The people in San Diego who discovered a multi-billion dollar asthma drug for Merck have captured the attention of Big Pharma once again.

Amira Pharmaceuticals, a privately held company in San Diego, has agreed to be acquired by New York-based Bristol-Myers Squibb (NYSE: BMY) for $325 million in cash upfront, plus additional milestone payments of $150 million, meaning the deal could be worth up to $475 million for Amira shareholders. Bristol said in a statement that it plans to retain Amira’s scientists, and keep them in San Diego. Amira had 25 employees at last count, in November.

The key asset in the deal is Amira’s drug for pulmonary fibrosis. This is the disease that damages and scars the lungs, and is probably best-known for the high rate of incidence among first responders to the 9/11 terrorist attacks. There isn’t currently an effective FDA-approved treatment, and the disease makes it hard for people to breathe and ultimately kills an estimated 40,000 people a year. While this is a relatively small patient population, Amira CEO Bob Baltera has pointed out this is a “grievous illness,” which means anybody who comes up with a good drug could have a pretty sizable market opportunity.

Amira’s drug has passed the first phase of clinical trials to demonstrate safety, and is now being prepped for the second stage, in which researchers will get a better sense of its effectiveness.

“Bristol-Myers Squibb has identified fibrotic diseases as an area of high unmet medical need that complements our research efforts in several of our therapeutic areas,” Elliott Sigal, Bristol’s president of R&D, said in a statement.

The acquisition is clearly a big win for Amira and its shareholders. The company was started in 2005 by a trio of scientists-Peppi Prasit, Jilly Evans, and John Hutchinson-who worked together at Merck until that company shut down its San Diego operation. Their biggest accomplishment there was the development of montelukast sodium (Singulair), an asthma drug that generated about $5 billion in sales in 2010. Based partly on that track record, Amira raised more than $28 million in venture capital, most of which came from Novo A/S, Avalon Ventures, Prospect Venture Partners, and Versant Ventures in March 2007.

But money has been tight since then, at Amira, just like many biotech companies with products in the early stages of development. Amira has been supported in most recent years by an asthma drug collaboration with GlaxoSmithKline, although that wasn’t enough to cover all of the company’s R&D expenses. Amira cut half its workforce last November, and its scientific founders left the day-to-day operation as the company sought to conserve cash in a tough climate for early stage biotech financing.

Amira’s lead drug, AM152, is designed to block a novel biological target on cells, known as the LPA1 receptor. That biological pathway’s relationship to pulmonary fibrosis was described by Andrew Tager and colleagues at Massachusetts General Hospital in a paper in Nature in 2008. Scientists said that mice who lack LPA1 were protected from fibrosis and death after being exposed to likely environmental triggers of the disease.

Brisbane, CA-based Intermune (NASDAQ: ITMN) has helped blaze the trail here. Its experimental drug for pulmonary fibrosis failed to win FDA approval, but was cleared for sale in the European Union, which has been enough to boost the company’s market valuation to more than $2 billion. Others, like Gilead Sciences and Novartis have R&D programs against pulmonary fibrosis as well.

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The U.S. Food and Drug Administration has granted orphan drug designation to AM152, the lead drug candidate under development at San Diego’s Amira Pharmaceuticals for treating idiopathic pulmonary fibrosis, a lung disease that makes it difficult to breathe. In a statement yesterday, the company says the designation provides a seven-year period of market exclusivity and potential tax credits and regulatory advantages to the developer of a new drug therapy for diseases that affect fewer than 200,000 people in the United States. Amira says it is completing early stage tests of a compound that seems to help block the activation of a cellular receptor implicated in tissue fibrosis and related disease processes.

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We had a mixed bag of bad and good news from the San Diego life sciences industry this week heading into the holiday weekend.

—At least 11 shareholder lawsuits have been filed against San Diego’s Sequenom (NASDAQ: SQNM) since the medical diagnostics company disclosed on April 29 that four employees were suspended for “mishandling” research data supporting a noninvasive prenatal test for Down syndrome. (A Sequenom spokesman told me last night the four employess are still suspended). The SEC also has launched an investigation into the mishandled research data that goes as far back as June 2008, according to regulatory filing from Sequenom earlier this week.

—Some documents filed by Hayward, CA-based Questcor (NASDAQ: QCOR) show that it is the source of an experimental drug now under development by stealthy San Diego biotech Evoke Pharma for treating gastroparesis, a serious digestive ailment. Questcor stopped its development of metoclopramide, which has significant side-effects, in mid-2001, when British drugmaker Shire Pharmaceuticals withdrew from their drug development partnership.

—After raising more than $47,000, a cancer diagnostics startup founded by UC San Diego grad student Raj Krishnan, was one of 16 finalists this week in a global business plan competition sponsored by Cisco Systems and the Draper Fisher Jurvetson venture capital firm. Alas, the top prize—$250,000 in investment capital—was awarded to a team from the University of Virginia who founded Husk Power Systems, a startup developing miniature power plants for rural India.

—San Diego’s Vical (NASDAQ: VICL) says the DNA vaccine it quickly developed for the H1N1 Swine Flu produced “robust immune responses” in animal tests. While the U.S. Navy has supported Vical’s work so far, the company has not been successful in landing additional government funding needed to move to the next stage of vaccine development.

—San Diego respiratory drug developer Amira Pharmaceuticals reported encouraging results from animal tests of its experimental drug for reducing fibrotic lung scarring in mice with pulmonary fibrosis. The biotech hopes to begin human tests of its oral medication during the first half of next year. Andrew Tager, a pulmonologist at Massachusetts General Hospital and adviser to Amira, told Denise that the drug also shows promise against other fibrotic conditions, such as cirrhosis of the liver and some forms of kidney disease.

—Illumina (NASDAQ: ILMN), the San Diego-based maker of genetic analysis tools, said its second quarter sales fell short of the company’s forecasts. It generated about $161 million in sales during the quarter, compared with the expected range of $168 million to $173 million.

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The story around Amira Pharmaceuticals’ experimental drug AP2966 is beginning to get interesting. Yesterday the San Diego-based respiratory drug company said its experimental drug reduced lung scarring in mice, offering promise that the oral medication might one day be approved to treat pulmonary fibrosis. But it turns out there may be a lot more to this drug.

Dr. Andrew Tager, a pulmonologist at Massachusetts General Hospital in Boston and a scientific advisor to the company, said AP2966 shows promise against other fibrotic conditions, such as cirrhosis of the liver and some forms of kidney disease. That could make AP2966 a much bigger deal.

Amira already has conducted animal studies pitting AP2966 against pirfenidone, its closest potential competitor. Pirfenidone is approved treat pulmonary fibrosis in Japan and InterMune of Brisbane, Calif. plans to seek FDA approval for the drug. Tager said the Amira drug was superior to pirfenidone in animal models of pulmonary fibrosis and equivalent to pirfenidone in animal models of cirrhosis of the liver.

“The data is very impressive,” Tager said. “As far as what’s out there, this is one of the most promising.”

Amira’s drug targets a receptor called LPA1 that plays a role in inflammation and wound healing. Tager said that it is thought that in some people the receptor has an “over-exuberant response” to injury, which leads to a build up of scar tissue. Tager was the first to connect this receptor to pulmonary fibrosis in a paper published in Nature Medicine last year. He reported that mice lacking an LPA1 gene did not develop lung scarring when exposed to a chemical trigger.

It is still early days for AP2966. Amira CEO Bob Baltera said the company must complete toxicology studies and manufacturing work before it can initiate human tests, which the company hopes to begin during the first half of 2010. Baltera said animal studies did not point to any serious safety concerns. “The data looks clean and the animals look healthy,” he said. “But you never really know until you do the studies in patients.”

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The people at San Diego’s Amira Pharmaceuticals are certainly breathing easier today. The respiratory drug development company is reporting that an experimental drug for idiopathic pulmonary fibrosis reduced lung scarring in mice, bringing Amira closer to its goal of beginning human tests of the oral medication during the first half of next year.

In results presented this afternoon, Amira says that mice receiving the drug AP2966 for 14 days experienced a 40 percent to 60 percent reduction in fibrosis and inflammation. The findings were presented at an American Societies for Experimental Biology conference in Carefree, AZ.

Idiopathic pulmonary fibrosis is an incurable disease in which scar tissue builds up in the lung, making it difficult to breathe. It kills about 40,000 people in the U.S. each year. Amira’s drug targets a receptor called LPA1 that plays a role in inflammation and wound healing. It is believed that this receptor is up-regulated in people with pulmonary fibrosis.

“This is a very big announcement for us,” CEO Bob Baltera told me by phone. Amira was founded in 2005 by a dream team of scientists from Merck who specialized in developing drugs for asthma and inflammation. The company is developing drugs for respiratory and cardiovascular disease with pharmaceutical giant GlaxcoSmithKline, but plans to develop AP2966 on its own.

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If there’s a theme to be found in the innovation news for San Diego last week, it might be comings and goings. While some companies are making layoffs or even shuttering their doors, we also found a number of new startups taking root here (although not as many as a year ago).

—In a report on San Diego’s innovation economy, the non-profit business group Connect found 73 new technology companies were started here during the last three months of 2008, a 58 percent decline compared to the year-ago period. It’s a sign the local tech economy is down, but not out.

—Luke profiled Amira Pharmaceuticals, a biotech startup founded in 2005 that is developing a drug to treat pulmonary fibrosis. In this recession, it’s worth noting that the three scientists who started Amira joined forces after Merck had shut down the San Diego operation where they had worked.

—A different kind of start-over is San Diego-based SpectraScience (OTCBB: SCIE). After salvaging the biomedical equipment maker from bankruptcy in 2004, local entrepreneur Jim Hitchin is just beginning to sell the company’s updated “optical biopsy” machines. The technology combines a low-power, fiber-optic blue laser with computerized spectroscopy.

—Another new biotech that Luke profiled is San Diego’s Pico Pharmaceuticals. The company is using research out of New York’s Albert Einstein College of Medicine to develop highly specific small molecule drugs that bind more tightly to their receptor targets.

—JP (Juha-Pekka) found that Dotmatics, a U.K. bioinformatics and visualization software developer, has opened a satellite office near San Diego as part of its expansion into the U.S. life sciences market.

—Sorenson Media, a Salt Lake City-based developer of video compression and encoding software, also has opened a new San Diego office to serve as the central hub of its business operations.

—On the other side of the ledger, I rounded up more layoffs that have come to light in San Diego in recent weeks. They included specialized laser maker Cymer, which with its latest round of 130 cuts has eliminated 38 percent of its workforce since … Next Page »

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People with pulmonary fibrosis have a pretty raw deal. Scientists don’t really know what causes this lung-damaging disease, and there’s no really effective FDA-approved treatment. The disease makes it hard to breathe, and kills an estimated 40,000 people a year. That’s a bigger killer than some far better known culprits like prostate cancer.

A few drug companies have tried to fill this void with little to show for it yet. But San Diego-based Amira Pharmaceuticals says it is hot on the trail of creating a new small-molecule drug against a new target that it thinks could represent a big step forward. This program is in very early stages—too early to say anything about potential effectiveness—but I figured I’d listen because this company’s scientific team worked together at Merck’s former San Diego operation and played important roles in developing montelukast sodium (Singulair), the asthma drug that generates $4 billion a year in revenue.

Amira was started in 2005 by a trio of scientists—Peppi Prasit, Jilly Evans, and John Hutchinson—who worked together for years at Merck until that company closed its San Diego operation. I got the update on what’s new from CEO Bob Baltera, who came to Amira after a 17-year run at Amgen, while that company became the world’s largest biotech. He surprised me a bit, because instead of talking about the company’s two lead programs in development-including one in clinical trials for respiratory diseases that’s in a partnership with GlaxoSmithKline—Baltera mostly wanted to talk about a promising new protein target for pulmonary fibrosis characterized by Andrew Tager and colleagues at Massachusetts General Hospital. The Amira team is at work developing the best drug candidate it can to hit this new target.

“This is a grievous illness, and Amira is out at the forefront,” Baltera says.

There’s still a lot of work to do, maybe 12 to 18 months’ worth, before Amira will have a drug candidate that can enter clinical trials, Baltera says.

Tager’s research was described in January 2008 in Nature Medicine. Scientists found that mice who lack a certain protein called LPA1 were protected from fibrosis and death after being exposed to likely triggers of the disease.

Many of the first responders on Sept. 11, 2001 in New York are coming down with pulmonary fibrosis, so anything that’s remotely successful … Next Page »

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