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VC Rick Klausner on the Future of Vaccines, and Why Dendreon is Only Scratching the Surface

Xconomy Seattle — 

Vaccines produced some of the biggest advances in medicine over the past two centuries, but for most of that time, scientists couldn’t say for sure how they worked to rev up the immune defenses. “You would close your eyes and hope,” says Rick Klausner.

That era is coming to a close, says Klausner, a former global health leader at the Bill & Melinda Gates Foundation and former director of the National Cancer Institute. Vaccines in coming years will be specifically designed to do what scientists want, Klausner says. They will stimulate certain cell types that you want to prevent an illness, fight off an existing infection, or possibly kill tough cancer cells.

The vaccine wave is one of several big ideas Klausner, 57, is pursuing in the latest chapter of his career as a venture capitalist. He’s now a managing partner with The Column Group, a San Francisco-based venture firm with about $260 million under management, and a team that includes three Nobel Laureates dreaming up the best ways to apply cutting-edge biology to vaccines and other areas. Klausner helped get the firm started from his home base in Seattle, but I spoke to him last week by phone from San Francisco. He moved to the Bay Area this month to be closer to his fellow partners, and most of his portfolio companies. But he insists he’ll be back on a plane once a month to the Northwest to keep tabs on his firm’s hot vaccine prospect, Seattle-based Immune Design.

“For the first time I’ve seen, we have a path forward to use vaccines against chronic diseases and as therapeutics,” Klausner says.

Immune Design, as we have written about in these pages, was born at an auspicious moment in both the science and business of vaccines. This business is pretty straightforward: these products, which once languished in the pharma industry backwaters, made up a $13 billion market in 2007, according to Lehman Brothers. What’s more, vaccine sales are expected to grow at an 18 percent annual rate through 2011, compared with 4.4 percent projected growth for the drug industry as a whole during that period, according to Lehman. Merck’s human papillomavirus vaccine, Gardasil, as well as Wyeth’s pneumococcal vaccine, Prevnar, have proven to the industry that newer vaccines can sell at high prices—and create new billion-dollar markets.

But when we spoke, Klausner mostly wanted to talk about why the science will lay an important foundation for this industry in the future.

Immune Design, albeit still in its early days, represents some of the exciting new advances in immunology that will make for better vaccines, Klausner says. The company was formed by combining two fundamental technologies. One was a delivery system, known as a vector, from the lab of Nobel Laureate David Baltimore at Caltech. That new tool makes it possible to precisely stimulate dendritic cells, which are known for sending sentinel warning signals about pathogens to other cells of the immune system, Klausner says.

The other component came from the lab of Steve Reed at the Infectious Disease Research Institute in Seattle, Klausner says. That’s where scientists have developed synthetic chemical compounds called adjuvants, which are used to boost the effectiveness of vaccines. These adjuvants, when combined with Baltimore’s precise delivery system, offer an opportunity to trigger highly potent, more specific immune responses in the body than vaccines from the past, Klausner says.

To be a little more specific, Immune Design hopes to custom design vaccines to interact with dendritic cells, which will tailor signals to any number of cell types, like helper T cells, memory T cells, killer T cells, or specific antibodies, Klausner says. It’s no longer the days of “close your eyes and hope” that a generalized immune response will kill the invader.

“The ability to dial it up really opened my eyes,” Klausner says.

Wait a minute, I said—what does he think about Seattle-based Dendreon (NASDAQ: DNDN)? That company made headlines earlier this year with its treatment designed to actively stimulate the immune system against prostate cancer cells—sometimes called a therapeutic cancer vaccine. The drug, sipuleucel-T (Provenge) showed an ability to help men live a median of four months longer with terminal prostate cancer than those on a placebo, with minimal side effects.

“We’re excited about Dendreon. It’s an effect, albeit a small effect,” Klausner says. “Dendreon is fantastic with what they’ve done.” But the next step in vaccines is still a difficult one, Klausner says. That will be to develop vaccines that can stimulate an even more powerful immune system reaction inside the body, without requiring the logistically-complicated process used by Dendreon. (The company withdraws blood cells from a patient, ships them to a manufacturing plant, incubates them with a genetically engineered marker of prostate cancer, and ships them back to the patient for re-infusion.)

Complex as its therapy may be, Dendreon has been pushing on its path for more than a decade and has arrived at the cusp of FDA approval. Immune Design only started its first clinical trial last year, and has years left to go before it can get that far, if ever. “It’s still early days,” Klausner says.

Besides vaccines, we talked about a few other items of interest to biotechies and innovation watchers. Here are tidbits left over in my notebook:

On life away in venture capital, away from politics:
“I’m enjoying it very much. I feel much closer to the science now. I’ve done my time in the political arena.”

On Seattle as a biotech hub:
“I really enjoyed Seattle. If not for the commute, I would have stayed. The talent is fantastic, there are great academic institutions. I’d like to see Seattle become a more vibrant hub. It’s an entrepreneurial place in the non-life sciences, in terms of engineering and IT. I’ve long thought that Seattle needs to find a way to link life sciences with other entrepreneurial activities.”

On an exciting company in Seattle not in his portfolio:
NeuroVista is a fascinating company. It combines biomedical research with very sophisticated computing and IT. Those are all incredible strengths of Seattle.”

On a field of science that’s not ready yet for venture capital:
“We had a two-day retreat not long ago on cancer stem cells. We started out excited, and I came out of it skeptical. What are they? What do they mean? The science isn’t clear enough.”

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