All this talk about quarterly earnings and venture stats reminded me: I never posted my favorite stories from Xconomy Boston’s third quarter.

Yes, I know it’s almost the end of October, and the third quarter ended a month ago. I must have been traumatized by the collapse of the Red Sox or something (is baseball still going on?). Go ahead, run me out of town like Theo and Tito.

This time, I’m not consulting with my colleagues. I’m a rebel, a maverick. I work alone. Without further ado, here are my favorite stories from July through September:

Top 10 Tech Stories:

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Catching up on an eventful week in Boston- and San Francisco-area venture capital personnel moves…

—Bijan Sabet of Spark Capital and Fred Wilson of Union Square Ventures are leaving the board of Twitter at the end of this month. Sabet and Wilson were early investors in the social-media giant, and there has been plenty of speculation as to the reasons for the move. The consensus seems to be that Twitter needs a public company-ready board, and that the VCs want to focus on early-stage startups. Plus there was talk that Twitter’s board needed a trim. (Of course, there might be more to it than that.)

—Mike Hirshland has left Polaris Venture Partners after 12 years to form his own seed-stage investment firm, the details of which (including its location) are still under wraps. Hirshland was a general partner at Polaris and helped lead the creation of the firm’s early-stage startup incubator Dogpatch Labs, which started in San Francisco, where Hirshland was a frequent presence. His investments have included Black Arrow, Q1 Labs, Formspring, and Stickybits, and his board appointments include Automattic, KISSmetrics, LolApps, and Quantcast.

—Ryan Moore from GrandBanks Capital is joining Atlas Venture as a partner, effective in November. Moore has spent the past dozen years at GrandBanks, making his name with investments in companies such as Enpocket (acquired by Nokia), GlassHouse Technologies (filed for IPO), and Vivox. Meanwhile, Atlas partner Axel Bichara will step back to a venture partner role with the firm. No word yet on how (or whether) GrandBanks will fill its new opening.

—Keith Dionne, the former CEO of Surface Logix and Alantos Pharmaceuticals, has joined Third Rock Ventures as an entepreneur-in-residence. Third Rock, a life sciences VC firm that raised its second fund last year, says Dionne (also a veteran of Millennium Pharmaceuticals) will provide expertise in areas such as rare genetic diseases and novel biologics. Some of Third Rock’s recent investments include Blueprint Medicines, Lotus Tissue Repair, and Zafgen.

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Startups in the Bay State have taken a bit of a break from the feverish pace they were inking deals at earlier this summer. Last month, 34 startups pulled in $250.5 million in equity-based deals, down from the whopping $564.7 million they raised across 38 financings in June, according to data from Funding Flash, a daily roundup of companies receiving venture capital, angel investment, and growth equity funding, provided by our data partner CB Insights.

It’s not too much of a drag, though. Tech startups this July raised almost twice as much this year as they did last July, when they nabbed $131 million through 26 deals. That month last year was also a big drop from June, when they raised $307 million. So it seems we’re following a pattern here.

The biggest startup investment this July—$33 million for Cambridge, MA-based obesity drug developer Zafgen—was just one-fifth of the size of June’s winning $165 million investment for Boston-based CSN Stores. There was also another $5.4 million raised in debt- or options-based deals this July.

Without the big Internet financings last month, healthcare was the winning sector for dollars raised, pulling in $134 million through 17 deals. Other than Zafgen, quite a few deals were small. Five of the healthcare investments rang in at less than $1 million each in July.

The Internet sector nabbed second place for dollars raised, at $60.8 million in seven financings. The winner for that sector was Boston-based Gazelle, which provides a site for recycling old electronics and raised $22 million in Series D financing.

Non-Internet and mobile software companies collectively pulled in the third highest total for funding in July, at $14.5 million across two deals. That’s actually an improvement over the money the sector raised in June ($13 million), and a big jump in its standing as a sector for the month (up from seventh in June). Energy came in fourth place as a sector in July with $13.1 million and two deals. The remaining sectors: mobile and telecommunications, electronics, industrial, and computer hardware and services, each pulled in $10 million or less.

Read below for the details on the top 10 deals of the month.

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Boston-area venture investing is starting to look a lot like 1999.

That’s my take from crunching the regional numbers in the latest MoneyTree Report, prepared by the National Venture Capital Association, PricewaterhouseCoopers, and Thomson Reuters. The Boston stats are in rough agreement with the national trends reported by my colleague Bruce Bigelow, but they are more pronounced in terms of growth.

The report says venture firms poured $1.06 billion into 96 Boston-area companies in the second quarter of 2011 (April through June). That’s almost double the dollar amount from the previous quarter ($553 million in 69 deals), and the most since the first quarter of 2001—remember those days?—when $1.37 billion was invested in 135 Boston companies. But perhaps the most historically similar quarter was the third quarter of 1999, when dollars invested topped $1 billion for the first time, peaking at $2.39 billion in the first quarter of 2000. Most of us remember what happened from there.

The biggest Boston deal of the last quarter was the $165 million growth round invested in Boston e-retailer CSN Stores by Battery, Great Hill, HarbourVest, and Spark Capital. Most of the other notable deals were in biotech and life sciences. The biggest was the $77 million Series G financing round for Merrimack Pharmaceuticals of Cambridge, MA. General Compression, an energy storage firm in Newton, MA, also raised a large round. No social media companies in the top 10, but consumer Internet and security were represented in the tech arena.

Here are the 10 biggest venture deals for Boston-area companies from the second quarter of 2011 (according to MoneyTree, with links to our related coverage; in some cases the financing amounts don’t agree, because of tranches and book-keeping, or else somebody be lyin’):

1. CSN Stores, $165 million

2. Merrimack Pharaceuticals, $77 million

3. General Compression, $54.5 million

4. Tesaro, $40 million

5. Blueprint Medicines, $40 million

6. Zafgen, $33 million

7. Verdasys, $28.9 million

8. Lotus Tissue Repair, $26 million

9. Proteostasis Therapeutics, $25.6 million

10. InfraReDX, $24.2 million

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Boston-area IT, energy, and life sciences firms are making up for a short week last week with plenty of headlines on acquisitions and venture investments this time around.

—Waltham,MA-based business software maker DynaTrace was bought by Detroit-based Compuware (NASDAQ: CPWR) for $256 million in cash, a deal that closed on July 1. DynaTrace, whose technology enables companies to manage the performance of their software applications, has raised $22 million since its founding in 2005.

—Boston-based EnerNOC (NASDAQ: ENOC), a energy management and demand response technology provider, bought Energy Response, Australia and New Zealand’s largest demand response provider, for an undisclosed sum.

—Zafgen, a Cambridge, MA-based developer of obesity drugs, bagged a $33 million Series C round led by its existing investors, including Third Rock Ventures and Atlas Venture. The deal doubled Zafgen’s total financing to $66 million.

—Maynard, MA-based Allegro Diagnostics added another $5.4 million to its Series A funding round, from existing investors Kodiak Venture Partners and Catalyst Health Ventures.

—Waltham-base med tech startup Avedro nabbed a $25 million Series C financing led by SCP Vitalife and Aperture Venture Partners, with participation from previous backers Prism VentureWorks, De Novo Ventures, Flagship Ventures, Borealis Ventures and Echelon Ventures. The company is … Next Page »

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New England biotechs and devices firms have been active in nabbing partnerships, landing investments, and progressing with clinical programs this week.

—Syndax Pharmaceuticals, an epigenetics startup out of Waltham, MA, revealed three sets of data on its lung cancer drug at the Study of Lung Cancer conference this week. The drug, entinostat, is in Phase 2 clinical testing, and acts against certain enzymes that influence specific epigenetic alterations that drive cancer growth and drug tolerance. Syndax aims to combine the drug with other cancer drugs to treat tumors that haven’t responded to other therapies.

—Xconomy national biotech editor Luke Timmerman caught up with Alkermes CEO Richard Pops about his plans to turn the Waltham, MA-based company into a biotech powerhouse. Alkermes (NASDAQ: ALKS), Luke wrote, has seen its stock climb about 30 percent since it announced its plans in May to buy Elan Drug Technologies for $960 million.

—Rib-X Pharmaceuticals could pocket about $772 million through a research and licensing agreement it inked with Sanofi (NYSE: SNY) surrounding Rib-X’s RX-04 program for the treatment of resistant Gram-negative and resistant Gram-positive infections. Sanofi payed $10 million upfront, with another potential $9 million to come in research milestones. Each product selected through the program could earn Rib-X up to $186 million in a mix of development, regulatory, and commercial milestones.

—Cambridge, MA-based obesity drug developer Zafgen nabbed a $33 million Series C financing led by existing investors such as Third Rock Ventures and Atlas Venture, to put toward advancing its lead drug candidate through Phase 2 clinical trials. The deal doubles Zafgen’s funding pot to $66 million.

—Maynard, MA-based Allegro Diagnostics, which is developing a platform for the early detection of lung cancer, said that it added another $5.4 million in Series A extension financing, from existing investors Kodiak Venture Partners and Catalyst Health Ventures

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Obesity drug developer Zafgen is announcing today that it has closed a $33 million Series C financing led by its existing investors, including Third Rock Ventures and Atlas Venture. This doubles the total amount of cash raised by the Cambridge, MA-based startup to $66 million.

Zafgen CEO Thomas Hughes says the company will use the proceeds to move its lead weight-loss drug candidate through Phase 2 clinical trials. In January, Zafgen announced that in an early-stage, one-month trial, its lead drug candidate helped patients lose 2.2 pounds a week. And on June 24, it said that in a Phase 1B trial, the drug produced significant improvements in low-density lipoprotein (LDL) cholesterol, triglycerides, and C-reactive protein (CRP) levels—all important markers of cardiovascular risk that are typically elevated in people who are overweight.

Hughes says the company’s experimental drug—a methionine aminopeptidase 2 (MetAP2) inhibitor called ZGN-433— has exceeded expectations. “We’ve established a rate of weight loss that’s about two-to-four times what one sees in other investigational agents,” Hughes says. “And we see almost a complete normalization of cardiovascular risk.”

Zafgen is currently completing a second Phase 1b study and plans to begin the Phase 2 early next year. The company has also been reformulating the molecule, transforming it from an intravenous drug that has to be given in a medical facility to a “subcutaneous” form that patients could give themselves at home, in an injection just below the skin. Prior to starting the Phase 2, Hughes says, the company will complete a small trial to show the new formulation is as safe and effective as the old one.

The folks at Zafgen seem undeterred by the FDA’s recent rejections of obesity drugs. Mountain View, CA-based Vivus (NASDAQ: VVUS) and San Diego-based Arena Pharmaceuticals (NASDAQ: ARNA) both failed to get their experimental obesity treatments cleared by the FDA. More recently, shares of San Diego-based Orexigen Therapeutics (NASDAQ: OREX) plummeted after the FDA said it would need to see results from a study of long-term cardiovascular outcomes before it would consider approving the company’s combo treatment naltrexone and bupropion (Contrave).

Hughes says he’s kept a close ear to the ground during the FDA’s discussions about those drugs—even going so far as … Next Page »

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New England’s life sciences companies and investors are wasting no time this new year. We saw headlines of financings, clinical trial results, acquisitions, and executive moves at biotech and pharma companies this week.

—Genocea Biosciences of Cambridge, MA, wrapped up $35 million in Series B financing from new investors Johnson & Johnson Development Corporation, MP Healthcare Venture Management, and Skyline Ventures. Previous Genocea backers Auriga Partners, Cycad Group, Lux Capital Management, Morningside Ventures, Polaris Venture Partners, and SR One also participated in the deal for the vaccine discovery and development firm.

—Year-old biotech venture firm Longwood Founders Management announced it had raised its first fund, with help from Cambridge-based Genzyme (NASDAQ: GENZ) and GlaxoSmithKline (NYSE: GSK), which employs two of the fund’s founders, Christoph Westphal and Michelle Dipp. The fund raise totaled to $86.9 million, according to an SEC filing. Ryan caught up with the other founder, biotech investor Rich Aldrich, for a look at Longwood’s strategy.

—Boston-based Relay Technology Management is ready to launch its search and analytics engine for biotech business development groups early this year, Ryan wrote. The startup was formed by a duo of Tufts University researchers in 2008.

—George Cotsarelis, co-founder of baldness treatment developer Follica, was part of a team that released research this week showing that men with pattern baldness have plenty of hair follicle stem cells in their scalps. Follica CEO William Ju said the findings fit with the rationale behind the experimental drug and device under development at the mostly virtual biotech firm, which was founded and incubated at PureTech Ventures in Boston.

—Cambridge weight loss drug developer Zafgen announced that its experimental treatment for severe obesity was well-tolerated and helped patients lose about 1 kilogram (2.2 pounds) of body weight per week in its first human study, which lasted one month. The biotech still has more to prove—obesity drugs must show sustained benefits for at least a year—but the first 24 people tested saw better weight loss effects than those with placebo.

—Ryan previewed our upcoming Xconomy Xchange: HHS CTO Todd Park and Friends on the Future of Health IT. Park, who co-founded Watertown, MA-based Athenahealth (NASDAQ: ATHN) before working in Washington, will dish on how the government can help innovate in the health IT space.

—Medical device maker Boston Scientific (NYSE: BSX) of Natick, MA, announced it had bought Intelect Medical, a maker of neuromodulation technologies for deep brain stimulation, for about $60 million in cash. Boston Scientific, which already had an equity stake in the company, said it will complement its existing technology to help physicians better visualize brain stimulation fields.

—Weston, MA-based Biogen Idec (NASDAQ: BIIB) enlisted former ZymoGenetics CEO Doug Williams to lead its R&D group. It also brought on a new vice president of corporate development: Steve Holtzman, the former chief executive of Cambridge-based Infinity Pharmaceuticals (NASDAQ: INFI). Both new hires will report to George Scangos, who joined Biogen as CEO in summer of 2010.

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People working on new drugs for obesity had a pretty crummy 2010 on the whole, but now an intriguing startup in Cambridge, MA, called Zafgen is starting the new year with a bang.

Zafgen is announcing today that its experimental weight loss drug for severe obesity was well-tolerated, and able to help people lose about 1 kilogram (2.2 pounds) of body weight each week in its first study in humans. The trial only lasted one month—and obesity drugs need to show sustained benefit for at least a year—but even in early days among the first 24 people tested, the weight loss effect was significantly better than a placebo. Side effects included mild headaches and dizziness at high doses. Detailed findings will be presented at the Keystone Symposia on Obesity in Keystone, CO, on January 15.

“While the long-term safety and efficacy of the compound remain to be established, there is nothing in the industry drug pipeline this advanced that has shown this kind of efficacy,” said Steven Smith, a diabetes and obesity expert at the Sanford-Burnham Medical Research Institute in Orlando, FL, said in a Zafgen statement. Smith was involved in the study design and interpretation.

If this drug can continue to deliver these kinds of results in further testing, it could be a potent new option for one of the biggest threats to public health in the U.S. An estimated 20 million people in the U.S. are considered severely obese, with a body mass index of 35 and above—for a person who’s 5-foot-6, a BMI of 35 means a weight of 216 pounds. Carrying all that extra weight puts people at risk for lots of chronic ailments like arthritis, heart disease, depression, and diabetes, to name a few.

Despite the growing problem, obesity drug developers have struggled to seize the opportunity. Mountain View, CA-based Vivus (NASDAQ: VVUS) and San Diego-based Arena Pharmaceuticals have failed to win FDA clearance for new treatments, as they were unable to strike the right balance of squeaky-clean safety and potent effectiveness in the past year. One other company, San Diego-based Orexigen Therapeutics (NASDAQ: OREX), is hopeful it will win FDA clearance for a new drug this month. But Zafgen’s drug helped people lose about two to four times as much weight by the same early point in time, when compared to what researchers saw in other studies. More invasive treatments like gastric bypass surgery are the only things that have been shown to help people lose more weight, the company said.

Tom Hughes

“We’re really excited,” says Zafgen CEO Tom Hughes.

We first wrote in detail about Zafgen in this space two years ago, when the company thought it had hit upon a novel idea of fighting obesity by cutting off the blood supply to fat tissue. Two big-name venture firms in Boston—Third Rock Ventures and Atlas Venture—recruited Hughes out of Novartis to pursue this intriguing concept. Further animal studies suggested the original hypothesis of how the drug worked was wrong, and that it probably worked instead by re-setting the way the body metabolizes fat.

Regardless of how the drug’s supposed to work at the metabolic level, Zafgen saw it produce consistent weight loss in animal studies. And the compound, a small molecule drug called ZGN-433 that’s designed to hit a target called MetAP2, had already been tested at much higher doses as a cancer treatment by South Korea-based CKD Pharma. That meant Zafgen had a pretty good idea of its safety and absorption profile. So the startup plowed ahead last year with this first clinical trial to see if the massive amount of weight loss seen in animals could be reproduced in people.

Here’s how the study was set up. Zafgen and its investigators recruited 24 severely obese women in Australia, and randomly assigned them … Next Page »

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Third Rock Ventures, a healthcare-focused venture firm with offices in Boston and San Francisco, says today it has raised $426 million for its second fund. The fund represents a vote of support for the firm’s model of investing in and starting life sciences ventures that have the potential to transform healthcare.

The Boston-based firm, which launched in 2007 with a $378 million first fund, says that it has also made some personnel moves, in part to facilitate its recent expansion in the Bay Area. Charles Homcy, the former CEO of South San Francisco-based Portola Pharmaceuticals, has been named a venture partner at Third Rock and will head the firm’s West Coast office. Alexis Borisy, the former chief executive of Cambridge, MA-based Zalicus (formerly CombinatoRx), has been promoted from entrepreneur-in-residence to partner. Also, Nick Leschly has left the partnership at Third Rock to become CEO of its Cambridge-based portfolio company, Bluebird Bio (former Genetix Pharmaceuticals).

Meantime, Third Rock has recently added Chris Varma, previously of Flagship Ventures, and David Armistead, the former chief scientist of CGI Pharmaceuticals, as entrepreneurs-in-residence. With the recent West Coast expansion, Third Rock partner Craig Muir and principal Jake Bauer are moving from the Boston office to the San Francisco outpost, according to the firm.

Third Rock—which includes founding partners such as Mark Levin and Kevin Starr who previously served as senior executives at Millennium Pharmaceuticals—has been one of the few venture outfits in the Boston area to aggressively launch and invest in life sciences startups during the past years, a period of financial turmoil for many of their counterparts in the venture industry. Since 2007, the firm has launched or invested in more than 15 life sciences companies, such as Cambridge-based cancer drug developer Agios Pharmaceuticals and Zafgen, a developer of obesity treatments in Cambridge, as well as Bay Area firms Ablexis, an antibody drug specialist, and Afferent Pharmaceuticals, which is focused on new treatments for chronic pain.

“These companies were formed around disruptive areas of science and medicine and many were developed as part of Third Rock’s unique company discovery process,” Starr said in a statement. “We look forward to continuing to partner with entrepreneurs, researchers and company founders to pursue bold ideas and groundbreaking science that promise to dramatically improve the lives of patients.”

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Boston’s Third Rock Ventures, the relatively young firm with an appetite for investing in some of the most disruptive ideas in biotech, is opening up a new office in San Francisco’s Mission Bay district. Third Rock principal Jake Bauer is moving to San Francisco, and will be joined by another partner at the firm. The news was first reported this morning by Scott Kirsner on the Boston Globe website.

Venture firms open new offices in San Francisco all the time, so that’s hardly news, but Third Rock is a little bit of a different case. This firm was founded in 2007 by a group of high-profile former executives at Cambridge, MA-based Millennium Pharmaceuticals, including former CEO Mark Levin. A year before the economic downturn caused many VCs to turn cautious and try to prop up existing portfolio companies, the firm was sitting pretty with a maiden fund of $378 million that it could invest in some of the best ideas emerging at Boston’s academic institutions.

Ever since, Third Rock has been placing a series of bets on Boston biotech companies that could only be called some of the most audacious and potentially groundbreaking ideas in the industry today. The portfolio includes Agios Pharmaceuticals, the company seeking to essentially starve cancer cells to death through blocking cell metabolism; Constellation Pharmaceuticals, an early leader in drugs that alter epigenetic targets; Eleven Biotherapeutics, a new protein drug developer; Genetix Pharma, a developer of new gene therapies; and Zafgen, the company with a novel approach for treating severe obesity.

One of the keys to Third Rock’s strategy, as partner Kevin Starr explained to me in this in-depth feature in September 2008, is that the firm’s partners don’t just attend one board meeting a month—they tend to get intimately involved in running the operations of the startups in their earliest days. Partly because of that close involvement, Starr emphasized to me in that interview that Third Rock wanted all of its investments to be in Boston so that the partners wouldn’t have to waste time on flying around the country to meet all their companies.

Starr didn’t immediately respond to an e-mailed request for comment today about the firm’s planned expansion to the Bay Area, but I’ll update this space if I hear more from him.

That philosophy appears to have changed over time as Third Rock has had some more success. The firm has already invested in a couple of Bay Area companies, San Francisco-based Ablexis (which I profiled in these pages recently), and Afferent Pharma. Ablexis CEO Larry Green, when asked about dealing with Third Rock, noted that he’s known Levin for years, going back to when Levin was a co-founder of Fremont, CA-based Abgenix. Third Rock partner Bob Tepper also has strong Bay Area roots, as a co-founder of Cell Genesys, and later Abgenix. Levin’s time in the Bay Area also goes way back, to when he co-founded the Mayfield Fund’s life sciences investing efforts, and was founding CEO of Tularik and Cell Genesys.

Now that Third Rock has expanded beyond its roots in Boston to the world’s other major hub of biotech, San Francisco, it will be interesting to see if the kinds of technologies it backs are any different. While a lot of VC firms are licking their wounds from bad bets of the past and trying to find ways to play it safe, Third Rock hasn’t shown any interest in retrenching. While others have sought to repurpose old assets from Big Pharma, Third Rock has spent time talking to Big Pharma about what kinds of technologies emerging in academia could be truly disruptive over the next two decades. The firm has apparently made enough promising bets that it is now out seeking to raise a second fund, potentially worth as much as $400 million, according to an April regulatory filing. Now that Xconomy is also in the Bay Area, I will be watching closely to see if these guys continue to get their fingers on some of the big ideas, with classic boom or bust potential, coming out of the Bay Area.

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Two prominent Bay Area biotech companies took their lumps in front of FDA advisory panels this week, which clearly sent some shivers through the startup community.

—Genentech, the U.S. unit of Roche, failed to persuade an FDA advisory panel to support the use of bevacizumab (Avastin) for women with a type of breast cancer that doesn’t overexpress the HER2 protein. The drug is already approved for colorectal, lung, brain, and kidney tumors, but analysts say the company could lose hundreds of millions in future revenue if it loses this promising market among breast cancer patients. The FDA has a deadline of September 17 to decide whether to keep breast cancer usage in the drug’s label.

—Mountain View, CA-based Vivus (NASDAQ: VVUS) was also unable to convince an FDA advisory panel that its obesity drug deserves a place on the U.S. market. This setback has implications not just for Vivus, which is counting on the weight loss drug to be its first real moneymaker, but also for competitors like San Diego-based Arena Pharmaceuticals (NASDAQ: ARNA) and Orexigen Therapeutics (NASDAQ: OREX). Tom Hughes, the CEO of an obesity drug developer in Boston, followed up with his perspective on what this means for the future of obesity drug development in a guest op-ed.

—I took time to profile one of the rising stars in the Bay Area venture industry, Kristina Burow of Arch Venture Partners. Burow, 36, hasn’t yet hit a home run for the Arch portfolio, but she has played a key role in starting some of its big idea companies of the past five years—including Sapphire Energy, Lycera, Receptos, and Siluria Technologies.

—Tethys Bioscience, the Emeryville, CA-based maker of a test that predicts an individual’s risk of getting diabetes, secured $33 million in an equity and debt financing. The company’s president, Mike Richey, talked in detail about how big Tethys thinks this new market could become, and how Tethys envisions it will save money for the healthcare system for years to come.

—Since Tethys was fresh in my mind, I followed up for a longer conversation with one of its early investors, Menlo Park, CA-based Mohr Davidow Ventures. Managing partner Bill Ericson talked about how MDV has been investing in personalized medicine companies like Tethys for the past seven years. While the concept of personalized medicine hasn’t gone mainstream yet, Ericson says it’s only a matter of time, and MDV is remaining patient, and continuing to bet big.

—Here’s a little story with a strong Seattle-SF Bay Area connection. Integrated Diagnostics, the company co-founded by biotech pioneer Leroy Hood, secured a $10 million second tranche of its $30 million Series A financing announced last October. Menlo Park, CA-based InterWest Partners led the deal for this company, which is seeking to analyze certain proteins found in a pinprick of blood that could suggest future risk of lung cancer.

—South San Francisco-based Achaogen secured one of the biggest biotech venture deals of the second quarter, pocketing $56 million, so I’ve been meaning to follow up with them for some time to find out what’s so interesting. CEO Kevin Judice offered up some revealing insights about his vision to create an antibiotic company that goes after multi-drug resistant bacterial infections.

—San Mateo, CA-based Itero Biopharmaceuticals secured its first partnership to develop a product, attracting support from generics maker Watson Pharmaceuticals (NYSE: WPI). Terms weren’t disclosed, although the companies plan to work together on a “biosimilar” drug for female infertility, a market estimated to be worth $1.2 billion.

—Lastly, we had a thought-provoking guest editorial from former Bayhill Therapeutics CEO Mark Schwartz on how the lack of will to finance early-stage projects is damaging the culture of innovation in biotech. He asks: “Where Will the New Disease Treatments Come From a Decade From Now?” If you have your own opinion on this, or any other issue that’s relevant to the local innovation community, send a draft over to me at ltimmerman@xconomy.com or Wade Roush, our San Francisco editor, at wroush@xconomy.com.

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Yesterday’s FDA advisory committee meeting on Vivus’ weight loss pill proved to us, once again, how incredibly difficult it is to successfully develop and register new drugs for obesity. Mountain View, CA-based Vivus had a solid program supporting their drug—demonstrating that their combination product of phentermine and topirimate (Qnexa) is very effective and has a defined safety profile worthy of a regulatory approval. Phentermine is better known as the ‘phen’ in fen-phen, and topirimate is used for the treatment of epilepsy, migraine, and a significant amount of obesity off-label.

The good news is that the combination—tested by Vivus at three dose levels—was effective, showing a clear dose response that resulted in a median weight loss (at the high dose) of about 15 percent for patients who completed 56 weeks of treatment. That’s a serious amount of weight, considering that your average obese patients weigh around 220 pounds or more. Furthermore, the Vivus drug demonstrated some very impressive salutary effects on other endpoints that travel with obesity—including blood glucose, blood pressure, HDL and LDL cholesterol, sleep apnea, and inflammation markers.

There were some compelling speeches from patient advocates, too. I have to confess, I choked up a bit when one young and striking patient who had been transformed with tremendous weight loss during her trial experience on the Vivus drug tearfully pleaded to the panel to support approval, saying “We need help. I … need help.” She, like others who were quoted by Kelly L. Close, who edits a journal called diaTribe and spoke passionately for approval—view obesity as ‘a nightmare I cannot wake up from.”

It’s true—obesity is a lifelong struggle. She and the rest of us need to have good tools in the hands of our physicians to keep weight in check, just like we do for hypertension, high cholesterol, and other chronic diseases. It’s very touching stuff, and sobering too. Especially when you consider that 30 percent or more of U.S. adults are obese, and that the strategies being taken to stop the problem through diet and exercise are about as effective against established obesity as a sponge mop on the oil-soaked beaches of Louisiana.

So what prompted the advisory committee to vote against approval by a resounding 10-6 majority? It’s a bit of a story in itself, one that started earlier in the same room, where the fate of the diabetes drug rosiglitazone (Avandia) was discussed and vigorously debated for two days. Vivus’ Qnexa was the closing act to follow a bitterly contested decision of whether to keep GlaxoSmithKline’s Avandia on the market—a matter that was in balance due to the question of whether the drug increases risk of cardiovascular events—events that were foreseen by some and contested by others, but which took tens of thousands of patients to assess. It is painful for everyone to go back to ask if approving a drug was the right decision. Hindsight is a mean master, and the master had just taught the field a serious lesson.

What lesson? I think if one were to characterize the problem with a phrase, it would be that timeless warning made to physicians in training—”Primum non nocere,” or “First, do no harm”. Another way to say it is—be careful, and make sure you don’t make a decision you’re going to regret. Don’t end up in the same tense room 10 years later trying to figure out what, if anything, went wrong.

Yes, there were signals and other concerns with Vivus’ treatment, falling into a few main categories inherent to the two molecules packaged … Next Page »

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Cambridge, MA-based Alnara Pharmaceuticals made headlines before Fourth of July weekend when the drug giant Eli Lilly agreed to buy the startup and its late-stage drug for pancreatic insufficiency for an undisclosed sum. But what might have been lost in all the hoopla about the deal was that there are only 21 full-time employees at Alnara.

Indeed, Alnara used what CEO Alexey Margolin called a “flexible model” en route to its buyout agreement with Lilly (NYSE:LLY). It’s an example of how biotech startups are trying to achieve, and in this case attaining, big successes with relatively modest resources.

The startup, which has raised a total of $55 million in venture capital, has relied heavily on its full-time staff of experienced people and a large number of contractors since it was founded in July 2008. Bob Gallotto, the chief business officer of Alnara, said that the company has kept its number of full-time staff members low to limit spending. It also used a contractor for manufacturing, Lonza, rather than investing in its own own large-scale drug production facility.

“On any one day we may have 40 people in the office, 25 of them coming in and doing different things one day a week here or there,” Gallotto said.

Biotechs have had to do more with less by necessity because of the lack of available capital since the financial meltdown in 2008. Alnara is among a growing number of biotech startups that have adopted business strategies or models that include the use contract workers, partners, and lean staffs of highly capable people to move their drugs toward the market. Another local example is Cambridge-based Zafgen, a developer of obesity drugs that complements its core staff of three senior executives with a network of consultants and contract research organizations, company CEO Tom Hughes has told me.

These companies have learned from the spending sins of their predecessors in the drug-development game. Take Altus Pharmaceuticals, the … Next Page »

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Early round venture funding dominated the deals news this week, but there were still announcements of partnerships, acquisitions, and IPOs to mix it up.

—Newton, MA-based energy storage company General Compression announced it had closed more than $17 million in commitments to its Series A round, but did not reveal how much of that money was in new equity investments. The funding came from U.S. Renewables Group and Duke Energy, and will go to building the company’s first commercial-scale wind power storage unit.

—Marathon Technologies, a Littleton, MA maker of fault-tolerance software, brought its Series B funding round up to $13.5 million, thanks to a third close, a regulatory filing revealed last week.

—Stealthy life sciences startup Ra Pharmaceuticals raised $10.3 million of a planned $27.6 million round of equity-based financing, according to an SEC filing. The company is incubated at the Boston office of Morgenthaler Ventures and is lead by Doug Treco, who co-founded former Transkaryotic Therapies, a Cambridge, MA company acquired by Irish drugmaker Shire in 2005.

—Intrinsic Therapeutics raised $18 million of a $20 million round that included equity, options, and warrants. An SEC filing listed New Enterprise Associates, Spray Venture Partners, and New Leaf Venture Partners as directors of Woburn, MA-based Intrinsic, which develops spinal implants to treat disc herniation.

—-Athenahealth, a Watertown, MA-based maker of Internet software for medical practices, and doctors-only social networking company Sermo announced a partnership early this week, but didn’t disclose financial terms of the deal. Athena plans on … Next Page »

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Zafgen, a Cambridge, MA-based startup focused on new obesity treatments, has raised $8.1 million in a third closing of its $28 million Series B round, a company spokeswoman confirmed this afternoon. The funding was revealed today in this SEC filing. The company, which has now raised $30 million, received the fresh capital from previous backers Third Rock Ventures in Boston and Atlas Venture in Waltham, MA. Zafgen CEO Tom Hughes told Luke earlier this year that the firm isn’t exactly sure how its drugs work, after a study showed that its earlier hypothesis that its molecules cut off the blood supply to fat tissues turned out be wrong.

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This week we’ve got another crop of great interviews with the founders and executives of some of New England’s most fascinating life sciences companies.

—Zafgen CEO Tom Hughes filled Luke in on his Cambridge, MA-based startup’s plans to begin human tests of its anti-obesity drug, which the company hopes will be the first drug to produce weight loss dramatic enough to compete with stomach stapling and other bariatric surgery. Hughes also shared some surprising news from animal studies that the Third Rock Ventures- and Atlas Ventures-backed company has completed over the last year: its original idea about how its drug works has turned out to be completely wrong.

—Solace Pharmaceuticals CEO Eliot Forster confirmed to Ryan that the startup, founded in 2006 to develop pain treatments, has shuttered its Cambridge operations. The move came in late November, after Solace’s lead drug candidate failed in a mid-stage clinical trial. Backed by PureTech Ventures, Polaris Venture Partners, and InterWest Partners, Solace will continue to operate out of its remaining office in Canterbury, UK.

—Veteran biotech dealmaker Adelene Perkins talked to Luke about her journey to the corner office of Cambridge-based Infinity Pharmaceuticals (NASDAQ: INFI). Perkins, who became Infinity’s CEO on January 1, also shared her plans to build up the commercial side of the company, which has yet to bring a drug to market, and to transform it into a fully integrated organization.

—Ryan chatted with PatientsLikeMe co-founder and president Ben Heywood, whose social networking site for people with diseases such as multiple sclerosis and epilepsy has grown from about 25,000 users in December 2008 to more than 55,000 early this month. The Cambridge-based startup, which sells anonymous data culled from the members of its 10 patient communities to pharmaceutical and research companies, has also staffed up from 20 to 30 employees.

—Cambridge, MA-based Genzyme (NASDAQ:GENZ) and Carlsbad, CA-based Isis Pharmaceuticals (NASDAQ:ISIS) reported results from a Phase III clinical trial indicating that their experimental cholesterol-lowering drug, mipomersen, significantly lowers the cholesterol of patients with a rare condition called heterozygous familial hypercholesterolemia. The drug was also associated with increases in liver enzymes called transaminases, which can indicate liver damage, however—this issue, seen in previous trials, has caused some nervousness about mipomersen among investors.

—Boston Scientific (NYSE:BSX) announced plans to cut 1,000 to 1,300 jobs, or 8 percent to 10 percent of its total work force, as part of a company-wide restructuring effort. The Natick, MA, medical devices giant is aiming to reduce its 2009 gross expenses by $200 million to $250 million during the next two years.

—CombinatoRx (NASDAQ:CRXX) co-founder and former CEO Alexis Borisy talked to Ryan about his new gig as an entrepreneur in residence at Boston’s Third Rock Ventures—and about the super-stealthy new life sciences firm he’s helming, Foundation Medicine. Borisy joined Third Rock in October, a few months after leaving his post at CombinatoRx as part of its merger with NeuroMed Pharmaceuticals.

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Alexis Borisy is back in company-building mode. The former CEO of the drug developer CombinatoRx tells Xconomy that he has joined Third Rock Ventures in Boston as an entrepreneur in residence—and he’s already at the helm of a secretive new life sciences firm called Foundation Medicine.

Borisy gave few details on the startup, other than saying that the firm is focused on personalized medicine. He was more forthcoming, though, about his new role at Third Rock, whose team he quietly joined in early October, about four months after officially stepping down from his post as chief executive of Cambridge, MA-based CombinatoRx (NASDAQ:CRXX).

Borisy’s departure from CombinatoRx, a developer of combination drugs that he co-founded in 2000, was revealed in July when the company announced its merger with NeuroMed Pharmaceuticals. Borisy is officially a scientific advisor to CombinatoRx, but he says that he isn’t spending much time working with the company.

He and Third Rock partner Mark Levin have been discussing new entrepreneurial opportunities in biotech for the past year. Third Rock, which was launched in 2007 with a $378 million initial fund, is appealing to Borisy because the firm is focused on backing life sciences startups with the potential to fundamentally improve how certain diseases are treated, he says, and the firm’s members often take active roles at the companies in which it invests.

“When we founded Third Rock, we realized great companies take more than just great science; they require passionate people who share our commitment to making a difference for patients,” Third Rock partner Kevin Starr said, in an e-mail. “Alexis is one of those rare people that has the tools to take a disruptive idea and transform it into an exciting vision for a company that will have a significant impact. He has made a big difference in the firm already and we are all very excited to work with him on our next generation of companies.”

As an entrepreneur in residence, Borisy has an office at Third Rock’s Newbury Street headquarters and spends time with other members of the firm assessing and pursuing opportunities to start or invest in companies. And he places particular emphasis on pitching in as an executive of young portfolio companies, he says.

Borisy’s interests have recently focused on the field of … Next Page »

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