Seattle-based JeNu Biosciences has raised some new cash to go after the emerging market for ultrasound-based skin care devices.

The company has pulled in $1.5 million from Seattle’s Second Avenue Partners and other angel investors, out of a round that is expected to be worth $3 million, says CEO Wayne Wager. JeNu has now raised a little more than $2 million since its founding, Wager says. The news was reported earlier today by Geekwire.

JeNu is looking to use ultrasound waves to deliver specially formulated creams into the skin, or simply, “put good things into the skin,” as Wager says. That’s a different approach than what the folks at Bellevue, WA-based Pacific Bioscience Laboratories took with the Clarisonic skin brush, which uses sonic waves to clean the skin by jostling loose dirt and oils out of pores. While ultrasound is well-recognized for its noninvasive diagnostic abilities, and sometimes for high-intensity therapeutic uses like breaking up kidney stones, the idea of using it for cosmetic applications is relatively new. Clarisonic proved it could be quite lucrative, by generating more than $100 million in sales in 2010, which led to a big acquisition by L’Oreal in November.

Wayne Wager

Wager has medical device industry experience as the former CEO of Redmond, WA-based Confirma, and is the co-chair of Wings, a local network of medical device angel investors. He’s teamed up at JeNu with Michael Lau and Alexander Lebedev, who co-founded Bothell, WA-based Mirabilis Medica—a company that uses ultrasound technology to treat uterine fibroids. The company has also recently hired Colette Courtion, the former CEO of Calidora Skin Clinics, as president.

JeNu has been testing its product candidate at skin care clinics in Seattle and New York, Wager told Geekwire. The company appears to be pursuing a razor/razor blade business model, in which it plans to sell its device plus starter skin creams for about $200, Wager says. The company will then make additional recurring revenue by selling more skin creams.

One big advantage of going into the cosmetics industry is the low barrier to entry, since it doesn’t require years of expensive and difficult clinical trials to win FDA approval, like a drug or medical device. That same ease of entry also brings lots of infomercial-type competitors making lots of often bogus, confusing claims about skin care benefits. But that’s the fray JeNu will enter. It plans to bring its device to the U.S. market in the second half of 2012, Wager says.

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Yesterday, we ran the first half of the Seattle life sciences year in review, which focused on biopharmaceutical companies and global health organizations. Today’s rundown will cover the medical device, diagnostic, and health IT side of the local life sciences cluster.

Medical devices may not fare so well in a glamour contest, but this year the Seattle device community had more success stories, more acquisitions, upheaval, and even a couple of controversies. SonoSite was the biggest acquisition of the year, and although terms weren’t disclosed, it was almost surely followed by Pacific Bioscience Laboratories (the maker of the Clarisonic skin brush you see prominently displayed at Nordstrom). Calistoga Pharmaceuticals, you had a great year, but your deal is probably the third-biggest of the year in Seattle biotech. Sorry.

For the highlights from Seattle med-tech, diagnostics, and various Bio-IT operations, read on:

Sonosite (NASDAQ: SONO): The maker of portable ultrasound machines has been relatively stable, and modestly profitable as an independent company for some time, so I was surprised to see it get acquired for $995 million earlier this month by Japan-based Fujifilm. Shareholders can’t complain, given the price represents a 50 percent premium over SonoSite’s prior closing stock price. This is the biggest deal of the year in local life science, by a long shot.

NanoString Technologies. This was a big year for NanoString. The company, a spinoff from the Institute for Systems Biology, developed a second-generation version of its digital nCounter instrument, which measures the extent to which multiple genes are turned on or off in a biological sample. This was part of a bold plan to turn this scientific instrument into a diagnostic tool. By the end of the year, NanoString had raised another $20 million from GE, former Genzyme CEO Henri Termeer, and others, and it presented some important data that suggests it could compete with Redwood City, CA-based Genomic Health (NASDAQ: GHDX) in the breast cancer diagnostic market.

Clarisonic. Terms weren’t disclosed, but this could be the second-biggest acquisition of the year in Seattle’s life sciences community (although this company is hard to really categorize). Pacific Bioscience Labs, the maker of the Clarisonic skin brush, was acquired by cosmetics giant L’Oreal last month. The Clarisonic surpassed the $100 million sales mark in 2010, was highly profitable, and growing by leaps and bounds. My best guess is that Clarisonic sold for about $500 million. It’s the second home run for the same entrepreneurial team who developed the Sonicare toothbrush.

Geospiza. The Seattle-based developer of software … Next Page »

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Portable ultrasound maker SonoSite is being acquired by Japan’s Fujifilm for just under $1 billion. SonoSite will remain based in Bothell, WA, under its current leadership team, the companies said in a joint announcement.

The $995 million price represents a cash offer to purchase all SonoSite (NASDAQ: SONO) shares for $54 each, a 50 percent premium on the average closing stock price for the past three months. The price also includes payments in connection with SonoSite’s convertible debt. The companies’ boards have already approved the deal.

In the announcement, SonoSite President and CEO Kevin Goodwin said joining Fujifilm “will enable us to significantly accelerate our international business and product development efforts, and respond to the fast-evolving needs of physicians around the world.”

SonoSite was itself an acquirer last year, paying $71 million for Toronto-based Visualsonics, whose initial market was in preclinical biology labs. At the time of the deal, SonoSite said the ultrasound market for preclinical research was estimated to be worth $350 million with projected double digit annual growth rates.

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[Update: 4:15 pm] Redmond, WA-based Cerevast Therapeutics has raised $6.6 million in venture capital to develop a new ultrasound technology to treat stroke patients.

The company, led by Icos veteran Bradford Zakes, said today that that it raised the money from seven investors in a Series C preferred stock offering. The round could be worth as much as $15.7 million over time, according to a regulatory filing. The money comes in addition to about $3.2 million from a series of financings the company has put together since it was formed in September 2009, following the purchase of assets from a previous company, ImaRx Therapeutics. The new financing was led by an unnamed “global medical device company” and included angel investors, Zakes says.

Cerevast seeks to use ultrasound waves to help provide an extra bit of oomph to clot-busting drugs that doctors use to treat strokes. As Zakes put it in an interview with Xconomy two years ago, today’s clot-busting technology has its limits. The Cerevast technology uses an automated device, put on the patient’s head, that sends ultrasound waves into the brain to gently jostle the clot so that it loosens up, and allows a clot-busting drug like Genentech’s TPA to fully penetrate the clot and dissolve it. The Cerevast technique is now going to be tested in a worldwide study of 800 patients next year, which will look to see if the new ultrasound device is safe, and whether it can help patients more fully recover from strokes, when compared with people who get the clot-busting drug alone. Stroke is the third-leading cause of death in the U.S., killing 160,000 people each year, and the No. 1 cause of adult disability, according to the National Stroke Association.

Cerevast’s plan is to use the new financing to support the 800-patient trial to help it tap into the European marketplace, and to form the basis of an application for FDA approval of its technology.

“We’ve got a lot ahead of us,” Zakes said.

Cerevast isn’t the only company in the Seattle area using ultrasound as a way to improve the effectiveness of clot-busting drugs. Bothell, WA-based Ekos is developing a system for fighting a different kind of stroke—the kind that comes when a blood vessel ruptures, creating a pool of blood that clots in the brain. The Ekos technology won approval in the European Union back in January for this treatment of so-called hemorrhagic stroke.

The predecessor to Cerevast, ImaRx, used a combination of ultrasound, the standard clot-busting drug, and a microbubble technolgy that was supposed to help further open up the clots. Cerevast chose to drop the microbubble component, because of the regulatory challenge of getting a more complex regimen cleared for sale, Zakes says.

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Bellevue, WA-based PhysioSonics has picked up a $2.5 million grant from a military agency to see if its ultrasound technology can be adapted to the battlefield.

PhysioSonics said today it has gotten the grant from the Telemedicine and Advanced Technology Research Center, an organization at the U.S. Army Medical Research and Materiel Command, located at Fort Detrick, MD.

The aim of the research grant will be to see whether PhysioSonics’ technology can determine when a soldier is suffering from vasospasm, a potentially deadly condition in which blood vessels of the brain constrict, usually after a loud explosion. The condition can be hard to detect, but when it is, doctors can reduce the rate of death and disability, the company said.

The PhysioSonics ultrasound technology, which has origins at the University of Washington, has been backed by a local syndicate of investors including former SonoSite chairman Kirby Cramer, as well as the big device players Johnson & Johnson and Medtronic.

PhysioSonics said in today’s release that it plans to file an application for FDA approval of its technology, although it didn’t disclose timing. The initial plan is to pitch its technology to neurosurgeons, and heart surgeons, the company said. I described the basic idea of this continuous technology for monitoring brain blood flow, and how it’s supposed to be more automated than existing transcranial Doppler ultrasound, in a June 2009 feature story. The company said it recently completed a clinical trial that “showed parity” between its technology and the existing ultrasound methods.

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Chronically bad unemployment is the biggest story in the U.S. today, and we had some more bad news about jobs being lost this week in Seattle biotech. But there were a few other good things to report, including a story about a new company being born.

—Amgen (NASDAQ: AMGN), the Thousand Oaks, CA-based biotech giant, said this week it is cutting 380 jobs companywide from its R&D operations, which includes 70 people at its sites in Seattle and Bothell, WA. The company plans to say more about the cutbacks Monday on its quarterly financial conference call.

—GlaxoSmithKline made big news in Seattle this week at the Bill & Melinda Gates Foundation‘s malaria forum. The story was about how GSK’s experimental malaria vaccine, supported by the Gates Foundation through the PATH Malaria Vaccine Initiative, was found to protect about half of African children in a Phase III clinical trial. But there’s an elephant in the room about vaccine cost that nobody is really discussing thoroughly in public.

—The latest biotech startup in town has officially spun out of the Fred Hutchinson Cancer Research Center. The company, called Blaze Bioscience, has raised its first $725,000 in angel financing and recruited former ZymoGenetics dealmaker Heather Franklin as its CEO. The idea, from the lab of researcher Jim Olson, is to “paint” tumors so that surgeons can make sure they get rid of the whole tumor, and not leave behind straggler cells that can lead to a recurrence.

—I’ve had Immunex on the mind lately as we prep for our next big Xconomy life sciences event, “The Immunex Impact“ on Dec. 1 in Seattle. Yesterday, I invited Immunoids to bring some old photos and company memorabilia to the event. I also announced the newest addition to the lineup of speakers—Patricia Beckmann. She will join Steve Gillis, Chris Henney, Doug Williams, Stewart Parker and others in this special confab of Immunex alumni. And speaking of Henney, he was honored this week with a biotech “Hall of Fame” award at an annual industry event in Laguna Niguel, CA.

—Bothell, WA-based Marina Biotech (NASDAQ: MRNA) has been running low on cash lately, but it found some support this week from a single investor who agreed to put as much as $15 million into the company over time.

—From the medical device side of town, we had a couple stories about companies going in opposite directions. Kirkland, WA-based Pathway Medical Technologies, acquired in August by Bayer’s Medrad unit, has allowed a lease extension option to expire on its headquarters, suggesting that it may not be interested in keeping operations in Seattle. On a more positive note, Redmond, WA-based Mobisante talked about how it has received more than 300 sales leads for its ultrasound-on-a-smartphone, even before it’s really ready to capture much of the market for this low-cost diagnostic tool.

—I know people have heard a lot of song and dance about genomics revolutionizing healthcare, and the reports have been greatly exaggerated to date. But in this week’s BioBeat I took a moment to marvel at the truly amazing kinds of experiments that are now feasible as scientists have learned how to sequence entire human genomes for $4,000 or less, in a matter of weeks. I’m going to explore this further next Monday at our next event in San Francisco, “Computing in the Age of the $1,000 Genome.”

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The folks at Redmond, WA-based Mobisante have what entrepreneurs sometimes call a “high-class problem.” The startup is getting more attention for its ultrasound-on-a-smartphone product than it really wants in its infancy.

Mobisante, a startup founded in 2007, started turning heads back in February, after Xconomy reported that it was the first company to win FDA clearance to sell a diagnostic ultrasound tool on smartphone hardware. The vision was to put the power of ultrasound—with its ability to look inside the body at damaged internal organs or developing fetuses—on a machine that costs as little as $7,500. That’s exciting to people in developing countries, and budget-strapped clinics in the U.S., who can’t afford the ultrasound machines on the market today that typically run between $20,000 to $100,000 and up.

Suddenly, ER doctors who have limited access to ultrasound got buzzing. The company caught the attention of Bloomberg BusinessWeek, and the folks at MobiHealthNews, who wrote stories in the past few weeks about the promise of the technology, and its commercial rollout.

The excitement about the device was encouraging, says co-founder and CEO Sailesh Chutani, but he doesn’t want people to get carried away. His company has four employees, and a network of consultants. It took months longer than expected to get manufacturing protocols set up to FDA standards, so that the devices could be properly tracked in case of a future product recall. Mobisante hasn’t built up inventory of its product yet, and hasn’t started actively marketing, and yet it is sitting on a list of 300 sales leads from potential customers. Eight months after FDA clearance, it has gotten to the point where it can take advance payment from customers, and deliver a device in three weeks, Chutani says.

Just last week, it reached a milestone. It got paid for its first commercial device, from a customer in the Philippines.

Sailesh Chutani

“We didn’t want to make a fuss about the product, we want to have a ‘soft’ launch,” Chutani says. “Our goal has been to sell limited numbers to our clinical partners. Somehow the news got viral.”

Before Mobisante can seriously start converting more customer leads into sales orders, and orders into deliveries, it has a lot of work to do. It is talking to a couple of VCs about raising some more money, striking some important clinical partnerships, and working behind the scenes to hit its stride in manufacturing. And, importantly, it has some key clinical trial work still to do.

Excited as some of the initial customers are, Mobisante has gotten feedback from customers over the past several months about a new iteration that could be even more interesting. The company is working on a tablet-based ultrasound system that it says some customers will prefer over the original smartphone product.

There are a few reasons why customers might prefer a tablet. The original MobiUS that’s now FDA-approved runs on a Toshiba TG01 smartphone handset, which has a Windows Mobile 6.5 operating system. That’s an old version of the software, but Mobisante had to go with it. That’s because … Next Page »

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The big idea of removing body fat through concentrated ultrasound waves hasn’t really caught on yet, but Hayward, CA-based Solta Medical is going to take a flier on it now.

Solta (NASDAQ: SLTM) said today it has agreed to pay $15 million up front, plus another $20 million in near-term payments, to acquire the Bothell, WA-based unit of Medicis Pharmaceutical that makes Liposonix ulrasound fat-busters. The payments to Medicis could increase if Solta can reach certain undisclosed worldwide commercialization goals over the next seven years, the companies said in a statement. Solta said it plans to maintain the Liposonix facility in Bothell.

The vision has always been to tailor ultrasound waves to bust up fat non-invasively. Done right, it would help tone up flabby tummies or thighs without subjecting people to the rigors of diet or exercise, and without the surgical risks of liposuction. The Liposonix technology has been in development for more than a decade, and Medicis paid $150 million to obtain it in June 2008. At the time of that deal, I noted here that Americans spent an estimated $13 billion in 2007 on cosmetic surgery and nonsurgical cosmetic treatments like Botox, according to the American Society for Aesthetic Plastic Surgery.

Liposonix attracted a big-name cast of investors, including The Carlyle Group, Versant Ventures, Shroder Ventures Life Sciences, and Accuitive Medical Ventures. In July 2004, Three Arch Partners, Delphi Ventures, Essex Woodlands Health Ventures and Pinnacle Ventures also participated in a $27 million round for the company.

But Liposonix has been unable to capture a big piece of the market, as it has been held up by various regulatory questions over time. Its product is now cleared for sale in Canada, the European Union and Japan, and was recently cleared by the FDA for non-invasive waist circumference reduction. The company is still awaiting word from the FDA on another regulatory milestone.

Medicis said it will continue to focus on its core business in dermatology, where it markets the popular anti-wrinkle product Restylane. Solta has grown through acquisitions to build a portfolio of medical aesthetic products, largely for the skin.

Solta said in today’s statement it expects the Liposonix deal to boost its profits within 12 months. It plans to discuss the acquisition on a conference call with analysts at 11:30 am Eastern/8:30 am Pacific today.

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SonoSite (NASDAQ: SONO), the Bothell, WA-based maker of portable ultrasound machines, said today it had a net loss of about $1.1 million in the quarter that ended June 30, compared with a profit of $1.9 million in the same period a year earlier. The company’s sales climbed 18 percent to $72.7 million in the most recent quarter, but the increased revenue was offset by increasing expenses, particularly on new strategic initiatives the company is advancing in the wake of its 2010 acquisition of VisualSonics.

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Seattle-based VentriPoint Diagnostics, a company seeking to develop fast, accurate ways to diagnose heart problems, has raised $1.2 million out of a financing round that could be worth as much as $3 million, according to a regulatory filing. The company, led by CEO George Adams, is using ultrasound and MRI instruments to construct 3-D images of the heart, particularly in newborns with congenital heart defects, according to a technology description on the company’s website.

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Seattle is the global capital of ultrasound technology, and now it can lay its claim as the place that developed the first FDA-cleared system that puts ultrasound on a smartphone.

Redmond, WA-based Mobisante said today it has won FDA clearance to start selling its MobiUS system to healthcare professionals in the U.S. The startup, which began R&D work in 2007, will now race over the next several months to establish manufacturing protocols so it can deliver its new ultrasound imaging system in a way that will pass future FDA audits, says CEO Sailesh Chutani.

The Mobisante ultrasound system will cost between $7,000 to $8,000 for the whole package—a Toshiba TG01 Windows Mobile smartphone, with ultrasound probe, and Mobisante’s proprietary software, Chutani says. The company hopes to cut that price in half over time, and is experimenting with leasing models to bring cost down even further, Chutani says. If that can be done, then Mobisante can start to dream much bigger about getting ultrasound into the hands of healthcare workers in remote villages around the world, doing basic scans for internal bleeding, fetal health, and other common tasks. Such scans can only be done today on ultrasound systems that cost at least $20,000, and often more than $100,000—putting them far out of reach of the average front-line healthcare professional, even in the U.S.

“I’d like for every healthcare worker in the world to be able to have one,” Chutani says.

This company is really a bootstrap kind of story. I wrote about Mobisante back in December, when it raised an undisclosed amount of seed financing from Seattle-based WRF Capital. The company was founded by Chutani, a former senior director in Microsoft’s Windows Mobile group, along with David Zar, an ultrasound researcher who previously worked at Washington University in St. Louis.

Sailesh Chutani

Mobisante’s technology, while still in its infancy, moves the field one step closer to what academics have been dreaming for years—the “ultrasound stethoscope.” The hope is that by putting the high-resolution diagnostic images of ultrasound in a super lightweight, convenient package, healthcare professionals will be able to detect and head off any number of ailments that would otherwise go unnoticed in a routine exam.

To be clear, this is still a long way from the ultrasound stethoscope, and Mobisante has a lot of work ahead of it to achieve the mass adoption Chutani hopes for. The company’s proprietary software for processing ultrasound images currently only runs on the Toshiba TG01 phone, equipped with older-generation Windows Mobile 6.5 software platform, and Qualcomm’s Snapdragon platform for high-speed processing of images, Chutani says. The Mobisante system must have that configuration because it needs a USB port so that ultrasound probes can plug in, and so it can draw enough power to capture those images of what’s going on inside the body. The technology isn’t compatible with all the hottest phones today on the market—Apple’s iPhone, or phones that run Windows Phone 7 or the Google Android operating system. (Although Chutani says the Mobisante software will work on one new tablet computer in the works, HP’s Slate, which will display larger images than the Toshiba device.)

But there are big potential advantages in what Mobisante is doing compared with today’s state-of-the-art in mobile ultrasound. By using smartphone hardware, Mobisante has a lightweight, battery-powered device that can be used in remote rural areas. The smartphone’s cellular capability means that Mobisante—unlike other proprietary ultrasound systems—-can capture images taken by an unskilled health worker, who then can e-mail the file to a more trained radiologist at a hospital for a second opinion, Chutani says. While the Mobisante system doesn’t offer nearly as many capabilities … Next Page »

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One of Seattle’s biotech stalwarts raised a lot of money this week that it will use to hire people for its inaugural commercialization drive.

—Seattle Genetics (NASDAQ: SGEN) pulled in $155 million this week through an underwritten stock offering of 10 million new shares. The company is preparing to seek FDA approval for its first product, brentuximab vedotin (SGN-35), for patients with certain lymphomas. The company is on a push to hire more people this year with skills in marketing and manufacturing, as CEO Clay Siegall has said.

—Uptake Medical is now officially Irvine, CA-based, not Seattle-based anymore. The medical device company has moved its headquarters to Orange County, which happens to be where CEO King Nelson lives, and where he was recently able to recruit a couple new key members to join the management team. Uptake, the developer of a minimally invasive device to treat chronic obstructive pulmonary disease, will retain a technical center in Seattle.

—PhysioSonics, a University of Washington spinoff that uses ultrasound to monitor blood flow in the brain, raised a new round of financing from med device giant Medtronic and local angel investor Kirby Cramer. The company is now aiming to win FDA clearance to start marketing its tool in 12 to 15 months, CEO Brad Harlow says.

—I’m getting ready for the next big Xconomy Seattle event “Computing in the Age of the $1,000 Genome.” Only a few tickets are left for this one. I got a kick out of a Twitter follower this week from the Netherlands, Greg Tyrelle, who asked politely if Xconomy can do a “similar event in Europe, pls?” Umm, Xconomy doesn’t have a bureau in Europe. But I guess we can dare to dream, right?

—Merck (NYSE: MRK), the pharmaceutical giant based in Whitehouse Station, NJ, told me all the right things about how it’s getting serious about a long-term biotech strategy. Much of this depends on assets it acquired in Lebanon, NH (GlycoFi), and from Schering-Plough (Palo Alto, CA and Kenilworth, NJ). Chief strategy officer Merv Turner and senior vice president Rich Murray didn’t mention Seattle as part of the plan, which isn’t really a surprise since the company shut down its local Rosetta Inpharmatics operation more than a year ago.

—We had two guest op-eds this week that I figure are of interest to the local biotech community. Dan Vorhaus, a New York attorney who specializes in personalized medicine issues, talked about the need for a comprehensive regulatory strategy on the federal level rather than a piecemeal state-by-state approach. And Eve Riskin, a professor of electrical engineering at the UW, made a case for why prominent women scientists in government and industry should consider coming back to campus for faculty gigs.

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PhysioSonics, a University of Washington spinoff developing ultrasound imaging technology to monitor blood flow in the brain, has raised its second round of equity financing. The deal was led by medical device giant Medtronic (NYSE: MDT) and the prominent local investor Kirby Cramer, Xconomy has learned.

Brad Harlow, the CEO of Bellevue, WA-based PhysioSonics, says his company has closed its Series B round of equity financing. He isn’t disclosing the size of this financing, but says it’s in the “multi-millions,” yet is smaller than the $8 million he raised in his Series A round. The company plans to use the cash to complete development of the PhysioSonics ultrasound technology, hire another 10 people to boost its staff to about 15 people, and hopefully win FDA clearance in the next 12 to 15 months, Harlow says.

“This is really a capstone event for us,” Harlow says.

While Medtronic and Johnson & Johnson—two traditional acquirers of medtech startups—have both invested in PhysioSonics, not a single dollar from a VC firm has gone into the company, Harlow says. Most venture capitalists have lost the hunger they once had to get in on the ground floor with cutting-edge medical devices, and can’t stomach the tribulations these companies often experience with the FDA, and with insurance reimbursement. So Harlow, who previously worked in investment banking, tapped his network of big strategic investors.

Cramer, someone you could call a local super angel for medical technology, met Harlow for the first time last June. They met and talked about PhysioSonics through a meeting of Wings, the new Seattle-area angel investing network for medical device startups. Cramer already had a deep understanding of ultrasound through his experience as the longtime chairman of Bothell, WA-based SonoSite (NASDAQ: SONO). Cramer also helped connect Harlow with other angel investors who ended up putting money in the deal, Harlow says.

Cramer says he followed up on the first meeting with Harlow, by meeting the scientific founders of PhysioSonics—Michel Kliot, Pierre Mourad, and Bob Frederickson. He says he liked what he heard.

“A blind man could see they are very talented people with a great idea!” Cramer wrote in an e-mail. He liked the combination of its intellectual property, and its big corporate partners. “After doing further due diligence, I decided to lead a group of private investors to take PSI [PhysioSonics] to the next level. They are all sophisticated investors who are well experienced in medical device investing. This confirmed my belief that this is a terrific investment opportunity.”

The PhysioSonics technology, as I described in a story back in June 2009, could be used to help doctors and nurses monitor a stroke patient for signs of complications in an easier, more automated way than can be done with today’s ultrasound.

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The United States has been the undisputed leader in medical device innovation for the past 50 years. But there are some out there who insist that title is in jeopardy.

It would certainly take a breathtaking free fall, if you look at the standings today. The U.S. is where most of the R&D gets done, and the most money gets made, on workhorse tools of modern medicine like diagnostic ultrasound, stents that prop open clogged coronary arteries, or clever new insulin pumps for diabetes. A whopping 32 of the 46 medical technology companies with $1 billion or more in annual sales are based here in the U.S., according to a new report this week from PwC. Many new medical devices are regional economic drivers in the geographies we cover—Boston, San Francisco, Seattle, San Diego, and Michigan.

Yet if you talk to medical device entrepreneurs in the U.S. today, they are frustrated. They tell horror stories about dealing with an FDA that’s constantly moving the goalposts around before granting product approvals, and about insurers driving ever-tougher bargains. They seethe in private—and sometimes in public—about a new 10-year tax increase on medical device companies (originally proposed at $40 billion, later reduced to $20 billion) that was incorporated into the new healthcare reform law. Venture capitalists are doing the math and wondering whether to steer clear.

Josh Makower, a prominent med device entrepreneur with ExploraMed and a consulting professor at Stanford University School of Medicine (and Xconomist), said in the PwC report that there are so many costs and regulatory hassles that he now looks outside the U.S. first to do clinical trials, because high quality clinical trials can be done overseas cheaper and faster.

While the U.S. is still the undisputed leader, the foundation for much of its med-tech strength is weakening, according to PwC. The firm’s report, written by a team led by former med device entrepreneur Chris Wasden, sought to put together a five-point list of essential ingredients for med-tech innovation, and then grade the U.S. on it against other countries over the past five years. The idea was that med device entrepreneurs and investors needed to stop passing along anecdotal stories, and start coming up with some convincing data to support their arguments, if they want to really persuade lawmakers, insurers, and citizens to provide more support for med-tech innovation.

Chris Wasden

“When we’d talk to regulators, policy people, they’d hear our anecdotes, but many of them were not impressed,” Wasden says.

The PwC formula factors in how much insurers in the country are willing to pay for med-tech innovation; the underlying strength of academic research; the regulatory approval process for new products; demand from patients for the best possible healthcare; and the base of support from venture capital. When PwC crunched the numbers and created a scorecard ranking countries from 1 to 9, with 9 being the best, the U.S. was head and shoulders above everyone else. The U.S. had a 7.4 score in 2005, which dipped to 7.1 over the next five years. Germany was second, seeing its score drop from 5.6 in 2005 to 5.4 last year—a decline that was similarly seen with other major European countries.

China, Brazil, and India all saw gains in that same five-year period, but they still aren’t even within hailing distance of the top—which you can see in the PwC bar charts if you click here on the Innovation Scorecard report go to page 5.

Still, there are reasons to worry that the U.S. leadership will continue to erode … Next Page »

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One of the Accelerator graduates made news last week (Allozyne) and this week another alumnus from the Seattle biotech startup propeller took its turn making headlines.

—Seattle-based Theraclone Sciences (an Accelerator grad) said it has formed an alliance with the world’s largest drugmaker, New York-based Pfizer (NYSE: PFE). Pfizer will get access to Theraclone’s antibody discovery platform to develop new drugs against certain targets for cancer and infectious diseases. The total value of this deal is $632 million over time, and as much as 30 to 40 percent of the cash could come from “near-term” milestones, says acting president Steve Gillis.

—Seattle-based Dendreon (NASDAQ: DNDN) continued to seize its momentum by snapping up a debt financing worth $540 million, which it plans to use as part of its strategy to take its immune-booster for prostate cancer into Europe. If Dendreon stock continues its bull run of 2010 throughout 2011, it’s possible that much of the debt could be wiped off the books and converted into stock.

—The other public biotech company in town that’s on a hot streak, Seattle Genetics (NASDAQ: SGEN), took its turn in front of the national TV cameras of CNBC last week. CEO Clay Siegall talked about the clinical trial results that support its “empowered antibody” for certain lymphomas. He also shed a little light on how he’s thinking about pricing this drug if it wins FDA approval, which many investors are expecting to happen this year.

—Ekos, the Bothell, WA-based developer of ultrasound technology for treating blockages in blood vessels, said this week it has won clearance to start marketing its Ekosonic product in the European Union for patients with clots in the lungs. As the FDA approval process looks ever more uncertain for med device makers, we are seeing more and more announcements like this, where new medical devices here get introduced first in Europe.

—We have wrapped up our series of Xconomist editorials that look ahead at the big trends to watch in infotech, biotech, and cleantech. I compiled the list of editorials we’ve run across our 5-city national network, and I’m pretty sure a few of these are of interest to folks in the Seattle biotech community.

—Arzeda, the University of Washington spinoff that uses computers to make custom-built enzymes, has achieved a technical milestone as part of its collaboration with DuPont’s Pioneer Hi-Bred business unit. Arzeda has developed a novel enzyme that is “showing activity toward a trait of interest” in corn and soybeans, Pioneer says.

—We’ve already hit the theme “Biotech’s Back in Seattle” through one of our Xconomy events from November, but I came back to this theme during a talk at the University of Washington‘s South Lake Union campus. Here’s the link to (most of) the archived webcast of the talk for those who couldn’t be there in person.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC) said this week it raised $25 million from a single investor, whose name wasn’t disclosed.

—We had an intriguing guest post from Stewart Lyman, who posed the question on whether biotech suffers from information overload, or underload. Essentially, biotech startups can’t afford to have access to a lot of the high-priced peer-reviewed journals they might have been able to read in yesteryear, so Lyman wonders what kind of impact that might have on their ability to innovate. As always, you are welcome to add your comments. Believe me, I read them, and sometimes get good ideas for follow-up stories from our readers, so keep them coming.

—On Friday, I banged out a quick wrapup of my whirlwind trip to the JP Morgan Healthcare Conference in San Francisco. I gathered a ton of news from contacts around the country there, and also snapped a few pictures along the way of people well known to local biotechies. One of the shots was of Keith Crandell of Arch Venture Partners teasing his fellow partner Bob Nelsen.

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Ekos, the Bothell, WA-based maker of an ultrasound-based technology for dissolving blood clots, has won approval to market its device against life threatening clots in the lungs among patients in Europe.

The Ekosonic system, which we wrote about in these pages a year ago, has won approval from regulators in the European Union as a treatment for pulmonary embolisms. It’s the first time an endovascular device—which uses a catheter to slide inside arteries—has won approval to fight pulmonary embolisms in Europe, Ekos said.

The Ekos system was designed to treat clots in the arms and legs, and has been used frequently for deep vein thrombosis. While that’s a chronic condition, Ekos has seen an important potential market open up with pulmonary embolism, in which clots that start in another part of the body break off and flow into the lungs, where they can quickly be fatal. Pulmonary embolisms are thought to kill 300,000 people a year in the U.S. and Europe, Ekos has said.

The Ekos system is designed to work by using ultrasound waves on a catheter that gently jostle the clot, making it faster and easier for standard clot-dissolving drugs (known as thrombolytics) to do their thing. Ekos decided to go after the new market of pulmonary embolism patients after doctors urged it to move into this quite sick patient population.

“Faster response with less thrombolytic drug means patients may recover within hours and the risk of bleeding is substantially reduced,” said Dr. Tod Engelhardt, a cardiothoracic surgeon from East Jefferson General Hospital in New Orleans, in an Ekos statement.

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Mobisante has a vision of taking the next step in miniaturization of ultrasound technology, and today it has raised some of the cash it needs to carry out the idea.

The Redmond, WA-based company has raised an undisclosed amount of seed financing from Seattle-based WRF Capital. Mobisante plans to use the cash to finish some key development steps with technology that puts diagnostic ultrasound capability on a smartphone. If all goes well, the company could win clearance from the FDA to start selling the product in the first or second quarter of 2011, says CEO Sailesh Chutani.

Mobisante was founded by Chutani, a former senior director in Microsoft’s Windows Mobile group, and David Zar, an ultrasound researcher who previously worked at Washington University in St. Louis. Their plan, which engineer Nikhil George described in demo last week at an MIT Enterprise Forum event, is to hook an ultrasound probe into a smartphone so that its diagnostic capability can fit in a doctor’s pocket. Traditional ultrasound machines, made by companies like General Electric, Philips, and Siemens, can cost hundreds of thousands of dollars and sit on big carts that are operated primarily by radiologists. Mobisante is hoping that by going with a low-cost, super-lightweight alternative, it will enable ordinary physicians from a wider array of disciplines to look inside the body quickly and easily for things like internal bleeding.

“Mobisante is a wonderful example of new innovative companies that are leveraging the deep local talent in Seattle to solve important global health problems,” said Loretta Little, managing director of WRF Capital, in a company statement.

If Mobisante can deliver this kind of small ultrasound tool to the marketplace, it could have significant implications for global health. About 70 percent of the population around the world currently lacks access to ultrasound imaging, Mobisante says, because of the cost and complex nature of many ultrasound systems. Since cell phones are so widely used around the world, the ultrasound images can be sent from remote areas to consulting physicians in a hospital, by building on a lot of pre-existing wireless communications infrastructure, the company says.

Mobisante isn’t the only company thinking about tackling this problem—Bothell, WA-based SonoSite (NASDAQ: SONO) has worked with doctors in Uganda to see what kind of impact its hand-held ultrasound machines can make. Like SonoSite has learned in its years of ultrasound miniaturization, the technology that will have to prove its medical value to physicians, and its economic value to the folks who purchase equipment. As I noted last week, the images George showed to the audience at the MIT Enterprise Forum are not the kind of vivid pictures that heavy-duty and expensive machines on the market deliver now. The key question is whether they are good enough to help doctors perform some fundamental tasks that they can’t already do in cost-effective way today.

It may not be long before Mobisante gets its chance to really prove to doctors what its tool can do. George, in his talk last week, says the company is ready for the challenge.

“This is not a toy,” George said. “It’s a real ultrasound machine.”

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The medical meeting season has passed, and pretty soon Seattle biotechs will go into hibernation for the holidays. But here are a few headlines to catch up on you may have missed in the last week.

—Washington’s Life Sciences Discovery Fund had never invested in a corporation until October, when it agreed to pump $5 million into a drug discovery project at Seattle-based Omeros (NASDAQ: OMER). Like many people, I was under the impression that the state couldn’t really do things like this because of a constitutional prohibition against investing in companies. But executive director Lee Huntsman explained in this follow up interview how this deal was structured in a way that passed legal muster, and which he says could provide a significant return on investment for the state, and a nonprofit entity that may someday replace the Life Sciences Discovery Fund.

—We had the exclusive feature this week on Seattle-based Adaptive TCR, a spinoff from the Fred Hutchinson Cancer Research Center, that has made major strides as a business in its first full year of operations. The company, which is seeking to dominate a new industry in what it calls immune system profiling, has signed up more than 50 academic customers this year, CEO Chad Robins says.

—The future of ultrasound may be on an iPhone, if the folks at Redmond, WA-based Mobisante are correct. This was one of a couple of interesting life sciences startups that were featured last week at the Northwest Startup Demo conference, organized by the MIT Enterprise Forum of the Northwest.

—We announced the next big event on the calendar at Xconomy Seattle, a conference we are calling “Computing in the Age of the $1,000 Genome.” This event, set for February 7 at Swedish Medical Center’s James Tower Auditorium, will feature leading speakers at the nexus of computing and biology from around the West Coast. Today is the last day to get the “super saver” discounted rate, so if you plan on attending, this is the best time to get a ticket.

—Bothell, WA-based AVI Biopharma (NASDAQ: AVII), the developer of RNA-based therapies, named former Celgene executive Chris Garabedian as its new CEO this week. He steps in after former CEO Les Hudson was ousted in a shareholder revolt last April.

—OVP Venture Partners hadn’t had an IPO in a long time until last month, when Mountain View, CA-based Complete Genomics (NASDAQ: GNOM) pulled off that daring feat. I caught up with CEO Cliff Reid last week, and asked him about his company’s business plan to sequence complete human genomes specifically for cancer researchers.

—The Fred Hutchinson Cancer Research Center has been on a major push to boost its immunotherapy programs, and it got an assist from the community with donations from its annual Hutch Holiday Gala. This year, the center pulled in $5.6 million in donations, which was enough over a two-year period to trigger a full $10 million matching grant from the family of Amazon founder Jeff Bezos.

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Writing about business at the microscopic level of genes and cells means that I rarely get to see compelling A/V shows of products in action. So last night was a rare treat to get an up-close look at a half dozen fun and interesting startups in Seattle, from a variety of industries, who were asked to give 8-minute demos that would do no less than make a business audience fall in love with their product.

This was the scene at the Northwest Startup Demo event at One Union Square in Seattle, organized by the MIT Enterprise Forum of the Northwest. I served as one of seven judges who were asked to award the prize for the best product demo. This was my first time judging this competition, but I will say that the overall quality of presentations struck me as surprisingly good, and there may even be a couple companies with legs. Kent, WA-based LaserMotive, the sci-fi-like company that beams power wirelessly, walked away with the top prize of the evening, but in my view, this was a close call.

“This year was the best we’ve ever had in terms of overall quality,” said Villette Nolon, president of Seraph Capital Forum, and a more seasoned judge than I.

Here are some brief highlights from each of the finalists who presented their demos:

—EverSpeech. This Redmond, WA-based company, led by Charles Hemphill, offers speech recognition technology to help professionals fill out forms on the Web. Hemphill wore a noise-reducing headset, speaking clearly into his microphone, and showed on a screen how he could quickly and easily fill out an engineering inspection form without using his hands. One example he gave, to illustrate how it works, was of how an airplane mechanic who’s up on a ladder looking at parts could fill out a form without having to use his hands to jot notes.

—Lipp Sync Automotive. Entrepreneur Bob Lipp had the audience giggling from the get-go with his demo. He fired up a program on his computer to demonstrate what he calls the “Throttlebox,” which he intends to sell to hybrid car owners as a way to simulate engine noise at low speeds, to help avoid accidents that can happen by running into unsuspecting bicyclists and pedestrians. The funny thing was the sound—the engine he was simulating was that of a growling V-8 from a 1970 Ford Mustang at idle—not exactly the kind of sound people envision coming from a Toyota Prius.

You can laugh all you want, but Lipp made his case … Next Page »

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[Updated: 4:05 pm] The University of Washington has filed a federal lawsuit against General Electric, in which the university is accusing the industrial giant of infringing on patented technology that is helping GE make major strides in the market for next-generation diagnostic ultrasound machines.

UW filed its complaint against GE (NYSE: GE) earlier this week in the U.S. District Court for Western Washington. The university claims that GE’s Healthcare unit has chosen not to obtain a license or pay royalties to the UW for its invention that enables doctors to combine ultrasound and other images like those from an MRI. The invention, from the lab of Yongmin Kim, was granted a patent, 6,775,404, in 2004. GE has known about it since at least June 2009, the university contends in its complaint.

Real money is at stake in this case, even for an institution as big as UW with a $1 billion annual research budget. UW argues that GE must pay for a license to the invention from Kim and his medical imaging colleagues in the bioengineering department, because GE uses the technology in its Logiq E9 ultrasound device. The U.S. ultrasound market alone is worth $1.2 billion a year, and GE has been on a tear in this field, boosting its market share from 10 percent in 2007 to 27 percent in 2009 in the fastest growing ultrasound market segments, according to a report from Millennium Research Group. GE’s Logiq E9 and Venue 40 were specifically cited as products enabling the company to grab market share from competitors like Philips Medical Systems and Siemens, according to the Millennium report.

UW says in its complaint that its invention is the sort of thing that enables physicians to get a good look at “real-time intraoperative information contained in ultrasound images with the rich anatomical content” from MRI and CT scanning images taken prior to surgery. One application of the technology, UW says, is that it can enable neurosurgeons to precisely guide their tools inside the brain.

GE introduced the Logiq E9 back in September 2008, and at the time, medical device industry publication Medgadget called it “the next plane” in ultrasound. “The beauty of LOGIQ E9 is in its new image technology and real-time capability to merge an ongoing ultrasound exam with previously acquired CT, MR or ultrasound images,” Medgadget wrote at the time.

[Update with GE response] A spokesman for GE Healthcare said the company, as a matter of policy, does not comment on pending lawsuits.

UW is asking the court to order an end to what it sees as GE’s infringement, and for the company to pay damages, which could come in the form of a royalty rate on product sales.

This is thought to be the first time UW has brought a patent infringement case against General Electric, says UW spokesman Norm Arkans. The university has benefitted in the past from some sponsored research by GE in its radiology, cardiology, and mechanical engineering departments, and the company has occasionally donated equipment, Arkans says. But the two parties apparently disagree on whether GE needs to pay for a license to the invention from the Kim lab. GE hasn’t sponsored any research in the Kim lab, Arkans says.

“Our view is we have a serious responsibility to protect the intellectual property of our faculty that emerges from their research,” Arkans says. “There is a process in this country for protecting IP, and it’s through the patent office. We believe this is an invention by Yongmin and his colleagues that has been properly registered. If a commercial entity wants to use it, it should be licensed.”

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