This was a great year for Seattle biotech if you measure success through sheer number of acquisitions. But if you prefer to measure the health of an innovation community by the number of exciting new startups it hatches, then this was most certainly a down year.

That’s the mixed bag of returns that I saw when looking back at the news of 2011 from the Seattle life sciences scene. This was the year of the acquisition for Calistoga Pharmaceuticals, Pathway Medical Technologies, Calypso Medical Technologies, SonoSite (NASDAQ: SONO), Amnis, Geospiza, and Pacific Biosciences Labs (the maker of the Clarisonic skin brush.)

While those companies got harvested, not a whole lot of new seeds got planted. The list of notable Seattle biotech startups this year includes Cardeas Pharma, Oncofactor, Blaze Bioscience, Aquedect Neuroscience and Cardiac Insight.

Who else made headlines in Seattle biotech in 2011? Seattle Genetics emerged. Dendreon crashed. Marina Biotech, Omeros, and AVI Biopharma all had years they’d like to forget. Cell Therapeutics somehow managed to stay in business. New leaders emerged at the global health nonprofits, as Alan Aderem moved in to run the Seattle Biomedical Research Institute, Stewart Parker took over at the Infectious Disease Research Institute, and Chris Elias created a vacancy at the top of PATH by leaving for a new gig at the Bill & Melinda Gates Foundation. The foundation’s head of global health, Tachi Yamada, left for a new venture capital gig, and was replaced by a former Novartis executive, Trevor Mundel.

Here’s a company-by-company rundown of the major events at Seattle biopharmaceutical and global health organizations we keep tabs on here at Xconomy. Tomorrow, I’ll follow up with the rundown of rundown of medical device, diagnostic, and others in fields like Bio-IT or Health IT.

Seattle Genetics (NASDAQ: SGEN). This was a transformative year for Seattle Genetics. The company broke through in August by winning FDA approval of its first product, a souped-up antibody for rare lymphomas. The drug validated a new target on the surface of cancer cells, CD30, and provided hard proof that Seattle Genetics’ proprietary chemistry can successfully link toxins to antibodies—a feat that has eluded scientists for 30 years. Big Pharma companies have beaten a path to Bothell to get licenses to the antibody-drug linking technology, and Seattle Genetics has exceeded Wall Street expectations in the early days of its drug rollout.

Dendreon (NASDAQ: DNDN). Dendreon was the star of local biotech in 2010, and this year it fell flat on its face. The company failed to live up to its first full year sales forecast with its immune-boosting drug for prostate cancer, and burned its shareholder base in the process. The company lost more than $3.5 billion in market valuation, and had to cut 500 jobs, largely because it sparked controversy and confusion by pricing its cancer drug too high—at $93,000 per patient. It remains to be seen this year whether Dendreon can pick up the pieces, as the disastrous screw-up of 2011 has created a gaping opportunity for emerging competitors like Johnson & Johnson’s abiraterone (Zytiga) and Medivation’s MDV-3100.

Amgen (NASDAQ: AMGN). The Thousand Oaks, CA-based biotech company, which has significant R&D in Seattle, said at the end of the year that longtime CEO Kevin Sharer … Next Page »

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Companies like Pfizer that constantly need to develop new drugs never got much return on the investment in genomics a decade ago. But Pfizer is showing some renewed interest in genomics through a partnership being announced today with deCODE Genetics, the Iceland-based genomics company.

deCODE, a 15-year-old operation which Arch Venture Partners and Polaris Venture Partners lifted out of bankruptcy in January 2010, has been making a comeback of late. Today deCODE is announcing it has struck its first partnership with New York-based Pfizer (NYSE: PFE), the world’s largest drugmaker.

Financial terms of the deal aren’t being disclosed, but deCODE founder and CEO Kari Stefansson says his company will work for two years to search for variations in the genome that increase the risk of getting lupus, an autoimmune disease. The work could lead to new biological targets for drug development and help researchers develop companion diagnostics to select patients most likely to benefit from certain therapies.

“We are being well compensated for doing the work,” Stefansson says.

Stefansson adds that Pfizer had an internal champion of sorts for this project in David Cox, a geneticist formerly at Stanford University and with Perlegen, who Stefansson said is “a man who has a substantial competence in genetics.” But Pfizer isn’t the only major pharma company with renewed interest in genomic research, now that costs of sequencing entire human genomes has plummeted in recent years. “We are at the point where you can relatively easily collect a very large percentage of variants in genomes from large numbers of people to make discovery very reliable. The pharma industry has become very interested in the use of human genetics again.”

Kari Stefansson

Lupus, known formally as systemic lupus erythematosus, is an area of emerging interest in both the pharmaceutical industry and basic science. Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI) and its partner GlaxoSmithKline won FDA approval earlier this year for an antibody drug that was the first new treatment for lupus in 56 years. Analysts predict this drug, belimumab (Benlysta), will become a $1 billion annual seller over time.

No one knows what causes the disease, but it disproportionately affects women. It occurs when the immune system attacks healthy tissues as if they are foreign invaders, like a virus, causing pain, swelling, and fatigue.

Researchers know that lupus tends to run in families, but aren’t sure which biochemical pathways get perturbed, and how that varies among individuals, Stefansson says. Now that sequencing has gotten so cheap, and a company like deCODE can combine that capability with extensive medical records and genealogy records in Iceland, the time is right to pursue questions like this, Stefansson says. “For us as geneticists, it’s an exciting one to work on,” he says.

deCODE, which has about 140 employees at its Iceland headquarters, announced last week that it has discovered a genetic variation that raises the risk of women getting ovarian cancer. That study looked at the whole genomes of 457 Icelanders, and found a rare variation in a gene called BLIP1 that was linked to an 8-fold higher risk of getting the cancer. The finding was published in Nature Genetics.

Discoveries like that one for a new ovarian cancer marker are part of what has persuaded Big Pharma companies to take a closer look at some of the work deCODE is doing, says Bob Nelsen, a managing director with Arch Venture Partners in Seattle.

“They clearly are becoming more interested, driven by some of deCODE’s rare variant discoveries like the ovarian cancer breakthrough last week,” Nelsen says.

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Most biotech entrepreneurs I’ve met have a dream that ends one of two ways. They will either take their company public, or sell their startup to a giant drugmaker. Those are the paths to making money, making venture investors happy, and getting the resources needed to take a new drug all the way to the market.

Jim Posada looked at those two roads and essentially said to himself: Find another way.

“A lot of people in venture capital think they’ll fund a company and it will get bought. It’s surprising. It’s becoming more and more obvious it’s an antiquated view,” Posada says. He added: “We don’t think there’s a large probability of going public or being acquired. Our exit will be a licensing transaction. The probability of that happening is quite high.”

Posada made those comments in a small news story I wrote this past week when his company, Seattle-based Resolve Therapeutics, raised its first $2 million in financing. The bigger story here is how Resolve is shrewdly challenging the conventional wisdom, and carving out what could be an intriguing new business model for biotech drug development. Posada, a former dealmaker at Indianapolis-based Eli Lilly and Lebanon, NH-based GlycoFi, has set up Resolve as a limited liability corporation (LLC) so that it can distribute returns to investors if it passes a couple of early-stage clinical trials, and strikes a licensing deal with a Big Pharma company.

Here’s how this is supposed to work: The plan is for investors to put up $10 million to $15 million over the next three years. The money will be used to take a new protein drug for lupus through animal testing and Phase 1 clinical trials. If the drug is safe and has an effect on a biomarker of inflammation, then Posada will be holding a good set of cards. Since lupus represents a potential multi-billion market, Resolve is betting it can entice a Big Pharma company to pay for a license, worth at least $30 million to $50 million in upfront cash, plus $400 million to $500 million in milestone payments based on future success in development.

Forget for a second whether those really big milestone payment dollars ever materialize, because they often don’t. But if Resolve can strike one of these straightforward licensing deals, investors who take the substantial risk of backing Resolve will only have to wait three years, and then be rewarded with a 3- to 5x return on their investment from the upfront cash payment alone. Beyond that, the investors still have room for greater upside returns if the drug continues to progress.

Jim Posada

From the Big Pharma side, this could be pretty attractive, too. Instead of writing a monster check to acquire a company with a risky new molecule, it will have to commit a relatively small sum of upfront money to obtain an asset that has already been at least partly “de-risked” by an experienced team of scientists and drug developers.

Biotech companies have long sought licensing deals with Big Pharma as a means to an end—the IPO or acquisition—not really as the end goal itself. But as readers of this column know, the traditional end goals are quite elusive in biotech these days. IPO investors have very little appetite for new biotechs, and Big Pharma companies (having been burned by overhyped biotech promises of the past) have become very stingy—some would say predatory—in the financial terms they are willing to offer for innovative new biotech drugs. The stingy terms may still be there, but if a biotech like Resolve can keep its capital investment down, it can still get a pretty good return.

You’d think those dynamics would encourage lots of biotech companies to find new exit strategies, but old habits apparently die hard. Resolve had to set itself up … Next Page »

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The structural changes roiling the pharmaceutical sector are driving innovation of biotech business models. With shrinking operating margins, patent expirations, a paucity of new product launches, significant reimbursement pressure, and an unpredictable regulatory environment—Big Pharma’s high risk bets on early stage biotechs of the past decade look cavalier through the lens of the current market environment.

The days of multi hundred million dollar upfront payments to acquire early stage biotech companies are likely gone for good, creating an exit trap for early stage private company investors. This trend is proving challenging to the sustainability of the venture capital model of the past. Various prognostications are that one quarter to one half of venture capital firms will disappear in the coming few years. The old biotech model of building early stage companies with loads of venture capital in the hope of a rapid Big Pharma acquisition at a large multiple to the invested capital, now seem oddly prosaic. Risk-sharing, earnouts, and contingent value right (CVR) agreements are the order of the day. The strategy of going public looks even more remote in today’s market. So, with that gloomy backdrop what does the future hold for those of us not ready to hang it up and head to the golf course?

Amidst all this turmoil a couple of things remain constant. The pace of innovative research and discoveries by our talented scientists in the public sector has not slowed; and pharma’s need for promising compounds is more dire than ever. However, the way in which one reaches the other is in flux at the present time, presenting a challenge but also an opportunity. In its latest efforts, pharma seems to be trying to sidestep the richly priced acquisitions and licensing deals of previous years by cutting out the middle market and going directly to the source – with a recent trend for generously funded research collaborations being doled out to top tier universities. Whether pharma has the agility to stock its pipeline through this mechanism without relying on biotech companies seems unlikely.

In the meantime, one biotech model gaining traction is the single asset, infrastructure-lite, development model, which deploys modest amounts of capital to develop a single compound to an early clinical data package which can be partnered with pharma. The asset resides within an LLC, and following the license transaction, the LLC is wound down and distributes the upfront, milestone and royalty payments to the LLC members on a pro rata basis. The key to success in this model is choosing the appropriate asset/indication – one where it is possible to get to a clinical data package on limited capital. This approach excludes many molecules and indications often favored by biotech, and tends to drive towards clinical studies using biomarkers – directly in line with one of pharma’s favored strategies.

The model seems to be gaining popularity in large part due to the fact that the probability of an M&A exit for any given private early stage biotech company is approximately 2 percent, and the probability of a licensing transaction on an attractive asset with early clinical data may be 30 to 50 percent. So on a risk-adjusted basis, the return profile of the single asset LLC model makes good sense for a growing number of investors with the flexibility to invest in these structures. The structure is also very motivating to founders and development teams since there is a real possibility of retaining undiluted equity ownership and reaching membership distributions of licensing revenue in the near term. That is something that has proven elusive for the scientific founders of more typically capitalized venture-backed companies.

With these principles in mind, we have recently founded Resolve Therapeutics, LLC and have begun work on a compound sourced from the University of Washington, discovered by researchers and scientific co-founders Keith Elkon and Jeff Ledbetter. In addition to the scientific founders, Resolve has built a highly experienced development team to advance the asset from preclinical research to an early biomarker phase IIa study in lupus patients, with the goal of partnering upon the successful completion of the study. As the team hones the model and strategic relationships are formed with key vendors, the next assets are coming into focus.

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Adimab has made its name for assembling a high-profile roster of Big Pharma partners that use its technology to discover new antibody drugs. Today, the Lebanon, NH-based company is announcing a new batch of partners—Genentech, Eli Lilly (NYSE:LLY), and Human Genome Sciences (NASDAQ:HGSI)—which add greater heft to co-founder and CEO Tillman Gerngross’s argument that his firm has vastly improved the way antibody drugs are discovered.

Adimab, which co-founded by Gerngross and Dane Wittrup of MIT in 2007, says it has now struck 15 antibody discovery agreements, up from five at the end of last year. Not all of its partners have agreed to be named, but the firm’s yeast-based system for discovering fully human antibodies has now attracted collaborations with the U.S. drug giant Merck (NYSE:MRK), Novartis, Pfizer (NYSE:PFE), and Roche, in addition to the latest trio of partnerships being disclosed today.

Adimab’s collaborators are seeking an edge in the competitive field of antibody drug discovery, and the startup’s system has shown it can produce quality antibody candidates against specific disease targets in shorter timeframes than traditional methods. “They are all looking for something better and more competitive, and right now we are the ones that are offering that,” Gerngross says. Antibody therapies already generate about $25 billion in annual sales and the rate of growth in that market has outpaced that of traditional small molecule drugs.

With Genentech, Adimab now has a collaboration with the most successful developer of antibody drugs in the world, Gerngross says. The South San Francisco company, the U.S. unit of Switzerland-based Roche, markets some of the best-selling antibody drugs on the planet such as the blockbuster cancer treatments … Next Page »

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The economists all say that the recession is over, but you’d hardly know from the creative contortions entrepreneurs must perform to start a biotech company in 2010. The latest sign of the times comes from Resolve Therapeutics, an interesting new startup in Seattle.

Resolve is the latest spinoff from the University of Washington, where it was cooked up in the labs of rheumatologist Keith Elkon and immunologist Jeff Ledbetter. They co-founded this company with CEO Jim Posada, a former dealmaker with Eli Lilly and GlycoFi before that New Hampshire-based company was sold to Merck in 2006 for $400 million. The startup’s vision is to create an effective new drug for lupus, a chronic disease in which the immune system goes haywire and attacks healthy tissue like an invading virus.

The way this company is getting structured says a lot about the cautious, short-term thinking that prevails today in biotech. Ledbetter is a proven scientific entrepreneur, having co-founded Seattle-based Trubion Pharmaceuticals, and having a played vital early role in the development an FDA-approved drug—Bristol-Myers Squibb’s abatacept (Orencia). The opportunity in lupus is still huge, with no new drugs approved in at least four decades, and an estimated 1.5 million to 2 million people in the United States suffering from the illness. Many companies have tried and failed in their quest to tap this huge potential market. Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI), along with Roche’s Genentech unit and AstraZeneca’s MedImmune operation, have rekindled hopes of patients and physicians through a series of advances in recent years.

Instead of seeking to raise a mountain of venture capital to build a company to pursue the big idea, Resolve is following the lean and mean “virtual” company model that has become popular by necessity. That’s nothing novel, but what’s more interesting is that Resolve is being financially structured to produce a quick payday for its investors. Knowing that it would take too long and cost too much to follow a traditional path, Resolve’s game plan is to raise $12 million to push a single drug candidate through the first part of mid-stage clinical trials, and then generate liquid returns through a partnership with a Big Pharma company that seeks to finish the long, expensive, and risky slog of drug development. There’s no pretending here that Resolve will go public, and it doesn’t need to be acquired for a fortune someday by a big drugmaker.

Jim Posada

“There’s a well thought out plan here,” Posada says. “We’re going to operate with as little capital as possible and get ourselves to a partnership deal as quickly as possible. We can provide returns for our investors in a timely way, and we can provide Big Pharma what it needs in terms of new drug candidates.”

The company hasn’t raised its money yet, although it now has an exclusive license from the UW to develop protein therapeutics against autoimmune diseases, including the biggie—systemic lupus erythematosus. This is based on deep knowledge of the disease and its molecular pathways from Elkon, lots of expertise in protein drug engineering from Ledbetter, and business strategy and dealmaking experience from Posada.

Posada says he got excited about the new idea about six months ago. The UW scientists have already created a fusion protein molecule, made to … Next Page »

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Like a scene from a Monty Python skit, a San Diego biotech left for dead has announced plans for a new financing—and says it has revived interest in its experimental drug for treating Lupus of the kidneys. La Jolla Pharmaceutical halted work on the drug in early 2009.  In a statement yesterday, La Jolla Pharmaceutical disclosed plans to raise as much as $16.3 million to evaluate potential various opportunities, including Riquent, its drug for Lupus nephritis. The San Diego Union-Tribune reports today that La Jolla Pharmaceutical found institutional investors to commit up to $6 million toward efforts to restart its business. The biotech could not get enough shareholders to vote on a liquidation plan last year, and withdrew from a planned merger in March.

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Staying in business was a challenge for La Jolla Pharmaceutical. Going out of business may be harder still.

After its lead drug candidate bombed last year in a clinical trial, La Jolla Pharmaceutical had few options. It proposed liquidation, but too few of its investors voted, so the plan failed due to lack of a quorum.

Last December, the company’s board opted to merge with Adamis Pharmaceutical, a San Diego-based company working on drugs for viral diseases. But La Jolla hasn’t been able to muster enough shareholder votes to get that plan approved either.

Time is running out.

So far, just nine percent of La Jolla’s shares have been voted. Most of these shares favor the merger, but their support isn’t enough. A majority of La Jolla shares must vote for the results to be valid.

A special meeting is scheduled today at 3 p.m. If the merger is not approved, the company will be liquidated and shareholders will receive two to three cents a share, La Jolla said in a press release.

Last December, Bruce reported that La Jolla had cash of $2.5 million to $3 million. A company spokeswoman couldn’t be reached for comment.

As previously reported, the merger would give La Jolla shareholders anywhere from 5 percent to 30 percent of the combined company, to be called Adamis Pharmaceuticals. The deal was structured as a reverse merger.

The trouble started for La Jolla Pharmaceutical a year ago, when its lead drug candidate, abetimus sodium (Riquent), failed in a clinical trial of lupus of the kidneys. An independent board of safety monitors found the company had no chance of reaching its goals of effectively treating lupus nephritis, and La Jolla said it decided to halt the study. Then it discontinued work on the drug.

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One of the hot biotech startups from the Midwest is setting up shop in Boston. Lycera, the Ann Arbor, MI-based company with a novel idea for attacking autoimmune diseases, has decided to move its headquarters to Cambridge, MA and is naming a young management talent as CEO.

Lycera is announcing today it has hired Bill Sibold, the former senior vice president of U.S. commercial business at Biogen, to be its new CEO. Sibold, 43, is taking over at a company that made waves last year when it closed a Series A venture round worth $36 million from InterWest Partners, Arch Venture Partners, Clarus Ventures, and EDF Ventures.

The company was founded in 2006 to build on research from the University of Michigan laboratory of Gary Glick. He looked at the landscape of treatments for people with autoimmune disorders—conditions in which the immune system goes haywire and attacks healthy tissues—and saw room for improvement. A number of biotech drugs are effective against these disorders, such as Amgen’s etanercept (Enbrel) and Roche and Biogen Idec’s rituximab (Rituxan), but they and other drugs like them have the drawback of requiring injections and disabling some of a patient’s immune defenses, potentially making the patient vulnerable to infections. The concept at Lycera is to pursue different targets on cells, which make it possible to tamp down the autoimmune activity, without making people vulnerable to infection.

The market potential of any drug that really works for autoimmune diseases is enormous. About 80 diseases fall into this class, with names like rheumatoid arthritis, lupus, and psoriasis. The conditions collectively affect an estimated one out of every 12 people in the U.S., according to the National Institutes of Health. Rheumatoid arthritis alone is now a $10 billion a year market dominated by companies like Amgen, Johnson & Johnson, and Abbott Laboratories.

Bill Sibold

“Even though this is at an early stage, I think Lycera can be a great company that can compete with anybody,” Sibold told me, during a phone interview from the Ann Arbor offices.

Lycera envisions growing up over time from two bases of operation. Ann Arbor will remain the home to the drug discovery team, which is made up of about 15 people, many of whom used to work together at Pfizer before the company closed its research center there. Clinical development, regulatory affairs, business development, and executive leadership is being established in Cambridge, to take advantage of the region’s rich talent pool, Sibold says.

Sibold, 43, has the kind of background that venture capitalists want in an executive, and that is hard to find outside of Boston or the San Francisco Bay Area. He’s got a Harvard Business School … Next Page »

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ZymoGenetics (NASDAQ: ZGEN), the Seattle-based biotech company, said today in a regulatory filing that the atacicept drug it developed and licensed to Merck KGaA has failed to reach its goal of controlling rheumatoid arthritis in a pair of mid-stage clinical trials. The study confirmed the biological effect of atacicept, and researchers saw no unexpected side effects. Studies are still ongoing of atacicept for two other autoimmune diseases—lupus and multiple sclerosis, the company said.

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This week biotech, both locally and nationally, showed some real swagger in its step. Human Genome Sciences turned into a rocket ship, Medarex made investors a fortune, and Onyx Pharmaceuticals surprised the street with positive news against breast cancer. You can bet this rising tide will lift other boats as investors prowl around for the next beaten-down biotech that might blossom.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) picked up some solid momentum this week after its longtime competitor, Rockville, MD-based Human Genome Sciences, shocked the world with a big success in a clinical trial for lupus, a common autoimmune disease. The HGS drug is made to hit a protein target called BLyS, which is the same target that ZymoGenetics and its partner Merck/Serono are pursuing. Zymo shares climbed 20 percent in the wake of its rival’s good fortune.

—Dendreon isn’t saying anything officially about its plans for manufacturing enough of its prostate cancer drug, Provenge, although it’s safe to say the Seattle-based company (NASDAQ: DNDN) is going to look to the southeastern U.S. for a second factory to support its existing one in Morris Plains, NJ. This move will be made to put this logistically tricky drug closer to where most of the prostate cancer patients in America live.

—Cell Therapeutics, in good times and bad, always finds a way to raise money. Yesterday, the Seattle-based biotech company (NASDAQ: CTIC), which has raised $1.3 billion in its 18-year history, said it has started an underwritten offering of 29.3 million shares, plus warrants. This ought to pull in at least $40 million—just as the company has a couple months of cash left, and needs more to stay afloat while it awaits an FDA decision on whether to approve its pixantrone drug for non-Hodgkin’s lymphoma.

—Bothell, WA-based OncoGenex Pharmaceuticals (NASDAQ: OGXI) has big plans to move into the final stage of clinical trials with its experimental prostate cancer drug, and this week it raised a little bit of money to buy some time. The company, which has octupled since February, is seizing the momentum to raise $9.5 million through a stock sale.

—Away from the prying eyes of public company investors, venture capitalists are still writing some of their very biggest checks to companies in life sciences and medical devices. The top 10 deals from Washington state in the second quarter showed Pathway Medical Technologies, NanoString Technologies, and Calistoga Pharmaceuticals at the top of the heap.

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ZymoGenetics watched in obscurity from the sidelines yesterday as one of its main competitors rocked the biotech world. Yet Zymo cheered every minute like this was a gift from heaven.

Say what? The big news came before markets opened yesterday when Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI)—once an overhyped darling of the genome bubble of 2000—saw its stock quadruple on record trading volume when it reported the first major clinical trial success with a new drug for lupus. If this result can be confimed in a second study, HGS will have the first new drug in more than four decades for this inflammatory disease that affects an estimated 1.5 million to 2 million people in the U.S.

The reason the news also boosted Seattle-based ZymoGenetics (NASDAQ: ZGEN) is because the rivals share a research focus. HGS just produced the first convincing proof that doctors can successfully treat lupus by blocking a specific inflammatory protein known as BLyS (pronounced bliss). ZymoGenetics scientist Jane Gross, whom I profiled for the The Seattle Times in 2004, staked a claim in the 1990s to excess production of this particular protein and a number of diseases in which the immune system goes haywire and starts attacking healthy tissue. By 2001, ZymoGenetics had formed a deal with Merck Serono to develop a genetically engineered protein drug, called atacicept (uh-tack-ee-cept) that would interfere with BlyS as well as another inflammatory protein called APRIL, which Human Genome Sciences’ drug isn’t designed to block.

Many investors have forgotten ZymoGenetics’ connection to atacicept and its BLyS target because the Seattle biotech handed over majority ownership of the drug candidate to Merck Serono last September when it started running low on cash. But Zymo still has plenty of skin in the game. Even though it quit paying for the development costs, Zymo was able to retain a royalty rate in the “mid-to-high teens” (as a percentage of sales) if Merck Serono can turn atacicept into a marketed product.

That’s why when Human Genome Sciences roared, ZymoGenetics let out a healthy whoop as its shares soared 20 percent yesterday to close at $5.22.

“We still have an upside stake in that drug, without having to pay a nickel more to develop it,” says ZymoGenetics CEO Doug Williams. “Our view is that we actually have a better mousetrap. Some people forgot, but the smart money is recognizing it.”

Before getting too carried away and bidding up ZymoGenetics stock to the moon, … Next Page »

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San Diego-based La Jolla Pharmaceutical (NASDAQ: LJPC) said today it received a Nasdaq delisting warning that says the company is not in compliance with the Nasdaq rule requiring at least $10 million in stockholders’ equity. La Jolla Pharmaceutical’s 2008 annual report also includes a “going concern” notice from its auditor that questions the company’s ability to continue as a viable business. In February, the company said it’s looking to sell or wind down its business after its Riquent lupus drug Phase 3 trials failed.

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Biogen Idec is the world’s biggest maker of drugs for multiple sclerosis, and it wants to keep things that way. But every drug that’s born eventually dies, and the last remaining patents on Biogen’s biggest-selling drug, interferon-beta1a (Avonex), run out in 2011 and 2013. To protect this $2.2 billion-a-year MS franchise—which generates more than half of Biogen’s sales—the company has cooked up a modified version (with a fresh new patent, of course). The new drug is supposed to last longer in the bloodstream, require fewer shots, and maybe even work better.

The idea—attach a polymer to the end of this type of interferon protein—has been tried by chemists for years with no luck, but it would be a big deal if Biogen or anybody else could find a way to make it work. Biogen is so jazzed about this concept that it is leapfrogging from the first phase of clinical trials to the final stage. I spoke with Biogen’s president of research and development, Cecil Pickett, this week for more insight into the company’s strategy in pursuing this “pegylated” version of its workhorse interferon drug.

The current batch of interferons, the standard of care for MS, are effective at reducing flare-ups from the chronic neurodegenerative disease, generating about $4 billion a year in revenue for Biogen, Bayer, and Merck KGaA. But patients say they can be a nuisance. The drugs cause flu-like symptoms and suffer from peaks and valleys of concentration in the bloodstream that are thought to weaken their effect and require them to be taken with more than one injection a week. Many patients struggle to stick with their meds, especially when it’s hard to tell for sure when the drugs are working.

There is a precedent for making a pegylated version of interferon—a related molecule for hepatitis C called interferon alpha. Modified forms of this drug, for hepatitis C, have been shown to boost their effectiveness and increase convenience for patients, and have become billion-dollar franchises for Roche and Schering-Plough. Since multiple sclerosis treatment is becoming increasingly competitive with convenient oral drugs from Novartis and Merck KGaA emerging in late-stage clinical trials, Biogen sees the long-lasting interferon-beta as an important way to defend its turf. There are at least two venture-backed startups, Seattle-based Allozyne and San Diego-based Ambrx, working on longer-lasting interferons for MS, but neither has yet entered clinical trials. Biogen believes it is still in the lead, and it might be able to strengthen its grip on the market by combining the longer-lasting interferon with an oral MS drug of its own, Pickett says.

“We felt comfortable with the dose and response we saw in the Phase I study,” Pickett says. “I think we’re in the lead, and given the expertise we have in MS and our ability to make these kinds of molecules, I’m bullish about this.”

Pickett says he’s been an in-house advocate for this program since he joined Biogen in September 2006, because he’s “biased” from his previous experience at Schering-Plough. That Kenilworth, NJ-based drugmaker (NYSE: SGP) attached a polymer to a different kind of interferon, the alpha variety, and turned it into a $914 million hit marketed as PEG-Intron for hepatitis C. What’s more, that compound works in combination with an oral hepatitis C drug, ribavirin. That’s gotten Biogen thinking about one day combining its long-lasting interferon beta with BG-12, an oral MS drug it has in development, Pickett says.

Chemists have traditionally had a hard time making a long lasting interferon beta, because attaching polymers in standard manufacturing techniques is easier said than done. Past techniques caused the polymer to attach to different parts of the protein, rendering it an inconsistent product in the vial, which is a big no-no … Next Page »

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Trubion Pharmaceuticals (NASDAQ: TRBN), said today it has started a clinical trial of a drug for lupus, an autoimmune disease. The drug, SBI-087, is made to hit a target called CD20, that’s currently blocked by Genentech and Biogen Idec’s rituximab (Rituxan) for patients with a different form of autoimmune disease, rheumatoid arthritis. The Trubion drug-which is also being tested for rheumatoid arthritis—is being developed in partnership with Madison, NJ-based Wyeth.

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Rituxan, the hit lymphoma drug from Genentech and Biogen Idec, has failed in yet another bid to expand into treating other diseases. The drug fell short of reaching the main goal in a final-stage study of 144 patients with lupus nephritis, an inflammatory disease of the kidneys.

The study, called Lunar, showed that patients who got a combination of immune-suppressing drugs in addition to rituximab (Rituxan) didn’t do significantly better those who got a placebo, Genentech said today in a statement. No new or unexpected safety issues popped up, the company said.

The two life sciences companies first formed a partnership to co-develop, and co-market the drug back in 1995, when rituximab’s developer, San Diego-based Idec Pharmaceuticals, was low on cash and needed help from Genentech to finish clinical trials for non-Hodgkin’s lymphoma. Genentech is based in South San Francisco, CA, and operates a manufacturing facility in Oceanside, CA, about 35 miles north of San Diego. Biogen Idec, based in Cambridge, MA, merged with Idec in 2003 and still retains a presence in the region.

Rituxan, approved in 1997 by the FDA as the world’s first targeted antibody drug for cancer, won an additional approval from U.S. regulators in 2006 for rheumatoid arthritis. The drug is designed to block excess B-cells of the immune system, which are culprits in non-Hodgkin’s lymphoma, as well as autoimmune diseases. After showing positive early signs in clinical trials, the drug failed last year in the final phases of development for multiple sclerosis, lupus that circulates throughout the body, and now lupus of the kidneys. The drug is a major revenue driver for both Genentech and Biogen Idec—it generated $2.6 billion in U.S. sales in 2008.

Genentech and Biogen Idec plan to continue to hunt for treatments of lupus nephritis based on findings from the study. “We plan to analyze the full set of data from this study and share the findings at an upcoming scientific meeting,” said Evan Beckman, Biogen’s senior vice president of immunology R&D, in a statement.

An estimated 1.5 million to 2 million people in the United States have lupus, a disease in which the immune system goes haywire and starts attacking healthy tissue like it would a virus. About one-third are estimated to have the form that attacks the kidneys, Genentech and Biogen said.

The failure of rituximab is just the latest in a string of setbacks for lupus treatments. An experimental drug called Riquent from La Jolla Pharmaceutical failed last month in a study of 730 patients with lupus nephritis.

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Cypress Bioscience (NASDAQ: CYPB), the San Diego-based developer of a drug for fibromyalgia, said today it has acquired technology from Cellatope to diagnose and monitor hard-to-detect autoimmune diseases like lupus. Cypress and its partner, New York-based Forest Laboratories, won FDA approval last month for milnacipran (Savella) as a treatment for a chronic muscle pain condition called fibromyalgia. Cypress plans to market that drug to rheumatology specialists, along with a range of other products to those doctors.

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There are not many options remaining for La Jolla Pharmaceutical, (NASDAQ: LJPC) which last week reported the failure of its Riquent drug candidate for treating lupus.

In a brief statement, CEO Deirdre Gillespie said Riquent was the San Diego biotech’s sole significant asset. The company says it is taking steps to reduce costs, “including a substantial reduction in personnel.”

La Jolla provided no details about the extent of the job cuts, but it reported having 86 full-time employees a year ago, according to its annual report filed with the Securities and Exchange Commission. The company did not immediately respond to an e-mailed request for clarification about the cuts this morning.

The company had $26 million in cash left at the end of September, and received $15 million last month through a partnership with Novato, CA-based BioMarin Pharmaceuticals. It is now evaluating strategic options to maximize the value of its assets, “such as winding down the business or the sale of the Company,” according to the statement.

La Jolla’s stock collapsed on Feb. 12, falling more than 90 percent after the Riquent failure. The stock traded this morning at 9 cents.

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La Jolla Pharmaceutical said today that its lead drug candidate, Riquent, failed in a clinical trial of lupus of the kidneys. The news wiped out almost 90 percent of the San Diego-based company’s stock market value, driving shares down to 26 cents after the opening bell.

The company (NASDAQ: LJPC) issued a one-paragraph statement this morning that said an independent board of safety monitors, who took an early peek at results of the Aspen study while it was ongoing, found the company had no chance of reaching its goals of effectively treating lupus nephritis. La Jolla said it decided to halt the study. Once it has had a chance to look at the data, La Jolla will tell investors more about its “strategic options in the future.”

The failure of the drug is a devastating setback for La Jolla, but not really a shock in the field of lupus, a difficult-to-diagnose and difficult-to-treat autoimmune disease, in which the body’s immune system goes haywire and attacks healthy tissue. No new drugs have been developed for the disease for more than 40 years, although several biotechs, including industry leaders Genentech and Biogen Idec, have tried and failed to develop drugs that work better than standard immune-suppressants. An estimated 1.5 million to 2 million people in the United States have lupus, according to the Lupus Foundation of America.

La Jolla’s Aspen trial began in October 2004, and was designed to enroll 730 patients, according to a description on clinicaltrials.gov. It was meant to examine two different doses of the injectable drug, abetimus sodium, compared with a saline injection as a placebo. La Jolla received a $15 million upfront payment last month, when it signed a partnership with Novato, CA-based BioMarin Pharmaceuticals to co-develop and co-market the drug.

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Sequenom, the San Diego-based developer of a non-invasive prenatal test for Down Syndrome, said today it has acquired Ann Arbor, MI-based SensiGen for $8.7 million, plus potential milestones. The deal gives Sequenom (NASDAQ: SQNM) molecular diagnostics for human papillomavirus, lupus, chronic kidney disease, and inflammatory bowel disease. The purchase is part of Sequenom’s strategy to offer diagnostics for women’s health and cancer, CEO Harry Stylli said in a statement.

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