Cambridge, MA-based Proteostasis Therapeutics has found a big new benefactor to support its R&D against neurological diseases.

Proteostasis said today it has formed a strategic alliance with Ireland-based Elan to develop traditional small molecule drugs and diagnostics with Proteostasis against neurodegenerative diseases like Parkinson’s, Huntington’s, and multiple sclerosis. Elan, the developer of the hit multiple sclerosis drug natalizumab (Tysabri), has agreed to invest $20 million into the small company, and may pump in another $30 million over the next five years. In return, Elan is getting a 24 percent ownership stake in Proteostasis now, a seat on its board of directors and scientific advisory board, and the first chance to exclusively license new drug compounds from the collaboration, the companies said in a statement.

Proteostasis has been pretty quiet lately, but it made a splash in the Boston biotech scene in September 2008 when it raised a whopping $45 million in its initial venture financing from HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund, and Genzyme Ventures. The founding science came from the San Diego labs of Jeff Kelly at The Scripps Research Institute and Andrew Dillin at the Salk Institute for Biological Studies, and Richard Morimoto at Northwestern University.

As I described in a feature story a year ago, Proteostasis is about delving into biology that seeks to alter protein pathways that deteriorate as people age, which can lead to neurodegenerative diseases like Alzheimer’s and Parkinson’s. When people are young and healthy, they might produce amyloid plaques, for example, but a network of proteins works to dispose of them. One theory is about Alzheimer’s is that as people age, this garbage disposal network weakens, amyloid plaques build up, and it leads to the cognitive impairment in the brain that’s associated with Alzheimer’s.

Today’s statement had a few details on what each party is supposed to bring to the table. It said that Proteostasis will contribute its discovery technology, novel biological targets, and drug candidates. Elan plans to contribute with its proprietary animal models, biology, medicinal chemistry, and clinical development.

Proteostasis’ president and chief scientist, Peter Reinhardt, said Elan is “a proven leader” who will help speed up the R&D progress at Proteostasis. Kelly Martin, Elan’s CEO, added: “This initiative with Proteostasis reinforces our commitment and strategic business objective of being an exceptionally high-caliber, science-driven company and provides a multitude of opportunities for Elan to advance its position as a world leader in the broad field of neuroscience.”

This isn’t the only Boston-Ireland connection we’ve seen in these pages lately. Elan recently agreed to sell one of its divisions to Waltham, MA-based Alkermes (NASDAQ: ALKS) for $960 million in cash and stock.

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It is not unusual to read about another drug failure in a challenging neurological disease such as multiple sclerosis, Alzheimer’s disease, or Parkinson’s disease. Designing therapeutics with exquisite specificity has been the goal of modern drug development, and significant resources continue to be allocated towards this approach, only to see treatments fail due to inadequate efficacy or intolerable side effects. How we approach the development of new therapeutics for treating complex diseases will be key for achieving better patient outcomes.

A recent example of a once promising drug candidate using a targeted approach is semagacestat, a treatment developed by Eli Lilly and Elan. Proposed to lower the build-up of harmful plaques in the brain of Alzheimer’s disease patients, its Phase III trial was halted last August because semagacestat worsened clinical symptoms compared to placebo. Semagacestat targets a single enzyme called gamma secretase, which turns a protein found in normal brain into amyloid, the building block of the plaques found in Alzheimer’s disease. Semagacestat’s failure represents the difficulties in developing treatments that target specific molecules, whether these targets are surface proteins or signaling pathway intermediates inside of cells.

Several stumbling blocks can be identified in the development of targeted therapies, using semagacestat as an example:

1. The role of the target is not well established.

Many drugs target proteins whose function within a specific disease is difficult to ascertain. Alzheimer’s disease is characterized by the presence of plaques that prevent nerve cells from communicating. The therapeutic value of targeting plaque build-up is unclear, and a lack of definition for the exact role of amyloid in disease progression adds uncertainty for the therapeutic effectiveness of drugs like semagacestat.

2. Redundancy in cellular communication prevents efficacy of the drug in the absence of toxicity

Obstructing the generation of amyloid alone has limited effect on the complex nature of Alzheimer’s disease. The dysregulation of a group of proteins called Tau has recently taken the forefront as another important contributor. Genetic factors, such as variations in the lipoprotein APOE, play a significant role in disease progression and may greatly impact the ability of proposed therapeutics to affect the entire patient population. In addition, inflammation … Next Page »

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In case you haven’t noticed, heart disease remains a debilitating illness for millions. Cancer, despite some recent advances, has not been cured. Drug resistant strains of bacteria are spreading across the globe. There are still no effective treatments for Parkinson’s disease, amyotrophic lateral sclerosis, muscular dystrophy, and a huge number of other illnesses.

The number of new medicines being brought to market has been declining in recent years at a time when we desperately need new treatments. A recent analysis of drugs moving through FDA trials in 2003-2010 found that the overall success rate was only about 14 percent for primary indications, and a dismal 3 percent success rate for secondary indications. The number of new drugs launched annually has fallen 44 percent since 1997, according to CMR International.

A variety of reasons have been put forth to explain this deterioration, as described below. As a nation, we should be doing all that we can to encourage innovators to find effective treatments for these diseases. Developing medications to successfully treat human diseases is an expensive enterprise, so it makes sense to ask the question: where will the new medicines come from? What financial resources are available now to biomedical researchers to fund their work, and who’s going to pay for future drug development?

A good place to start to answer these questions is to have an understanding of where our present drugs have come from. Two recent studies illustrate nicely that modern medicines originate from a variety of sources, and help explain the expanding number of partnerships between industry and academia. Robert Kneller examined every drug approved by the FDA over the past 10 years, and determined for each one whether it originated with pharmaceutical companies, from biotechs, or sprang forth from the labs of academic investigators. His analysis showed that about half of all new drugs arise from pharmaceutical companies, while the other half arise from the efforts of biotech firms and academic investigators. In a separate study, other researchers identified which medicines resulted from public sector research over the past 40 years. Their analysis identified some 153 products that were discovered or co-discovered by 75 different academic institutions. These drugs accounted for some 13 percent of all FDA approvals over that period. Having roughly quantified where our drugs come from, let’s shift our focus to how this drug discovery work gets funded. What monetary sources are available to biomedical researchers in the public and private sectors? Here’s what my informal survey found:

Pharma and Biotechs Still Lead the Charge (Funding Level: $65.3 billion in 2009)

There is no doubt that pharma and biotech companies are the major source of new drug discoveries. However, both groups find themselves under significant fiscal pressures as a result of troubles in the financial markets, recent patent expirations, and their diminishing number of drug approvals in the past decade. Why have these numbers been declining? The primary problem faced by industry is the challenge of translating basic biological discoveries (e.g. genomic sequences; RNA interference; mutated genes) into functional drugs. Although scientists have determined the causes of many diseases over the past quarter century, they haven’t figured out yet how to fix many of them. Other urgent industry concerns include pricing pressures, reimbursement issues, regulatory hurdles, generic competition, and investor expectations. Big Pharma’s response to these challenges have varied: some companies responded by either maintaining or increasing their research and development commitments (e.g. Merck), while others took the opposite approach and slashed their research dollars (e.g. Pfizer, Glaxo).

Many Big Pharma companies have been slowly transforming themselves over the past few years to be more like biotechs. They have taken note of the fact that the success rate for getting biologics (e.g. recombinant growth factors, monoclonal antibodies) approved is twice that seen with their small molecule drugs. Generic competitors of their blockbuster small molecule drugs are continuing to poke enormous … Next Page »

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Score one for neurodegenerative disease therapies. Cambridge, MA-based NeuroPhage Pharmaceuticals said today it has closed $12.4 million in Series B financing led by Mérieux Développement, the healthcare investment arm of French firm Institut Mérieux. Irish biopharma Shire (NASDAQ: SHPGY) also participated in the round as a new investor.

This is the first round of institutional funding for NeuroPhage, which raised a $7 million Series A round from angel investors in early 2008. The quiet biotech startup says it plans to use the new money to prepare its lead drug candidate—NPT001 for the treatment of Alzheimer’s disease—for Phase 1 clinical trials within the next two years.

The company’s technology is designed to prevent the buildup of amyloid plaques and to break up existing plaques, which degrade the performance of neurons. In addition to Alzheimer’s, NeuroPhage intends to address a broader class of disorders thought to be caused by protein misfolding, including Parkinson’s, amyotrophic lateral sclerosis, and other rare diseases. There has been a growing amount of activity in this field in the past half-year, including Pfizer’s acquisition of FoldRx Pharmaceuticals, and Roche’s strategic alliance with reMYND.

NeuroPhage was founded in 2007 by a small team of Boston-area entrepreneurs, together with Beka Solomon, a neuroscientist and expert in immunotherapy for Alzheimer’s at Tel Aviv University in Israel. The company currently has a dozen employees worldwide. Its scientific advisors include John Maraganore, CEO of Alnylam Pharmaceuticals; Franz Hefti, chief scientific officer at Avid Radiopharmaceuticals; and Cynthia Lemere from Harvard Medical School and Brigham and Women’s Hospital.

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The big Nor’easter this week didn’t get in the way of big news from New England’s life sciences firms.

—Civitas Therapeutics, a startup operating out of Alkermes’ (NASDAQ: ALKS) leased facility in Chelsea, MA, is working to commercialize inhaled drug delivery from Waltham, MA-based Alkermes. The firm has about $20 million in first-round funding to develop the technology for the treatment of Parkinson’s disease, Ryan wrote.

—Cambridge, MA-based stealthy biotech company Dekkun revealed it had raise $9.9 million of an equity financing that could hit $30 million, via a filing with the SEC. The firm is operating out of the offices of venture firm HealthCare Ventures, which is also represented on the board of directors at Dekkun.

—-Rib-X Pharmaceuticals of New Haven, CT, said it raised $20 million in financing, led by private equity firm Warburg Pincus. Rib-X is developing drugs targeted at traditionally antibiotic-resistant infections.

—Cambridge-based Resolvyx Pharmaceuticals announced that Celtic Therapeutics exercised its option to buy the company’s lead drug, RX-10045, a treatment for dry eye and other eye diseases. Celtic will move the drug, among Resolvyx’s crop of small molecule derivatives of omega-3 fish oils, into Phase III clinical trials later this year.

—Boston venture firm Oxford BioSciences held the first close of its sixth fund at $66 million, according to Fortune’s Dan Primack. Part of the money came from the government of South Korea and the city government of Seoul.

—iWalk, a Cambridge developer of an advanced prosthetic ankle and foot, raised $15 million in third-round funding, the Boston Globe reported. Sigma Partners, General Catalyst, and WFD Ventures participated in the financing.

—Bedford, MA-based Ocular Therapeutix added $6 million to its Series C round, bringing the financing’s total to $21 million. The startup, which is developing advancing hydrogel technology for protecting the eye after ophthalmic surgeries and for delivering drugs to the eye, raised the first $15 million of the round from Polaris Venture Partners, according to a June 2009 announcement.

—Ryan caught up with Daphne Zohar of Boston-based PureTech Ventures, which has recently helped launch Vedanta Biosciences and Entrega. Zohar, who previously served as CEO of baldness treatment developer Follica, dished on what distinguishes PureTech.

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One of the Bay Area’s promising stem cell startups just got a big shot of cash from a couple of major pharmaceutical players in Boston. South San Francisco-based iPierian is announcing today it has secured a full $28 million in its Series B venture round, which includes GlaxoSmithKline’s SR One venture arm, along with Biogen Idec New Ventures, as new investors.

The financing isn’t a big surprise, given that iPierian already announced back in July that it had raised $22 million in a round led by Google Ventures. What’s really new is that a couple of corporate venture funds, Glaxo and Biogen Idec, decided to join the syndicate a couple months later.

“The strategic funds have come in at the price that was set by the Google Ventures investment,” says iPierian CEO Michael Venuti. The corporate venture funds “take a little longer on their diligence, they run it through their research groups,” Venuti says. “It was a great opportunity for further validation.”

For now, anyway, the Glaxo and Biogen Idec investments are strictly financial, Venuti says, and aren’t part of any broader collaboration with iPierian. That’s one of the startup’s main goals, to find a big pharma or biotech partner that will agree to help further develop its technology for transforming ordinary adult cells into a stem cell-like state. Unlike embryonic stem cells, these cells, known as induced pluripotent stem cells (IPSCs), are not being designed as regenerative cell therapies for people with neurodegenerative diseases like Parkinson’s. Instead, iPierian’s plan is to coax this type of stem cell into all kinds of cell types, like, for example, motor neurons of a patient with Alzheimer’s, so that pharma companies can test a variety of drugs against those cells in the lab dish.

While this process has only been around for a couple of years in academic labs, iPierian is seeking to make the process low-cost, reproducible, and consistent enough that it’s worthy of big investment from Big Pharma. Just in case anyone is wondering, iPierian doesn’t do any work with embryonic stem cells, the controversial line of work that has been stalled in recent weeks by a ruling from a federal judge who struck down a new policy the Obama Administration developed to finance more of the work.

By avoiding work on embryonic stem cells, iPierian is also avoiding any slowdown or confusion about the future of its work, Venuti says. It would be safe to say the drug company money wouldn’t flow to iPierian if there was really any doubt about the company’s work being put on hold.

“The field is moving fast and we are definitely at the front edge of how to industrialize the technology,” Venuti says.

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News surrounding Genzyme’s ongoing battle with billionaire investor Carl Icahn cropped up this week, alongside headlines from other big biotechs and in-depth profiles on newer life sciences names in the New England area.

—Luke caught up with the chief scientist and the co-founder of Cambridge, MA-based Proteostasis Therapeutics, which was built around research from the Scripps Research Institute, the Salk Institute for Biological Studies, and Northwestern University. The company, which launched with a massive $45 million venture capital round in 2008, is out to make drugs that alter the protein pathways that break down as people age, contributing to conditions like Alzheimer’s disease and Parkinson’s.

—Ryan took a look at Ligon Discovery, a spinoff of MIT and Harvard’s Broad Institute that develops small-molecule technology that could have applications in identifying potential disease proteins and finding drugs to home in on those targets.

—Link Medicine, a Cambridge developer of drugs to treat neurodegenerative diseases, exceeded its original expectations for its Series C round of funding by $5 million, the company’s CEO told Ryan. A third closing of the Series C, at $20 million, brought the round’s total to $45 million, money that will go to testing Link’s drug for treating mild Alzheimer’s, which went into its first human clinical trial in November 2009.

—Activist investor Carl Icahn continued his campaign for greater influence on the board of Cambridge-based Genzyme (NASDAQ: GENZ), filing a proxy statement with the SEC in which he called the drugmaker’s manufacturing system “broken,” and advised shareholders not to reelect chairman and CEO Henri Termeer to the board. Icahn, who controls 4.9 percent of Genzyme’s common stock, is vying to get himself and three associates on the board, which has 10 seats up for reelection in mid June. On Thursday, the Genzyme board of directors also announced plans for a $2 billion stock repurchase aimed at increasing shareholder value

—I profiled Beverly, MA-based Eliza, a company that employs intelligent speech-recognition technology in a system of automated phone calls that communicate to patients about their healthcare, on behalf of insurers, employers, and prescription benefit managers. The company has made more than 400 million phone calls in ten years, encouraging patients to do everything from lose weight to schedule preventative screenings.

—Cambridge’s Ariad Pharmaceuticals (NASDAQ: ARIA) revised a 2007 agreement with Merck & Co, giving the pharma giant exclusive license to develop, produce, and sell Ariad’s cancer drug, ridaforolimus—activities that Merck (NYSE: MRK) will also cover the costs of. Initially, the two companies were sharing the marketing rights and the responsibilities of funding the development of the drug, which is designed to treat certain soft tissue and bone sarcomas. Ariad nabbed $69 million for the revised deal, which comes on top of … Next Page »

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Peter Reinhart, the new chief scientist of Cambridge, MA-based Proteostasis Therapeutics, spent the last six years leading one of the top neuroscience groups in the pharmaceutical industry, at Wyeth. The group has gotten its share of press for its efforts, with mixed results, to take aim at neurodegenerative scourges like Alzheimer’s and Parkinson’s.

But Wyeth’s $68 billion megamerger with Pfizer closed last year, and priorities started getting shuffled around in a massive R&D organization. One of the first things the new parent company did was close down Wyeth’s neuroscience operation in Princeton, NJ. For Reinhart, it was time to look around for something early, edgy, and with potential for bigger impact than a big company is willing to take a flier on. He says he’s found it with Proteostasis.

“Pharma, in a way, is chasing a number of targets that have been validated over and over again. Some of the shakeout you see happening in pharma right now is because there is so much overlap with a lot of companies chasing the same few targets,” Reinhart says. “In part what attracted me to Proteostasis is that we are entering uncharted water. We have the potential to create innovative novel targets, and innovative therapies that really are unique.”

Proteostasis burst on the biotech scene back in September 2008 when it raised a massive, $45 million initial round of venture capital from HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund, and Genzyme Ventures. The founding science came from the San Diego labs of Jeffery Kelly at The Scripps Research Institute and Andrew Dillin at the Salk Institute for Biological Studies, and Richard Morimoto at Northwestern University.

Peter Reinhart

The money, and the talent, is being directed toward biology that seeks to alter protein pathways that break down as people age, possibly leading to neurodegenerative diseases like Alzheimer’s and Parkinson’s. Proteostasis sees itself navigating the complex steps by which proteins that have already been synthesized based on genetic instructions are made fully functional and stable and are transported to their appropriate locations in the cell. Sometimes these pathways degrade as we age and cause neurodegenerative diseases. While we are young and healthy, we might produce amyloid plaques, for example, but a network of proteins works to dispose of them. One theory is about Alzheimer’s is that as we age, this garbage disposal capacity weakens, amyloid plaques build up, and we get neurodegenerative changes.

I sat down with Reinhart and Proteostasis co-founder Jeff Kelly a few weeks ago during a visit to Kelly’s lab at The Scripps Research Institute in San Diego. This is still very early stuff, and they offered none of the timetables biotech companies usually trot out about how they have drugs poised for the clinic in the next year or so. As Reinhart says, they are pursuing completely new targets, with conventional oral pills, that will seek to restore a sense of protein network balance—or proteostasis, as the name suggests—that should restore the functions people have for disposing of plaques thought to cause Alzheimer’s.

Some of these new targets, Kelly says, appear to be implicated in more than one disease. So if you restore protein network balance with an eye toward treating Alzheimer’s, your drug could also provide a benefit for another disease like Parkinson’s.

Before people get carried away, the company isn’t talking about creating silver bullets … Next Page »

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The new CEO of Quanterix isn’t afraid to dream big, and say it out loud.

“We participate in an $8 billion market,” says CEO Dave Okrongly, referring to the business of antibody-based diagnostics. “Quanterix can be a platform for that whole $8 billion market.”

Okrongly was named CEO of the Cambridge, MA-based company in September, and now that he’s been settling in for a while, I got a fresh update just yesterday. The company is the latest brainchild of Tufts University chemistry professor David Walt, who previously hit gold with Illumina (NASDAQ: ILMN), the San Diego-based genetic analysis powerhouse. Quanterix hasn’t said much publicly since it raised $15 million in venture capital back in August 2008, so I’ve been curious for some time about the company’s game plan for approaching the first segments of that $8 billion antibody-based diagnostics market.

Before diving into that, I first wanted to know a little about Okrongly. It turns out he’s got a doctorate in chemistry, and a resume with a lot of commercial experience, most recently as the senior vice president of the molecular diagnostics unit at Siemens Healthcare Diagnostics. Earlier in his career, he caught the startup bug at Applied Immune Sciences, an early gene therapy company that was acquired in 1995 by what’s now Sanofi-Aventis.

So while Okrongly, 51, rose in the ranks at big companies, and introduced a number of clinical diagnostic tests around the world, he felt the urge to come back to a startup to create something new. When he first heard about Quanterix, he didn’t think it was for him. “It seemed early and raw,” he says.

Then he met personally with Walt, who changed his mind. “I thought, holy cow, this could change the whole way we do immunodiagnostics. I gotta give this a run. This is a transformative technology with top-notch people around it.”

Dave Okrongly

Walt is equally enthused about the new leader at Quanterix. “Dave has exactly the right blend of diagnostics experience and strong technical background. He has helped push the company’s market strategy forward while helping it achieve its technical milestones,” Walt says.

The initial idea at Quanterix is to find a way to detect trace quantities of proteins in the blood, which could be an early warning sign for cancer or a neurodegenerative disease like Alzheimer’s or Parkinson’s. Quanterix says its test is about 1,000 times more sensitive than the gold standard ELISA assays. The older tests employ specific antibodies that are made to bind with certain biomarkers, known as antigens.

Some of these older tests can be quite cheap and reliable, but they also have their limits. One of the emerging ideas in biology is that tumors and other diseased tissues spill off specific proteins in the bloodstream, but these proteins generally come in trace amounts too small to be detected by the standard ELISA tests. The Quanterix system is designed to detect thousands of single molecules simultaneously, with proprietary chemistry and what the company calls “a relatively simple” instrument with a light source, optics, a digital camera, and an automated handling system. Software is then used to analyze the images.

Quanterix is betting that its ultra-sensitive tests can fill some of the gaps that ELISA tests struggle with. One well-known example is the prostate-specific antigen (PSA) screening test … Next Page »

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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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