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

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

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

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

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

Comments | Reprints | Share:          

A little more than 4 million children are born in the U.S. every year, and quite a few of those prospective parents are curious about potential genetic defects in their offspring. And so a group of investors are betting $20 million today that Redwood City, CA-based Gene Security Network is going to make some serious money from a variety of prenatal genetic tests for those curious parents.

Gene Security Network, which is being renamed Natera, is announcing today it has raised $20 million in a Series D financing led by Lightspeed Venture Partners, with participation from Claremont Creek Ventures and Sequoia Capital. The company, founded in 2004, has now raised a combined $42 million of venture capital in its four publicly announced financing rounds. Founders Fund, the West Coast’s largest in vitro fertilization center (Huntington Reproductive Center), and Google vice president Marissa Mayer have all participated in prior investment rounds in the company.

The company currently sells a test that examines the genetic profile of embryos that are candidates for implantation in a woman’s uterus through in vitro fertilization. The new investment will help Natera commercialize a noninvasive test that looks for Down Syndrome, as well as other genetic conditions. Several companies, including San Diego-based Sequenom (NASDAQ: SQNM) have been working for years on a test to detect chromosomal abnormalities like Down by looking at a drop of maternal blood, rather than using accurate but more invasive techniques like amniocentesis or chorionic villus sampling (CVS). Natera said today it is preparing to introduce the new commercial test in 2012.

Natera’s claim is that its test is less invasive than the other techniques, can be performed in the first trimester of fetal development, and approaches the accuracy of amniocentesis, as the company described in a story last month by Bloomberg News. The company generated $4 million in revenue in 2010, tripled that in 2011, and expects to triple that again to about $36 million in 2012, according to the Bloomberg report.

Comments (1) | Reprints | Share:          

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

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

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

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

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

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

Comments | Reprints | Share:          

San Diego-based Sequenom (NASDAQ: SQNM) says today it’s making a prenatal test for fetal Down syndrome available in 20 U.S. cities, 2 1/2 years after the company shelved the debut of an earlier Down syndrome test due to “mishandled” research data.

The proprietary test announced today is a laboratory-developed test (LDT) that detects an abnormal chromosome for Down syndrome in the fetal DNA fragments found in a maternal blood sample. A Sequenom-funded study that confirms that the technique is 99.1 percent accurate also is being published in the journal Genetics in Medicine by an independent group of researchers.

A spokeswoman for Sequenom says the test announced today is a “completely new” diagnostic approach that analyzes fetal DNA circulating in the mother’s bloodstream, using next-generation genetic “shotgun” sequencing technology developed by Illumina (NASDAQ: ILMN), the San Diego maker of genetic-analysis equipment.

The diagnostic technology that Sequenom shelved in 2009 was based on detecting fetal RNA in maternal blood samples. Following an internal investigation into the mishandled clinical data, Sequenom ousted CEO Harry Stylli, former R&D chief Elizabeth Dragon, and three other employees.

Sequenom says the 20 cities where its MaterniT21 test is now available are part of a phased rollout of the new test, which is intended for pregnant women who are at higher risk for Down syndrome (roughly half of the mental retardation cases in the United States). Out of 4.2 million births in the U.S. each year, about 750,000 are considered high-risk (based mostly on pre-screening or because the mother is 35 or older). Only about one out of five of these high-risk cases, however, undergo amniocentesis or chorionic villus sampling, two invasive procedures that can accurately determine Down syndrome but carry a slightly higher risk of miscarriage.

Sequenom is offering a different approach. A doctor would first send a maternal blood sample for the MaterniT21 test to the Sequenom Center for Molecular Medicine in San Diego, a lab certified under federal CLIA regulations just over a year ago.  (The company announced last week it is planning a similar CLIA-certified lab in North Carolina). The physician would receive the results in 8-10 business days, and determine if a higher-risk procedure is warranted. Andy Pollock of The New York Times wrote a thorough account of the technology here.

On Sept. 2, Sequenom said it had agreed to a SEC “cease and desist” order arising from an investigation into Sequenom’s misconduct, which securities regulators began in 2009. That order was focused on claims the company had made about its prior RNA technology, and included no monetary penalties.

The U.S. Attorney filed a criminal charge against Dragon in mid-2010 that alleged she had disseminated materially false information and had made misleading statements concerning tests of Sequenom’s RNA technology. She pleaded guilty, but died in February, before sentencing, according to the company’s last earnings filing.

Comments | Reprints | Share:          

Our roundup of San Diego’s life sciences news is short and sweet this morning. Could these be the dog days of summer?

—Scientists from Seattle’s Theraclone Sciences, San Diego’s Scripps Research Institute, South San Francisco’s Monogram Biosciences, and the New York-based International Aids Vaccine Initiative (IAVI) have identified 17 new human antibodies that target a chink in the armor of HIV. Under their collaborative agreement, IAVI owns the rights to all the antibodies for potential development of an AIDS vaccine; Theraclone keeps commercial rights to the broadly neutralizing HIV antibodies for therapeutic purposes.

—San Diego-based Zogenix reported encouraging results from a late-stage efficacy study of hydrocodone bitartrate (Zohydro), an experimental extended-release pain-killer intended to treat moderate to severe chronic pain in patients who require 24/7 opioid therapy for extended periods. Zogenix says the pain-killer met its end point for efficacy and was safe and well-tolerated. If approved, the drug would be the first extended-release hydrocodone available without acetaminophen.

—San Diego-based TrovaGene, which was previously known as Xenomics, said last week it has regained development rights for transrenal technology for prenatal and cancer diagnostics. TrovaGene had licensed its technology to San Diego-based Sequenom (NASDAQ: SQNM) in 2008, only to learn that Sequenom had “mishandled” its clinical trials data. TrovaGene alleged in a 2009 lawsuit that Sequenom had deliberately falsified the data.

—In his BioBeat column, Luke says the volatility roiling the markets these days is not as bad as the 2008 financial crisis that triggered the great recession—despite all the scary talk. Even though biotech investments carry considerable risks, Luke says this is no time for life sciences investors to hide their cash under the mattress.

—DNA sequencing tools from companies like San Diego’s Illumina (NASDAQ: [[ticker: ILMN]]) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) are improving so fast that it will soon be possible to generate the 3-billion-letter signature of a person’s complete genome for $1,000—and possibly in as little as 15 minutes. Xconomy has organized an afternoon conference with prominent leaders in this emerging field to explain the implications for personalized medicine. The event will be held Oct. 24, at the Byers Auditorium on UCSF’s Mission Bay campus. Online registration is here.

Comments | Reprints | Share:          

Bio-engineering tissue for use in humans seems to be gaining ground in San Diego, with Organovo and Advanced BioHealing reporting progress on separate fronts. We have that and more as part of our weekly review of local life sciences news.

—After developing an Amazon.com-like site that connects biotech scientists with clinical research organizations (CROs) that provide laboratory services, San Diego’s Assay Depot has developed a private version of its online marketplace for Pfizer, (NYSE: PFE). Assay Depot CEO Kevin Lustig told me the startup he co-founded in 2006 is now working on similar projects for at least three other global pharmaceutical companies.

—Organovo CEO Keith Murphy has found a way to help support the San Diego startup’s development of 3-D bio-printer technology, which has the potential to someday create kidneys and other organs. Organovo is now licensing its technology so drug developers can test their prospective drug compounds on 3-dimensional clumps of human cells. Murphy says three partnership deals signed so far almost have Organovo operating in the black.

—San Diego’s Advanced BioHealing, which makes bio-engineered skin grafts used to treat diabetic foot ulcers, is planning to hire 50 new employees following its acquisition by Shire. Advanced BioHealing CEO Kevin Rakin told me the deal also gives Shire, based in Dublin, Ireland, a new base of operations on the West Coast.

—In his BioBeat column this week, Luke asks, “Where have all the courageous biotechies gone? He quotes Kevin Starr of Third Rock Ventures, who told him he works to instill a “nothing is impossible” attitude in the biotechs he has helped to start.

—San Diego-based Sequenom, which has been working on a noninvasive diagnostic prenatal test for Down syndrome, says it’s now getting genetic sequencing equipment and other supplies from Illumina under a three-year agreement with the San Diego-based diagnostics equipment maker. The partnership should help Sequenom’s credibility as it gets closer to seeking FDA approval for its test, which scans a blood sample from a pregnant woman for DNA linked to Down syndrome in the fetus.

—The National Institutes of Health have awarded a $698,000 small business innovation research (SBIR) grant to NanoSort, a San Diego startup developing technology to advance the development of flow cytometers. Flow cytometry is a widely used biomedical technique to enumerate, analyze, and sort cells and particles. With innovations done in the lab of UC San Diego Professor Yuhwa Lo, NanoSort is working to develop a system-on-a-chip approach to drastically reduce the size and cost of flow cytometers.

Comments | Reprints | Share:          

A noninvasive diagnostic test for fetal Down syndrome is the hoped-for outcome a deal announced today under which Sequenom, the genetic testing vendor, will obtain tools from Illumina, which develops large-scale systems for genetic analysis. No dollar value was put on the three-year agreement, which calls for Sequenom and its subsidiaries to purchase sequencing equipment and consumables from Illumina. The goal is to develop a noninvasive way to detect an overabundance of chromosome 21 in pregnant women, a possible sign of Down syndrome in the fetus. The two San Diego firms say they will collaborate to seek regulatory approval.

Comments | Reprints | Share:          

There seemed to be a spate of financings among San Diego’s life sciences companies in recent weeks, and some local CEOs are telling me more deals are in the works. Your briefing begins now.

—San Diego has added another startup to its growing cluster of companies developing next-generation genome sequencing and molecular diagnosis technologies. BioNanomatrix, which has raised nearly $29 million to develop its proprietary nano-scale DNA mapping technology, said it has moved its headquarters from Philadelphia to San Diego’s Torrey Pines mesa.

—Awarepoint‘s new CEO, Jay Deady talked with me about his strategy for expansion at the company, which specializes in proprietary wireless real-time location system for tracking equipment and supplies in hospitals and other health care facilities. Deady, who has been working to raise another round of venture capital, has moved to diversify Awarepoint’s products and has beefed up the company’s sales reps and account managers.

—Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: [[VRTX]]), which has substantial operations in San Diego, agreed to pay $60 million upfront, and as much as $1.46 billion in follow-on payments to license new hepatitis C drug candidates from South San Francisco-based Alios Biopharma. I got a note from the Latham Watkins law firm, which was involved in the deal, that says: “This is the largest partnering deal Latham has ever done, the largest preclinical deal in history, the largest [hepatitis C] deal in history, and one of the 5 largest deals overall in biotech history. Had the full economics been announced, it would have been the largest biotech deal ever.”

—Luke’s BioBeat column argued that Twitter has become too useful for biotech executives to ignore anymore, and I think the same argument could be made for executives in other industries as well. As Luke put it: “I’ve been careful to follow people that have valuable and relevant information to report and share, while unfollowing everything else. I’ve expanded my professional network around the world by having conversations with readers I never would have met any other way. I’ve gotten story tips. And this is all happening even while … Next Page »

Comments | Reprints | Share:          

With San Diego’s Optimer and Conatus Pharmaceuticals successfully raising capital, and Sanderling Ventures reportedly planning to raise a new fund, it would be easy to think that the capital markets are opening a little for the life sciences sector. You decide.

—San Diego’s Optimer Pharmaceuticals (NASDAQ: OPTR) completed a secondary public offering of 7.8 million shares, including all 900,000 shares granted to underwriters for overallotments. Optimer sold 6.9 million shares for $11.25 a piece in the offering announced last Thursday. The company raised aggregate gross proceeds of $77.6 million before expenses. Optimer has been developing a new antibiotic treatment for C. difficile, a potentially deadly intestinal infection.

—A former patent agent for San Diego-based Sequenom (NASDAQ: SQNM) and his brother pleaded guilty to federal charges of passing inside information about the genetic test maker to two Florida men who collected $646,000 from illegal stock trading, according to the FBI. Aaron Scalia of San Diego and his older brother Stephen Scalia of Baltimore, MD, pleaded guilty to conspiring to commit securities fraud as part of an agreement with prosecutors.

—San Diego-based Conatus Pharmaceuticals closed on $20 million in an equity funding round led by AgeChem Venture Fund of Montreal. Conatus plans to use the proceeds to advance development of a new drug for treating hepatitis C.

—The San Diego-based West Wireless Health Institute named Ed Cantwell as a senior vice president, responsible for creating low-cost technology for delivering wireless health care in hospitals and other medical facilities. Cantwell was previously director of 3M’s wireless business and the founding chairman and CEO of Texas-based InnerWireless.

—San Diego’s Sanderling Ventures intends to raise a seventh fund, according to a report from PE Hub. The venture firm, which specializes in funding life sciences startups, raised $421 million for its previous fund in 2004.

—The number of IPOs in registration for U.S. exchanges increased to 121 at the end of 2010, according to a report from Ernst & Young. Among the 22 California companies waiting to go public are two San Diego life science companies: Ambit Biosciences and IASO Pharma.

—San Diego-based Genomatica signed a strategic agreement with Houston’s Waste Management to develop technology that can turn syngas into commercial chemical products. Landfills produce syngas, which is mostly carbon monoxide and hydrogen, as waste is broken down by exposure to high heat, pressure, and bacteria. Genomatica plans to create proprietary organisms and manufacturing processes that use syngas as the raw material for making certain industrial chemicals.

Comments (1) | Reprints | Share:          

San Diego’s life sciences community gained a new company when HemaQuest Pharmaceuticals decided to move its headquarters here, and a couple of Bay Area executives will also be working at San Diego’s Otonomy and Receptos. Get all your life sciences coming and goings here.

—A Food and Drug Administration advisory panel voted 13-7 to recommend approving bupropion/naltrexone (Contrave), a weight-loss drug developed by San Diego’s Orexigen Therapeutics for the U.S. market. The FDA is expected to follow the recommendation by Jan. 31. The FDA last approved a weight-loss drug in 1999. The FDA’s Endocrinological and Metabolic Drugs Advisory Committee recently blocked two other obesity drugs from approval—one by Arena Pharmaceuticals of San Diego and the other by Mountain View, CA-based Vivus.

—San Diego-based Otonomy named a Bay Area biotech entrepreneur, David A. Weber, as CEO and director. He replaces Avalon Ventures managing director Jay Lichter, who co-founded Otonomy in 2008. Lichter will continue to as a member of Otonomy’s board.

—Former Favrille CEO John Longenecker, who was named to head Seattle’s HemaQuest Pharmaceuticals a few weeks ago, has hired two former Favrille executives, Richard Ghalie and Tamara Seymour, to join him at HemaQuest. HemaQuest also is moving its headquarters to San Diego.

—Faheem Hasnain, the former CEO of Redwood City, CA-based Facet Biotech, is replacing interim CEO Bill Rastetter at San Diego’s Receptos, a startup looking to produce super high-res images of an important class of new drug targets. Hasnain sold his previous company to Abbott Laboratories.

—CommNexus, the San Diego non-profit wireless industry group, has reorganized its EvoNexus technology incubator by folding it within its own menu of programs. Former DivX CEO Kevin Hell has volunteered to serve as the pro bono chairman for EvoNexus and Cathy Pucher, who served as executive director, has accepted an offer to join Grid2Home, a smart grid software startup. Medical device and health IT startups based at the free incubator include Medipacs, Crisi Medical, and Independa.

—San Diego’s Sequenom (NASDAQ: SQNM) completed a stock offering that raised gross proceeds of $96.6 million (before costs of the offering are deducted) for the biomedical diagnostics company. The company offered 16.1 million shares, after underwriters exercised their option to purchase an additional 2.1 million shares, at a public offering price of $6 a share.

—Carlsbad, CA-based Verdezyne has raised $6.3 million of a targeted $15 million equity round. Verdezyne is developing gene libraries for use in industrial biotechnology, as well as developing its own sustainable technology processes to make adipic acid and other chemicals usually derived from fossil fuels.

Comments | Reprints | Share:          

San Diego’s Sequenom (NASDAQ: SQNM) says today it hopes to raise gross proceeds of $84 million from an underwritten public offering of 14 million shares of its common stock at a price of $6 a share. Jefferies & Company is the sole book-running manager for the offering. The company, which specializes in biomedical diagnostics, says it has granted the underwriters a 30-day option to purchase as much as 2.1 million additional shares to cover any over-allotments. The offering is expected to close Dec. 7. Sequenom share prices fell by more than 3 percent, or 22 cents, and were trading at about $6.60 at mid-day; trading was more than four times the recent average volume.

Comments | Reprints | Share:          

A new 7,000-square-foot genetic testing laboratory is under construction at Sequenom’s San Diego headquarters. The San Diego Union-Tribune says today the new lab will open later this year, as the company begins to process samples in its “start-over” clinical trial intended to demonstrate the accuracy of its non-invasive test for Down syndrome. Sequenom (NASDAQ: SQNM) had to toss test results it had collected before April 2009, when the company scrubbed the launch of its test for Trisomy 21, the scientific name for Down syndrome, due to “mishandled data.” The clinical trial is being led by researchers at Women and Infants Hospital in Providence, RI, which is affiliated with Brown University. Sequenom hopes to introduce the Down syndrome screening test by late 2011. The test is sensitive enough to identify fetal DNA circulating in the pregnant mom’s blood.

Comments | Reprints | Share:          

San Diego’s biotechnology industry has played an integral part in advances in genomics. Our reach extends from the research and tools created by startups during the genomics boom that began in the late 1990s, to cost-saving improvements made in DNA sequencing and the new field of synthetic genomics, which may provide important advances from biofuels to personal health. Looking at the history of local companies that helped shape the genomics industry gives us insights to the future, a topic we will also be discussing at the San Diego Biotechnology Network’s 10th Anniversary of the Human Genome event on August 18th. The evening will feature experts from Illumina, Synthetic Genomics, UCSD, the Genomics Institute of the Novartis Research Foundation, Fate Therapeutics, and Accelrys.

We’ve created a list of genomics companies in San Diego, with the companies listed according to the date they were founded or their first landmark in genomics. After the first announcement that the human genome had been sequenced in 2000, many thought that a “gold mine” of new disease targets awaited, and early efforts focused on identifying protein structures and functions. Companies forming in this era include GeneFormatics, ActivX, and Structural Bioinformatics. However, we soon realized that this was not enough; that drug targets must be validated by biology in order to “mine” them. In those early years, I was part of a genomics startup in San Diego called GeneFormatics, and we did some very interesting work with protein structure predictions. But like many other investigators, I think we might have lacked the crucial “gene to disease” piece required to use genomic data to create drugs. Even Craig Venter has said, “we have learned nothing from the (human) genome,” meaning that the realities of learning about health and disease are more complex than just understanding our genetic code.

Structural biology has always been a strong suit in San Diego, fueled by The Scripps Research Institute (TSRI) work on behalf of the Protein Structure Initiative and the San Diego Supercomputer Center at UC San Diego, which helps maintain the Protein Data Bank. High throughput protein structure companies Syrrx and Structural Genomics came on the scene in the late ’90s, along with the Genomics Institute of the Novartis Foundation (GNF) which is arguably the first translational research organization in San Diego.

The establishment of GNF, which brought big pharma literally to TSRI’s front yard, fueled another driving force in San Diego, known as … Next Page »

Comments | Reprints | Share:          

There wasn’t a lot of San Diego life sciences news over the past week, but what we got was big. Here’s our summary.

—San Diego-based Illumina (NASDAQ: ILMN), which makes high-speed gene sequencing equipment for biomedical laboratories, acquired Carlsbad, CA-based Helixis for at least $70 million, with an additional $35 million tied to meeting certain milestones. Helixis was founded three years ago and has raised a total of $17.3 million in venture capital from Domain Associates, Advanced Technology Ventures, and Okapi Venture Capital.

—The Paris-based drug giant Sanofi-Aventis plans to press ahead with a formal offer for Cambridge, MA-based Genzyme (NASDAQ: GENZ), according to a report yesterday from Reuters. News accounts of Sanofi’s informal offer earlier this week sent Genzyme shares soaring—but failed to stir the intended response at the company.

—San Diego’s Sapphire Energy has rapidly expanded its use of genetic engineering in its quest to make algae-based biofuels since last October, when president Cynthia “C.J.” Warner told me the biofuels startup was just using high-throughput screening techniques. Sapphire spokesman Tim Zenk said the pace of genetic engineering has been accelerating—although the algae used in Sapphire’s first biofuels production plants will not be genetically engineered.

—San Diego-based Sequenom (NASDAQ: SQNM) said it was one of 14 medical diagnostics manufacturers to get FDA letters earlier this month that question whether they got proper regulatory approval for the genetic tests they make. The Food and Drug Administration’s letters to the manufacturers, which are available on the agency’s website, follows FDA action against Poway, CA-based Pathway Genomics and five other companies involved in marketing direct-to-consumer genetic tests. In a filing with the Securities and Exchange Commission, Sequenom said it does not provide direct-to-consumer genetic testing, and that tests marketed under its SEQureDx program are laboratory developed tests (LDTs), certified under the Clinical Laboratory Improvement Amendments (CLIA) of 1988.

Comments | Reprints | Share:          

The big news came with a guilty plea by Sequenom’s former R&D chief, but it’s just the beginning. In pleading guilty, Elizabeth Dragon agreed to cooperate with a continuing criminal investigation of wrongdoing in the company’s development of a prenatal diagnostic test for Down syndrome. Our weekly wrap-up begins here.

—The former chief of research and development at San Diego’s Sequenom (NASDAQ: SQNM) pleaded guilty yesterday to conspiring to commit securities fraud. Elizabeth A. Dragon, who joined Sequenom in 2006 after 16 years at Roche Molecular Diagnostics, admitted in federal court that she had lied to investors about the sensitivity and accuracy of a prenatal genetic test the company was developing for Down syndrome. Dragon, who has agreed to cooperate with a continuing criminal investigation, also settled a civil suit filed yesterday by the Securities and Exchange Commission.

—San Diego’s DexCom (NASDAQ: DXCM) says it will comply with changes sought by the FDA in the way it labels certain biomedical devices used to monitor blood sugar levels. In a warning letter sent to the company, the FDA says DexCom should have disclosed that its sensor wires sometimes fracture, leaving wire splinters under the skin of some users.

—James Sweeney, who started CardioNet (NASDAQ: BEAT) in San Diego and led its $425 million IPO in 2008, says his advice to startup CEOs about initial public offerings is “to avoid going public at all costs.” Sweeney, who now heads San Diego’s PatientSafe Solutions, talked about IPOs, reverse mergers, and other corporate exits during a meeting of the San Diego Venture Group.

—In a small step for gene therapy, San Diego-based Celladon says its gene therapy treatment for healing patients with advanced heart failure didn’t appear to cause any serious side effects and was more effective than a placebo in a study with 39 patients. The biotech hasn’t yet disclosed exactly how effective its treatment is.

—Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) made an undisclosed equity investment in San Diego’s Synthetic Genomics, the startup co-founded by genomics pioneer J. Craig Venter. Life Technologies makes many of the laboratory instruments and materials that Synthetic Genomics and other biotechs use to sequence the genomes of different organisms.

—Life Technologies also disclosed that it has acquired a 74 percent ownership stake in Germany’s GeneArt, one of five small companies around the world that specialize in synthesizing custom-ordered genes for use in biomedical research.

—Luke profiled Blue Heron Biotechnology, which is the Bothell, WA, biotech that Craig Venter recently turned to in making the first bacterial cell with an entirely synthetic genome. Like GeneArt, Blue Heron is among the five small biotechs that specialize in synthesizing custom-ordered genes for use in biomedical research.

Comments (1) | Reprints | Share:          

A former senior vice president for research and development at Sequenom (NASDAQ: SQNM) admitted today that she knew “blinded” studies the company was conducting of a genetic test for Down syndrome were falsified.

Elizabeth A. Dragon, a former Sequenom senior vice president for research and development, admitted in an appearance before a federal judge this morning that scientists involved in the clinical studies either knew the outcomes before testing the samples, or had been directed to change their initial results. As part of an agreement with prosecutors, Dragon pled guilty to a single count of conspiracy to commit securities fraud.

In her guilty plea, according to a statement released in San Diego by U.S. Attorney Laura Duffy, Dragon admitted that she participated in a conspiracy to defraud Sequenom shareholders in 2008 and 2009 by disseminating false and misleading information about the screening test for Down syndrome that Sequenom had under development at that time.

Sequenom said last month it was restarting development of its prenatal test for Down syndrome after abruptly postponing the long-planned commercial introduction of the test on April 29, 2009. The diagnostics company said at that time only that the delay was due to “employee mishandling of R&D test data and results.”

Less than five months later, an internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, Dragon, and three other employees. Sequenom’s CFO and another executive resigned also resigned in September.

In her appearance today before U.S. Magistrate Barbara L. Major, Dragon acknowledged that she and others “caused Sequenom to falsely claim that the test’s reliability and accuracy were nearly perfect” and that she personally made such assurances to analysts and investors at meetings in San Diego, New York, and Vancouver, BC.

Sequenom agreed earlier this year to pay $14 million to settle a consolidated shareholder suit over the matter. In restarting development of the test, which screens a sample of the mother’s blood for fetal markers of Down syndrome, Sequenom raised $51.6 million in a private stock placement. At the end of March, the company’s accumulated deficit stood at $614.2 million.

Assistant U.S. Attorney Eric Beste, who has been involved in the Sequenom investigation for months, tells me that no other public charges related to the fraud at Sequenom have been brought at this time. Beste also adds, though, that Dragon “has agreed to make herself available to cooperate with our ongoing investigation.”

Comments | Reprints | Share:          

The sector was firing on all burners in the past week with fresh developments in devices, drug development, wireless health, and weight loss (just ask Larry Smarr). You can catch all the latest here.

—Sequenom (NASDAQ: SQNM), which scrubbed the launch of its diagnostics test for Down syndrome a year ago over “mishandled data,” is resuming development on a new testing schedule. The company also raised $51.6 million for R&D, commercial product development and general corporate purposes.

—Cytori Therapeutics reported (NASDAQ: CYTX) announced encouraging results from two small, placebo-controlled studies of its fat-derived regenerative cell therapy in cardiac patients. The double-blind studies, which were conducted in Europe, should pave the way for a larger test in 150-250 heart attack patients, the company said.

—Pathway Genomics fired the next salvo in the personal genome-testing wars with its announcement that it will begin selling genetic tests this week at 80 percent of Walgreens stores nationwide. Consumers can choose the $249 test that looks for a total of 46 genetic and health conditions, or a $179 test  that will look for either 23 genetic conditions or 23 health conditions.

—Sotera Wireless CEO Tom Watlington told me the company is preparing to test the ViSi, a wireless device that continuously monitors blood pressure, respiration, temperature, blood oxygen levels and heart rate, at five Southern California hospitals. If ViSi works, Sotera could begin marketing the device to hospitals during the first quarter of 2011, he said.

—Two San Diego companies were recognized for their innovations at the Wireless Life Sciences Investor Meeting in La Jolla, which was attended by 200 people, nearly double last year’s number. CortiCare, of San Diego, which provides remote and continuous electroencephalography monitoring of patients admitted to a hospital intensive care unit for signs of micro-seizures, was a finalist in the Best Clinical Applications category. Great Connections, which just moved to San Diego from Sweden, has technology that transmits ultrasound and X-ray medical images to any mobile device.

—Luke chatted with Internet pioneer Larry Smarr about his personal … Next Page »

Comments | Reprints | Share:          

Sequenom can cross off another item on its long to-do list. The San Diego-based developer of diagnostic tests is announcing today that it has raised $51.6 million in a private placement, an important step toward regaining the confidence of investors. The much-needed funds will go toward R&D, product commercialization and general corporate purposes, Sequenom (NASDAQ: SQMN) says.

The announcement comes less than a week after Sequenom disclosed that it was resuming development of its prenatal test for Down syndrome. In April, 2009 Sequenom abruptly delayed launch of the test because of what it described as “employee mishandling of R&D test data and results.” The ensuing mess brought inquiries from the Justice Department, the Securities and Exchange Commission, and cost several executives, including then-CEO Harry Stylli, their jobs. Last week, Sequenom agreed to pay $14 million to settle a shareholder suit over the matter.

Purchasers of the 12.4 million shares sold in the private placement paid $4.15 a share, a 23 percent discount from Sequenom’s closing price of $5.37 on Tuesday, a sign that investors are somewhat skeptical of the company’s prospects, Hapoalim Securities analyst Raghuram Selvaraju told Reuters. The company’s accumulated deficit stood at $614.2 million at the end of March, up three percent from the end of last year. Sequenom’s shares were trading lower today.

Sequenom hasn’t said how much money it will need to restart its Down syndrome diagnostic development program. As Bruce reported last week, Sequenom had available cash and securities of $29.2 million on March 31 (it was also owed $8.6 million on unpaid bills). The company used net cash of $13.4 million in its first quarter to support operations. So if that spending trend continues, today’s cash infusion should last more or less a year.

Sequenom says a laboratory test for Down syndrome could launch in 2011. So Sequenom has a ways to go before it can cross everything off its list.

Comments | Reprints | Share:          

San Diego’s Sequenom, which scrubbed the launch of its diagnostics test for Down syndrome back in April 2009 over “mishandled data,” says today it’s resuming development with a new testing schedule. Sequenom says it could launch a laboratory test “before the end of 2011″ if everything goes as planned.

In announcing its financial results for the first quarter that ended March 31, Sequenom laid out a timeline that begins with the optimization of a DNA sequencing-based test to be completed by the fall of this year. By the end of 2010, the company said it expects to have collected a sufficient number of blood samples from high-risk pregnancies for its blinded clinical studies. “These blinded studies represent the pivotal validation studies to support launch of a noninvasive T21 test,” the company says, using shorthand for Trisomy 21, the scientific name for Down syndrome.

In a surprise announcement last April 29, Sequenom postponed the long-anticipated debut of its flagship Trisomy-21 test, which screened a blood sample drawn from a pregnant mom for fetal DNA linked to Down syndrome-due to “employee mishandling of R&D test data and results.” A subsequent internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, senior vice-president of R&D Elizabeth Dragon, and three other employees. The CFO and another executive resigned.

The company, which is now headed by chairman and CEO Harry Hixson, still faces long odds on several fronts, including federal criminal and civil investigations as well as a looming shortage of cash. Sequenom did not say how much it will cost to restart development of its Down syndrome diagnostic test, but as of March 31, the company says it had total available cash and securities of $29.2 million—with another $8.6 million due from in unpaid bills. The company says it used net cash of $13.4 million in its first quarter to support operations.

Sequenom is reporting a loss of $16.9 million, or 27 cents a share, for the first quarter of 2010. That compares with a loss of $17.5 million, or 29 cents a share, in the same period a year earlier. The company says total revenue amounted to $10.6 million in the first quarter, a 22 percent increase over the 8.7 million in revenue during the same quarter last year.

Comments | Reprints | Share:          

We saw a spate of deal-making in the past week. Those developments and more are summarized for you here.

—Avalon Ventures, one of the few San Diego venture capital firms that continues to invest in early-stage life sciences companies, embarked on fund-raising for its ninth venture fund with the intention of raising $150 million from its investment partners. The fund will split its investments between life sciences and Web and wireless companies.

—Erin identified four San Diego life sciences companies that raised less than $1 million in March. Leading her under-the-radar deals list is Tracon Pharmaceuticals, which is developing treatments for cancer and age-related macular degeneration.

—Sequenom (NASDAQ: SQMN) said a federal judge in San Diego approved its $14 million class-action settlement with shareholders who sued the company after it retreated from plans to introduce a diagnostic test for Down syndrome due to “employee mishandling” of R&D test data and results

—Cadence Pharmaceuticals (NASDAQ: CADX) re-submitted its new drug application for an IV form of acetaminophen (Ofirmev) to the FDA. In February, the agency told Cadence it could not approve the drug because it found deficiencies during its inspection of third-party manufacturer, Baxter International.

—Schrödinger, a New York and Portland, OR-based maker of chemical-simulation software for drug development and research, received a $10 million equity investment from Bill Gates through Cascade Investment. The company has an office in San Diego.

—Althea Technologies, a contract development and manufacturing company focused on biologics, acquired the assets and IP portfolio of Waltham, MA-based Altus Pharmaceuticals for an undisclosed price. Althea said applications of Altus’ technology range from therapeutics to protein purification and catalysis.

—Luke profiled Proteostasis Therapeutics, a Cambridge, MA-based biotech working on drugs for Alzheimer’s disease and Parkinson’s disease. Jeffery Kelly of the Scripps Research Institute in San Diego is one of the scientific founders of the company.

Comments | Reprints | Share: