The news has been breaking fast and furious here at Xconomy, just as we are putting the finishing touches on a terrific event on Monday that will explore the 20-year outlook for the Seattle region as a life sciences hub.

—Xconomy dug up an exclusive late Friday afternoon from a couple SEC filings that showed Seattle-based Dendreon has added two heavy hitters to its board of directors. They are Ian Clark, the incoming CEO of the Genentech unit within Roche, and Pedro Granadillo, the former senior vice president of manufacturing at Eli Lilly. Dendreon (NASDAQ: DNDN) announced the move officially, and the wire services picked up the report, on Monday.

—Amgen generates $15 billion a year in revenue, and plows back 20 cents on the dollar, or about $3 billion, back into research and development. But what does it really do with that money, and what ideas does it have to improve on the industry’s abysmal 1-in-10 average success rate for new drugs entering clinical trials? Senior vice president Joe Miletich offered up some fascinating insights on what Amgen is trying to do, and how Seattle and Boston teams contribute, in an exclusive interview.

—Leroy Hood, the biotech pioneer who has started more than a dozen companies, announced this week that he has raised another $30 million to launch a startup that embodies his latest vision—Integrated Diagnostics. This company will seek to develop instruments that can detect cancer and Alzheimer’s disease by looking at concentrations of proteins from a tiny droplet of blood.

—Seattle-based Omeros (NASDAQ: OMER) pulled off the first IPO of a true biotech company anywhere in the U.S. since February 2008. The company netted about $62 million, part of which will go to support pivotal trials of its treatment to help improve recovery from knee surgery. But other biotechs watching this as a bellwether have to be a little concerned after seeing Omeros price its offering at $10 a share, the low end of its forecasted range. The stock has been heading downhill ever since it started trading, to $7.44 at yesterday’s close.

—Chris Henney, the co-founder of Immunex, Icos, and Dendreon, offered up a very entertaining list of six tips for investors on how to spot a winning biotech company. He made these remarks at a luncheon event organized by the CFA Society in Seattle, in front of about 100 investing professionals.

—Medical device startups are feeling a lot of pain this year, for a lot of reasons, and it was all laid bare this week in a sobering report by Ernst & Young.

—One of the more fortunate medical device companies in Seattle, Uptake Medical, secured an additional $1.2 million in equity financing, meaning it has now raised $4.6 million out of a venture round that could be worth as much as $13.3 million. The company is developing a minimally invasive technique for treating chronic lung diseases by using hot vapor to seal off damaged parts of the lung so air doesn’t get trapped there.

—Lots of people are wondering whether Roche will retain most of the talent at Genentech in the wake of its acquisition this spring. Bothell, WA-based Seattle Genetics (NASDAQ: SGEN) pried loose at least one important player from the industry’s pioneering company, naming Bruce Seeley to the newly created position of executive vice president, commercial, with responsibility for future sales and marketing. Seattle Genetics will lean on him to spearhead what it hopes will be a successful commercial rollout of its “empowered antibody” for Hodgkin’s disease.

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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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Venture financing perked up last month, at least for a handful of Seattle-area startups and young companies. VCs and corporate investors poured $76.9 million into five Washington-based companies in September, according to data provided to Xconomy by ChubbyBrain, a New York-based information services company that develops tools for investors, startups, and entrepreneurs. There were also two debt financings worth a total of $8 million.

The total funding of Washington companies, $84.9 million, is up from $51.4 million in the previous month (and that figure included a couple of companies whose headquarters are out of state). But the September increase is largely due to one especially big transaction.

The largest deal by far was Seattle-based Calypso Medical’s $50 million Series E financing, led by Skyline Ventures and Frazier Healthcare Ventures. It’s the biggest venture deal in the Northwest so far this year, and you can read about the story behind the financing here—Calypso has overcome some challenges in the past year. The company makes a medical device that pinpoints radiation in ways that are supposed to help minimize the side effects of prostate cancer treatment.

The September deals were concentrated in medical devices and healthcare, with a few smaller deals in software and tech. The biggest financing in software was Bellevue-based VoiceBox Technologies, which raised about $13 million from corporate investors in Asia, including AutoNavi, Inventec, MiTAC, and the Morningside investment fund. But that money was raised over the course of the past year, with the company officially announcing it in September after a regulatory filing let the cat out of the bag. VoiceBox makes speech recognition systems for cars and mobile applications.

The venture deals (see Table below) were spread evenly among early, mid, and late-stage financings. The only Series A deal was Seattle-based Integrative Diagnostics, which raised $7.5 million for early cancer detection. The company was founded by biotech pioneer Leroy Hood.

In addition to the venture deals, Redmond-based Spiration (which makes a medical device for treating lung diseases) raised $7 million, and Kirkland-based SchemaLogic (which makes software to manage metadata) raised $1 million in a pair of debt financings.

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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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This week featured the best run of positive news for Seattle biotech I’ve seen this year.

—Seattle-based Calypso Medical Technologies raised the biggest venture capital round of the year in the Northwest, pulling in $50 million. Calypso, which sells a device that pinpoints radiation therapy for prostate cancer so it doesn’t go off track and cause impotence, is gearing up for an international commercial push and expanded uses against other tumor types. Xconomy got the scoop from CEO Eric Meier on what the company did to convince the VCs to open up their checkbooks.

—Biotech legend Leroy Hood has secured $7.5 million in venture capital out of a $30 million offering, to launch a new company that aims to fulfill his vision for P4 medicine—predictive, preventive, personalized, and participatory. This company, Integrative Diagnostics, isn’t saying yet who invested or exactly what it aims to accomplish, but Hood told me in an interview a year ago that it seeks to create machines that can spot signs of cancer in a pinprick of blood, at the earliest and most treatable stage of disease.

—Novo Nordisk is the world’s largest maker of insulin for diabetes, and it is now looking to Seattle in a big way to help it forge the new frontiers of autoimmune disease. Novo CEO Lars Rebien Sorensen told a fascinating little story about how Novo’s short-sightedness three decades ago led it to Seattle, and how the company hopes to get ahead of the curve now by setting up its own research center here, and forming partnerships with the world-class scientists who live here.

—Seattle’s biotech companies, as a group, are in much better financial shape than they were at the beginning of the year. Essentially, 10 of the 12 companies Xconomy follows in Seattle are in better shape now than they were on New Year’s Day, based on our analysis of quarterly financial reports and some more recent news. This is a much better performance than I see in San Diego, where 15 of the 27 public companies we follow there were in a stronger cash position on June 30, according to the latest batch of quarterly SEC filings.

—Gov. Chris Gregoire was rumored to skip out on her own Governor’s Life Sciences Summit this year, apparently because she’s so busy working with power brokers in DC on healthcare reform. But she showed up in Seattle for the summit anyway, and insisted she remains “committed” to the state’s Life Sciences Discovery Fund, mainly for its ability to produce promising new treatments for disease.

—I sat down for an extensive interview with Steve Gillis, one of the founders of the biotech industry both nationally and in Seattle. Gillis talked about how life is different for him as a venture capitalist at Arch Venture Partners, and how he hopes to make a broad impact on a new generation of entrepreneurs, and help them avoid some of the mistakes he made in his past life as a co-founder of Immunex and Corixa.

—Dendreon (NASDAQ: DNDN) has been pretty quiet for the past couple months, but it is showing off its game plan for the commercial rollout of sipuleucel-T (Provenge) today on Wall Street. I previewed this event with five key questions the Seattle-based company will have to answer.

—One prominent veteran of Dendreon, former chief medical officer Rob Hershberg, provided an in-depth update on his latest venture, VentiRx. Hershberg has become an evangelist for the lean-and-mean virtual company model that’s in vogue, and talked about how much progress his little band of 12 has made with two drugs in early-stage clinical trials.

—Of course, no week can go by with all the news being good. One disturbing trend we spotted was that some of the Seattle companies that have been fortunate to raise the most venture capital this year have still been cutting jobs or putting a lid on hiring. That’s something to consider when you hear the economists talk about the “jobless recovery.”

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The last official week of summer brought a slew of Northwest deals, to go along with today’s heat wave. Two of the year’s biggest financings happened in tech and life sciences, along with a big acquisition in healthcare, while a host of smaller deals went down in software, digital media, and advertising—and one company inched closer to an IPO.

—Seattle-based Integrative Diagnostics, Leroy Hood’s early cancer detection company, has raised $7.5 million out of a $30 million equity round, as Luke reported. The investors were not disclosed, but we’ll have more on this story soon.

—Seattle-based Free & Clear, which offers phone-based coaching for company employees battling tobacco addiction, obesity, and stress, was acquired by Inverness Medical Innovations (NYSE: IMA) of Waltham, MA, for $100 million in cash plus up to $30 million in follow-on payments, as Wade reported. Free & Clear was backed by Polaris Venture Partners, Three Arch Partners, and Kaiser Permanente Ventures. Inverness offers medical diagnostic tests and other disease management services for consumers.

—Portland, OR-based Ensequence raised $20 million, led by Clay Mathile, the CEO of CYMI Technologies (and former owner of Iams, the pet food company sold to Proctor & Gamble for $2.3 billion in 1999). It’s one of the Northwest’s largest tech financings of the year. Ensequence was founded in 2000 and is a leader in the interactive TV business, which lets viewers do things like call up additional information on the screen. There is some question as to whether the firm is moving its headquarters to New York, where its new CEO, Peter Low, is based.

—In the biggest life sciences venture financing of the year, Seattle-based Calypso Medical raised $50 million led by Skyline Ventures and Frazier Healthcare Ventures, with Bay City Capital and InterWest Partners also participating, as Luke reported. The funds will be used to expand Calypso’s worldwide rollout of its radiation pinpointing product, which helps radiation oncologists and technicians better treat prostate cancer. Luke also reported on the story behind the deal here.

—Seattle-based Getty Images, the creator and distributor of photos and other digital media, has made a $4 million strategic investment in Daylife, a New York media and content services company, according to the Wall Street Journal’s All Things Digital blog. The two companies have also formed …Next Page »

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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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[Updated, 3:15 pm Sept. 11 with added "burst" from Immune Design.]

Seattle biotech has taken its share of lumps lately, but beyond the next quarter or next year, what kind of life sciences potential really exists here in the Northwest? Over the next 20 years, will this area have grown as a world leader in university and corporate research, venture financing, and entrepreneurial activity in the life sciences—and, if so, in what fields? Those are the questions Xconomy is seeking to answer at our next event here in Seattle on Oct. 19.

I’m excited to announce today that we have assembled a panel of some of the most accomplished life sciences entrepreneurs and visionaries in the world, all of whom happen to live here in Seattle. They are: Leroy Hood, president of the Institute for Systems Biology; 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 both Merck and Rosetta Inpharmatics.

It’s hard to imagine a group more qualified to speak on the region’s future. Hood is a legendary entrepreneur who has co-founded 13 companies, including Amgen, and is best known for inventing high-speed gene sequencing machines that made the Human Genome Project possible. Gillis co-founded Seattle-based Immunex, where he led the team that created a breakthrough for autoimmune disease that now generates more than $7 billion a year in worldwide sales. Shapiro, a former chairman of the University of Washington’s biochemistry department, was executive vice president of basic research at Merck during its 1990s heyday when it did the early development of Gardasil, the vaccine to prevent cervical cancer. And Friend was co-founder and CEO of Rosetta Inpharmatics before that company was sold to Merck for $620 million, and he stayed with Merck for eight years to integrate its personalized medicine approach through the company’s global operations.

Chris Rivera, the president of the Washington Biotechnology & Biomedical Association, will lead off with introductory remarks about the WBBA’s effort to secure more support for the local biotech cluster. The star-studded panel will be moderated by Carl Weissman, CEO of Accelerator and a managing director of OVP Venture Partners.

After that discussion, Bob Nelsen, co-founder of Arch Venture Partners, will introduce startups from the Seattle area with the potential to transform their respective fields of biotech—Calistoga Pharmaceuticals, VLST, and Immune Design. Executives from those companies will deliver “bursts,” or brief introductions of their work, before the networking portion of the evening.

The event will be held from 5:30 pm to 8 pm on Oct. 19 at the Seattle Biomedical Research Institute in the heart of Seattle’s South Lake Union neighborhood. You can get more information on how to register here. We expect this to be a highly interactive conversation with the audience, with yours truly running around with a microphone—so be ready with your questions. We look forward to seeing you there on Oct. 19.

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Omeros, the Seattle biotech company developing a treatment to help people recover faster from knee surgery, is preparing a renewed push for an initial public offering this fall, possibly as soon as next month, Xconomy has learned from people familiar with the matter.

The company first showed an interest in going public back in January 2008, and if it can pull this off now, it could be the first IPO from a Washington company in more than two years, since Kirkland, WA-based Clearwire went public in March 2007. A spokeswoman for Omeros declined to confirm the company’s plans, citing an ongoing regulatory quiet period.

Lots of ink has been spilled about how the IPO market has been shut down by the recession, but there have been small signs of life recently that have to encourage many companies chomping at the bit to go public. Nashville, TN-based Cumberland Pharmaceuticals (NASDAQ: CPIX), the first pharmaceutical company to go public in almost two years, raised $85 million earlier this month by selling 5 million shares at $17 apiece. Investors haven’t lost their shirts yet, since Cumberland stock closed today at $16.87. Also, while few people seem to have noticed, biotech firms have actually seen improving demand from investors this year in general. Biotech companies raised $8.3 billion in the first six months of this year, about 41 percent more than they did a year earlier, according to Signals magazine, an influential online trade publication.

“The window is opening again for IPOs,” says Michael Butler, chairman and CEO of Seattle-based Cascadia Capital, who’s not underwriting the Omeros deal. “In this environment, the quality of the companies going out is high, and the pricing is reasonable. The institutions want to see IPOs happen, and companies want to get out.”

At least one other Washington company, Seattle-based InfrastruX Group, has recently filed paperwork to go public. It’s a spinoff from Puget Sound Energy that provides construction services to gas and electricity companies.

So what would investors be getting if they buy up shares in Omeros? The company has been around the Seattle biotech scene since 1994, had 67 employees at the end of May, and has no marketed products. It has spent more than $102 million of investors’ money since inception, according to its most recent regulatory filing in June with the Securities and Exchange Commission. The company was co-founded by CEO Greg Demopulos, an orthopedic surgeon who received training at Stanford University and Duke University.

The company’s goal is to develop proprietary low-dose combinations of existing drugs, and deliver them directly into a point on the body that’s undergoing surgery, to reduce inflammation, pain, and other complications that prolong recovery time. Omeros’s lead drug candidate is in the final stage of clinical trials for patients undergoing arthroscopic knee surgery—a procedure that 2.6 million people undergo each year in the U.S., according to market research cited by Omeros.

The drug combination, dubbed OMS103HP, is currently being tested in a final-stage …Next Page »

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

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

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

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

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

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

Chad Waite

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

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

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

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

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

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Covance, the giant drug development services company based in Princeton, NJ, said today it has agreed to acquire a Seattle laboratory run by Merck’s Rosetta operation that performs genomic analysis tests for biologists around the world.

Merck has been gradually winding down its Rosetta operations in Seattle since last October, when it said it would close the division, which had 300 local employees, as part of a global cost-cutting move. But it looks like Merck still wants access to some of the work being done by Rosetta. As part of the agreement announced today, it has committed to pay Covance $145 million over the next five years for genomic analysis services—presumably that includes services from the Seattle Gene Expression Laboratory, which looks at DNA sequences, slight individual variations in genetic code, and which genes are dialed up or down in a given biological sample.

Covance (NYSE: CVD) expects to offer jobs to the majority of the current employees in the Rosetta Gene Expression Laboratory, and expects to move into the company’s South Lake Union operation on Aug. 17. The work of the lab is considered valuable to drug developers as they continue to seek ways to find out a genetic basis for why certain patients respond to drugs, and some don’t. As this field of science progresses, researchers hope to better predict which drugs will succeed in clinical trials, saving time and money on the majority of drug candidates that fail.

“The acquisition of this laboratory brings world-class talent and technologies to Covance and further expands our capabilities in genomics testing and personalized medicine,” said Joe Herring, chairman and CEO of Covance, in a statement.

Rosetta, which was founded in 1996 by Stephen Friend, Leroy Hood, and Lee Hartwell, was one of the bigger success stories in Seattle biotech over the years, when it was acquired by Merck in 2001 for more than $600 million. Since Merck announced it was closing the Seattle operation last fall, it has moved some of its researchers to a consolidated research facility in Boston, while others have split off with Friend in a new nonprofit effort to create an open-source genetic database for researchers, called Sage Bionetworks. Another piece of Rosetta that marketed life sciences software was acquired last month by Microsoft.

I have an interview scheduled with Herring this afternoon, and will provide updates when I have more information.

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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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Microsoft could be safely ignored on the biotech beat for years, but not anymore. The Redmond, WA-based software powerhouse, in another move to beef up its stake in the life sciences software business, said today it is acquiring the Seattle-based assets of Rosetta Biosoftware from Merck.

Financial terms of the deal were not disclosed, but Merck has agreed to become a customer of Microsoft’s new Amalga Life Sciences platform, which is supposed to help researchers better analyze the vast pools of genomic data now piling up in their hard drives. Merck, the drug giant based in Whitehouse Station, NJ, will also help Microsoft better understand the life sciences market so the software maker can develop new products to analyze all this emerging digital data on how genes and proteins interact with drugs in the body. The deal is expected to close by the end of this month, and Rosetta should be integrated into Amalga Life Sciences by early 2010, Microsoft said in a statement.

This is important news for Seattle biotechnology, because Merck announced last October that it is closing down its Rosetta Inpharmatics subsidiary in Seattle, with more than 300 employees. Some of the researchers have been offered transfers to a consolidated Merck cancer research facility in Boston. But that left an uncertain future for about 200 other people, including those at the biosoftware division that sells products to other drug companies, and a Rosetta group that does sophisticated work analyzing how genes are turned on or off in tissue samples. Rosetta was one of Seattle biotech’s big success stories, having been founded by Stephen Friend, Leroy Hood, and Lee Hartwell in 1996, before it was acquired by Merck for $630 million five years later.

Microsoft has made little headway in the life sciences market after years of strategizing about how to tap into this major segment of the national economy. Yet Microsoft co-founder Bill Gates has long personally had an intense interest in trying to come up with better software for drug development, and it’s a subject he’s long discussed with Leroy Hood, the high-speed gene sequencing pioneer. Last month, Microsoft introduced Amalga Life Sciences, which as far as I can tell from interviewing experts, is the first serious product Microsoft has introduced to help bring biologists out of the computing stone age of simply using old Excel spreadsheets and Access databases, which were never designed to corral all the complex data points from modern clinical trials.

“We’re excited to collaborate with Merck and augment the capabilities of Amalga Life Sciences with the complementary assets of Rosetta Biosoftware,” said Peter Neupert, corporate vice president of Microsoft’s Health Solutions Group, in a statement. “The newly combined offering will enable customers to improve the management and analysis of genomic, biological and research data, helping to bring lifesaving drugs and therapies to market faster and accelerate the realization of personalized medicine.”

I expect to gather more information from Microsoft and Merck later today, so stay tuned to this space for updates.

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The usual suspects in Seattle biotech were quiet this week, but we reported on an intriguing cancer drug developer with Paul Allen’s fingerprints all over it, as well as some compelling life sciences companies from British Columbia.

—Vulcan Capital, the investment vehicle that controls billionaire Paul Allen’s fortune, quietly dialed back its biotech investing a couple years ago. But it planted one very promising seed back in 2005, BiPar Sciences, which has produced a windfall $100 million return on a $13 million venture investment. We’ll see exactly why researchers are so excited about this company’s cancer drug at the American Society of Clinical Oncology meeting this weekend.

—Most of the glory for developing RNA interference drugs goes to Cambridge, MA-based Alnylam Pharmaceuticals, but the company relies on an important partner in Vancouver, BC, Tekmira, to help deliver these drugs through the body. I got some insight into Tekmira from CEO Mark Murray.

—I profiled another Canadian biotech that tends to fly below the local radar, Victoria, BC-based GenoLogics. This company received $5 million from venture backers in February, including OVP Venture Partners. It aspires to stitch together a dizzying mosaic of data from lab samples, patient medical records, and genomic analyses into something useful for biologists.

—Individual genomes will soon be as done for as little as $1,000, so what will this fast-moving technology mean for how medicine is practiced, and for society? Here’s the recap from a fascinating conversation between Leroy Hood of the Institute for Systems Biology, and Irving Weissman of Stanford University, who held court during the OVP Tech Summit in Seattle.

—We captured some of the entrepreneurial spirit of the University of Washington’s Business Plan Competition in our pages last week, including this post for the Xconomist Forum from Anthony Rodriguez. He’s a Ph.D. candidate in bioengineering, fired up about a new company called Shockmetrics that aims to detect medical shock at an earlier, and more treatable, stage.

—Fate Therapeutics, the high-profile company that aims to use stem cell biology to create new treatments, started its first clinical trial this week. Fate is based in La Jolla, CA—right next door to the Xconomy San Diego bureau—but we like to keep tabs on this company in Seattle as well because it has ties to the University of Washington and Arch Venture Partners.

—We had one significant biotech financing for the week, as Seattle-based Uptake Medical raised $3 million. Uptake is developing a minimally-invasive method for sealing off diseased portions of lungs, for people with emphysema and chronic bronchitis, otherwise known by the umbrella term chronic obstructive pulmonary disease.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drugs, said it is shrinking its board from eight to five members as part of its effort to save money. Former CEO Steven Quay, Alex Cross, and Jack Pollack are out.

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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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