One of the scientific co-founders of San Diego-based Fate Therapeutics, along with his team at The Scripps Research Institute, is reporting a major advance that will make it faster, cheaper, and potentially practical on an industrial scale to turn adult cells into stem cells that can morph into any type of cell in the human body.

Sheng Ding and his colleagues at Scripps have found a combination of three conventional small-molecule chemical compounds that can coax adult human cells into an embryonic-like state. The new technique is about twice as fast as existing methods, and produces 200 times more cells per batch. The research in how to efficiently make these so-called “induced pluripotent stem cells” was sponsored by Fate, and is being published online today in the journal Nature Methods.

The technology, which is exclusively licensed to Fate through its sponsored research agreement with Scripps, is a big feather in the cap for the startup company as it seeks to strike deals with pharmaceutical and biotech companies that are looking get into the stem cell game. Fate has been a leader in the field since its founding two years ago by a group of top stem cell scientists from Harvard University, the University of Washington, Stanford University, and Scripps. One of those co-founders was Ding, a young scientist who got his first faculty post in 2003 at Scripps.

“This is the first example in human cells of how reprogramming speed can be accelerated. I believe that the field will quickly adopt this method, accelerating [induced pluripotent stem cell] research significantly,” Ding said in a statement from Scripps.

The latest advance builds on the discoveries of Shinya Yamanaka of Kyoto University and James Thomson of the University of Wisconsin, who showed for the first time two years ago that scientists could transform adult human cells into a pluripotent state, like that of cells in an early embryo. That was important because it was a way to circumvent the political and ethical controversy over destroying embryos in order to harvest their stem cells for research.

Pioneering as that work was, it was nowhere near ready for prime-time use in the biotech and pharmaceutical industries. Yamanaka and Thomson used viruses to insert multiple copies of four genes into adult cells. Two of the genes are known to cause cancer. Given that risk, it’s almost impossible to imagine regulators ever allowing cells with that kind of genetic modification to be injected into people who want to, say, regenerate new pancreas cells to treat their diabetes. The other big problem with the original method was that it took four weeks from start to finish, and only worked in about one out of every 10,000 cells.

Today’s announcement is the second big stem cell paper this year from the Ding lab. In May, the Ding lab reported that it had essentially gotten around …Next Page »

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Shares of Seattle-based Omeros, the first true U.S. biotech company to go public in more than 18 months, dropped about 13 percent in the company’s first day of trading.

Omeros (NASDAQ: OMER) opened trading at $10, but tumbled $1.27, or 13 percent, to close its first day at $8.73. The company now has 21.3 million shares outstanding, giving it a market valuation of about $186 million at today’s close of trading.

The company, which has an experimental drug in the final phase of clinical trials to help patients recover from knee surgery, raised a total of $68.2 million through the transaction and will get to take home about $62.1 million after subtracting underwriting discounts and expenses. It’s an important deal not just for Omeros and its shareholders, but for biotech and Washington state. It’s the first IPO for a true biotech company since Sunrise, FL-based Bioheart took the plunge in February 2008 (without counting Nashville’s Cumberland Pharmaceuticals and Research Triangle Park, NC-based Talecris Biotherapeutics, which aren’t traditional VC-backed biopharmaceutical companies). Omeros also represents the first IPO for a Washington state technology company since Kirkland, WA-based Clearwire did it in March 2007.

The deal provides a much-needed capital infusion for Omeros as it heads into the pivotal phase for its lead compound for knee surgery patients, and drug candidates at earlier stages of development for neurological conditions like schizophrenia and Parkinson’s disease. Omeros started the year with $20 million in cash, and burned through about $10.4 million of that in the first six months of the year. The company, founded in 1994, has estimated the new cash ought to provide at least two years’ worth of operating capital.

Besides offering cash to the company for drug development, the deal also provides some liquidity for the company’s investors. Gregory Demopulos, 50, the company’s co-founder, chairman, CEO, president, and chief medical officer, is the largest single shareholder with about an 11.4 percent stake in the company after the close of the IPO, according to a regulatory filing today. Other major holders include Arch Venture Partners (3.5 percent), Aravis Venture (2.3 percent), and the Omeros vice president and general counsel, Marcia Kelbon (1.4 percent), according to the regulatory filing.

Omeros overcame some unusually challenging circumstances in completing this deal. The company is facing a lawsuit from former chief financial officer Richard J. Klein, who accused Omeros of wrongfully terminating him. Klein says he was fired after he filed a whistleblower report on the company in December for filing false time records on grant work performed for the National Institutes of Health. The company, in its legal response, admits it made errors in timekeeping, but says it reported them to the NIH, and never overbilled the government. The company also says the NIH accepted the results of an internal investigation. Klein’s suit is still ongoing in U.S. District Court.

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The price of shares in Avanir Pharmaceuticals climbed by almost 30 percent today after the onetime San Diego biotech said a late-stage clinical trial shows its drug for treating an unusual neurological disorder can substantially reduce involuntary emotional outbursts and is “generally safe and well tolerated.”

Avanir (NASDAQ: AVNR), which is now based just across the Orange County border, in Aliso Viejo, CA, announced the positive Phase III study results of its reformulated drug dextromethorphan/quinidine, or DMQ, before the market opened today. Wall Street responded with an outburst of its own, sending Avanir shares nearly 80 percent higher. That fell back later, and the stock closed in regular trading at $2.84 a share, a gain of 65 cents, or nearly 30 percent. Trading volume was almost 29.6 million shares, 35 times Avanir’s recent daily average of 845,091 shares.

As Denise reported, Avanir developed the drug, to be marketed as Zenvia, to treat unpredictable episodes of crying, laughing, and other emotional outbursts, which the company calls pseudobulbar affect, or PBA. The random outbursts often accompany brain injury or neurologic disease such as multiple sclerosis, Lou Gehrig’s Disease, or Parkinson’s.

Avanir agreed to develop and test a new formulation of the drug after the FDA raised concerns about possible cardiac side effects from quinidine, which helps metabolize the key ingredient, dextromethorphan. So the latest trial was intended to test whether the drug would still be effective with a smaller amount of quinidine.

The company said it plans to submit the phase III findings to the FDA in the first half of 2010.

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One consequence of the downturn is that it appears to be widening the gaps between the winners and losers in Seattle biotech. Here’s a rundown of who was up and who was down:

—One of the emerging winners, Dendreon (NASDAQ: DNDN), raised a fresh $221 million through a public offering underwritten by Deutsche Bank. The Seattle biotech company was able to raise that kind of loot to beef up its manufacturing and marketing capacity as it gets ready to bring its prostate cancer drug, Provenge, to the U.S. market. The company is in the midst of a hiring binge, looking to fill 81 jobs at last count, to give it the horsepower to commercialize this product that analysts say has $1 billion sales potential.

—Seattle-based Targeted Genetics, a mainstay of the field of gene therapy, appears headed in the opposite direction as Dendreon. The company (NASDAQ: TGEN) said it will consider bankruptcy or shutting down the business if it doesn’t raise money in the next few weeks. The company said it is “unlikely” it will raise the needed cash.

—Cell Therapeutics is continuing its high-wire act. A week after the Seattle biotech company (NASDAQ: CTIC) disclosed it only had enough cash to operate into August, it went out and raised $20 million from an unnamed institutional investor. The cancer drug developer plans to use some of the money to wipe out about three-fourths of the debt on its books—$89.2 million.

—As everyone who tries to make a living in the Seattle biotech scene knows, it’s hard to find a good job out there. But we had a thoughtful post this week from Richard Gayle, a former scientist at Seattle-based Immunex, on where he still sees opportunities for young scientists.

—Is Seattle a “minor league” innovation town? Ed Lazowska, a University of Washington computer science professor, made this point in front of a high-tech and biotech audience this week at the sixth annual OVP Venture Partners technology summit. His argument is that Seattle lags far behind San Francisco and Boston as hotbeds of innovation, and our region needs to have a serious debate about what we can do better.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) had a tidbit of positive news this week, that its IL-21 drug for metastatic melanoma showed an ability to shrink or stabilize tumors in a mid-stage clinical trial.

—A few miles up the road, Vancouver, BC-based Tekmira struck a big deal with Swiss pharmaceutical giant Roche to develop RNA interference drugs for cancer. Roche agreed to pay more than $18 million upfront to get access to Tekmira’s technology, which puts RNAi drugs in lipid nanoparticles so that they can remain stable and be delivered throughout the body.

—We had a flurry of news briefs cross our wire. Kirkland, WA-based ProteoTech, the developer of drugs for Alzheimer’s and Parkinson’s disease, raised $519,000. Aspen Medtech, a Bellevue, WA-based medical device incubator backed by Polaris Venture Partners and Three Arch Partners, closed down. And lastly, CMC Icos Biologics, the contract manufacturer of biotech drugs in Bothell, WA, reached a deal with Brisbane, Australia-based Implicit Bioscience to manufacture a drug for acute lung injury.

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ProteoTech, a Kirkland, WA-based developer of neurology drugs, said it has raised $519,000 in a debt offering, according to a regulatory filing. The company, founded in 1996, is testing an oral pill called Exebryl-1 in clinical trials for mild to moderate Alzheimer’s disease, and has another drug in animal testing for Parkinson’s disease, according to its website. Chairman Alan Snow couldn’t be reached for comment.

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Acadia Pharmaceuticals struck an important deal this morning to continue developing a Parkinson’s drug. The San Diego-based biotech company said it will get $30 million in upfront cash through an alliance with Biovail to develop a new drug for psychoses related to Parkinson’s and Alzheimer’s disease.

Acadia (NASDAQ: ACAD) stands to get as much as $395 million in milestone payments from Mississauga, Canada-based Biovail. Besides the upfront payment, Acadia stands to get $160 million in milestone payments if it can successfully complete clinical trials and regulatory applications, another $160 million in sales milestones, and $45 million if the drug can be applied for another use. Acadia will receive 15 percent royalties on sales below $100 million a year, and that percentage will rise to 20 percent for sales above that threshold.

The news was a major boost to Acadia, causing its stock to more than double this morning from $1 to $2.52 at 9:53 am Eastern. Even more importantly, the partnership brings in much needed cash. Acadia had about $60 million in cash entering this year. So this deal, in combination with a Japanese partnership announced in March that brought in $25 million upfront, will keep its balance sheet from relatively healthy compared to the many biotechs running out of money for their drug development programs.

The drug, pimavanserin, is designed to block a receptor called 5-HT2a, which appears on cells in the brain. The compound is currently in the final stage of clinical trials for patients with psychosis related to Parkinson’s disease. Psychosis is considered common in Parkinson’s patients, and is thought to be caused by overuse of the standard L-dopa medication to relieve symptoms of the disease, like tremors and rigidity. About 1.5 million people in the U.S. have Parkinson’s, and Acadia estimates that as many as four out of 10 patients suffer from psychosis, which can be in the form of hallucinations or delusions. There is no treatment for this condition in Parkinson’s patients.

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Biogen Idec had some encouraging word for the treatment of Parkinson’s disease this morning. The Cambridge, MA-based biotech company (NASDAQ: BIIB) said its experimental drug for the disease reached its goal of demonstrating effectiveness in a pair of mid-stage clinical trials, although it didn’t go into detail about how good the data really was.

The drug, BIIB-014, reached its goal in a study of 40 patients who took the treatment alone for early stage Parkinson’s, and was also effective in about 70 patients with more severe forms of the disease who took it in combination with standard L-dopa, Biogen said. The news came from Cecil Pickett, Biogen’s president of research and development, in a presentation today to investors at the JP Morgan Healthcare Conference in San Francisco.

Biogen isn’t saying yet what its next steps will be in developing the drug, said spokeswoman Naomi Aoki. But the company clearly has high hopes for this program, as we described last week. Parkinson’s is a degenerative disease of the central nervous system that robs patients of their ability to control movement and speech. About 1.5 million people in the U.S. have this chronic ailment, according to the National Parkinson Foundation. The last truly big innovation for patients with Parkinson’s came in the 1960s, with L-dopa, a drug used to help replenish the brain’s diminishing supply of a neurotransmitter called dopamine. But the drug’s effect diminishes after a few years, and patients develop secondary symptoms over time like cognitive decline, depression, anxiety, and involuntary movements as the drug’s effect wears off.

Researchers have tried lots of different approaches to treating Parkinson’s, like gene therapies, cell-replacement therapies, and deep-brain stimulation, with little to show for it. The Biogen candidate, an oral pill, is designed to block a specific receptor on brain cells called A2a. Blocking this target is supposed to help restore normal brain circuitry, the company says. Kenilworth, NJ-based Schering-Plough, and Swiss drug giant Roche are also pursuing drugs designed to hit the same target on cells.

Pickett’s R&D update also had some newsy nuggets for treatment of multiple sclerosis and cancer. The company is planning to go ahead with a final-stage clinical trial program of a longer-lasting form of interferon beta therapy (Avonex) made through pegylation chemistry. This treatment would allow patients to take injections every other week or once a month, instead of the much more frequent injections currently required by standard treatments. The final stage trial will enroll 1,260 patients with a goal of reducing the number of MS flare-ups over a year, he said. “We think this will increase patient compliance, and increase convenience,” Pickett said.

The company is also forging ahead with a drug designed to block heat shock protein 90, a so-called chaperone protein that’s plays a role in tumor growth. An interim analysis of a mid-stage clinical trial of the drug among patients with gastrointestinal stromal tumors produced positive data, and the company now plans to initiate other mid-stage studies against different tumor types, Pickett says. This program would put Biogen in competition with Cambridge, MA-based Infinity Pharmaceuticals among others aiming to block this protein. “We think ours may be best in class,” Pickett said.

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Omeros, a Seattle-based drug developer, said it has received a $465,000 grant from the Michael J. Fox Foundation for Parkinson’s Research. The grant will pay for research of a new target on brain cells discovered by Omeros scientists, which has been linked to movement disorders like Parkinson’s and Restless Leg Syndrome.

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Biogen Idec will get an early glimpse next week into whether it has created an important new innovation for Parkinson’s disease. If the company’s drug candidate lives up to its promise, it could be one of the early movers in a new class of medicines that minimize the secondary symptoms and keep standard therapy from wearing off over time.

The drug is code-named BIIB-014, and I got an overview of it from Spyros Papapetropoulos, an associate medical director at Biogen. It was a good time to talk, since the Cambridge, MA-based biotech company (NASDAQ: BIIB), which has operations in San Diego, expects to release some results from a mid-stage clinical trial next week at the JP Morgan Healthcare Conference in San Francisco.

Parkinson’s, as many people understand thanks to actor Michael J. Fox, is a degenerative disease of the central nervous system that robs patients of their ability to control movement and speech. About 1.5 million people in the U.S. have this chronic disease, according to the National Parkinson Foundation. The last truly big innovation for this disease came in the 1960s, with L-dopa, a drug used to help replenish the brain’s diminishing supply of a neurotransmitter called dopamine. Researchers have tried lots of different approaches, like gene therapies, cell-replacement therapies, and deep-brain stimulation, with little to show for it.

“Dare I say that we’re optimistic,” Papapetropoulos says.

Here’s the problem as Biogen sees it. L-dopa-related treatments are reasonably effective at controlling the most visible symptom of the disease, the uncontrolled tremors and rigidity, but aren’t as good at controlling secondary symptoms like depression, anxiety, or cognitive decline, Papapetropoulos says. Usually, after a few years of treatment on L-dopa, the drug starts wearing off after a couple hours, instead of maintaining its effect for a full five to six hours. Plus, strangely, in an attempt to enable movement, the treatment can go overboard, stimulating too many involuntary twitches and movements through what are known as “dyskinesias,” he says.

Biogen’s goal is for its product to keep the L-dopa from wearing off, and to stop those uncontrolled movements from cropping up. The Biogen candidate, an oral pill, is designed to block a specific receptor on brain cells called A2a. Blocking this target is supposed to help restore normal brain circuitry, Papapetropoulos says.

Biogen isn’t the only company …Next Page »

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Ceregene said its experimental gene therapy technique for Parkinson’s disease failed in a mid-stage clinical trial of 58 patients. The San Diego-based biotech company said its injectable treatment, CERE-120, didn’t offer a signficant improvement compared with a placebo. Ceregene’s chief scientist, Raymond Bartus, said in a statement he was “stunned” by the result, and will continue to analyze the findings to figure out why it turned negative. The company also has treatments in development for Alzheimer’s disease, Lou Gehrig’s disease, and eye conditions.

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Cambridge, MA-based biotech firm Sirtris has garnered national and international attention for its work to use its formulation of resveratrol, a natural chemical found in red wine, to treat diseases of aging such as Type 2 diabetes and cancer. Now the company, a wholly-owned subsidiary of British drug giant GlaxoSmithKline (NYSE:GSK), plans to increase its focus on developing a more potent molecule to treat diabetes, according to CEO Christoph Westphal.

Westphal made a presentation of some new data from studies his biotech firm has conducted with the new chemical entities, or NCEs, at the Boston Biotech R&D conference the company hosted at Harvard Medical School yesterday. Sirtris says the new drugs are more than 1,000 times more potent than its formulation of resveratrol, dubbed SRT501. Westphal told me in an interview that his company plans to conduct Phase 2 clinical trials of a new molecule called SRT2104 as a treatment for diabetes next year. Meantime, the earlier form of resveratrol is being scrapped in diabetes, yet Westphal says the company plans to continue developing it to treat colon cancer and a rare metabolic disorder called MELAS.

“I think ultimately, from a pharmaceutical- company perspective, a patented, composition-of-matter compound that is 1,000 times more potent is going to be more attractive than reformulated resveratrol, so definitely our focus is more on the NCEs,” Westphal says.

The new drugs, like resveratrol, are designed to activate genes linked to the production of sirtuins, which have shown in early studies to increase metabolic function and essentially mimic the benefits of consuming fewer calories.

Sirtris presented basic findings from an early human study of the new chemical, revealing only that it was well-tolerated and caused no serious side effects in humans. Sirtris and GSK aren’t saying how well it works in treating diabetes in humans, says Michelle Dipp, Sirtris’ vice president of corporate development. (The company did highlight that the compound about doubled the lifespan of mice in a new study, however.)

In a related development, Westphal revealed publicly for the first time that the company plans to develop its new drugs to treat neurological disorders such as Alzheimer’s, Huntington’s, Parkinson’s disease and chronic obstructive pulmonary disorder. He says his company won’t necessarily get bigger in Cambridge, because GSK can do much of the clinical trials work at other research and development units around the world.

Westphal gave credit to his new pharma parent GSK—which acquired Sirtris in a $720 million buyout earlier this year—for providing his firm the resources to pursue more drug development programs. GSK recently approved a $200 million budget for its Sirtris unit for the next three years, which Westphal says is about twice as much as his company could have afforded to spend as an independent biotech.

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Link Medicine, a secretive Cambridge, MA, startup that’s spent the last three years investigating new therapies for neurodegenerative diseases like Alzheimer’s, Parkinson’s, Huntington’s, and Amyotrophic Lateral Sclerosis (ALS), said today that it has completed a $40 million Series C venture round.

The investment comes from Clarus Ventures, a Cambridge- and San Francisco-based fund focused on life science companies, and SV Life Sciences, another biotech-oriented fund based in Boston, San Francisco, and London. It’s a significant jump over Link’s first two venture rounds, which together brought in $16.5 million.

The company’s drug discovery approach is focused around the work of its chief scientific officer, Harvard Medical School neurologist Peter Lansbury, who is developing ways to counter the buildup of misfolded proteins in neural tissue that seems to be a common factor in several neurodegenerative conditions. But as the Boston Globe reports today, the company’s first drug is actually a compound it’s in-licensing from an unnamed pharmaceutical company that unsuccessfully tested it against a different illness. The company says the funding round will help it move this compound from preclinical programs into human testing, which it hopes to begin next year.

Link’s CEO, Adam Rosenberg, told the Globe that the company’s ability to raise such a significant round of working capital is a sign that venture capital firms are still interested in life science startups with “novel science in areas of high unmet need.”

Nick Galakatos, managing director of Clarus Ventures, said in the company’s funding announcement that its approach is “a novel way to tackle Alzheimer’s disease and related disorders. It is particularly attractive because it can be potentially used as a monotherapy, or as a complementary combination with other medicines.” But the company has said little about the compound it’s testing or its mechanism of action.

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One of those foggy concepts from eighth-grade biology came back to me the other day when I spoke with David Pendergast. It’s homeostasis, the idea that the human body naturally makes constant adjustments on the fly to maintain a proper balance of things like body temperature, water, or salt in your system.

Pendergast, the CEO of Cambridge, MA-based Proteostasis Therapeutics, is attempting to take advantage of new insights in biology that may enable scientists to promote or restore the homeostasis of proteins—molecules that are key players in every tissue and organ in the body and which can cause a host of problems when they’re out of whack. Restoring protein homeostasis might mean revving up the protein machinery that normally does the job of sweeping up degraded proteins; this machinery can break down as we age, causing diseases like Alzheimer’s or Parkinson’s. Or it could help patients with rare genetic disorders, such as Huntington’s disease, who might just need a nudge to their protein networks to keep their symptoms at bay, Pendergast says.

Proteostasis recently raised a whopping $45 million in its initial round of financing, from HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund, and Genzyme Ventures. Pendergast was formerly the president of human genetics therapies at Shire Pharmaceuticals, and before that was CEO of Cambridge, MA-based Transkaryotic Therapies. He’s now placing a big bet on a field of biology that isn’t being tapped by traditional pharmaceutical or biotech companies, and that’s still three to five years away from entering clinical trials, Pendergast says.

“We’re talking about restoring a natural function that works for people,” Pendergast says. “It has a lot of appeal, as opposed to a lot of other drugs that try to block something, and you may not always understand the unintended consequences of that.”

Some of the pioneering work in this field of biology comes from the lab of Proteostasis co-founder Andrew Dillin at the Salk Institute in San Diego. A series of experiments there and other labs have given the venture capitalists confidence that it’s time to invest, Pendergast says. The researchers were able to show they could stimulate the pathways that control protein homeostasis using conventional small-molecule drugs that are cheaper and easier to make than drugs produced through genetic engineering, he says. The effect is reversible, and reproducible in rodents, worms, and tissue cultures growing in lab dishes, he says.

It sounded to me like a technology that could potentially be applied as a preventive medicine. Who wouldn’t want a pill, for example, that might be able to ensure 70-year-olds will maintain order in the protein network responsible for clearing up amyloid plaques in the brain, which are thought to play a key role in Alzheimer’s disease?

It’s theoretically possible to do that, Pendergast says, but that’s not what the company has in mind. To get a drug approved by the FDA, the company would aim to treat patients who already have mild-to-moderate Alzheimer’s disease, then give them the drug for a six-month or one-year period, and use standard measures tracking their cognition. It would take many more years, and loads of more capital, to show, say, that healthy 70-year-olds who take a Proteostasis drug have a lower risk of getting Alzheimer’s by the time they turn 80.

That’s a pretty far-out, futuristic vision, and not really on the company’s agenda, Pendergast says. For now, Pendergast is focused on hiring a chief scientific officer and scientific team of 20 people over the next 12 to 18 months, to better understand the protein networks it is thinking about targeting.

It’s a new challenge for Pendergast, whose experience is with leading bigger companies. “Here, you’re starting with a blank sheet of paper,” he says. “It’s a building project. We’re excited, and we think this is an exciting area of biology, and we hope we can show significant benefit for patients.”

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