An economic report shows federal funding for medical research has become a substantial factor in fueling the innovation economy in San Diego. And as if on cue, the National Cancer Institute issued a couple of grants here. We have the rest of your life sciences news in queue here:

—The board at San Diego’s Cypress Bioscience (NASDAQ: CYPB) unanimously rejected a slightly higher buyout offer from Ramius Value and Opportunity Advisors, a private equity firm in New York. In a nod to unhappy shareholders, though, Cypress said its board would conduct a broad evaluation of the biotech’s strategic alternatives to maximize shareholder value. The San Diego Union-Tribune’s Keith Darcé provided an in-depth look at the situation.

—Federal health sciences funding for research in San Diego increased by 38 percent over the first quarter of 2010, to $341 million during the quarter that ended June 30, according to the Connect Innovation Report. That was the highest level in more than two years. But the almost-40-page report shows that venture capital investing in San Diego continues to be anemic.

—Ophthonix, a vision correction technology company based in Vista, CA, raised $5.4 million toward a $12.1 million round of equity, rights and securities.

—The National Cancer Institute has renewed a grant for the Sanford-Burnham Medical Research Institute that will provide a total of $21 million through 2015. That’s a 21 percent increase over the cancer institute’s previous grant, according to the Sanford-Burnham.

—The National Cancer Institute also awarded $3 million to Advanced Targeting Systems, a privately held San Diego company that specializes in reagents for neuroscience researchers. ATS has developed a reagent called SP-PAP that targets chronic pain transmission, and the company plans to use the funding to initiate clinical trials for treating cancer pain.

—San Diego’s Amira Pharmaceuticals has filed an FDA application to begin clinical trials of a new drug for fibrotic disorders in the lungs. The company is seeking to run tests in healthy volunteers on AM152, an experimental blocker of a target called LPA1.

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Ikaria has some disappointing news out today on its lead drug development candidate. The Clinton, NJ-based biotech company, which has research and development operations in Seattle, said over the weekend that its inhaled form of nitric oxide didn’t work for premature infants with bronchopulmonary disease.

Results from a Phase III study of 800 premature infants found that Ikaria’s drug, INOT27, didn’t perform any better than standard treatments in a control group, researchers said at the European Academy of Pediatrics meeting in Nice, France.

“These results were quite unexpected based on prior evidence indicating the efficacy of inhaled nitric oxide in the prevention of bronchopulmonary disease in pre-term infants,” said Jean-Christophe Mercier, a professor of pediatrics at the University of Paris, and the study’s lead researcher, in an Ikaria statement. Mercier noted that the study called for using a low dose of nitric oxide for infants born at a higher weight, which may have contributed to the failure of the study.

Ikaria currently markets inhalable nitric oxide as INOmax, for newborns with “Blue Baby” syndrome, known medically as persistent pulmonary hypertension in newborns, a disease in which blood flow is restricted to the lungs, harming a baby’s ability to breathe. The company has attracted even greater attention for a program in earlier stages of development, a liquid sodium sulfide for injection, that is designed to induce “hibernation-on-demand.” This sort of drug is thought to hold huge promise, with one idea being that inducing a metabolic slowdown could buy time for a surgeon trying to save someone before he or she bleeds to death.

Ikaria’s Csaba Szabo told me last month that the company is planning to move forward with a Phase II clinical trial program of the sodium sulfide candidate, IK-1001, by the end of this year. Ikaria is a private company, so it doesn’t report its finances publicly, but we’ll find out if it’s still planning to go full-steam ahead with the IK-1001 program, or if it needs to conserve cash in the wake of the Phase III failure with its lead drug candidate.

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