When somebody gets a fever in a poor country, there is no quick or easy way to tell whether it’s a symptom of flu, malaria, a bacterial invader, or some other bug.

And if you don’t what it is, then it’s hard to treat.

So it’s only natural that shrinking modern diagnostic tools into a lightweight box that’s fast, accurate, cheap, and rugged enough for the African bush is one of the big ideas the Bill & Melinda Gates Foundation has supported in the past five years. The instrument is now starting to take shape under the direction of a team at the University of Washington, through what’s called the DxBox, which looks a little like the popular video game console with a similar name. And this particular box is entering a delicate phase in which big decisions are being made about whether it is really ready for a prime time commercial push, in which it could help healthcare workers better diagnose millions of people.

The original Gates grant, worth $15.4 million over five years, went to a diverse collaboration between a pair of bioengineering labs at the University of Washington, global health experts at Seattle-based PATH, and a couple of commercial partners in Redmond, WA-based Micronics and what used to be called Bothell, WA-based Nanogen (now part of ELITech Group). Four years have now passed by since the first check arrived. As the lead scientist on the project, UW bioengineering chair Paul Yager, put it in a recent UW symposium, “it’s put up or shut up time.”

What he really meant is that enough work has been done that it’s time to size up the real-world commercial potential of the product, or maybe spend some more time back at the drawing board. “You have to take what’s in a lab here in Seattle and scrunch it down to that,” Yager said, pointing to a prototype sitting on a shelf in his office, when I followed up recently. “It’s probably about two years away.”

DxBox

So after all of the long hours from 40 UW graduate students and postdocs, another 60 professionals outside the UW, and a lot of trial and error to meet all the demanding requirements of a portable diagnostic, what can this DxBox really do?

It is made to take a pinprick of blood, which a health worker squeezes onto a cartridge that slides into an 8-pound prototype device. All the health worker needs to do is hit “run,” and the pumps and valves inside the little box perform two kinds of automatic diagnostic tests. One is an immunoassay test that uses conventional antibodies, not all that different from a pregnancy test, that are made to bind with certain microbial invaders or antibodies that people produce in response to a certain infection. The other test is a more precise nucleic acid assay, which is supposed to identify microbes at the DNA level. Both tests are made to spit out an answer on an LCD screen in whatever the worker’s native language is, within 30 minutes, to identify the patient’s illness, Yager says. And the machine can run a full day on a laptop battery in places without electricity, Yager says.

The DxBox was designed to screen for six common illnesses that are associated with high fevers—flu, malaria, typhoid, rickettsial infections, measles, and dengue. Even from the start, the machine wasn’t made to be comprehensive, since it doesn’t screen for two of the biggest killers …Next Page »

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The Seattle-based Infectious Disease Research Institute, a nonprofit global health research center, said today it has agreed to license technology from Israel-based NanoPass to use very short “microneedles” that cause less pain than traditional needles. The technology is supposed to stimulate the dense network of immune system cells just under the surface of the skin, which might make a number of new vaccines more protective, IDRI said in a statement. Financial terms of the agreement weren’t disclosed.

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We had a smorgasbord of life sciences news this week, featuring updates on Northwest companies developing drugs, devices, vaccines, and scientific instruments.

—Cell Therapeutics has bet the company on pixantrone for non-Hodgkin’s lymphoma, and this week it hit one of its key goals for the year, by turning in its new drug application to the FDA before the end of June. The Seattle company (NASDAQ: CTIC) fell short in its bid to unload all of its $118.9 million in debt, instead getting rid of about $52.9 million of its liabilities.

—Seattle-based Targeted Genetics (NASDAQ: TGEN) has been in survival mode for some time now, and this week it said it will cut its staff down to as little as 10 to 15 employees. The company hopes the cuts will stretch its cash reserves into August, giving it enough time to close a deal to keep the company from closing its doors.

—Sanofi-Aventis CEO Chris Viehbacher traveled to Seattle last week for a global health meeting, and took time to offer a glimpse into his strategy to make the Paris-based drugmaker a bigger player in global health. He also shared his perspective on partnerships with biotech companies.

—Seattle-based Amnis shared its story of how it has rolled out a second-generation version of its sophisticated lab instrument, which combines properties of a microscope with a high-speed cell counter called a flow cytometer. Orders are building up, and this could be the company’s first full year of profitability after a decade in business, says CEO David Basiji.

—Oncothyreon (NASDAQ: ONTY), the Seattle-based developer of cancer drugs, said that its German partner, Merck KGaA, started up a pivotal trial of its immune-boosting therapy, Stimuvax. It’s the second big trial of this drug, which is already being tested against lung cancer. If it’s successful, Oncothyreon will stand to get royalties on product sales.

—AVI Biopharma (NASDAQ: AVII), the Portland, OR-based developer of RNA-based therapies, said it is working on a contract to develop swine flu drugs.

—Bothell, WA-based Mirabilis Medica told its story about how it is developing the first use of high-intensity therapeutic ultrasound waves to treat uterine fibroids, as a non-invasive alternative to surgery.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drugs, gained full rights to a technology license from Denmark-based RiboTask to make its treatments more stable, and less likely to spark inflammation.

—Global health funding has quadrupled over the past two decades, and while a lot of this new money comes from foundations like the Bill & Melinda Gates Foundation, the biggest financier of this work is now the U.S. taxpayer, according to this intriguing new study from the University of Washington.

—Anthony Fauci, the head of the division of the National Institute of Allergy and Infectious Diseases, called for a transformative research agenda to fight tuberculosis, like the country did for HIV in the 1980s, during a stop last week at the Pacific Health Summit in Seattle.

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Not long ago, drug companies would break out quarterly income streams from the U.S., Europe, Japan, and something called ROW, as in rest-of-world. Investors usually didn’t care about the last numbers, because they were little more than a rounding error.

That’s not the case anymore, as these countries are often called “emerging markets.” They’ve grown enough that Chris Viehbacher, CEO of one of the world’s largest drug companies, Paris-based Sanofi-Aventis (NYSE: SNY), traveled to Seattle this week to curry favor with global health officials at the Pacific Health Summit. The head of a major drug company might have gotten a cold shoulder at a meeting like this a decade ago, but these officials welcomed Viehbacher. Sanofi made headlines at the summit, as it said it plans to donate as many as 100 million doses of flu vaccine to the World Health Organization to help poor countries cope with the swine flu pandemic.

This could all be written off as some kind of public relations exercise, but I wondered if there’s more to the story. The pharmaceutical industry is terrified by a series of patent expirations coming over the next few years, which will allow a flood of cheap generic copies to grab market share away from franchise products that generate an estimated $67 billion in annual sales. Not much has emerged in the industry’s R&D pipeline to replace all these aging blockbusters. Some analysts predict pharma companies will have to continue acquiring and partnering with innovative biotech companies to sustain themselves.

Sanofi has made a couple aggressive moves like this since Viehbacher took over Sanofi in December. Earlier this year, it acquired cancer drugmaker BiPar Sciences for $500 million (giving BiPar investor Paul Allen a big payday), and partnering with South San Francisco-based cancer drug developer Exelixis for a deal possibly worth more than $1 billion.

But Viehbacher also has his sights on making money on low profit-margin, high-volume products in parts of the world that are off the pharma industry’s beaten track. It’s part of a strategy to make Sanofi a more globally diversified company, rather than placing all its chips on the U.S. and Europe—where governments are looking for ways to trim healthcare spending.

Here are edited highlights of a wide-ranging conversation we had about industry trends, the reasons for donating flu vaccine, and how he likes to deal with biotechs.

Xconomy: Why come here to the Pacific Health Summit?

Chris Viehbacher: I laid out a strategy for the company in February, to become a global healthcare company, versus a pharmaceutical company focused on the U.S. and Europe. That means we want to be present in all countries, and therefore, you have to address all diseases in all countries. You can’t just take medicines doing well in the U.S., and try to find people rich enough in other countries to buy them. So, the company is hugely committed to these huge global health issues. We probably, I think, do more than just about anybody. We are very significant in malaria. We are the only company doing things for Sleeping Sickness. We have a new antibiotic coming for tuberculosis, which could cut the treatment time down to four months [from six months], which is huge in the area of TB. We are spending huge amounts of money developing a Dengue Fever vaccine and developing facilities for it. We have partnered with a lot of people in that room, whether it’s the Gates Foundation, GAVI[Global Alliance for Vaccines and Immunization], the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Those are all people we try to work with on a regular basis. It’s very much in line with our strategy. I take a personal interest in these global health issues, and it’s good to meet folks.

X: To what extent does the donation of flu vaccine amplify the company’s global health effort, or show that you’re serious?

CV: The pandemic flu donation is exceptional. I’d normally say donations are not the way to deal with issues of access to medicine. It’s not sustainable. If we were dealing with malaria, or tuberculosis, then I wouldn’t …Next Page »

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Many people thought tuberculosis had gone away. Unfortunately, it has not. Indeed, it is coming back strongly, and in a multidrug resistant form. This has occurred at a time of a vacuum in drug discovery and development for tuberculosis.

Fortunately, government institutions like the National Institutes of Health, non-governmental agencies like the Seattle Biomedical Research Institute, PATH, and even pharmaceutical companies are investing in tuberculosis research.

Interestingly, pharmaceutical companies are doing this for the public good, as it is unlikely that this research could ever be turned into a profitable business for them. Nonprofit organizations like the Global Alliance for TB Drug Development are clinically testing new and more convenient treatments for patients.

Encouragingly, at the Pacific Health Summit, the Global Alliance and Johnson & Johnson’s Tibotec subsidiary announced a novel partnership devoted to the development of an innovative new drug for both drug-sensitive and drug-resistant TB [See Xconomy's earlier coverage].

Much of this work in research and development is being shepherded and supported by the Bill & Melinda Gates Foundation. Scientists follow the money. If the money flows in to support TB, so too will high-quality scientists.

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[Updated: 7:05 pm Eastern]

Wealthy donors like the Bill & Melinda Gates Foundation have helped spark a movement that has almost quadrupled financial support for global health in the past two decades, yet much of the world’s financial support is being spread unevenly, and isn’t always getting to the poorest people in the neediest countries, according to a new study by researchers at the University of Washington and Harvard University.

It might sound surprising, but the people who produced this edgy piece of research, which claims to be the first ever comprehensive look at funding for global health projects, are sponsored by the Gates Foundation. The study, being published in The Lancet, is co-authored by Christopher Murray and six colleagues, including Catherine Michaud of the Harvard Initiative for Global Health. Murray is the former Harvard University professor recruited to the UW two years ago with a $105 million donation by the Gates Foundation to establish the Institute for Health Metrics and Evaluation (IHME).

The report—written without input from the Gates Foundation—is loaded with financial detail, which will certainly be required reading for those who argue that powerful private donors aren’t being transparent enough about what they do. The report found that financial support for global health has climbed from $5.6 billion in 1990 to about $21.8 billion in 2007. This field that attempts to reduce health disparities around the world, used to be primarily the responsibility of international organizations like the World Bank and the United Nations, but now gets almost one-third of its total funding from private sources, according to the study.

Yet even as all this money has flowed in for help, 12 of the 30 countries with the highest burden of disease in the world weren’t getting as much aid as people in healthier, and in some cases, wealthier, countries, according to the study. Angola, Ukraine, and Thailand were among the neediest countries that haven’t been getting their share of health aid.

“The size and scale of it all was surprising,” Murray says. “We all knew the money was going up, but it was much a bigger increase than we thought we’d see. ”

Since no one organization has done a comprehensive analysis of how much money is going to global health, which countries get the money, and which disease categories receive the most, the findings are likely to spark a lot of conversation in global health circles about how to better allocate resources.

“Everyone’s watching,” Murray says.

Some small island nations like Micronesia and the Solomon Islands receive more health aid per capita than countries with higher rates of illness—like Niger and Burkina Faso, according to the study. Mali and Colombia have about the same level of sickness, yet Colombia receives triple the health funding, researchers said. Researchers said they don’t know exactly why that is, although many of the countries with great health needs, and that lack support, are French-speaking former colonies in central and western Africa, Murray says. …Next Page »

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Anthony Fauci is known around the world as a leading scientist and advocate, starting in the early 1980s, for research to fight HIV. The Voice of America once called him a “tireless warrior” for the cause. Now, Fauci says, biologists need to channel their creative energy to fight another deadly bug that has been around for centuries and rarely makes headlines—tuberculosis.

Fauci, 68, has been the director of the National Institute of Allergy and Infectious Diseases since 1984. This division of the U.S. government has a $4.7 billion annual biomedical research budget, which happens to be a lot more than the Bill & Melinda Gates Foundation gives away every year. So people listen carefully to what Fauci has to say. He delivered a high-intensity call to action yesterday to a crowd of 250 global health stars at the Pacific Health Summit, and I followed up with him for an exclusive interview.

First, a quick reminder of why anyone should pay attention to TB. It’s a contagious bacterial infection, and kills an estimated 1.7 million people a year worldwide, ranking it right up there with the world’s biggest scourges, like HIV and malaria. Yet it’s basically been treated like a research backwater for too long, Fauci says. The state of the art is depressing. There’s no vaccine. Diagnostics are lousy. The standard course of therapy—which has seen no improvement in 40 years—involves four drugs that must be taken daily for six months. Fail to comply fully with doctor’s orders, and you increase the odds of developing drug resistance, making it harder to treat.

Incrementalism in this field won’t cut it—a bigger transformation of TB is required to get serious about the disease, Fauci says. Here are the edited highlights of our conversation:

Xconomy: Why has TB been on the back burner of research priorities for so long?

Anthony Fauci: When you think about how basic and applied research drive a particular field, a lot of it has to do with the interest and energy of investigators who get involved in the field. They see it as an opportunity for them to make a contribution, as well as to advance their own careers.

TB has suffered a lot because of its own success historically. There were some blips when TB rebounded in the mid-80s and early 90s, and most recently with the serious issue of multidrug resistant TB and extensively drug resistant TB that has sort of rekindled interest. But most young investigators have not seen, with some exceptions, a career in research of TB as something to pursue. A lot of the transformational research from the past few decades, from the end of the 20th century and early 21st century, in the arena of systems biology, genomics, and all the other -omics fields, and all sorts of host-pathogen interaction study, has really passed by TB research.

The point I made in my talk is we’re starting to see a rekindling of some effort. We are really going to have a research agenda, and have research play a role in what is a very broad, heterogeneous, comprehensive approach to TB control, of which research is only one element. We have, in our possession, many of the tools if properly implemented, that could go a long way to control TB, including MDR and XDR TB. But we don’t have …Next Page »

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Center stage in Seattle life sciences moved to the waterfront this week, as 250 global movers and shakers in science, global health, and the pharmaceutical business gathered for the Pacific Health Summit.

—The Pacific Health Summit, an invitation-only event of global health stars, in its fifth year, focused this year on multidrug resistant tuberculosis, as I wrote in this preview story. Big names from global health came to brainstorm, including Margaret Chan of the World Health Organization, Anthony Fauci of the National Institutes of Health, and Chris Viehbacher, the CEO of Sanofi-Aventis, the world’s largest vaccine maker. Seattle’s Infectious Disease Research Institute is one of the players in this field, too, through work supported by Eli Lilly.

—Every good conference like the Pacific Health Summit needs power players competing for media attention. This year, we had two pieces of international news. Johnson & Johnson announced a deal to co-develop a new drug with the nonprofit TB Alliance; the deal could lead to the first new drug against tuberculosis in more than 40 years. Sanofi-Aventis also broke some news by announcing it will donate 100 million doses of flu vaccine to the WHO, to help poor countries cope with the swine flu pandemic.

—I profiled Beat Biotherapeutics, a Bellevue, WA-based company that envisions a way of generating stem cells that could perform the function of a cardiac pacemaker, or maybe someday even regenerate heart muscle that’s been damaged by heart attack. This company is built on years of research by UW stem cell scientists Chuck Murry and Michael Laflamme, and is married to bioengineering techniques from Buddy Ratner’s lab at the UW.

—Mukilteo, WA-based CombiMatrix (NASDAQ: CBMX) never captured much of the market for sophisticated gene chips used in modern biotech labs, which is now dominated by Santa Clara, CA-based Affymetrix and San Diego-based Illumina. But now CombiMatrix hopes to carve out an emerging niche by marketing its DNA microarray instruments as a diagnostics service to physicians, who are looking for accurate ways to diagnose the aggressiveness of an individual patient’s form of cancer, and to use genetic screening to catch malignancies earlier.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drugs, has been working hard to clean up its balance sheet the last few months. It faced a cash crisis earlier in the year, and then raised $7.25 million from Novartis, another $10.5 million from investors, and used some of the proceeds this week to pay off its $5.5 million debt to GE Capital.

—Seattle’s Infectious Disease Research Institute said it is offering up its immune-stimulating compounds known as adjuvants to the world’s major vaccine makers. With the right partnerships in place, these adjuvants have potential to greatly amplify the world’s supply of flu vaccine, says IDRI founder Steve Reed. This may come in especially handy if the swine flu pandemic takes a severe turn for the worse.

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Johnson & Johnson, the diversified healthcare giant, is forming a partnership with the nonprofit TB Alliance to share expertise and resources needed to finish clinical trials aimed at developing the first new drug for tuberculosis in more than 40 years.

The announcement from J&J (NYSE : JNJ) is being made this morning in Seattle at the Pacific Health Summit, the invitation-only gathering of 250 of the world’s leading scientists, public health officials, and businesses focused on global health. This is the first big announcement to come from this event, known as the “Davos” of global health, which I previewed yesterday.

J&J’s Tibotec division and the TB Alliance will focus their energy on a drug called TMC207. This product recently passed a mid-stage clinical trial of 47 patients, in which almost half of people with multidrug resistant forms of TB had no evidence of the bacterial invader in their mucus or phlegm after eight weeks of treatment, compared with one out of 10 who did that well on placeo (9 percent). The findings, published recently in the New England Journal of Medicine, suggest the treatment may have what it takes to be the first approved drug with a new way of working against the disease since the 1960s.

About 1.5 million people worldwide die each year from TB lung infections, making it one of the world’s deadliest diseases, along with HIV and malaria. Drug companies traditionally haven’t invested much in the field because it offers far less profit potential than diseases that are more common in wealthy countries, like cancer and diabetes.

“We see tremendous potential in this collaboration and in the future of TMC207 as part of a critically-needed new TB regimen,” said Mel Spigelman, president and CEO of the TB Alliance.

The TB Alliance, based in New York, generated $30.8 million in public support and other revenue in 2007, according to its annual report. It has partnerships …Next Page »

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Movers and shakers in global health—including a lot of people not named Bill & Melinda—will be buzzing around the Seattle waterfront this week for what some people like to call the “Davos” of global health.

Like the World Economic Forum in Davos, Switzerland—another picturesque setting with mountains and water nearby—the Pacific Health Summit is an invitation-only annual conference of about 250 world leaders in science, politics, and business. This year, they are gathering to brainstorm about how to put a dent in one of the world’s deadliest infectious diseases: tuberculosis.

The list of power brokers appearing on the docket includes: Margaret Chan, director-general of the World Health Organization; Chris Viehbacher, CEO of drug and vaccine giant Sanofi-Aventis; Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases; and Paul Farmer, founding director of Partners in Health, the famed physician to people in poor countries. Big Pharma will be well-represented by the likes of Merck, GlaxoSmithKline, Johnson & Johnson, Bayer, and others.

The main theme of discussion, TB, rarely captures the attention of the masses, like, say, swine flu does. But it’s at least as worrisome, and it’s not going away. The disease, caused by a bacterial invader that attacks the lungs, is characterized by a chronic cough that makes it especially contagious. There is no vaccine, diagnostics aren’t very accurate, and no new drug has been developed in decades, as Farmer put it in a recent appearance in Seattle. That adds up to a pretty grim outlook for a lot of people. About one in three people on Earth (2 billion cases) are estimated to be infected, and TB kills 1.5 million people a year—ranking it right up there with HIV and malaria as one of the world’s leading killers.

“With TB, there have been no new drugs for 40 years,” says Michael Birt, the executive director of the Pacific Health Summit, and senior vice president for health and society affairs at the National Bureau of Asian Research. “Industry can and should contribute more.”

This field has traditionally been plagued by a classic free market failure. No new drugs get developed …Next Page »

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You know you’re a global health rock star when you can tease the Bill & Melinda Gates Foundation on its home turf and get away with it.

That was what Paul Farmer did last night as the keynote speaker for the Seattle Biomedical Research Institute’s Passport to Global Health fundraiser. Farmer is best known as the protagonist in Tracy Kidder’s book Mountains Beyond Mountains, which tells the story of how Farmer found his calling as a young doctor at Harvard to treat the serious illnesses of the world’s poorest people. He spoke to a crowd of several hundred people gathered for dinner at the Washington State Convention and Trade Center.

Farmer peppered his talk with lots of side references and jokes. “I like to use levity when I feel emotional,” he said at the beginning.

For people in global health outside of Seattle, the Bill & Melinda Gates Foundation is simply known as “The Foundation,” sort of like how the CIA is known to some as “The Firm,” Farmer said. And even though “The Foundation” is famous for insisting on metrics of progress before they write checks, Farmer resisted using any statistics at all to describe his fight against global scourges like tuberculosis.

Instead, Farmer used an old-fashioned storytelling narrative to show how his work can make a difference. He showed a picture of a young boy in Haiti who came into the clinic looking skeletal, suffering from TB. He was put on “lots of drugs, high doses, never miss a dose,” the tenacious regimen that Farmer and his colleague from Partners In Health, an international healthcare nonprofit, swear by.

Once the drugs went to work, he needed to put on his medical detective hat and find out where the TB came from to cut it off at the roots. Most kids spend their time in two places—school and home. So he investigated, and found out the boy’s father had TB, too, and needed treatment.

After getting to the bottom of this, Farmer said self-deprecatingly, “They get better, I forget about them.” He lost track of the boy after the treatment.

Nine years later, the little boy has grown up into a teenager, and he recently sent a photo to Farmer via e-mail to provide a progress report. The crowd ooohed when Farmer showed the picture of an athletic-looking young man, smiling, wearing a black Air Jordan T-shirt that would make him fit in at any American mall.

All this is happening on what Farmer called “the delivery end” of global health, but he said none of it would be possible without what scientists like those at Seattle Biomedical Research Institute do on the “discovery end.” And he reminded the audience that there’s an enormous amount of work to do on discovery. TB, for one example, hasn’t had any innovative new drugs come along in decades, there’s no vaccine, and diagnostics aren’t very accurate. “I want everybody here in the lab to stay in the lab,” Farmer says.

Farmer, who started out in the global health field 26 years ago, long before it could pull together swanky fundraisers like this one, closed his talk by reminding people how far the field has come.

“This city and a number of institutions here have performed CPR on international health,” Farmer said. “It was not a growing field, it was not drawing young people. It was kind of a hangdog, depressed field.” That’s all changed now, he said. “I think we’re on a path to real progress in global health and reversing epidemics.”

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Biomedical research funded by Uncle Sam is hot, but publicly traded biotech companies that seek to develop those discoveries in the Northwest are cold. Here’s a recap of the week’s ups and downs in the local life sciences scene:

—President Obama is proposing a whopping $10 billion addition to the National Institutes of Health’s budget as part of his economic stimulus plan, and this has researchers in the Northwest scrambling to turn in their applications. The University of Washington, already the nation’s largest public research center with $1 billion a year in sponsored research, may capture as much as another $300 million in federal stimulus grants, says Linden Rhoads, vice provost of UW TechTransfer. Still, she says that’s no excuse for state lawmakers to start whacking away at the university’s state support.

—Yet even with basic biomedical research on the rise, many public biotech companies are struggling. Based on my review of the quarterly financial filings of the 12 public companies in the Northwest, six were looking pretty vulnerable with less than $20 million in available cash as they headed into 2009.

—Healionics, the Redmond, WA-based company that spun out of the University of Washington bioengineering lab of Buddy Ratner, took its first step this week toward becoming a commercial business. It shipped its first product, a biomaterial coating for shunts that are made to relieve pressure behind the eyes of dogs with glaucoma. If it works by helping allow fluid to pass more easily through the shunt, it could set an important precedent for using the biomaterial in human beings with glaucoma—a more lucrative potential market.

—Halosource, the Bothell, WA-based maker of technology to purify drinking water, won certification from the U.S. Environmental Protection Agency for its technique. This is no big deal in the U.S., where we take clean drinking water for granted, but it’s an important validation to partners Halosource is working with in India, China, Brazil and other parts of the world that are looking at its cheap, gravity-fed system for ridding water of viruses and bacteria. This technology is now providing clean water for 2 million people in India, double the number who were using it nine months ago.

—MDRNA (NASDAQ: MRNA), the Bothell, WA-based developer of RNA interference drug technology, received a bit of a lifeline this week when it received $7.25 million from Novartis in exchange for a non-exclusive worldwide license to its technology. But easy come, easy go. The company has to use $870,000 to write a severance check to its former CEO, Steven Quay.

—Nanostring Technologies CEO Perry Fell has resigned his post, and is being replaced …Next Page »

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(Updated) Angel investors and biotech companies don’t usually mix. Most biotech startups begin with university research, and embark on a decade-long quest of product development, all while inhaling several hundred million dollars of capital, and carrying the burden of a 90 percent failure rate. This is where deep-pocketed, risk-seeking venture capitalists and public equity investors tread, not angels who are long on experience and short on dough.

So I was curious why, in the teeth of a recession, and as many biotech companies are facing extinction, the Seattle-based Zino Society chose to organize its first Life Sciences Investment Forum. This event, held yesterday at the Pan Pacific Hotel in Seattle, drew 12 determined startup companies from around the country, developing drugs, diagnostics, or medical devices. They all lined up to make their best 7-minute pitch to attract angel investment bucks.

The event drew some of the pioneers of Seattle biotech, including Bruce Montgomery of Gilead Sciences, Bruce Carter, the former CEO of ZymoGenetics, and H. Stewart Parker, formerly the CEO of Targeted Genetics. They were there to listen and to offer advice to the entrepreneurs, and maybe more than anything, provide a pep talk for people willing to try to do this innovative work. In his keynote, Montgomery outlined four ways he sees businesses have historically made money in the past. The first was centralization of small businesses like coffee (Starbucks); second was becoming the low-cost provider (Wal-Mart); third was leveraging or securitizing assets (Wall Street); and fourth is through innovation. Guess which one he believes has a future?

“Innovation is the only way to have a true win-win for our society and make us competitive with foreign competitors,” Montgomery said. “Innovation still actually has a chance.”

Zino Society did its best to make this a bit fun, and a bit competitive, with awards. The award for best presenter, as voted by the audience of about 100 Seattle-area angel investors, was given to Douglas Turnquist of Salt Lake City-based ThermImage. The prize for best investment opportunity went to Malvern, PA-based Carbon Nanoprobes. One big winner will be selected in coming weeks by the Zino Society for a $50,000 investment, and the right to make a presentation next month on a bigger stage at Invest Northwest, the regional life sciences investing conference.

So what were some of these innovative companies about? Here were a few of the highlights:

—Carbon Nanoprobes CEO Brian Ruby had one of the best opening gambits in his presentation. “We take pictures of tiny things. We’re like the paparazzi of atoms and molecules,” he said. Essentially, his company’s nanotech materials are used to provide high-resolution images for customers who need to look at small things in the semiconductor, basic research, and biomedical research businesses. It has raised almost $1 million from about 30 investors in Seattle, and is moving into manufacturing its disposable product before the end of March. He said the company has sales leads from big-name customers like IBM, Intel, and Harvard University, among others, although I didn’t hear him say he had booked sales or delivered any just yet. “People are lining up to buy the product before it’s off production line,” Ruby said.

—Oasis Diagnostics. This Vancouver, WA-based company is attempting to develop precise diagnostic tests that extract tiny bits of DNA from saliva, instead of blood. CEO Paul Slowey showed a picture of a young girl grimacing after getting stuck with a needle, stacked next to a photo of her smiling while sticking what looks like a power toothbrush inside her cheek. “A picture paints a thousand words,” Slowey says.

OK, but he had more than just fluff in his quick talk. The saliva diagnostics technology has improved enough in recent years that it can detect minute amounts of a foreign invader, like HIV virus, which has 1,400 times less concentration in saliva than in blood. The company is developing tests for tuberculosis, anthrax immunity, diabetes, and breast cancer. Slowey has experience at two other saliva diagnostics companies, Saliva Diagnostic Systems and OraSure Technologies.

—Calcionics. This Seattle-based company, which spun out of technology developed at the University of Washington, is aiming to develop a drug to prevent and treat cardiovascular disease, particularly hardening of the arteries. CEO Chip Jacob is working with Cecilia Giachelli of the UW, who discovered osteopontin, a naturally occurring protein that breaks down calcified tissue that makes arteries harden. “It’s the body’s natural response to hardening of arteries, we augment it,” Jacob says. This drug has a long way to go through animal and human clinical trials, but Calcionics has no intention of commercializing it alone.

It plans to raise $35 million in three investment rounds over the next five years, and then cash out through getting acquired by a larger drug company for around $350 million. It would be tempting to scoff at this idea in the downturn, but Jacob pointed out it’s been done, and not long ago. Santa Clara, CA-based Ilypsa, which developed a phosphate binding drug for kidney-dialysis patients, raised $45 million before it was sold to Amgen for $420 million in 2007.

What Jacob didn’t mention is that when Amgen took the drug into further clinical trials, it failed. But that’s life in biotech—I’m pretty sure the people at Ilypsa were pretty happy with the returns, and willing to do it again, regardless of whether the drug ever made it on the market.

(Update: The original version of this story left out one of the finalists for the $50,000 investment prize, Inson Medical Systems. The finalists were Oasis Diagnostics, Calcionics, and Inson. Here’s a glimpse of what Inson had to say.)

—Inson Medical Systems, a Bellevue, WA-based is developing polymer-based materials from the lab of UW bioengineering professor Buddy Ratner. As CEO Tracy Klein explained, these materials are supposed to allow a constant dose of a drug over time. The first product is being developed as an eye implant to treat cataracts in animals.

Inson is going after the veterinary market before humans, because it’s easier and faster, Klein says.  But that doesn’t mean Inson has written off the human market. About 14.6 million people worldwide have cataract surgeries each year, and Inson says its technique could help many of them avoid infection, inflammation, and secondary cataracts that can crop up after surgery. If it can capture any significant piece of that market in the next few years, I’m sure this is a story we’ll hear more about.

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Bill Gates says he loves his new job at his charitable foundation. The co-founder of Microsoft says so this morning in his first annual letter, posted online, sizing up his nonprofit work.

Gates left his full-time job at Microsoft in June, to devote his full attention to the Bill & Melinda Gates Foundation, the world’s largest charitable foundation. He insists he finds this mission—to wipe out modern global health plagues, boost global economic development, and reduce disparities in U.S. education—to be just as exciting as running one of the world’s most valuable companies.

“Many of my friends were concerned that I wouldn’t find the foundation work as engaging or rewarding as my work at Microsoft,” Gates wrote in the 19-page letter. Even though he reveled in the challenge of leading the software company, “I love the work at the foundation,” Gates wrote.

Now that he has a few months under his belt, friends shouldn’t worry that he’s getting restless, because Gates sees some of the same “magical things” happening at the foundation that he did at Microsoft.

Just like at the company, there is an opportunity for “big breakthroughs.” Like at the company, he can use his skills of “building teams of smart people with different skill sets” to tackle long-term problems. And also like at the company, he’s anything but bored. “I find the intelligence and dedication of the people involved in these issues to be just as im¬pressive as what I have seen before,” Gates wrote. (He discussed these thoughts in a video interview with New York Times columnist Nicholas Kristof over the weekend.)

Like at the company, there’s also plenty to worry about, starting with the economic crisis. The foundation lost about 20 percent of its assets in 2008, which is actually quite a bit better performance than the NASDAQ Composite Index and the S&P 500, which dropped 41 percent and 38 percent on the year, respectively. Even though the foundation lost billions, it will increase spending from $3.3 billion in 2008 to $3.8 billion this year, about 7 percent of total assets. This will drain the foundation’s assets more quickly than the amount it is required to spend annually under federal law, but Gates says that’s not a concern.

“The goal of our foundation is to make investments whose payback to society is very high rather than to pay out the minimum to make the endowment last as long as possible,” Gates wrote.

Here’s what Gates had to say about the three specific areas of the foundation’s interest, global health, global development, and U.S. education:

—The foundation steers about half of its total spending …Next Page »

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The global health bug bit Lisa Cohen in 2001. She was a producer at KING5-TV in Seattle at the time, and along with anchorwoman Jean Enerson, she traveled through Africa for two weeks in a delegation with Patty Stonesifer, who was then running the Bill & Melinda Gates Foundation.

“That trip inspired me to get me to get involved with global health,” Cohen says. “I was enthralled with the things PATH and the Gates Foundation were doing. And I was appalled that I didn’t know anything about it.”

Cohen told me this little story this week in a conference room at PATH, the Seattle-based nonprofit organization where she now has an office. She’s the founding director of the Washington Global Health Alliance, a group that aims to strengthen Seattle’s claim as one of the world hubs of global health research and strategic thinking—up there with Geneva, Switzerland, home of the World Health Organization.

Everyone in Seattle knows the Gates Foundation is the world’s biggest charitable organization, and it has lofty goals of tackling the biggest scourges of humanity, like HIV, malaria, and tuberculosis. What fewer people realize is how much research horsepower the region built up even before the foundation arrived, and how much potential there is to strengthen the region by making the research community even more tight-knit, Cohen says.

Momentum for this idea got rolling in the fall of 2006. Cohen had left the TV news business for good, realizing the economics of the business were steering it away from her interest in meaty topics like global health. She had a connection with Gov. Chris Gregoire through serving as a communications adviser in the 2004 election. Two years later, Cohen helped set the agenda for a meeting of all the big guns in the region’s global health scene and the Governor. The meeting drew Bill Gates Sr. to help represent his son’s foundation; PATH president Chris Elias, Fred Hutchinson Cancer Research Center director Lee Hartwell, King Holmes of the University of Washington’s Global Health department, Ken Stuart of the Seattle Biomedical Research Institute, as well as provosts from the UW and Washington State University.

The main thrust of the meeting was that Washington state could make a bigger impact if all these hard-driving players lifted their noses from the grindstone once a while to look around at what each other is doing. At a minimum, they could avoid redundancy in their work, and at best, they could form beneficial partnerships to help develop, say, new vaccines. “The Governor was fabulous, and on board right away,” Cohen says. “The first thing she said …Next Page »

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Old-school vaccines like shots for tetanus don’t add up to good business anymore for doctors who give them, according to a report this week in the Associated Press. Then again, the market for a new breed of vaccines against all sorts of other diseases is booming, on a trajectory from an estimated $10 billion in 2007 to some $24 billion globally by 2012, according to a research report from Kalorama Information.

We’re planning to take a closer look at the changes to the science and business of vaccines in our first Xconomy Seattle event, to be held next Thursday at the Institute for Systems Biology. Here’s a brief rundown of the perspectives our panelists will bring to the conversation:

Todd Patrick (moderator)

Todd Patrick is the former president of ID Biomedical, a Vancouver, BC-based vaccine developer that was sold to GlaxoSmithKline for $1.5 billion in 2005. Patrick is now the CEO of Vaxent, a Memphis, TN-based biotech company that is working to develop the first strep throat vaccine.

Steve Reed

Steve Reed is CEO of Immune Design, a Seattle-based biotech startup that raised $18 million in venture capital in June. The company is working on adjuvant compounds that when combined with a specific antigen, are supposed to stimulate a more effective immune system defense against a particular invader like HIV—possibly with a single shot. Reed is also the founder of the Seattle-based Infectious Disease Research Institute, which recently licensed technology to his new company. IDRI is working on multiple vaccines to protect people from tuberculosis, leishmaniasis, malaria, leprosy, and chlamydia.

Denise Galloway

Denise Galloway is head of the Program in Cancer Biology in the Human Biology and Public Health Sciences Divisions of the Fred Hutchinson Cancer Research Center. She did pioneering work with researchers in Australia and at the National Institutes of Health on getting a key viral gene to assemble into particles that look like human papillomavirus, the virus that causes cervical cancer. This discovery led to the development of Merck’s Gardasil, which has pumped new life into vaccine research, partly because it exceeded $1.5 billion a year in sales in 2007, its first full year on the market.

Chris Elias

Chris Elias is CEO of PATH, an international non-profit that works to alleviate disparities in health worldwide. PATH is the lead organization running a $168.7 million Malaria Vaccine Initiative financed by the Bill & Melinda Gates Foundation. The organization also sponsors work toward developing next-generation pneumococcal vaccines—to prevent childhood pneumonia and meningitis. This week, PATH also announced it is investing $3 million in a vaccine candidate in development by Gaithersburg, MD-based Lentigen that may protect against “bird flu.”

It’s a stellar lineup and a great evening of insight and networking. You can register here, and we hope to see you there.

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The Seattle area has one of the world’s strongest concentrations of global health research, with much of it being fueled by the Bill & Melinda Gates Foundation. Vaccines are one of the primary tools being studied here to fight leading killers around the world, like malaria and tuberculosis. Yet these products have long been a neglected stepchild of the pharmaceutical industry, regarded by many as a high-risk, high-liability, low-profit backwater. Even the massive influx of world-class research and worldwide attention prompted by the search for an HIV vaccine failed to breathe life into the industry.

So why do many venture capitalists and philanthropists consider now the best time in history to invest in vaccines? What has changed in biology that is paving the way for a new breed of immunizations? How big is the opportunity for business and human health?

We will pose these questions and more to some of the world’s leading authorities at the inaugural Xconomy Forum: Vaccines 2.0. This panel discussion and networking event will take place from 6 to 8:30 pm on Dec. 11 at the Institute for Systems Biology in Seattle.

This event will bring together pioneers with a variety of insights into the research, development, and commercial implementation of the next generation of vaccines. The panel will be moderated by Todd Patrick, the former president of ID Biomedical in Bothell. That company, which worked to develop a nasal spray flu vaccine and an injected vaccine for strep throat, was sold to the world’s second-biggest drugmaker, GlaxoSmithKline, for $1.5 billion in 2005. Patrick is now leading a new company in Memphis, TN called Vaxent.

And now for the panelists. Steve Reed, founder of the Infectious Disease Research Institute, will talk about his experience starting a new company called Immune Design, which is working to develop a new generation of vaccines that spur specialized immune reactions against pathogens, and that are meant to work in a single shot. Denise Galloway, a professor of microbiology at the Fred Hutchinson Cancer Research Center, will talk about her pioneering work that paved the way for the first vaccine to prevent infection by the human papillomavirus, now marketed by Merck as Gardasil. Chris Elias, the CEO of PATH, will talk about his organization’s efforts to finance research into a new generation of vaccines, and to help make sure existing vaccines can have the greatest impact possible in the developing world.

The event begins with registration at 6 pm, with the panel to follow about 30 minutes later, with time left at the end for networking and refreshments. You can find more details about how to register here. Xconomy has done a number of events in Boston already, and this is the first of many events we plan to host in the Seattle area, concentrating on both technology and life sciences. We hope you’ll join us.

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The last time Gov. Chris Gregoire spoke at the Washington Biotechnology and Biomedical Association’s annual meeting, she had to share the stage with Republican challenger Dino Rossi during the election campaign of 2004. This morning, she had the podium to herself, and Gregoire used it tout the region’s expertise in biotech and its potential to grow even during what she called a “dramatic downturn” in the national economy.

“I fundamentally want and believe we can be the epicenter of life sciences and global health,” Gregoire said this morning, to a room of about 700 people attending the WBBA’s annual meeting at the Seattle Sheraton. “It’s within our reach if we stay focused.”

She pointed to a list of accomplishments on her watch. Work on a new vaccine for malaria, as well as new drugs and vaccines for tuberculosis, two of the leading killers in the world, has sprouted here. The state has doubled its exports in the past four years and is the only state in the country with a trade surplus with China, Gregoire said. Then she ticked off a list of progress in cleantech: The state is now the No. 5 producer of wind power in the country, there’s a growing solar panel production plant in Moses Lake, WA, while Hoquiam has the nation’s largest biodiesel refinery (although she left out its financial struggles, which Greg has described.)

There was no mention of some of the more discouraging developments in the region over this term, like the dismantling of Icos and Merck’s recent shutdown of its local Rosetta Inpharmatics unit. That sort of thing, of course, is beyond the power of the Governor anyway, and she reminded this friendly audience that she went to bat for them. Gregoire led the charge for the 10-year, $350 million Life Sciences Discovery Fund passed by the legislature back in 2005. It only passed the state Senate by one vote, she said, which sounded to me like she was implying its might be in jeopardy if her opponent wins the Governor’s mansion next week.

Besides Gregoire’s talk, there was a fascinating big-picture view of the University of Washington from president Mark Emmert. A few of the highlights:

—Emmert focused his talk on what he called “managing paradox.” At the UW, he needs to balance the need to do cutting-edge basic research with the competing demand of getting research translated into real-world products. The UW needs to compete on an international stage, but have a local impact by churning out inventions and a talented workforce. It must be open and collaborative, while at the same time being “competitive and proprietary” to win in the marketplace, Emmert says. And of course, it needs to excel at academics and on the football field. (Sorry, Ty Willingham.)

Against that backdrop, Emmert made it clear that he needs to create an environment in which UW researchers can collaborate with the biotech community. He acknowledged some of the industry’s previous complaints about technology transfer, but said they are just that—in the past. UW’s technology transfer operation recorded 350 invention disclosures from researchers, signed 200 licensing deals, and helped form 10 startups in fiscal 2008, Emmert says. And it hired Linden Rhoads, a serial entrepreneur, to run the office with a new kind of mentality.

“We brought in an innovative entrepreneur because we thought it was easier to teach an entrepreneur the ways of the university than it would be to teach someone from the university the ways of business,” Emmert said. “This is an experiment. We’ll learn together. If anyone can pull it off, it’s Linden.”

One biotechie I spoke with after the meeting was impressed by Emmert’s talk. “I hadn’t heard him speak before. The guy has a brain,” said this person.

One other item in the program that struck me as interesting, yet didn’t get a lot of attention, was the list of a dozen new WBBA members, which president Jack Faris called the “Class of 2008.” …Next Page »

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Sen. Patty Murray is one of seven kids. While growing up, her dad was diagnosed with multiple sclerosis. It was hard for him to support a family, so Murray’s mother went on food stamps for a time. But no matter how rough times got, the family had a goal that all seven kids would graduate from college. They did.

Murray used this little anecdote yesterday to make a point to an audience of business leaders at the Seattle Chamber of Commerce’s annual leadership conference at Suncadia Resort in Roslyn, WA. Instead of making excuses or whining about the recession, people here in Seattle should keep their eyes on the prize, which is to turn the region into an even bigger hotspot for global health research and development than it already is.

“We did it because we had a goal,” Murray said of her family’s success.

The chamber’s leadership retreat brought together big-name speakers from the global health arena to help brainstorm a bit about ways that businesses, nonprofit organizations, and researchers can collaborate to put a dent in some of the health disparities that keep holding back poor countries. Judging from the question-and-answer sessions, the drumbeat of dire economic news was weighing pretty heavily on this audience. That’s what led Murray to urge the business leaders to stay focused.

There were quite a few other thought-provoking sessions from the morning sessions. Here are some highlights:

—William Foege, a former director of the Centers for Disease Control and now a senior fellow at the Bill & Melinda Gates Foundation, got a standing ovation after he urged businesses to bring their expertise, time, and cash to the global health cause. As an example, he told the story of ivermectin (Mectizan), the drug Merck donated to cure river blindness in the developing world in the 1980s, after making its money on selling it as a product for dogs.

This wasn’t all about altruism for Merck, Foege said. The drug company found that the river blindness program motivated its employees, and helped Merck retain some of its brightest people, because they were proud to work there. (Nobody dared to ask out loud if this is really possible anymore, but since Merck announced 7,200 global layoffs the day before, including 300 in Seattle, I’m sure plenty of people were wondering.)

Foege wasn’t just scolding businesses, but urging everyone to set aside their preconceptions to work for global health. Nonprofit organizations need to recognize that corporations aren’t all evil, and that they have critical talents and products that nonprofits need to tackle these global health problems, he said. “We underestimate the amount of altruism in corporations, just as we underestimate the amount of greed in church workers, public servants, and public health workers,” Foege said.

—Sometimes the enormity of these problems get lost in statistics, but yesterday one man’s story drove home how huge these problems are. Jackson Orem, a physician at the Uganda Cancer Institute, traveled to the conference as part of his collaboration with Corey Casper and colleagues at the Seattle-based Fred Hutchinson Cancer Research Center. Until September, Orem was the only full-time oncologist in Uganda, a country with 30 million people. …Next Page »

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Seattle biotech took an uppercut on the chin this week, as Merck bailed out on the region seven years after it established the first Big Pharma beachhead in the Northwest. Since pharma companies like this play critical roles in providing stability to biotech scene, there’s no other way to slice this than to call it a downer of a week.

—All that said, Vulcan’s Ada Healey told me she knows of some prospective tenants who might be able to fill the snazzy building in South Lake Union that will be vacated because of Merck’s decision to shut down Rosetta Inpharmatics. She also notes that not everybody in pharmaland is hunkering down. Danish drugmaker Novo Nordisk said this summer it’s going to hire 80 people in Seattle over the next two years.

—One positive sign came this week from the Bill & Melinda Gates Foundation. The Seattle-based nonprofit said it is backing 104 far-out ideas from researchers around the world that might shake up conventional wisdom in treating HIV, tuberculosis, and other infectious diseases. Five of these grant winners were based in Seattle.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) reported an early glimpse of effectiveness from a study of 18 patients on its IL-21 drug for kidney cancer, in combination with Bayer and Onyx Pharmaceuticals’ sorafenib (Nexavar.) Final results on whether this study slowed the spread of disease will be available by mid-2009.

—Accium Biosciences told me a fascinating tale about how it has found a way to apply a tool of archaeology to the world of drug development. The Seattle-based startup has grown to 14 employees over the past two years, and is now running its 15-ton particle accelerator around the clock to keep up with demand from pharmaceutical companies that want to measure precisely how well their drugs are being absorbed into tissues.

—I profiled WRF Capital, the nonprofit entity that is being transformed into a tech and life sciences venture capital fund to support research and innovation at the University of Washington and other state institutions.

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