This was the week that a little biotech company in Bothell that few of the locals have ever heard of, burst onto the national stage.

—Bothell, WA-based Alder Biopharmaceuticals had its breakout moment this week when it pulled in $85 million in upfront cash, and stands to gain more than $1 billion over time from a partnership with Bristol-Myers Squibb to co-develop a new drug for rheumatoid arthritis. Clinical trial data on this drug hasn’t yet been released publicly, but CEO Randy Schatzman says it’s good enough to give market-leading drugs from Amgen and Abbott Labs a “run for their money.” Seattle Genetics CEO Clay Siegall, an Alder director, says it is now a “force” in regional biotech.

—Over in Seattle’s South Lake Union, another little-known private company called Kineta said it is splitting a little more than half of a federal contract with the University of Washington worth $13 million over the next five years. The goal will be to develop new chemical compounds, called adjuvants, that can boost the effectiveness of a wide variety of vaccines.

—The Institute for Systems Biology is continuing to net a lot of grant money, this week announcing that it has pulled in $8 million from the National Institutes of Health to contribute to The Cancer Genome Atlas. This is a genomic effort to identify potential new targets for cancer drugs.

—The battle between Seattle-based ZymoGenetics (NASDAQ: ZGEN) and Bristol, TN-based King Pharmaceuticals is heating up in federal court in Tennessee. If you’ve missed any of the back-and-forth, or how this ball really got rolling back in August, here’s a quick summary.

—Bellevue, WA-based Light Sciences Oncology, another private company that keeps a low profile, revealed in a regulatory filing that it has lined up another $35 million to support its drug-device combination therapy for cancer. The money is available in the form of a line of credit, and if investors choose to exercise warrants.

—Bothell, WA-based Verathon, the maker of a simple ultrasound tool for diagnosing bladder disorders, was acquired by Sarasota, FL-based Roper Industries (NYSE: ROP) as part of a pair of transactions valued at $356 million. The companies aren’t saying how much of that is going to the Verathon shareholders.

—Seattle-based Dendreon (NASDAQ: DNDN), the king of the moment in Seattle biotech, issued a pretty vanilla quarterly report with the Securities and Exchange Commission. One point worth noting was that it burned $28 million of its cash reserves in the three-month period ending September 30. It ended that quarter with $259.6 million in cash and investments left in the bank as it prepares to manufacture and market sipuleucel-T (Provenge) next year for men with terminal prostate cancer.

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Alder Biopharmaceuticals has just struck one of the biggest biotech partnerships of the year, both in the Seattle area and nationally. The Bothell, WA-based developer of faster and cheaper technology for making antibody drugs has formed a collaboration with Bristol-Myers Squibb (NYSE: BMY), focused on the development of Alder’s experimental rheumatoid arthritis drug, that could be worth more than $1 billion.

Under the deal, Alder will grant a worldwide exclusive license to Bristol to develop ALD518 for all potential uses except cancer; Bristol will get an option to market the drug as a treatment for cancer outside the U.S. In return, Alder will get $85 million in upfront cash, as much as $764 million in payments for reaching development and regulatory milestones, sales-related milestone payments that could exceed $200 million, and an undisclosed royalty rate on product sales. Alder may also require Bristol to make a $20 million equity investment to support an initial public offering, if it chooses to go that route.

Alder’s big idea is to manufacture antibody drugs in yeast instead of in traditional mammalian cells. This enables the company to make “fast-follower” drugs that are faster and cheaper to produce, and that also may have improved properties like less frequent dosing, Alder CEO Randy Schatzman has told Xconomy. In the case of ALD518, Alder has developed an antibody to follow Roche’s tocilizumab (Actemra). The Roche drug, the first in its class, is an antibody designed to block the receptor of an inflammatory protein called IL-6 that hammers the joints of rheumatoid arthritis patients. This approach could offer doctors an alternative to the $10 billion-a-year class of drugs that block a different protein called TNF, like Amgen’s etanercept (Enbrel) and Abbott Laboratories’ adalimumab (Humira). Analysts have predicted sales of the Roche drug could capture a tidy portion of this huge market, with sales of $2 billion a year.

Alder has designed its antibody to block the IL-6 protein target. The Alder drug, ALD518, is designed to last longer in the bloodstream, so it can be given less frequently, possibly as little as three or four times a year instead of once a month, Schatzman has said. It is much more potent, so it can be given in one-tenth the dose, which is one reason it should be much cheaper to manufacture. The drug is also engineered to avoid dangerous immune system reactions that other antibodies can sometimes provoke.

“With its novel mechanism of action, ALD518 has the potential to offer an exciting new option for patients with rheumatoid arthritis,” said Brian Daniels, Bristol’s senior vice president, global development and medical affairs in a statement. “We are pleased to have the opportunity to develop this novel monoclonal antibody.”

Alder has completed a Phase II trial with about 120 patients who got ALD518 for rheumatoid arthritis, although it hasn’t made the results of that study public. But the company was actively deal-hunting at the American College of Rheumatology conference in Philadelphia last month.

The deal with Bristol is that company’s second big partnership with a Seattle biotech company this year, after an alliance with ZymoGenetics that it formed in January. That collaboration could also be worth more than $1 billion over time, to co-develop and market a new interferon drug with fewer side effects for hepatitis C patients. It’s also the second partnership for Alder this year, after it agreed in June to develop new antibodies for Schering-Plough, which wants to test them for a neurological disease.

Alder was founded in 2004 after Celltech R&D closed its doors in Washington and a core scientific group stuck together to start something new. It is now one of the better-financed development-stage biotechs in Seattle. It pulled in a $40 million Series C round in January 2008 from Delphi Ventures, TPG Biotech, Sevin Rosen Funds, Ventures West, HIG Ventures, and WRF Capital.

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ZymoGenetics started really playing hardball with King Pharmaceuticals in August, and now a high-and-tight fastball has come right back at the Seattle biotech company.

The projectile in question is a lawsuit filed on November 2 by Bristol, TN-based King in the U.S. District Court in Eastern Tennessee; the suit accuses ZymoGenetics of false advertising, unfair competition, and other violations of federal and Tennessee law. King went so far to ask a federal judge to impose three temporary restraining orders to stop ZymoGenetics (NASDAQ: ZGEN) from making certain claims comparing the two drugs—and it was successful for a couple of days until Zymo got the restrictions overturned on Friday.

The suit, it seems, is at least partly a response to a move made in the summer by ZymoGenetics, maker of a drug for surgical bleeding, to try to get King’s rival product pulled from the market. For those not following all of the two companies’ maneuvering, here’s a quick summary.

The incumbent product, Thrombin-JMI, is made by Bristol, TN-based King Pharmaceuticals (NYSE: KG) for surgeons to dab or spray onto an organ that’s bleeding too much during surgery. The King product has been around in hospitals since 1995, and generated $255 million in sales a year ago. Surgical bleeding drugs (called topical hemostats in the operating room) are used in an estimated 1 million surgeries a year in the U.S.

But ZymoGenetics, whose own drug was approved in January 2008, has been arguing for years that it can do a lot better. The King drug is derived from clotting proteins called thrombins in cow blood. Since that’s from a foreign source, the human immune system recognizes it as such, and can spark a reaction that can lead to severe bleeding and death, ZymoGenetics has argued.

The challenger in this niche market, ZymoGenetics developed what it considers a safer alternative, recombinant thrombin, a genetically engineered copy of the human thrombin protein. Because the new drug is a human, rather than cow, protein, it shouldn’t provoke as many immune reactions or dangerous bleeding episodes, ZymoGenetics has contended. But ZymoGenetics has struggled to convince doctors that they need to switch, and it has backed away from earlier attempts to charge premium prices. The company forecasts that it will generate $28 million to $30 million in sales of the drug this year.

Back in August, ZymoGenetics found another venue besides the marketplace in which to wage this fight—the FDA. The company gathered evidence of two cases in which physicians attributed patient deaths to bad reactions on its competitor’s drug, and 23 more cases of severe complications. That was some of the ammunition contained in a 31-page citizen’s petition the company filed with the FDA, in which ZymoGenetics asked the agency to pull the drug off the market for the sake of public health. “There are physicians using Thrombin-JMI without a clear understanding of its risks,” said ZymoGenetics CEO Doug Williams in an interview with Xconomy in August. “There are at least three better alternatives in the marketplace now.”

King, a company with a $2.7 billion market capitalization, didn’t comment at the time. But it obviously decided that when ZymoGenetics started playing hardball, it was time to follow suit.

King challenged the ZymoGenetics citizen petition …Next Page »

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We had a little something for everybody on the life sciences beat this week, with news on biopharmaceuticals, devices, and healthcare software.

—Seattle-based Omeros (NASDAQ: OMER) had potential to be a bellwether for the U.S. biotech sector earlier this month, as the first true biopharmaceutical company to go public since February 2008. But its stock has tanked, making it the worst-performing IPO of the year, according to data from Renaissance Capital. Not surprisingly, no other biotech company has stepped up to put its name on the IPO calendar since.

—ZymoGenetics‘ former chief medical officer, Jan Ohrstrom, told me about his latest passion to develop a dry powder drug for excess bleeding that could be conveniently used by paramedics, and might be a superior alternative to liquid formulations like the one made by his former employer. He has recruited a former Zymonite to work for him at ProFibrix, and he’s set up a new office not far away from his old stomping grounds on Seattle’s Eastlake Avenue.

—Microsoft has been leading the way for a couple years now to make medical records go electronic, and put individuals in charge of them, but the HealthVault software is still a long way from gaining mainstream acceptance. My colleague Ryan McBride reported on all the challenges Microsoft is facing following a talk by Peter Neupert, the vice president of Microsoft’s Health Solutions Group, at the Connected Health Symposium last week in Boston.

—The Washington Biotechnology & Biomedical Association’s big annual meeting in March is being revamped with a new name, new look, and a new program, as we heard in this guest editorial from Valerie Carricaburu of UW TechTransfer and biotech consultant Neile Grayson. The event, formerly known as Invest Northwest, is now going to be called Life Science Innovation Northwest, and will seek to entice not just investors, but also corporate and strategic partners with the wherewithal to support innovation in the Northwest. Valerie and Neile are seeking ideas from the community on how to improve the event, so feel free to post a note at the bottom of this story.

—Seattle-based Kineta, the developer of treatments for autoimmune diseases, formed a collaboration with Matawan, MI-based MPI Research, to support animal studies that will enable clinical trials to start in 2010. Terms weren’t disclosed.

—Bothell, WA-based SonoSite (NASDAQ: SONO) said its sales dropped by 13 percent in the quarter ending Sept. 30, and that it recorded an operating loss of $240,000 in the period.

—ZymoGenetics (NASDAQ: ZGEN) said it has started a mid-stage clinical trial of its pegylated interferon lambda drug for hepatitis C, which triggered a $70 million milestone payment from its partner, Bristol-Myers Squibb.

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Seattle-based ZymoGenetics (NASDAQ: ZGEN) will receive a $70 million milestone payment from its partner, Bristol-Myers Squibb, for starting a mid-stage clinical trial of pegylated interferon lambda for hepatitis C, according to a statement. The trial, called Emerge, will initially enroll 50 patients on a variety of doses, then expand to 500 patients who are randomly assigned to get the ZymoGenetics drug or Roche’s peginterferon-alfa 2a (Pegasys). ZymoGenetics’ pegylated interferon lambda, sometimes called IL-29, is designed to have potent anti-viral activity without the nasty flu-like symptoms that force many patients to quit taking other interferon drugs.

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One of the key people who transformed ZymoGenetics from a basic research institute into a more balanced biotech company with both R and D, has set up shop in a rival startup just a few blocks away on Seattle’s Eastlake Avenue. If he plays his cards right, this little company will surpass his former employer, with what he hopes will be an even better treatment to control bleeding.

His name is Jan Öhrström (pronounced Yahn Oar-strum), and he’s the former chief medical officer of Seattle-based ZymoGenetics (NASDAQ: ZGEN), and now the chief operating officer of a company called ProFibrix. The newer company is headquartered in the Netherlands, and when it went looking to establish a U.S. presence a year ago, it hooked up with Öhrström to build that in Seattle. The company picked up some momentum in August when it raised $11 million in a Series B venture round, and it has some intriguing technology, so it was time to catch up with Öhrström over lunch to find out what’s up.

ProFibrix sees itself carving out a niche in the market for drugs and sealants that are used to stop excess bleeding, both in the surgical operating room and among paramedics—or on the military battlefield. The company is creating a dry powder that is ready to be used at a moment’s notice, can be sprinkled on a wound, remains stable at room temperature, and can be packaged in a spray or a bandage. It sees its potential edge in convenience when going up against standard treatments that need to be thawed, mixed with another solution, or kept in a fridge. If this new product can be proven effective in clinical trials, ProFibrix will tap into a couple different market segments worth about $600 million a year combined in the U.S.

“There’s no doubt about it, we can make significant inroads in the market,” Öhrström says.

Jan Ohrstrom

When we met over lunch near his home on Mercer Island, Öhrström was excited about getting ProFibrix set up in a new office on Eastlake, complete with all the usual mundane aspects of a startup—getting the lease signed, phones working, and the office furniture assembled (I could relate this part to when Greg and I got the Xconomy Seattle office up and running in June 2008.)

ZymoGenetics is well known for its blood coagulation expertise, although its Recothrom drug has gotten off to a slow start in sales. ProFibrix CEO Jaap Koopman, it turns out, had been cultivating a relationship with Öhrström for years, dating back to when Ohrstrom oversaw the development of recombinant thrombin (Recothrom). The vision was that if ProFibrix could get Ohrstrom on board—somebody …Next Page »

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Dendreon watchers got all hyped up in anticipation of the company’s analyst day in New York, but there really wasn’t much in the way of news. So I dug up some other stuff for your reading enjoyment.

—The biggest piece of news out of Seattle-based Dendreon’s analyst day was that the company says it plans to file its application by mid-November to seek approval from the FDA to start selling Provenge in the U.S. Dendreon (NASDAQ: DNDN) had already said this was coming in the fourth quarter, so this added specificity is nice, but not exactly big breaking news. But the company is still hiring quite a bit, which you can read about how much here in case you missed it.

—Dendreon’s former CEO Christopher Henney has moved on to other endeavors, one of which involves being the chairman of AVI Biopharma (NASDAQ: AVII). So it shouldn’t have been a big surprise when this developer of RNA-based therapies recently moved headquarters from Portland, OR to Bothell, WA, under Henney’s watch. I checked out the company’s new digs in person with AVI Biopharma CEO Les Hudson, who’s enjoying his new surroundings, even while he’s trying to find out how to run the building’s HVAC system.

—ZymoGenetics (NASDAQ: ZGEN) released some bad news first thing Monday morning in an SEC filing, in which it said its partner, Merck KGaA, pulled the plug on a couple of trials for an experimental drug for multiple sclerosis called atacicept. This is just the latest in a string of setbacks for this drug, which was once the shining star in the Zymo pipeline.

—Charlotte Hubbert, a Kauffman Fellow at Seattle-based Accelerator, wrote a downright funny and insightful guest editorial for the Xconomist Forum on her journey from academic science to the supposed “dark side” of biotech and venture capital. I can only imagine what her parents think about the remark she made about hosiery.

—Fate Therapeutics, the La Jolla, CA-based company that counts Xconomist and University of Washington stem cell scientist Randall Moon as one of its big-name co-founders, has been on a growth spurt over the past year, as I discovered on an in-depth tour of the company’s labs.

—Redmond, WA-based Spiration, the maker of a minimally invasive device for treating chronic lung diseases, raised another $7 million in debt financing to keep supporting its work to commercialize the device in Europe and complete a pivotal trial in the U.S.

—Larry Corey, a scientist at the Fred Hutchinson Cancer Research Center and world leader in the quest to develop an HIV vaccine (he’s also an Xconomist), weighed in this week with an editorial about why he’s encouraged by findings of a clinical trial of a vaccine that protected about one out of every three people tested.

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More bad news out of ZymoGenetics (NASDAQ: ZGEN) this morning. The Seattle-based biotech company disclosed in a regulatory filing today that its partner, Germany-based pharmaceutical giant Merck KGaA, has halted studies of their atacicept drug candidate for multiple sclerosis after concluding the drug’s benefit wasn’t worth the risk.

One trial showed that multiple sclerosis patients actually had more flare-ups and brain lesions when they were given atacicept, compared with a placebo. Two studies are still ongoing of atacicept, one for rheumatoid arthritis and one for lupus, and no comparable issues have been seen in those studies, ZymoGenetics said.

The multiple sclerosis failure is the third big flop of the past year for the atacicept (pronounced Uh-TACK-ee-sept) program, once one of the shining stars in ZymoGenetics’ pipeline. The drug failed to control rheumatoid arthritis in a pair of mid-stage clinical trials last month. Last October, ZymoGenetics said a trial of the drug for patients with lupus of the kidneys was halted after it appeared to raise the risk of severe infections.

ZymoGenetics had been developing the product jointly with Merck KGaA until a year ago, when it decided to conserve cash by handing over full responsibility for development costs, and settled for a smaller share of future royalties from the product. That move was designed to save ZymoGenetics $200 million in development costs as atacicept was scheduled to move into the final, most expensive phases of clinical trials.

The ZymoGenetics drug was largely forgotten by many analysts at that point, but it got some renewed attention in July, when Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI) delivered the first convincing proof that doctors can successfully treat lupus by blocking a specific inflammatory protein known as BLyS (pronounced bliss). This caused Human Genome Sciences’ stock to quadruple, and gave ZymoGenetics a smaller boost, because its drug is made to block not just BLyS, but another inflammatory protein called APRIL, that the Human Genome Sciences drug doesn’t hit. Since multiple sclerosis is an autoimmune disease, in which the immune system goes haywire and starts attacking the normal fatty coating around nerve cells, researchers hoped that atacicept’s ability to dampen the inflammation would help patients with that condition like with other autoimmune diseases.

Since last September, when ZymoGenetics handed over atacicpet rights to Merck KGaA, it has concentrated more of its efforts on a new pipeline project, pegylated interferon lambda for hepatitis C, which is the subject of a new partnership with Bristol-Myers Squibb that’s potentially worth more than $1 billion.

ZymoGenetics stock fell 8 cents to $6.07 after the opening bell on the news.

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Most Seattleites would probably list Bill Gates, Paul Allen, Howard Schultz, and Jeff Bezos when asked to name local entrepreneurs who built not just successful companies but entirely new industries. But they’d be forgetting Steve Gillis.

Gillis would have to be considered something like the Fifth Beatle in a group like that—you can walk into his office today without being babysat by PR handlers—but he is one of the pioneers of the biotechnology industry both in Seattle and nationally.

For those who don’t know, Gillis was a charismatic 28-year-old immunologist when he left a faculty post at the Fred Hutchinson Cancer Research Center to start Immunex in 1981. He and co-founder Christopher Henney rode the early wave of investor enthusiasm for genetically engineered drugs to an IPO, recruited top scientific talent from around the world to Seattle, and persevered through some dark days to create a breakthrough drug for autoimmune diseases that generates more than $7 billion a year in worldwide sales for biotech giants Amgen and Wyeth.

Talk to any scientist who worked at Immunex in the early days, and they’ll tell you they adored Gillis, the inspirational scientist with an irreverent brand of humor. Legend has it he used to dare scientists to dream big, and instead of bashing them for running a failed experiment, he’d honor goof-ups with the “Pons & Fleischmann award for achievement in dubious science,” named after the guys who once claimed to discover cold fusion.

Gillis didn’t have as much success in his second career act from 1994 to 2005, as the founder and CEO at Seattle-based Corixa. But when GlaxoSmithKline bought that company for a little more than $300 million, he took a new direction in his career, joining one of the most active life sciences venture firms in Seattle, Arch Venture Partners.

This role at Arch allows Gillis, now 56, to put his fingers in a lot more pots. He serves on the boards of six life sciences companies in Seattle: Accelerator, Trubion Pharmaceuticals (NASDAQ: TRBN), VLST, Theraclone Sciences, Qwell Pharmaceuticals, and VentiRx. He also serves on the board of two other Arch companies in Massachusetts—Brighton, MA-based Surface Logix and Cambridge, MA-based Variation Biotechnologies.

This new perspective as a venture capitalist provides Gillis an opportunity to be even more influential in the community, says one of his protégés from the Immunex days, ZymoGenetics CEO Doug Williams. “He can be enormously helpful to the local biotech scene at Arch, and in fact I think if you look at the companies he’s involved with locally, you’d have to conclude that he already is. Steve is one of those rare people with an equal dose of talent in science and the business of biotech. He’s pretty much done and seen it all, and for him to be able to convey that to many companies instead of just one is of great benefit to the local scene,” Williams says.

I sat down with Gillis a few days ago to talk about life as a venture capitalist, how the biotech investing model has changed, and Seattle’s strengths and weaknesses. Here are the highlights of the conversation.

Xconomy: Can you bring us back to your thought process when you came to Arch? It was the summer of 2005, you had a long run at Corixa, and could have done a lot of different things. Why did you decide to become a venture capitalist?

Steve Gillis: After whatever it was, 14 years at Immunex and 11 at Corixa, that was 25 years of being involved in operations of a public company. I didn’t want to jump back into doing that. I needed some sort of break. Because sometimes running public companies isn’t a lot of fun. A lot of what you do is …Next Page »

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Seattle’s biotechnology industry is in significantly better financial shape than it was six months ago. The turnaround has been nothing short of amazing, thanks to a frantic run of dealmaking, cost-cutting, and remarkable clinical trial results that have made local companies some of the best-performing stocks this year on the NASDAQ.

Indeed, while our first analysis of the Northwest’s public life sciences companies, published last November, showed that six of 10 companies had less than a year’s worth of cash on hand at that point, only one—Seattle-based Northstar Neuroscience—actually folded.

And when we took a look at the most recent quarterly reports filed with the Securities and Exchange Commission by the 12 companies we’re following right now (11 of them public, one preparing for its IPO), we found that seven of them were actually in a stronger position at the end of June than they were at the start of the year. What’s more, three of the companies that were classified by this analysis as worse off (Seattle-based Trubion Pharmaceuticals and Targeted Genetics and Bothell, WA-based OncoGenex Pharmaceuticals) have recently struck partnerships or completed financings that aren’t yet reflected in the federal filings, but have clearly improved their financial futures.

Read on for a complete rundown of all 12 companies, listed in alphabetical order. To purchase a much expanded version of this report, in PDF format, click the “Add to Cart” button below. The expanded version, available for $95,* includes an assessment of each company’s financial position at the end of June compared to six months earlier, the projected length of time it can survive on its existing cash reserves, and an analysis of the strategic moves it has made to stay afloat in the current environment. Click here to see a sample entry. *Price is subject to change without notice.

We intend to repeat this analysis regularly to monitor the financial health of the life sciences companies we follow in San Diego, Seattle, and Boston. Please send feedback to editors@xconomy.com.

AVI Biopharma (NASDAQ: AVII)
Cash on hand: $20.2 million
Related Xconomy coverage:
“AVI Biopharma Bolts from Portland to Seattle to Tap Biotech Talent”
“AVI Biopharma Out to Reinvent Itself, Making RNA-based Drugs for Ebola and Other Nasty Things”
“Ebola Fighter AVI Biopharma Gears Up for Biodefense Contracts”

Cell Therapeutics (NASDAQ: CTIC)
Cash on hand: $12 million
Related Xconomy coverage:
“Cell Therapeutics Teeters on the Brink as Cash Runs Out on Promising Cancer Drugs”
“Cell Therapeutics Taps Stock Market Again, Seeks $40M or More”
“Cell Therapeutics Files Cancer Drug Application, In Nick of Time”
“Cell Therapeutics Lymphoma Drug Boosts Remissions, Shares Boom”
“Cell Therapeutics Reports Severe Cardiac Events in Drug Trial”
…Next Page »

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Seattle might never have gotten its newest biotech research center if not for a historic corporate blunder from 30 years ago, according to Lars Rebien Sorensen, the CEO of Novo Nordisk.

Novo, the Danish drugmaker that is the world’s biggest producer of insulin for treating diabetes, was approached then by a small biotech company from California that thought it could help Novo come up with a better way to treat diabetes. This little company had an idea for making genetically engineered copies of the human insulin protein, which would be more effective, and less likely to provoke an immune system reaction in patients than the standard insulins of the day, which were derived from animals. Novo was satisfied with what it had, and politely said no thanks, according to Sorensen.

That little company was South San Francisco-based Genentech. It went on to form a partnership with Eli Lilly to make genetically engineered human insulin in the early 1980s, which soon made animal-derived insulin completely obsolete, and directly threatened Novo’s core business. Novo Nordisk was forced to play catch up, and it found a little biotech partner from the 1980s in Seattle—ZymoGenetics—that helped it create a human form of insulin that was able to become a dominant player.

Sorensen told this little parable this morning at the grand opening of Novo Nordisk’s brand new research center in Seattle’s South Lake Union neighborhood. This event drew a lot of the who’s who in Seattle biotech, and Sorensen told this little parable to make a point. Novo doesn’t want to be that short-sighted again, and while it’s prospering with its treatment for the global diabetes epidemic, it wants to spend some of that money planting seeds for the future opportunities in biotech that it doesn’t want to miss.

Lars Rebien Sorensen

After considering what it knows from its years of partnership with ZymoGenetics, and watching Immunex create a breakthrough for rheumatoid arthritis that now generates $7 billion a year in sales, Novo has reached two conclusions: Autoimmune diseases are said to affect one out of every 12 Americans, and represent a big unrealized opportunity for the future of pharmaceuticals. Seattle is one of the best places to tap into scientific know-how that has a shot to create the next generation of medicines for those patients, Sorensen said.

“We do not want to make the same mistake again,” Sorensen said this morning at the grand opening.

Novo is putting its money where its mouth is, investing while others are cutting in the recession. It proudly showed off its facility at this morning’s event. The research center at the corner of Mercer and Fairview Avenue North, is led by former ZymoGenetics scientist Don Foster. It currently employs 35 people, and is expected to grow to 60 people by the end of 2010.

The company definitely wants to make inroads with the local VIPs in Seattle. Mayor Greg Nickels showed up to deliver some welcoming remarks, and some big names from local biotech were there to mingle—VLST’s Marty Simonetti and Paul Carter, ZymoGenetics chairman Bruce Carter, Seattle Biomedical Research Institute president Ken Stuart, and Washington Biotechnology & Biomedical Association president Chris Rivera. They were there to mix with some very well-dressed Danish business executives, including Sorensen and Novo’s chief scientific officer Mads Krogsgaard Thomsen.

Foster—who looked just like a classic American scientist a little uncomfortable in a suit, speaking in front of an audience—actually delivered a pretty forceful case for why he’s excited about the opportunity to create new drugs with Novo. He railed against the trend in the industry toward creating “me-too” products that attempt to make money by piggybacking on truly groundbreaking discoveries like Immunex’s etanercept (Enbrel), but that don’t really add much benefit for patients. Novo, he says, is going to stick its neck out and collaborate with innovative biotechs like VLST that can help it discover promising new avenues for therapy, and then put its corporate horsepower in manufacturing back in Denmark to work.

“I can remember saying to my wife a year ago that I wanted to find a place with the will, the resources, the fortitude, and the patience to come up with new biologic therapies,” Foster told the audience. “We will not be a me-too company. We will make a difference.”

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One of Seattle’s biotech companies showed it’s willing to stick its neck out to see whether the IPO window is really going to open this fall or not.

—Omeros, the Seattle biotech company developing a treatment to help people recover faster from knee surgery, has been getting its ducks in a row to go public for weeks, and this week it formally tipped its hand. Omeros issued an updated prospectus that says it wants to sell 6.8 million shares at a range of $10 to $12, which could generate almost $82 million if it can sell shares at the high end of its range.

—The medical device industry is fuming over a proposal in the U.S. Senate to set up a 10-year, $40 billion tax on medical devices. I got an earful about it this week from David Auth, a local medical device industry leader. He compared this action to the government’s behavior toward General Motors, and concluded, “our government rewards dummies and punishes geniuses.”

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) disclosed some disappointing news late last week, in which its atacicept drug candidate failed to work in a pair of clinical trials for rheumatoid arthritis. ZymoGenetics still has a stake in this product, although it has handed off development work to its partner, Merck KGaA.

—Seattle-based Uptake Medical provided a small bright spot in the local medical device field when it disclosed in a filing that it raised about $3.4 million out of an equity offering worth more than $13 million. Uptake is developing a way to seal off damaged parts of the lung for patients with chronic obstructive pulmonary disease, without leaving any implantable device behind that might cause complications.

—We had a little announcement of our own at Xconomy when we revealed our next event in Seattle, which will focus on the 20-year outlook for life sciences in Seattle. This event on Oct. 19 will feature a stellar lineup of speakers, including Leroy Hood, Steve Gillis, Ben Shapiro and Stephen Friend. They will be followed by executives of Seattle biotech startups with disruptive potential: Calistoga Pharmaceuticals, Immune Design, and VLST. For more information on how to register, click here.

—Autism makes a lot of headlines for its rising incidence, but it has stumped scientists for generations and nobody in pharma or biotech has ever had much to brag about in terms of new therapies. But Gordon Brandt, a former executive at Bothell, WA-based Nastech Pharmaceuticals (now MDRNA) has licensed an intriguing nasal spray compound that he thinks has potential, and he told me all about his quest to raise the capital he needs to put this idea to the test at a company he’s calling Anatrope Pharmaceuticals.

—Gov. Chris Gregoire would, of course, beg to differ with David Auth’s commentary about punishing geniuses. The Life Sciences Discovery Fund, which Gregoire pushed through the legislature in 2005, gave out another batch of state research grants worth a collective $5.1 million to researchers at the University of Washington, Washington State University, the Institute for Systems Biology, and Pacific Northwest National Laboratory.

—Mukilteo, WA-based CombiMatrix (NASDAQ: CBMX) said this week it has secured a $1.5 million contract from the U.S. Air Force to develop automated tools that detect biological, chemical, and environmental hazards that may affect the health of soldiers.

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ZymoGenetics (NASDAQ: ZGEN), the Seattle-based biotech company, said today in a regulatory filing that the atacicept drug it developed and licensed to Merck KGaA has failed to reach its goal of controlling rheumatoid arthritis in a pair of mid-stage clinical trials. The study confirmed the biological effect of atacicept, and researchers saw no unexpected side effects. Studies are still ongoing of atacicept for two other autoimmune diseases—lupus and multiple sclerosis, the company said.

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We’re supposed to be oh-so-laid-back here in the Northwest, so the surprise of the week came when one of the local biotech mainstays showed it was willing to step up and punch a competitor in the nose.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) showed it was willing to ruffle some feathers in its quest to gain market share for its sole marketed product, recombinant thrombin (Recothrom) for surgical bleeding. The company asked the FDA to pull a competing product from Bristol, TN-based King Pharmaceuticals (NYSE: KG) off the market, citing two deaths attributed to the product.

—Targeted Genetics (NASDAQ: TGEN) only has enough cash to operate through this month, so these could be the final days for this 17-year veteran of the Seattle biotech scene. It never cured anything, but this company is leaving a legacy, with a generation of biotechies making an impact at other local companies. I’ve pulled together a list of 60 Targeted Genetics alumni at last count. If you know of someone I’ve overlooked, please add a comment at the bottom of the story or send me an e-mail at ltimmerman@xconomy.com.

—Seattle-based Omeros is preparing to make a renewed attempt at an IPO, possibly as soon as next month, according to this story we broke on Xconomy yesterday. The IPO market is expected to open up again in the middle of September, because institutional investors like the caliber of companies in the IPO queue, and the bargain prices, says Cascadia Capital CEO Michael Butler.

—Speaking of the IPO market, Kirkland, WA-based OVP Venture Partners sees IPO potential in one of the most flush members of its portfolio, Mountain View, CA-based Complete Genomics. This is the company that’s on a quest to introduce full human genome sequencing for as little as $5,000. OVP joined a syndicate this week that pumped in another $45 million to help the company get its commercial sequencing facility up to full capacity.

—Seattle Genetics has been saying it’s six months ahead of schedule in enrolling patients in the pivotal trial of its drug for Hodgkin’s disease, and this week the Bothell, WA-based company (NASDAQ: [[ticker:SGEN]) made it official. It completed enrollment in the trial, and expects results in the second half of 2010.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC) said the FDA has agreed to review its application to market pixantrone for non-Hodgkin’s lymphoma. The company still hasn’t heard from the FDA on when the review should be completed, although it expects to be informed of the deadline by Sept. 4.

—AVI Biopharma, the developer of RNA-based drugs that moved its headquarters from Portland, OR to Bothell, WA, loaded up its balance sheet this week with more cash. The company (NASDAQ: AVII) ended up pulling in $34 million through selling common stock and warrants.

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[Updated: 4:30 pm Sept. 11 with one new name]

Targeted Genetics never cured anything. The Seattle biotech company (NASDAQ: TGEN) didn’t prove the concept that gene therapy could usher in a new era of more effective medicines. It was never profitable. It burned through more than $315 million in investor capital during its 17-year history.

Those are cold facts that can’t be ignored as Targeted Genetics takes in what appear to be its dying breaths, as it says it needs new capital to operate beyond this month. But what will its legacy be on the Seattle biotech landscape? One of the clear answers is this: people.

It all started with H. Stewart Parker, the founder and longtime CEO, whose roots in biotech go back to her days as the first employee at Seattle-based Immunex in 1981. She learned the industry ropes there, climbed the ladder, and spun off that company’s gene therapy research into Targeted Genetics in 1992. She recruited, inspired, and mentored a generation of biotechies who have moved on to make important contributions at other organizations across the Northwest. It’s not going out on a limb to say these people, and others they will train in the future, will continue to make an impact on the local industry for years.

“People literally slept on the floor sometimes, I can remember, in the middle of manufacturing campaigns,” says David Schubert, president of Seattle-based Accelerator, who worked at Targeted Genetics from 1997 to 2000. “People there were incredibly committed and felt a great sense of camaraderie. It was an amazing training ground for talented people.”

Some Targeted Genetics alumni have left for jobs in other parts of the country, but here is a list of notable names in alphabetical order who remain active in Seattle biotech, which I’ve put together with help from Parker and Schubert, and from other readers. This list certainly isn’t comprehensive, so if you can think of former Targeted people who are making an impact in Seattle biotech who I’ve overlooked, please send me an e-mail at ltimmerman@xconomy.com. Or feel free to post a comment at the bottom of the story:

—Tara Allen, clinical research associate, Dendreon

—Todd Allen, Technical Operations at ZymoGenetics

—Kevin Anderson, scientist, Seattle Genetics

—Rema Assaf, senior project manager, Seattle Genetics

—Emma Austin, document control specialist, ZymoGenetics

—Susan Bell, research associate, MDRNA

—Emily Bradeen-Duncan, manufacturing quality assurance associate, Seattle Genetics

—Stacie Byars, director of marketing and membership, WBBA

—Barrie Carter, consultant, president-elect of the American Society of Gene and Cell Therapy

—Victoria Cleator, biotech facilities expert, Seattle Children’s Hospital

—Holly Craven, quality control analyst, ZymoGenetics

—Richard Daifuku, consultant, founder of Redmond, WA-based Koronis Pharmaceuticals

—Daryn Debelak, Northwest account manager for Invitrogen

—Devon DeHaas, Seattle account manager, VWR International
…Next Page »

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Before it asked the FDA to yank a drug made by its chief competitor, King Pharmaceuticals, off the U.S. market, ZymoGenetics learned that physicians had attributed the deaths of two patients to bad reactions to the drug, says ZymoGenetics CEO Doug Williams.

I spoke with Williams this morning shortly after the Seattle biotech issued a statement saying that it has filed a formal citizen petition with the FDA, asking the agency to force Bristol, TN-based King to withdraw a rival treatment for surgical bleeding from the U.S. market. ZymoGenetics (NASDAQ: ZGEN) contends that King’s Thrombin-JMI product poses a risk of immune-system reactions that can lead to severe bleeding episodes, and even death.

ZymoGenetics has been trying to grab away King’s market share, primarily by arguing its drug is safer. The King product, which has been around for years, is the dominant drug used to control bleeding in an estimated 1 million surgeries a year in the U.S. It generated $255 million in U.S. revenues last year. But ZymoGenetics has sensed an opportunity to supplant King’s drug, because it is derived from cow’s blood, and therefore recognized as foreign by the immune system, which it says can lead to complications with repeated use. ZymoGenetics won FDA approval for its recombinant version of human thrombin, called Recothrom, in January 2008. Just as with insulin for diabetes, animal-derived products eventually lose in the marketplace when safer, genetically engineered human products come along to replace them, the company contends.

Yet ZymoGenetics it has struggled to capture much of the market for surgical bleeding drugs. It generated just $8.8 million in first-year sales—partly because physicians were unaware of the risks associated with the animal-derived product they had been using for many years, Williams says. Now the company hopes to change that, by asking the FDA to take a closer look at how to handle that risk from the cow-derived clotting agent.

“There are physicians using Thrombin-JMI without a clear understanding of its risks,” Williams says. “There are at least three better alternatives in the marketplace now, that don’t have the same risk profile.”

ZymoGenetics CEO Doug Williams

When reached by phone this morning, King Pharma’s vice president of investor relations, Jack Howarth, said the company has no comment.

The 31-page citizen petition, which I reviewed this morning, highlights 25 cases published by researchers that drew a link between cow-derived blood control treatments and bad immune-system reactions that led to severe complications, or death. One report by a physician to the FDA last October attributed a death to usage of Thrombin-JMI, and just this month, ZymoGenetics said it learned of a second case.

The prescribing information for Thrombin-JMI has carried the FDA’s strictest warning, called a “Black Box,” since 1996. It warns physicians of potentially dangerous immune reactions. But ZymoGenetics said few physicians seem aware of the risk, and keep using King’s product anyway. Now that ZymoGenetics’ genetically engineered version is on the market, along with two other products that use clotting proteins derived from human blood—Johnson & Johnson’s Evithrom and Baxter Healthcare’s Gelfoam Plus—there’s no longer any reason …Next Page »

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ZymoGenetics isn’t giving up on its sole marketed product, and it’s playing some hardball to fight for it. The Seattle biotech company said today it is asking the FDA to yank its top competitor’s drug off the market because, it contends, it’s not safe enough.

Thrombin-JMI, made by Bristol, TN-based King Pharmaceuticals (NYSE: KG), is derived from clotting proteins called thrombins in cow blood. Since that’s from a foreign source, the human immune system recognizes it as such, and can spark a reaction that can lead to severe bleeding and death, ZymoGenetics says. The company says it has found more than 25 published cases of patients who developed blood clotting disorders after they were given cow-derived thrombin products.

ZymoGenetics (NASDAQ: ZGEN) has a major dog in this fight, because its only marketed product—a genetically engineered copy of human thrombin—is a direct competitor to the King product. Both are approved by the FDA to control bleeding during surgery. Zymo won FDA approval to market its recombinant thrombin (Recothrom) in January 2008. Zymo has been arguing for years that its version of thrombin is less likely to spark an immune reaction than animal derived-ones, and that it’s therefore safer. But the argument hasn’t done much to sway doctors. The ZymoGenetics drug generated just $8.8 million in sales last year, and the company predicts it will generate $25 million to $35 million this year. Thrombin-JMI, the established player hospitals have used for years, had $255 million in sales a year ago.

Now, ZymoGenetics is clearly going on offense to get a bigger piece of the market. The drugs for bleeding products are used in an estimated 1 million surgeries a year in the U.S.

“Serious adverse events, including death, linked to bovine thrombin continue to be reported to the FDA,” said George Rodgers, a pathologist at the University of Utah, and medical director of the coagulation laboratory at Salt Lake City-based ARUP Laboratories, in a ZymoGenetics statement. “These adverse events are a serious, ongoing safety issue for patients undergoing surgery.”

ZymoGenetics CEO Doug Williams says the company remains committed to boosting sales of its drug in its second year on the market, as part of an overall strategy to reduce its cash spending rate and stabilize the company in a bad financing market. ZymoGenetics struggled in its first year to get hospitals to try the product, because many didn’t consider the bleeding drugs they use to be a problem, Zymo chairman Bruce Carter has said.

Via a citizen petition to the FDA, ZymoGenetics argues that the risks of treating people with the King product outweigh the benefits, and it should be pulled from the market. Physicians don’t have a readily available diagnostic test for when patients have developed antibodies to previous doses of the drug, and therefore don’t know when a follow-up treatment has the potential to cause a bleeding disorder, the company argues.

King Pharmaceuticals, when confronted in the past by ZymoGenetics’ arguments that its product isn’t safe enough, has generally dismissed them as exaggerations. I’ll add any comments here if the company responds to the latest salvo in the thrombin battle.

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Some of the lesser-known names in Seattle life sciences made some noise this week, just when we here at the Xconomy biotech desk thought things might slow down a tad in the dog days of summer.

—AVI Biopharma (NASDAQ: AVII), the Portland, OR-based maker of RNA-based therapies, is now getting a new tagline as the Bothell, WA-based maker of RNA-based therapies. This company, led by CEO Les Hudson and chairman Christopher Henney, decided to move its headquarters to the Seattle area to tap into this region’s deeper biotech talent pool as it advances drugs through clinical trials for Duchenne Muscular Dystrophy, Ebola and Marburg virus, and other tough-to-treat conditions.

—Seattle-based Dendreon (NASDAQ: DNDN) has one of the most avid fan bases in the biotech industry, but few people realize it has a low-key neighbor across the lake in Bothell, WA, that has also produced some very impressive results against prostate cancer this year. Scott Cormack, the CEO of OncoGenex Pharmaceuticals (NASDAQ: OGXI) told me this week in an exclusive feature that he’s fielding “competitive” partnership proposals from a number of Big Pharma companies that want a piece of its action.

—Sometimes you have to strike while the iron is hot in biotech, and that’s what Seattle-based Oncothyreon did this week. The company (NASDAQ: ONTY) said on Monday that some follow-up data suggests its immune-boosting therapy for lung cancer was able to generate long-term tumor responses without causing any serious side effects. This boosted the stock 26 percent on Monday. One day later, Oncothyreon CEO Bob Kirkman seized on the newfound demand for his shares by selling some more shares, and refilling the company coffers with $15 million.

—Scientists over at PATH, the Seattle-based nonprofit that works to improve health in poor countries, were pumped up about a new formula they developed that was shown to protect hepatitis B vaccine from getting damaged by hot or cold temperatures. This work, financed by the Bill & Melinda Gates Foundation, only adds one-tenth of a penny to the cost of a vaccine dose, and PATH says it ought to work just as well for a wide range of vaccines.

—Seattle-based ZymoGenetics (NASDAQ: ZGEN) said this week that second-quarter sales started to pick up, as expected, for its sole marketed product for surgical bleeding. The company reported $6 million in sales of recombinant thrombin (Recothrom), which puts it on pace to reach its full-year sales forecast of $25 million to $35 million.

—Buddhists and biotechies don’t usually go hand-in-hand, but this sort of unlikely alliance might yield some big future opportunities for biomedical entrepreneurs in mental health, according to Seattle’s Ben Shapiro. He’s the former executive vice president of worldwide research at Merck, who has been exposed to these ideas through serving on the board of the nonprofit Mind & Life Institute in Boulder, CO.

—Does the laid-back Northwest lifestyle keep this region from reaching its full potential as a dynamic hub of innovation and entrepreneurship? Janis Machala, the champion of startup creation at the UW TechTransfer office, stirred the pot last week with some thought-provoking comments about this idea at an event hosted by the Washington Biotechnology & Biomedical Association. This generated a lot of comments, many of them quite thoughtful, at the tail end of the story.

—Seattle-based Amnis, the maker of an instrument for high-speed imaging of cells, said it closed on the first $839,000 out of a $1.5 million round of financing. The company, which has seen rising demand for its second-generation product, raised the cash from CVF LLC, MedVenture Associates, and OrbiMed Capital, and angel investors.

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ZymoGenetics, the Seattle-based biotech company, said today that it generated $6 million in second-quarter sales of recombinant thrombin (Recothrom). That performance is an improvement on the $4.5 million the company reported in the first quarter, and puts ZymoGenetics (NASDAQ: ZGEN) on pace to reach its 2009 sales forecast of $25 million to $35 million. The company trimmed its net loss to $27 million in the second quarter, and had $118.2 million in cash on the balance sheet at the end of June.

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Christopher Henney’s career in biotechnology looks like a three-act drama over three decades. He’s a classically-trained immunologist who went on to be the co-founder of Seattle’s three most successful biotech companies when ranked by stock market value—Immunex, Icos, and Dendreon.

Henney, now 68, pushed Dendreon on its odyssey when he joined as CEO in 1995. He developed its technology, drove it into late-stage clinical trials, took it public, and then handed over the company to his young protégé Mitchell Gold at the beginning of 2003. Henney left the company as chairman of the board a year later. He doesn’t make a whole lot of public appearances around town anymore, although he still lives in Seattle and serves on the boards of five different biotech companies around the world.

I caught up with Henney at the Starbucks in the Madison Park neighborhood, mainly to find out what he had to say about Dendreon (NASDAQ: DNDN). The company has become one of biotech’s biggest success stories of the year, since April, when it said a 500-patient clinical trial of its first-of-a-kind treatment for prostate cancer, sipuleucel-T (Provenge), was able to extend lives of men with terminal prostate cancer by a median of about four months, with minimal side effects like fever and chills.

Henney provided some interesting added history to the Dendreon saga. The company had actually started in 1992, and spun out of Stanford University under the name Activated Cell Therapy. It had a technique for sifting out a powerful type of white blood cell known as a dendritic cell from a blood sample, but didn’t really have a business model other than selling some commodity parts, Henney says. He recruited chief scientific officer David Urdal, then at Immunex, to join him on a mission to build what became Dendreon—a company that separates out the dendritic cells from a patient’s blood sample, and incubates them in such a way as to “teach” the immune system to fight cancer cells like a virus. If the FDA clears this treatment for sale early next year, as analysts generally consider a fait acompli, then this will be the first drug ever made commercially available in the U.S. to actively stimulate the immune system to fight any form of cancer.

If that happens, it would be a coup for prostate cancer patients, and a vindication for a long-snakebit field of science. Even though Gold has said he hopes to build an anchor company for Seattle, like Biogen and Genzyme are for Boston, Henney says he doesn’t necessarily see that happening. Here are edited highlights of the conversation, which we’re running today and tomorrow:

Xconomy: Do you stay in touch with (CEO) Mitch Gold, and the Board?

Chris Henney: Absolutely. Not so much with the board, but with individual members of the board. At social levels. Mitch and I are very cordial.

X: Does he seek your advice from time to time?

CH: I wouldn’t say that, and I don’t proffer it. We talk …Next Page »

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