us to look at what were the regions that could have been responsible, or most important, for the increased pathogenicity or resistance of this particular strain,” Schadt says. “When you’re looking at comparing an outbreak strain to a single genome in the public domain, what can you really infer from that?”

PacBio came late to this scientific party, Schadt says, but it had reason to get in the game. Just as the outbreak struck, the company was in the midst of its all-important commercial introduction of its DNA sequencing machine. Given that it took $580 million of investment capital to get to that point, it would be an understatement to say that execution on its sales and marketing plan is a top priority.

But as followers of the company know, PacBio is hoping to carve out a niche for its novel sequencing technology in the world of infectious disease, so it stands to reason it could drum up sales by showing it is doing something useful in this field. The company made headlines last year when it showed that its machine was, in a matter of days, able to sequence a handful of different strains of cholera, which helped public health officials identify the source of a deadly outbreak last year in Haiti.

In this most recent case of the German E.coli outbreak, the PacBio instrument was able to generate sequences on each strain in about five hours, Schadt says. There was more work beyond that in analyzing the genomes, but the speed of the machine enabled PacBio and its collaborators to catch up with other scientific groups that had a head start using other machines, Schadt says.

PacBio’s instrument itself is high-priced at $700,000, but it can run simple experiments very fast and very cheaply-a basic question can be answered for as little as $99 and in as little as 30 minutes, the company has said. The machine in its current form is technologically different from others on the market, which PacBio and collaborators have learned has made it useful for infectious disease research. The PacBio machine can’t read a huge volume of DNA strands simultaneously, but it can read very long stretches of DNA. Scientists say that makes the instrument good at stitching together or “assembling” genomes for bacteria like E.coli which have much shorter overall genomes, than say, human beings.

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San Diego-based Illumina (NASDAQ: ILMN), the market-leading maker of gene sequencing instruments, said today that its sales climbed 36 percent, to $287.5 million, in the quarter that ended June 30. The company turned a profit of $30.6 million in the quarter, a 2.7 percent increase compared with the $29.8 million profit in the same period a year earlier. Spending on R&D climbed by 16 percent, and sales, general and administrative costs rose by 30 percent to $69.2 million, the company said.

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People in the biotech business (most, anyway) aren’t delusional. They know the odds are stacked against anybody who dares to develop a new drug. But even during the darkest days of recent economic history, December 2008, I heard a seasoned executive explain why the U.S. was, and would remain, the leading place in the world for biotech.

It was about attitude.

“Europeans always want to focus on the 100 reasons why something won’t work,” Bruce Carter, the British-born former ZymoGenetics CEO said. Americans, he went on, know the 100 reasons why a drug probably won’t work, yet “are willing to look at the one reason why it will.”

I’ve been wondering lately whether this is still true, whether biotech has lost its nerve, its anything-is-possible swaggering attitude. Sure, everybody tries to cast their companies and products in the best possible light, that will never change. But deep down, there’s a lot of lingering insecurity. People (me included) keep saying things like the venture capital model for biotech is broken, the IPO market is cruel, Big Pharma is slowly imploding, everything must be outsourced to China and India, young scientists can’t find jobs, drug price controls are inevitable, and the FDA is smothering life sciences innovation.

My job as a journalist requires me to have a well-tuned BS detector, to be skeptical of those who say they can overcome all the odds. But lately I can’t help but wonder, where are the biotechies today who really believe in themselves, and are willing to bet everything that they will beat the odds and do something remarkable?

There is a lack of scientific courage running through biotech today. That’s what Steve Ertel, a senior vice president at Cambridge, MA-based Acceleron Pharma, said on a panel that I moderated last month at the Biotechnology Industry Organization convention in Washington, D.C. Carl Weissman, a Seattle-based VC who invests in biotech startups with disruptive potential, gave an emphatic “yes” when I asked him if he thinks the industry is lacking in guts. Kevin Starr, a partner with Third Rock Ventures in Boston, made this basic point in a different way a few weeks ago, when he talked about the kind of culture Third Rock has worked hard to instill in the more than 20 biotech startups it has founded in the past four years.

“What you need to create is life in an enterprise where there’s a ‘nothing is impossible’ attitude, and that assembles the right set of complementary people together to turn an idea into something that’s great,” Starr says.

Kevin Starr is a partner with Third Rock Ventures

It struck me as kind of an odd thing to hear from a venture capitalist. I’ve covered the industry for the past 10 years, so I’ve only heard tales about biotech culture from the years before then. But my sense is that investors didn’t need to instill a “we-can-do-anything” attitude in the DNA of biotech companies. The entrepreneurial spirit was driven partly because of the exciting new technologies of the day, coupled with charismatic industry founders, and an only-in-America appetite for high degrees of investment risk and reward.

What’s really ironic here is that some of the most truly exciting things in biotech’s 35-year history are happening right now—at the precise moment when there’s so much timidity flowing through the business. Scientists are sequencing entire human genomes for $5,000 and the price is only going down, clearly paving the way for a new wave of more predictive diagnostic tests. The biology of cancer is getting much clearer, and the drugs are starting … Next Page »

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South San Francisco-based Fluidigm (NASDAQ: FLDM) said today it has settled a legal dispute over intellectual property with Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), as the companies have agreed to cross-license and sub-license certain technologies from each other. Fluidigm, which went public in February, makes microfluidic instruments that biologists can use to identify rare and valuable cells in samples, while Life Technologies makes a variety of tools for genetic and cell analysis. In this case, Fluidigm will get access to Life Tech’s polymerase chain reaction (PCR) technologies, in exchange for access to certain IP on imaging readers and other technologies, Fluidigm said. “This is a very positive outcome for both companies. It provides each company with the freedom to compete in the marketplace instead of the courtroom,” said Gajus Worthington, Fluidigm’s CEO, in a statement.

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NanoString Technologies, the Seattle-based maker of genetic analysis instruments, has collected $2.5 million in new financing, according to a regulatory filing. NanoString’s financing, which could be worth as much as $14 million over time, comes in the form of debt that be converted later into equity holdings, as well as warrants to buy shares in the future at a certain price, according to the filing. NanoString last raised $30 million in an equity financing two years ago.

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Eric Schadt, one of the world’s top researchers looking at how changes in the genome lead to disease, is leaving his full-time job as chief scientist of Pacific Biosciences to spearhead a new genomics research center armed with more than $100 million of financial backing at Mt. Sinai School of Medicine in New York.

This new arrangement is being set up as a bi-coastal collaboration between Menlo Park, CA-based PacBio (NASDAQ: PACB) and Mt. Sinai, in which Schadt will divide time between academia and industry. Schadt will still be chief scientist of PacBio, helping craft company strategy, but it will be a part-time role. Schadt, 46, says he will spend about 75-80 percent of his time as director of Mt. Sinai’s new Institute for Genomics and Multiscale Biology, and as chair of the medical school’s department of genetics. His Mt. Sinai teams will seek to get the most bang out of PacBio’s fast new gene sequencing machines and tools made by rivals like Illumina (NASDAQ: ILMN) and Life Technologies (NASDAQ: LIFE).

The union of PacBio and Mt. Sinai is a high-profile effort to bridge the traditional divide between lab research and clinical treatment of patients. For Mt. Sinai, hiring a star like Schadt means it will likely attract more donations, and be able to recruit many more bright young physicians and scientists interested in genomic-based personalized medicine. For PacBio, it hopes to learn how to best position its instrument with customers around the world, after hearing from Schadt how it works in the trenches.

And for Schadt, it gives him the chance to work on the inside of an ambitious medical system in the nation’s biggest city, which sees about 500,000 patients a year, giving it the potential to capture lots of biological samples from patients. Those precious samples, which can be hard to obtain and share in traditional academic settings, will be kept on electronic medical records in the Mt. Sinai system. The records will capture results of genomic tests, plus more traditional lab tests of disease. Those are dots that rarely get fully connected in today’s medical centers.

“This is enormous for us. If you’re not world-class in genetics, you can’t be a world-class medical school and academic medical center. By adding Eric, it assures we’ll be among the very best places in genetics,” says Dennis Charney, the dean of Mt. Sinai School of Medicine. “We see Mt. Sinai being at the vanguard of the genomic revolution. When these genetic findings become actionable for medicine, Mt Sinai could be a major place that makes it all happen.”

Says Schadt: “This is the exact right thing I’ve always wanted to do. I won’t have anybody else to blame if I can’t pull off something significant here.” PacBio CEO Hugh Martin added in a statement: “With a strong commitment, shared vision, and extensive access to patient samples, we believe Mount Sinai is a perfect partner.”

Schadt, who I profiled in these pages in March 2009 and who was more recently written about in a 6,000-word piece by Esquire’s Tom Junod, made his name in biology over the past decade while at Merck’s Rosetta Inpharmatics unit in Seattle. There, Schadt and his colleagues published seminal papers that sought to go beyond the basic sequence of 3 billion chemical units that make up a human genome. Schadt and his colleagues tackled the immensely complex next step of trying to help explain what all those data points mean. The concept, sometimes called “network biology,” is about looking at faulty DNA and showing it causes faulty transcriptions of RNA, which leads to the production of proteins that go awry and cause diseases like cancer.

Schadt eventually left Merck in the spring of 2009, insisting that … Next Page »

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Santa Clara, CA-based Cell Biosciences, the life sciences instrument maker that raised $20 million in Series F funding last fall, said yesterday that it has added a $13 million second tranche to the round and used some of the money to acquire Brightwell Technologies, an Ottawa, Ontari0-based maker of protein analysis tools. Essex Woodlands Health Ventures led the second tranche, which was joined by existing investors Novo A/S, Domain Associates, Latterell Venture Partners, Royal Bank of Canada, The Vertical Group, and Lansing Brown Investments.

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One of the ambitious new players in the field of superfast/supercheap gene sequencing graduated from R&D mode into a commercial enterprise this week. The plot thickens in this competitive world…

—The sequencing company in Menlo Park, CA, Pacific Biosciences (NASDAQ: PACB), had a coming out party this week when it said it has converted its original 11 beta customers into full-fledged buyers of its new commercial machine. It took PacBio seven years of work, and it raised $580 million of investment capital to get to this point. Wall Street liked what it heard, sending the stock up 5 percent. But it will be fascinating to see how quickly scientists snap up the PacBio machine to see what it can really add compared to the workhorse offerings from Illumina (NASDAQ: ILMN) and Life Technologies (NASDAQ: LIFE).

—One of Kleiner Perkins Caufield & Byers‘ favored cleantech companies here on the West Coast is Harvest Power, and I’m happy to say co-founder Jan Allen will be making an appearance at an alternative fuels conference I’m organizing for Xconomy in Seattle on May 19. Harvest is seeking to steer organic waste like lawn clippings away from the landfill and into its anaerobic digesters, so it can be turned into more useful stuff, like garden soil and natural gas fuel for electricity generation. A couple more Bay Area cleantech leaders—Kristina Burow of Arch Venture Partners and Ned David of Kilimanjaro Energy—will be featured speakers at this event on May 19.

—FivePrime Therapeutics, the South San Francisco-based developer of protein drugs, said this week it has obtained a license to technology from Cambridge, MA-based Dyax (NASDAQ: DYAX) to help develop antibody drugs. Terms weren’t disclosed.

—This week’s edition of the BioBeat column talked about how quite a few VCs from around the country are putting pressure on the FDA to get faster and more predictable, especially in the review of new medical devices. This is almost certainly a story to be continued, as there is a lot of anti-FDA sentiment building out there in biopharma land, too, and the FDA is showing signs of being sensitive to the criticism.

—Last week I was in town for the BayBio annual conference, where I listened, learned, networked, and oh yeah, tweeted a whole lot. Biotechies are certainly not early adopters of the whole social media phenomenon, but I’m starting to hear more and more curiosity about it, so I tried to offer a little bit of a guide for beginners on how it can be useful.

—Ryan McBride, our departing correspondent in New England, made a note this week about how GlaxoSmithKline’s venture investment arm, SR One, has opened up a new Bay Area office. Frankly, I was surprised that SR One didn’t already have a place to hang its hat in the world’s leading hub of venture capital.

—Lastly, my new colleague in New York, Arlene Weintraub, chipped in with a cool feature which talked about why Bay City Capital‘s Doug Given felt it was important to keep one of the firm’s portfolio companies, Vivaldi Biosciences, in the Big Apple, and not the City by the Bay.

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GE Healthcare, a unit of industrial giant General Electric (NYSE: GE), said today it has agreed to acquire Issaquah, WA-based Applied Precision for an undisclosed amount. Applied Precision makes super high resolution microscopes with software and data visualization tools for biomedical researchers. Applied Precision had $37 million in revenue in 2010, has been growing 20 percent a year, and has 130 employees, according to a statement from GE Healthcare. “The worldwide resources of GE Healthcare will allow us to significantly widen our reach into new markets and provide a stronger support network for our existing customers,” Applied Precision CEO Joe Victor said in a statement.

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Pacific Biosciences has spent seven long years in R&D, and raised $580 million, to arrive at a milestone that all businesses must reach sooner or later.

Today, it has officially started selling its much-anticipated commercial product.

Menlo Park, CA-based PacBio (NASDAQ: PACB) is announcing today that it has begun commercial shipments of its PacBio RS machine for DNA sequencing. This means that 11 customers who have been testing out beta versions of the product since last summer have agreed to pay the full list price of $695,000 to keep the new instrument in their labs. Anticipation of PacBio’s commercial push has been building for a couple years now, and PacBio has most recently been promising customers and investors that it would begin shipments during the second quarter, which it did.

PacBio is seeking to carve out a niche in what it calls “third-generation” sequencing that attempts to push the envelope even further on high-speed, low-cost gene sequencing. PacBio is seeking to carve out its place in a sequencing industry currently led by San Diego-based Illumina (NASDAQ: ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE). All of the companies are moving at breakneck pace to bring down the cost of sequencing whole genomes to below $10,000, and possibly to as little as $1,000 for a complete human genome in the next few years. As the price comes down, and more scientists gain access to sequencing technology, the market for sequencing is thought to be getting much bigger. The DNA sequencing market is expected to grow from $1.2 billion in 2009 to more than $3.6 billion by 2014, according to Scientia Advisors.

Hugh Martin

So far, PacBio’s beta test machines have been put through their paces at elite scientific centers like the Broad Institute of MIT and Harvard, Washington University in St. Louis, Cold Spring Harbor Laboratory on Long Island, The Sanger Institute in the U.K., and at agricultural biotech giant Monsanto (NYSE: MON). As the market expands, more scientists will be able to ask questions about subtle gene mutations involved in cancer, changes in viral pathogens like the one that caused the cholera outbreak in Haiti, or ideas on how to genetically modify optimal traits into a new form of corn or soybeans.

All of that is the blue-sky stuff of dreams for PacBio, which has been riding a wave of enthusiasm—witness its $200 million IPO from last October. But now the pressure is on for the company to deliver on its promise. When I met with PacBio CEO Hugh Martin a few weeks ago at his office, he was in a reflective mood, celebrating his seventh anniversary at the company, but also sounding a bit antsy about how the company needed to get its product on the market—and pronto.

“My first reaction, looking back, is that it took a lot longer than I thought it would take when I started,” Martin says. “It was a lot harder problem than I thought it was, and it took a lot more money than I thought it was going to take.” While that certainly added to the risk, there’s a big potential for reward. He adds: “It’s not very often that really big ideas come around that are big enough to sustain a 7-year effort, $580 million, and then result in a successful product or family of products. When it happens, really big long-lasting companies get built. That’s what we want to do.”

The PacBio instrument is clearly different from the market leaders. Illumina and Life Technologies use common polymerase chain reaction (PCR) techniques to … Next Page »

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NanoString Technologies, the Seattle-based maker of a genetic analysis instrument, said today it has hired two new vice presidents to fill out its commercial management team. Chris Grimley, the new vice president of marketing, previously worked at Agilent Technologies and Applied BioSystems. Katherine Webster, NanoString’s new vice president of worldwide sales, comes from Qiagen, and before that, 454 Life Sciences. NanoString has seen demand for its instrument increase in the past year, and it has staked out a new strategy to diversify beyond its base of academic research customers, and into a new market of cancer diagnostics.

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