—It wasn’t exactly news when the board at San Diego-based Illumina (NASDAQ: ILMN) said it had rejected the $5.7 billion hostile takeover offer from Swiss drug maker Roche. Now Wall Street’s arbitragers are placing their bets on whether Roche can prevail. The most intriguing news about the deal, however, came from The Wall Street Journal, which revealed potential conflicts of interests with Illumina’s key adviser, Goldman Sachs.

—A new molecular diagnostics startup stepped into the light in San Diego. Applied Proteomics named Peter Klemm as CEO, and disclosed it raised $22.5 million in venture capital last summer from Vulcan Capital and Domain Associates. Applied Proteomics also said it moved to San Diego last June from the Los Angeles area, and double its staffing over the next year.

—San Diego-based Tocagen and Siemens Healthcare Diagnostics disclosed a partnership that will begin with Siemens’ support of clinical trials Tocagen has planned for its viral gene therapy treatments for primary brain cancer. Siemens said it will help provide companion diagnostics that are intended to help doctors decide the best course of treatments for patients, based on their unique genetic characteristics.

—San Diego’s OncoSec Medical, which was created out of a reverse merger less than a year ago, is beginning mid-stage trials of a treatment that combines electroporation and immunotherapy in patients with three types of skin cancer. Electroporation is a technology that causes cancer cells to take up higher concentrations of anti-cancer drugs by administering pulses of electricity directly to the cancer cells. OncoSec is trying it on patients with metastatic melanoma, Merkel cell carcinoma, and cutaneous T-cell lymphoma.

—Brooks Life Science Systems, a Poway, CA-based division of Brooks Automation, (NASDAQ: BRKS), said it had established a development and commercialization partnership with The Scripps Research Institute (TSRI). Brooks plans to manufacture and commercialize a microplate imaging system under an exclusive licensing agreement with the biomedical research institute.

—San Diego-based Prometheus Laboratories Inc., a specialty pharmaceutical and diagnostic company, said it signed a research and collaboration agreement that provides its proprietary cancer diagnostic technology to an unnamed global pharmaceutical. Financial terms were not disclosed. Prometheus said its technology can detect the activation of specific cancer pathways with high levels of sensitivity and specificity.

—San Diego-based Synthetic Genomics and Ipswich, MA-based New England Biolabs (NEB) said they signed a non-exclusive licensing agreement allowing NEB to commercialize the “Gibson Assembly Master Mix,” a one-step, isothermal approach to enable the rapid assembly of multiple DNA fragments. The companies said Daniel Gibson and colleagues at the J. Craig Venter Institute (JCVI) developed the technology as part of a program sponsored by SGI. Financial terms were not disclosed.

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—Peter Clarke of EE Times reported that San Diego’s Qualcomm (NASDAQ: QCOM) has acquired Andover, MA-based Pixtronix, a startup founded in 2005 to develop Microelectromechanical systems (MEMS) display technology. Qualcomm, which confirmed the deal with EE Times but provided no details or press release about the deal, reportedly spent between $175 million and $200 million for Pixtronix. The Massachusetts company founded by Nesbitt Hagood raised more than $53 million in venture funding, athough the Pixtronix technology has not yet been introduced to the market. Qualcomm has spent years working to refine its own MEMS-based display technology—known as Mirasol.

—More than 200 entrepreneurs turned out to hear TechStars founder and CEO David Cohen talk about the startup accelerator program he helped to launch in Boulder, CO, in 2007. Cohen told the rapt audience during a San Diego Tech Founders meetup that the Internet software community in Boulder “is just totally on fire” compared to five years ago. This was the night after Cohen met with local tech leaders to discuss the steps that helped boost the entrepreneurial ecosystem in the Colorado college town. Xconomy San Diego arranged the dinner discussion, and I plan to have more about our conversation later this week.

—Meteorologist Stephen Bennett and investor John Plavan founded San Diego’s EarthRisk Technologies in mid-2010 with the idea of creating predictive analytics technology that could extend the range of weather long-term forecasts from two weeks to 30 or 40 days. They are now providing their Web-based technology to commodities and energy-trading firms on a subscription-basis. Bennett told me the core business at EarthRisk Technologies is focusing on extreme weather events—heat waves, frigid cold snaps, and storms because extreme events are the ones with the highest impact.

—Mark Heesen of the National Venture Capital Association gave a good-news, bad-news presentation to the San Diego Venture Group last week. Among the interesting bright spots: Corporate venture capital is growing and San Diego-based Qualcomm now ranks as the nation’s second-largest corporate venture outfit. The bad news? U.S. VC firms invested $28 billion in startups last year, but only … Next Page »

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It’s that outlook time of year, and Mark Heesen, president of the National Venture Capital Association (NVCA), was in San Diego earlier this week, talking about the 2012 outlook for venture capital. Today he’ll make a similar presentation to the New Jersey Technology Council. Next week,  John Taylor, the NVCA’s director of research is set to talk in Florida about the 2012 outlook.

Heesen began his presentation in San Diego by saying, “Be prepared for a roller coaster ride here, because that’s where we’ve been for the past year—and that’s where we’re going.”

In a conversation with Xconomy yesterday, Heesen talked about some of the broader trends he’s charting throughout the United States. Here are some of the takeaways from our talk, and from Heesen’s presentation in San Diego:

—The VC industry continues to contract. Venture capital investments in U.S. startups peaked in 2000, when VCs sank $99 billion into emerging companies of all kinds. There were 1,022 venture capital firms at that time, and they were collectively managing $220 billion worth of invested capital. In 2010, VCs invested more than $20 billion into startups of all kinds. The number of VCs had plunged by almost 55 percent—to 462 VC firms with $177 million under management.

—VCs are raising more capital from their limited partners, but it isn’t enough to sustain current investment levels. In 2011, U.S. venture firms raised a total of $18 billion. That was up significantly from the $14 billion that VCs raised in 2010—but it falls $10 billion short of covering the $28 billion that VC firms invested in 2011. As a result, Heesen says he expects venture investments in U.S. technology and life sciences companies to decline in 2012.

—A handful of VC firms accounted for … Next Page »

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The unsolicited $5.7 billion offer that Roche made for Illumina will no doubt dominate San Diego’s biotech news for weeks to come. We have it and more.

—Switzerland’s Roche offered $5.7 billion, or $44.50 a share, for San Diego-based Illumina (NASDAQ: ILMN in a hostile bid disclosed yesterday. Roche’s bid to stake a claim in genetic diagnostics by acquiring the market-leading maker of DNA sequencing instruments would be the Swiss pharma giant’s biggest deal since its $46.8 billion buyout of Genentech almost two years ago. Roche is the world’s biggest maker of cancer drugs, which suggests its quest for Illumina represents a significant move to base cancer treatments on each patient’s genome.

—Venture capital investors sank $4.73 billion into 446 biotechs nationwide in 2011, according to the MoneyTree report from the National Venture Capital Association, PwC, and Thomson Reuters. But as Luke pointed out in his BioBeat column, there is an alarming drop in support for early stage life sciences startups. Only 153 biotech and medical device startups got their first round of financing in 2011, the lowest amount of seed investment activity in 15 years.

—At an Xconomy dinner discussion, former Amira Pharmaceuticals CEO Bob Baltera said insufficient access to capital is the biggest driver for decision-makers on both sides of biotech-pharma partnerships. So what are some other key factors? We asked some of San Diego’s life sciences leaders to explore the question in an “on the record” dinner discussion late last year.

—San Diego’s Sequenom (NASDAQ: SQNM) completed its secondary public offering, raising roughly $62 million in gross proceeds (before underwriting costs) in the sale of 14.95 million shares, including additional allotments granted to underwriters. Sequenom said it plans to use the net proceeds for … Next Page »

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As early stage biotech startups advance their drug candidates into pre-clinical development, many must decide at some point whether to start working with a big pharmaceutical or biotech partner to continue to pursue their program through clinical trials.

It’s no small decision, and a topic of increasing industry interest, especially since initial public offerings (IPOs) by life sciences companies have fared poorly in recent years, curtailing their ability to raise cash and develop new drugs on their own. Of the 12 biotechs that went public in 2011, for example, 10 raised substantially less cash than they wanted to, according to the BIO industry group.

The IPO class of 2010 also was schooled in terms of post-IPO performance, with shares in just four of the 12 biotechs trading higher at the end of 2011 than when the companies began trading. Small wonder, then, if Wall Street traders are asking, “Why buy biotech shares at the IPO when we can get them cheaper later?”

So joining forces with larger drug companies offers a wise alternative strategy, which was evident in a new conference that Biocom organized last year to focus on the nitty-gritty of biotech-pharma partnerships. (The Second Annual Global Life Science Partnering Conference convenes in San Diego on Feb. 1, with an agenda that includes VIP speakers from GlaxoSmithKline, Merck, Vertex, Novartis, Pfizer, Roche, and Bristol-Myers Squibb.)

Under the circumstances, you’d think these times would be ideal for partnership deals. After all, big pharmas are prospecting for new drug candidates outside their own R&D programs, and late-stage venture financing remains tenuous for today’s startups. But to borrow a pop psychology concept, pharmas and biotechs are from different planets. Startups are almost invariably motivated by a need for capital to advance their drug development program. Hooking up with a particular pharma may or may not align with their true strategic desires. Big pharmas, on the other hand, are looking to fill their pipeline with new products, but they have trust issues. The pharmas ask themselves, “Does that biotech want a true drug development partner, or just some tawdry substitute for venture financing?”

Of course, this isn’t something that happens on Match.com. The process of choosing the right partner and negotiating a … Next Page »

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Carlsbad, CA-based SkinMedica says it has acquired Dana Point, CA-based Colorescience, a mineral makeup company that provides cosmetics to remedy and camouflage skin discolorations and other defects while also protecting skin from the damaging effects of the sun. Financial terms were not disclosed.

In a statement, SkinMedica indicates that it plans to operate Colorescience as a subsidiary, and named Josie Juncal to lead the business as vice president of new commercial operations. She previously held roles in product development, marketing, and public relations at SkinMedica.

SkinMedica markets its skin care products to dermatologists and other physicians. Its primary prescription product is an eflornithine hydrochloride cream intended to help women reduce unwanted facial hair. The company was founded in 1999, and has received venture backing from Apax Partners, Domain Associates, EuclidSR Partners, HealthCare Ventures, Montagu Newhall Associates, Montreux Equity Partners, Perseus-Soros BioPharmaceutical Fund, St. Paul Venture Capital, Split Rock Partners and Windamere Venture Partners.

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[Updated 1/5/12 8:05 am. See below.] San Diego’s Active Network (NYSE: ACTV) made roughly 50 acquisitions since it was founded (in 1998), but the company has become more deliberate about its deals since it paused in 2010 to overhaul its Software as a Service technology and prepare for last year’s IPO.

The Active Network provides Web-based event registration and related services, and most of its acquisitions have helped the company expand its business beyond online registration for recreational sporting events to include outdoor activities, online communities, and corporate business events. As CEO Dave Alberga told me in August, the company is now targeting a $10 billion market that wasn’t really apparent before the rise of Software as a Service.

Today the company is announcing its latest deal—the acquisition of StarCite, a Philadelphia, PA-based provider of Web-based meetings management, meetings procurement, and online event registration management. It reflects a more concerted focus by the Active Network on the multi-billion dollar business conference and events industry.

[Updates financial terms] In a regulatory filing this morning, the Active Network values the deal at $57.7 million in cash and stock, including $6.6 million in outstanding debt. StarCite has 300 employees and maintains offices in San Jose, CA, London, Dusseldorf, Shanghai, and Hong Kong to serve its target market of global 2,000-size companies. The privately held company was founded in 1999, and has received at least $15 million in venture funding from the ICG Group (NASDAQ: ICGE), TPG Ventures, and Norwest Venture Partners (NVP).

One intriguing aspect about the deal is that it follows a strategic partnership with the Professional Convention Management Association (PCMA) that the Active Network disclosed a few days before Christmas. As part of this new alliance, the Active Network says it’s providing its … Next Page »

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2011 was a year of bigger deals and fewer exits for venture-backed companies, according to data being released today by Dow Jones VentureSource.

VentureSource says that venture-backed companies netted $53.2 billion through a total of 522 deals of all kinds in 2011—mergers, buyouts, and IPOs. That was a 14 percent decline in the number of deals, and a 26 percent increase in capital raised when compared to 2010.

The median price paid for a venture-backed company was $71 million in 2011, a 77 percent gain over the median price of venture-backed M&A and buyout deals in 2010. VentureSource says companies raised a median of $17 million in venture financing to reach an M&A or buyout deal, which was a 12 percent slide from 2010.

The financial information service says 45 venture-backed companies raised $5.4 billion through initial public offerings in 2011. That’s significantly more capital than the $3.3 billion that 46 venture-backed companies raised in 2010. But the difference is due mostly to two IPOs in 2011, Groupon and Zynga, which together raised $1.7 billion.

“The IPO market saw some gains through the first half of the year, but the momentum was not strong enough to survive the volatility in August,” says Zoran Basich, editor of Dow Jones VentureWire, in a statement released today. “During 2012 we’ll get a sense of whether the last two years of flat IPO activity is the new normal for the industry or if there’s room to grow.”

During the fourth quarter of 2011, 10 IPOs raised $2.4 billion. Currently, 60 U.S. venture-backed companies are in IPO registration. Thirteen of those companies filed during the fourth quarter.

Connecticut-based Renaissance Capital, which tracks all IPOs, says 24 Internet companies went public in 2011—the highest number in a decade.

Renaissance Capital also counted 260 IPO filings in 2011, just one less than the 259 IPO registrations filed in 2010. But Renaissance also notes that 67 companies withdrew their IPOs in 2011, which is the second-highest number of withdrawals since 2003. The peak occurred in 2008, when 103 companies withdrew their IPOs.

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—Quest Software (NASDAQ: QSFT), the IT software provider on the border between San Diego and Orange Counties, said today it acquired BitKOO, a North Hollywood, CA-based specialist in identity and access management technology. Financial terms were not disclosed. Combined with the recent acquisitions of e-DMZ (privileged identity management), Völcker Informatik AG (provisioning), and Symlabs (virtual directories), Quest says the BitKOO deal extends the strength of its Quest One Identity Solutions business.

—San Jose, CA-based EnVerv, a chip design firm with a San Diego office, said it raised $12 million in a Series B round for its power line communications technologies, which enable electric utilities to use their own power lines to serve as a smart grid communications network. Benchmark Capital led the new round, which was joined by existing investors New Enterprise Associates and Walden International.

—UC San Diego computer security researcher (and San Diego Xconomist) Stefan Savage talked with me about recent research into spam networks and hacking the automotive software used to control cars. Savage said he takes a more holistic approach to protecting computers and networks against malicious intruders. While a great deal of money and effort are devoted to technically “hardening” computer systems against spam, for example, Savage said the payment systems by which advertised goods and services accept consumer credit cards “is a huge weak link that has no cheap substitute.”

—Ford’s Dan Kapp came to San Diego to plug the carmaker’s new plug-in, the 2012 Focus EV. The electric vehicle will go on sale at San Diego Ford dealers during the first quarter of 2012. Ford said … Next Page »

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Last week was the storm before the calm, as a warm front of high-tech news moved through the San Diego region before the Thanksgiving holiday. We’ve got the details here.

—San Diego-based DriveCam said it raised $85 million through a private placement that will be used mostly for its acquisition of RAIR Technologies. As I explained a couple of years ago, DriveCam puts its video data technology on the dashboards of fleet vehicles. Brookfield, WI-based RAIR provides technology that helps U.S. Department of Transportation-regulated fleet operators manage driver qualification requirements, vehicle inspection requirements, hours-of-service logs, and scoring for compliance, safety, and accountability. A New York private equity firm, Welsh Carson Anderson & Stowe, provided the $85 million in investment capital.

—The San Diego Venture Group awarded top honors—and $10,000 in startup capital—to San Diego-based SwoopThat at its annual PitchFest event. More than 70 early stage startups applied for the PitchFest competition, which ended last week in final presentations by SwoopThat, Gamer Grub, and Deal Current Network. SwoopThat helps college students at 2,347 schools nationwide save both time and money by purchasing their textbooks through Web-based technology that matches buyers with sellers of used textbooks. SwoopThat also operates a search engine that provides price comparisons for over 15 million products.

—A model fuels consortium formed six years ago by San Diego-based Reaction Design has developed software that can accurately simulate the formation of soot particulates during internal combustion. The modeling software was developed in anticipation of new engine exhaust regulations aimed to dramatically reduce the size and number of soot particles in gasoline and diesel-powered engines. As I had previously explained, Reaction Design develops software that models gaseous chemical reactions.

—A new San Diego startup, Swarmology, said it has raised $1.2 million as part of its emerging Web-based business, which mines social media as part of an integrated marketing approach for healthcare clients. Pharmaceutical and health IT executive Malcolm Bohm founded Swarmology to analyze online conversations about specific health concerns.

—Austin, TX-based car2go, a subsidiary of Daimler North America, announced the debut of its all-electric car-sharing program in San Diego—the first in North America. The company began deploying 300 zero-emission smart “fortwo” electric-drive vehicles here Friday, and said they are now in service.

—First, IBM’s Watson beat the best players on TV’s Jeopardy! game show. At last week’s SuperData Summit, IBM executive Christine Kretz said the company is now working on … Next Page »

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In financial results for the quarter ending Sept. 30, San Diego’s Active Network (NYSE: ACTV) said it paid $21.5 million in cash to acquire RTP, an Avon, CO-based IT company that provides online registration services for Vail and other ski resorts.

While the deal is consistent with the Active Network’s basic strategy, it is the first acquisition the company has made in winter sports as well as the destination resorts market, according to Alan Cole, a senior general manager at the Active Network. The San Diego company provides online registration services for a variety of sports leagues, marathons, and other recreational sports, as well as reservation services for campsites, community activities, business conferences, and other events.

The Active Network has more than 2,600 employees, and processed more than 70 million online transactions last year for 47,000 customers around the world, including Ironman, Cisco, Hewlett-Packard, and the US Tennis Association.

RTP began in 1998 as part of Vail Resorts, providing IT services as well as a point-of-sale commerce engine for Vail and several other Rocky Mountain ski areas. The business was later spun out of Vail Resorts, and now provides software as a service that enables skiers to book resort accommodations, buy lift tickets, ski school classes, and register for other activities. RTP says it also has integrated a host of other services for its customers, including back-office administration and reporting; customer relationship management; RFID access control; interactive marketing; website development; mobile apps and promotions; and augmented reality mobile application development. The integrated set of technologies captures customer transactional data for analysis and marketing.

RTP currently serves 20 of the top 30 ski resorts in North America, including the Aspen Skiing Company, Intrawest, and Powdr Corp., as well as Europe’s SkiStar, and VERBIER-St-Bernard.

Cole says RTP also has begun to develop other interesting opportunities in unrelated markets, including online registration services for Colonial Williamsburg, the destination resort in Williamsburg, VA, and for several water-parks, which he did not identify.

It was the Active Network’s second quarter as a public company. The company narrowed its third-quarter loss to $1.4 million (from a loss of $10.9 million during the same quarter last year) loss on total revenue of $89.6 million, (a 23 percent increase over the $73.1 million generated during the same quarter last year.

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A comprehensive snapshot of San Diego’s innovation economy shows that 76 technology startups were formed during the three months that ended June 30, a nearly 20 percent increase over the 64 startups established during the same quarter last year.

Counting the 70 new tech companies formed during the first quarter, a total of 146 startups sprouted here during the first half of 2011, according to the latest Connect Innovation Report, which covers innovation activity in the San Diego area during the second quarter of 2011. The full report is available here.

Connect’s innovation report also highlights rising tech employment, a three-fold increase in the total value of M&A deals involving tech companies, and a historic high for patent applications. The report was prepared by Connect, the nonprofit group supporting San Diego innovation and entrepreneurship.

Taken as a whole, the indicators suggest that economic activity was improving for thousands of local life sciences, technology, and defense companies during the first half of 2011. For example, the 146 new companies founded during the first six months of 2011 marked a nearly 48 percent jump over the 99 new companies formed during the first half of 2010.

But the encouraging vital signs measured in the report were taken before this summer, when U.S. markets were unsettled by a variety of political and economic setbacks, both foreign and domestic.

Those broader economic concerns could have been a factor in a nationwide survey of CEO confidence conducted during the third quarter by Vistage International. The survey, which Connect included in its full report, found that small-business CEOs anticipate a slowdown in the pace of economic growth amid record-high economic uncertainty. Generally speaking, that means small companies are more cautious about making investments and slower to hire new workers. The September survey of 1,710 small business CEOs resulted in … Next Page »

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New York’s interclick (NASDAQ: ICLK), an advertising technology company, agreed to be acquired by Yahoo (NASDAQ: YHOO) for $270 million in cash, according to a press statement on Tuesday.

Five-year-old interclick developed a platform to help advertisers process large volumes of data from multiple sources to better understand and target their audiences with online display and video ad campaigns. According to an interclick spokesperson, the company’s management will remain onboard after the acquisition is complete. Yahoo is offering $9 cash per share for all outstanding shares of interclick. The deal is expected to close by early 2012.

The acquisition by Yahoo is a bit of a coup for interclick, which is rapidly making a name for itself in the online advertising sector. In October, comScore said interclick ranked No. 16 among ad-focused Web properties in the U.S. for the previous month. Yahoo Network Plus was No. 2 behind Google Ad Network in the same ranking.

Interclick has been growing quickly on its own. In an earnings statement released in August, interclick estimated its 2011 revenue would be about $142 million, up from its previous guidance of $140 million. Interclick reported a profit of $4 million on revenue of $101.2 million for 2010, up from a profit of $502,000 on revenue of $55.3 million in 2009.

Though its technology whetted Yahoo’s appetite, interclick has had to defend some of its practices in court. In August, the U.S. District Court for the Southern District of New York dismissed, with prejudice, several claims against interclick that alleged the company’s online advertising practices violated a variety of state and federal laws. Last December, Sonal Bose filed a lawsuit, which included claims of privacy violation, against interclick and sought class action status. Bose alleged interclick monitored her Web browsing and misappropriated personal information via code within online advertisements; however, she dropped the privacy violation claim in March.

Michael Katz, CEO of interclick, said in a statement, “We have said from the beginning, interclick has always taken consumer privacy very seriously and these claims were brought without merit.”

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Economists from the UCLA Anderson Forecast and University of San Diego will break out details of their 2012 economic outlook at a conference in downtown San Diego this morning. The study was released earlier today. We have highlights, along with a roundup of last week’s San Diego tech news.

—Job growth in the nation, state, and San Diego remains the biggest concern in the 2012 economic outlook being released today by the UCLA Anderson Forecast. The San Diego economy will “continue to grind along with slightly positive job growth… mirroring the softening forecasted for the nation and state,” according to University of San Diego economists Ryan Ratcliff and Alan Gin, who prepared the local economic outlook for the next three to four quarters. They say, “Unfortunately, this job growth will just barely keep up with the growth of the labor force.” They see unemployment holding steady at 10 percent in San Diego County. The California forecast sees virtually no growth in employment, with the jobless rate stuck at 12 percent. The forecast predicts very modest national economic growth of 2.5 percent to 3 percent, with nationwide unemployment at 8.6 percent.

—Japan’s Sony Corp. agreed to pay almost $1.5 billion to buy Ericsson’s share in Sony Ericsson, the joint venture the two global giants formed 10 years ago to make wireless handsets. The deal could pose ramifications for San Diego-based Sony Electronics, part of Sony’s U.S. operations. By buying out its Swedish partner, Sony is expected to integrate smartphones produced by its new handset business with Sony’s existing expertise in consumer electronics, as well as games, music, and movies.

—In a separate announcement, Sony said its U.S. subsidiary based in New York has acquired Redmond, WA-based Micronics, which is focused on developing “point of care” medical devices. Financial terms of the buyout were not disclosed. This deal also could involve Sony’s operations in San Diego, which has been emerging as a hub for both biomedical diagnostics and wireless healthcare. The Japanese giant said it bought Micronics to accelerate its own R&D in point-of-care diagnostics, and to accelerate the commercialization of Micronics’ other point-of-care devices.

—The Consumer Electronics Association showcased wireless health at its annual industry forum in San Diego last week. The CEA says a study on the role of technology in consumer health and wellness found that consumers are interested in communicating with their doctors via wireless devices. The study says 36 percent of those polled said they would be interested in sending health data to their doctor via a wireless device; 33 percent are interested in managing their health records online; and 32 percent would be willing to consult with their doctor via online video.

—U.S. Chief Technology Officer Aneesh Chopra told a consumer electronics industry forum that government initiatives in technology innovation are leading to a host of success stories in communications, from helping to find lost children to fostering better collaborations among police, fire, and other emergency “first responders,” according to the Consumer Electronics Association. In a keynote speech during the CEA Industry Forum in San Diego, Chopra named Compete.org as a website where entrepreneurs can find information about incentive prize competitions and other challenges the government has established.

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Between the formation of the new $100 million West Health Investment Fund and the new wet-lab space Johnson & Johnson is hosting for as many as 20 startups, you’d have to say it’s been a good week for life sciences innovation in San Diego. Get briefed here or get left behind.

—San Diego’s Gary and Mary West, who provided $90 million to establish the West Wireless Health Institute, established the $100 million West Health Investment Fund to invest solely in startups that promise to drive down the cost of health care. Don Casey, the fund manager and West Wireless CEO, vowed that the fund would not cause a “balloon squeeze,” where innovation moves the cost from one part of the health system to another.

—Johnson & Johnson has refurbished part of its Pharmaceutical Research & Development facility in San Diego to provide lab and office space for as many 20 life sciences startups. Each startup will have to make monthly payments to stay at the Janssen Labs at San Diego, but J&J says there is no “quid pro quo,” and each tenant will get office space and access to a common area with wet lab research equipment that would be difficult for a company to afford on its own.

—Anadys Pharmaceuticals (NASDAQ: ANDS), the San Diego-based biotech developing antiviral drugs for treating hepatitis, agreed to an all-cash buyout offer worth $230 million from Roche, the Swiss pharmaceutical giant. Roche’s offer to pay $3.70 for each Anadys share was a 256 percent premium over the previous trading day’s close of $1.04. Anadys had just released encouraging results from a mid-stage clinical trial of its lead hepatitis C drug.

—Venture capital firms invested $6.95 billion in 876 deals throughout the United States—including $202 million in 21 venture deals in the San Diego area—during the three months that ended Sept. 30, according to the MoneyTree Report. The third-quarter survey from PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters also highlighted a shift in VC activity, with a pullback in funding for life sciences. That was also true in San Diego, where nine life sciences companies got $26 million, or 13 percent of total VC investments here.

—Following a two-year setback, San Diego’s Sequenom (NASDAQ: SQNM) rolled out a laboratory-developed blood test that can determine with … Next Page »

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Buyouts and mergers of Web companies that offer online “daily deals” have accelerated sharply over the past five months, driven by a rapid decline in valuations and a surplus of Groupon clones, according to a report issued today by CB Insights, a New York data services firm.

CB Insights counted 22 global mergers and acquisitions in the sector during the second quarter that ended in June—more than double the M&A activity that took place during the first three months of 2011, when nine companies offering online discounts for local goods and services were involved in M&A transactions. An additional 22 M&A deals disclosed in July and August have brought the five-month total to 44—before the third quarter has even ended. (Disclosure: CB Insights will share with Xconomy a portion of the revenue from any copies of the report that it sells to our readers. Nobody involved in the writing or editing of this post was involved in negotiating this arrangement or was aware of it before publication.)

The five-month surge in M&A activity far outpaces the 28 transactions done over the previous 15 months (from the beginning of 2010 through the first quarter of 2011), according to CB Insights. The data reinforces a report yesterday from Dow Jones VentureWire, which said the industry is undergoing a shake-out. Citing data from Yipit.com, which aggregates daily deals, VentureWire reported that 170 of 530 daily deal sites across the country—nearly a third—have shut down or been sold so far this year.

“Looking past just the headline M&A transaction numbers, it becomes apparent that things are not going swimmingly in the daily deal space,” CB’s analysts write in their 17-page report. Valuations also have declined sharply since the first quarter, based on the way daily deal sites are valued according to “price per subscriber,” which fell 36 percent and “price per voucher sold,” which fell 40 percent during the current quarter.

The CB report attributes the declining valuations to … Next Page »

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What was my favorite local life sciences news over the past week? It would have to be the announcement that Apricus Biosciences made before the three-day Labor Day holiday. In case you missed it, we’ve got it here.

—Amira Pharmaceuticals CEO Bob Baltera talked with Luke about the fortuitous outcome of the company’s acquisition by New York’s Bristol-Myers Squibb (NYSE: BMY). The $325 million upfront payment yielded an immediate 10-fold return for Amira’s investors, who can still look forward to another $150 million in potential milestone payments. Best of all,  two potentially lucrative drug development programs were not included in the deal, which gives Baltera and the Amira team an opportunity to start anew.

—Last week, Xconomy editor-in-chief Bob Buderi asked readers to vote on the bad corporate news most likely to get announced (i.e. buried) just before the long Labor Day holiday. The poll drew a lot of responses, but no one guessed what San Diego’s Apricus Biosciences (NASDAQ: APRI) would do. In a statement issued last Friday, Apricus corrected four press releases that had declared three of the company’s over-the-counter topical creams had been “approved” or “cleared” by the FDA. Apricus says it should have said instead that its new products only “complied” with a regulatory process for over-the-counter drugs that requires no formal approval or clearance.

—During a swing through San Diego, California Gov. Jerry Brown won endorsements from a several life science leaders for his “California Jobs First” plan. Brown wants to change a two-year-old business tax rule—which he says would generate $1 billion in revenue—and use the proceeds for tax credits to California-based companies that buy new manufacturing equipment. David Gollaher of the California Healthcare Institute endorsed the plan, saying, “The present employment crisis will not self-correct; we need vision and creativity in the public sector.”

—Three San Diego life sciences companies secured additional funding. Biomatrica, which has a process to “shrink wrap” biological samples to protect them from degradation, raised slightly more than $3 million. Celladon, which is developing gene therapy treatments for heart attacks and other serious cardiovascular events, raised $250,000 in debt and securities. And Abrexa Pharmaceuticals raised $500,000 in a combination of debt and equity financing.

—San Diego’s Ardea Biosciences (NASDAQ: RDEA) said it had successfully reached agreement with FDA regulators on the overall size and design of its planned Phase 3 clinical studies of lesinurad, its drug candidate for treating gout. Ardea said it also had agreed with FDA regulators on the study’s primary endpoints, the total safety database proposed for NDA filing, manufacturing plans for both drug substance and drug product, the preclinical toxicology program and the clinical pharmacology program. Ardea plans to begin its Phase 3 studies before the end of this year. Gout is a painful, debilitating and progressive disease caused by abnormally elevated levels of uric acid in the blood stream.

—In a BioBeat column that revealed his passion for both fantasy football and biotech, Luke made some tongue-in-cheek comparisons of U.S. life sciences personalities, companies, and drugs with some big-name football players. Xconomy readers who understand biotech and football might appreciate his comparison of former Chargers’ running back LaDanian Tomlinson’s fading superstardom with Amgen’s erythropoietin anemia drug franchise. He also compared FDA regulators to Baltimore Ravens’ hard-hitting linebacker Ray Lewis for their concussion-causing tackles of two San Diego diabetes drug developers—Arena Pharmaceuticals (NASDAQ: ARNA) and Orexigen Therapeutics (NASDAQ: ticker:OREX]]).

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Global spending on information and communications technologies is fueling higher valuations for public software companies, according to a quarterly report released by the San Diego-based Software Equity Group. Much of that increased spending, however, reflects an intensifying demand for cloud computing and software as a service (SaaS), as big-company CIOs increasingly accept the notion of outsourcing many programs that were previously installed on corporate networks.

As a result, valuations of public SaaS companies have continued to climb, and more SaaS companies got acquired during the second quarter that ended in June.

For all sectors of the software industry, the Software Equity Group counted 397 buyouts and mergers with a cumulative value of more than $21.3 billion during the second quarter. That was down from a revised tally of 423 mergers and acquisitions during the previous quarter, although the latest quarter’s $21.3 billion worth of deals was almost twice the $11.1 billion total in the previous quarter.

However, that $21.3 billion was skewed by a single mega-deal—Microsoft’s May 10 acquisition of Skype for $8.5 billion. During the same quarter of 2010, the firm counted 378 mergers and acquisitions valued at a total of $17.2 billion.

The firm also counted nine software IPOs, which collectively raised more than $3 billion, at an average of $344 million. That was up sharply from the four software IPOs with an average valuation of $120 million during the previous quarter. The nine companies listed … Next Page »

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Qualcomm (NASDAQ: QCOM), Apple, (NASDAQ: APPL) and Nokia (NYSE: NOK) are deciding if buying wireless technologies specialist InterDigital (NASDAQ: IDCC) makes sense, according to a report in Reuters.

InterDigital, based in King of Prussia, PA, generates most of its revenue from its portfolio of nearly 9,000 wireless technology patents. The company, which opened a new R&D outpost in San Diego just a few months ago, hired two investment banking firms last month to explore its strategic options.

Reports that Google was in talks to acquire InterDigital sent the company’s stock soaring last month. Google then surprised many earlier this week by instead acquiring Motorola Mobility for $12.5 billion. Analysts have cited Motorola’s extensive patent portfolio as a key factor in the deal.

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Private research organizations employ almost 31,000 people in San Diego County, more than the number of similar employees in any other California county, according to a new quarterly innovation report from Connect, the local non-profit group for technology and entrepreneurship.

Researchers teased that statistic from U.S. Department of Labor data for the third quarter of 2010, the most recent quarter available, according to Steve Hoey, a project leader at Connect who called the new finding “a testament to the strong R&D base we have in our region.” The report ranked Silicon Valley’s Santa Clara County second, with almost 19,000 working at private research institutions. Los Angeles was third with more than 17,000.

Such findings in the report underscore how San Diego has become a hotbed for early stage technology and life sciences companies, despite a decline in the amount of venture capital invested here.

Entrepreneurs started 70 companies in San Diego during the first three months of this year— double the 35 startups formed during the same quarter of 2010, according to Connect’s First Quarter 2011 Innovation Report. The report also shows an uptick in tech sector employment, continuing strength in federal research funding, a sharp increase in patents issued to local inventors, and increasing mergers & acquisition activity. Venture capital investments in San Diego startups, however, continue to decline.

Here’s a breakdown of the report’s major indices:

—The 70 new startups founded in San Diego accounted for nearly 12 percent of the 597 technology and life sciences companies created throughout California during the first quarter. San Diego’s tech startups created more than 130 new jobs, nearly 8 percent of the 1,700 new jobs created by new startups statewide. Twenty-seven of San Diego’s new companies are developing software, an increase that was offset in the life sciences where only 11 new companies were formed. Another 17 were communications startups, with the rest focused on recreational goods, defense, computer, and environmental sectors.

—Communications equipment manufacturing, as usual, represented the largest employment sector of the local innovation economy, with almost 28,000 jobs. San Diego’s life sciences sector and software each accounted for 27,400 jobs, and defense … Next Page »

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