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PhaseRx Angles for a Deal, Tom Clement’s New Device Gig(s), InDi’s Alzheimer’s Plan, & More in the Life Science Innovation Northwest Wrap-Up

Xconomy Seattle — 

My head is spinning from the whirlwind of presentations and hobnobbing at this year’s Life Science Innovation Northwest. The regional biotech showcase drew by far the most people in its 11-year history, almost 1,000. More importantly, folks I talked to from outside the region were impressed with the technology here, combined with the community’s can-do spirit.

It could just be that everybody is breaking out of their shells after many years of being beaten down, but whatever it is, there was a really strong vibe at this year’s regional biotech conference.

“You don’t see anything quite like this in the Bay Area,” said Brian Atwood, a managing director at Menlo Park, CA-based Versant Ventures, who I sat next to at lunch on Wednesday.

That’s not to say everything’s peachy. There’s still no IPO market to speak of, the regulatory barriers at FDA are daunting, many VCs are fading away, political and legal uncertainties dog the patent system, and Big Pharma has been, shall we say, stingy in how it values new technologies.

All that said, there are plenty of hungry entrepreneurs out there brimming with optimism about what’s ahead for their companies in 2011. Here are some tidbits I gathered on a handful of interesting small companies at the conference, who often fly below the radar.

PhaseRx. This Seattle-based company, a spinoff from Patrick Stayton’s lab at the University of Washington, is creating new polymers to help deliver RNA interference drugs to the places they need to go in cells. PhaseRx raised a $19 million Series A venture round in February 2008 from Arch Venture Partners, 5AM Ventures, and Versant Ventures—and has said very little publicly in the three years since.

RNAi is one of the hot fields of pharma R&D, because it has the potential to specifically silence genetic targets of disease that are inaccessible to traditional small-molecule drugs, or protein therapies like antibodies. Delivering these small, interfering RNA molecules has been the primary challenge for this field, since a plain RNAi molecule basically gets chewed up by enzymes and flushed through the kidneys in minutes.

Lots of ideas are percolating to improve RNAi delivery, and one of the more promising is up the road at Vancouver, BC-based Tekmira Pharmaceuticals, which uses lipid nanoparticles to help keep the siRNAs stable in the bloodstream long enough so they can hit the desired target. PhaseRx has taken a different tack, making polymers.

Bob Overell

PhaseRx CEO Bob Overell, a former partner at Frazier Healthcare Ventures, says his company has been working these past three years to show that its polymers can be manufactured in a scalable, reproducible manner—which is vitally important to any prospective Big Pharma partner. The company has shown its delivery system can specifically hit an undisclosed genetic target of interest in mice, that it can make the drug accumulate in tumors, and that anti-tumor responses get better at higher doses.

This year, PhaseRx expects to enter into a “major partnership” with a Big Pharma company to license rights to the delivery technology, Overell said. The company will explore co-development opportunities as well, he said.

One thing Overell didn’t mention in his slidedeck was his existing cash position. He wouldn’t comment on where PhaseRx stands financially, but it sounds like he’s planning for a cash infusion. He said he plans to hire a VP of business development, and he notes that everyone interested in RNAi is also interested in improving delivery technology. “There’s a large need out there for this technology,” Overell says.

Margaret McCormick has a startup company in the works. McCormick, the chief operating officer at Seattle-based Targeted Growth and a partner at Integra Ventures, is in the process of spinning out an algae biofuel research project she has led at Targeted Growth the past three years. The new operation, called Matrix Genetics, is working on genetically modifying single-cell algae known as cyanobacteria to turn them into mini-factories for oils.

McCormick has no illusions this will be a straightforward thing. Matrix is up against some formidable competitors in the algae biofuel business, like Sapphire Energy, Solazyme, LS9, and Alganon. But McCormick, who has a PhD in biology from MIT, has decided to stake this new company’s claim on basic science, instead of trying to build up massive, scalable infrastructure like others. There are already 14 employees working on the Matrix Genetics team, housed in offices at the Institute for Systems Biology, McCormick said. Her goal for this year—raise a $15 million Series A financing.

“There are still huge biology challenges to be met,” McCormick said. “Most companies are spending so much time on engineering, they aren’t focused on the biology. That’s where we will make the difference.”

—Al Luderer, the CEO of Integrated Diagnostics, offered a little update on where things stand with this company, which seeks to detect protein signatures in the blood that offer early telltale signs of Alzheimer’s disease and lung cancer.

InDi has been focused in on 198 different proteins it believes are associated with diseases of the central nervous system, and is working to drill down into the data to find out which ones are really most important signs of disease. Having Leroy Hood and David Galas of the Institute for Systems Biology among the cast of co-founders means that Luderer hasn’t had to worry about raising money—the company already pulled in a $30 million Series A financing. Instead, he’s focused on assembling the clinical data to prove the usefulness of its test, and thinking ahead about how to make this transform from a science project into a business.

InDi doesn’t sound like it’s planning to run forward-looking clinical trials that look at a blood marker, and follow patients to see whether they really get Alzheimer’s. Instead, these tests will be retrospective. It will be very interesting to see how much confidence they can really provide doctors, and how much it will cost. InDi plans to commercialize the Alzheimer’s test as soon as 2012, Luderer said.

“We’re already having dialogue with reimbursers on how to do this properly,” Luderer says. Finding a price point that provides a return for InDi’s investors, and that isn’t cost-prohibitive for insurers, is the tricky part, he said.

Tom Clement, the founder and chairman of Kirkland, WA-based Pathway Medical Techologies, revealed a bit more about what new ventures he’s discovered during his time as an entrepreneur-in-residence at the UW.

“I’m the CEO of Cardiac Insight, as of about 24 hours ago,” he quipped at the beginning of his Wednesday talk.

Cardiac Insight, the brainchild of cardiologist David Linker, is seeking to combine a low-cost clever piece of hardware with a proprietary software algorithm, to do a better job of monitoring a form of irregular heartbeat known as atrial fibrillation. About 2.2 million people develop “afib” each year in the U.S., and it’s responsible for 15 percent of all strokes. “If we can identify the patients, we can reduce the risk of strokes. Afib can be silent,” Clement said.

The algorithm is supposed to be 20 times more accurate than competing atrial fibrillation monitors, Clement said. So far, Cardiac Insight has raised about $200,000 in seed capital from Wings, the medical device angel investment network.

—The other UW spinoff company Clement is helping get off the ground is called Acqueduct Neurosciences. The vision for this company comes from Samuel Browd, a pediatric neurosurgeon at UW and Seattle Children’s Hospital, and Barry Lutz, a UW bioengineer. Acqueduct is seeking to treat hydrocephalus, a buildup of cerebrospinal fluid in the brain that occurs in about 1 out of 1,000 live births.

Patients with this disorder get shunts that drain off the excess fluid. It’s a common procedure that Browd performs a lot, and which he said makes him “a glorified plumber.” Shunts developed in the 1960s have brought down the hydrocephalus death rate from more than 50 percent to less than 10 percent in 2005, according to Seattle Children’s Hospital. Yet about 40 percent of the time, existing shunts fail in two years, Browd said. When a shunt fails, doctors place another one, so there’s been little in the way of innovation, Browd said.

Competitors like Medtronic and Codman make these shunts, and although they are marketed as being adjustable to a patient’s physiology to avoid clogging up, they really aren’t adjustable, Browd says. “These devices are static, not smart, and they don’t use modern technology. You can’t see intracranial pressure,” Browd said.

Acqueduct’s idea is to make a shunt device that is adjustable, in that it works against “fouling” or clogging up. It will be able to diagnose when intracranial pressure is building up, and transmit a signal via cell phone that alerts the doctor to a problem—which other devices don’t do, Browd said.

The project has gotten $50,000 in financing from WRF Capital, $150,000 from the state Life Sciences Discovery Fund, and is seeking $1.5 million in capital from the federal Small Business Innovation Research program.

Browd, a young guy who operates on a lot of kids, definitely had a swagger to his presentation that you don’t often see in the buttoned-down Northwest.

“Their valve sucks compared to what we’re doing,” Browd says. “This technology could be a lot better than what’s out there.”

Presage Biosciences, a spinoff from the Fred Hutchinson Cancer Research Center, had a few tidbits of news to pass along. Jim Olson, the scientific founder, talked about how Presage has carried out an initial project for one of the world’s top two pharmaceutical companies, and apparently is confident enough to say the customer is happy.

“We’re now moving from a project-based relationship with a pharmaceutical customer to a more long-term alliance-based relationship,” Olson said. That means the pharma company would get long-term access to the Presage technology to help improve its drug discovery capabilities. It will be structured so Presage gets paid for performing the service, and so that Presage retains some percentage ownership of drugs the Big Pharma company discovers this way, Olson said.

Presage, which has raised $4 million, is using a multi-pronged probe to deliver various experimental drugs or combinations of them directly into human tumor tissue to see how well the drugs work. This is thought to be a more reliable tool for drug discovery than traditional cell culture based tests in petri dishes, which are a more artificial environment where tumors behave differently than in the body, Olson said.

One interesting nugget—Olson said that Bob Nelsen of Arch Venture Partners advised the company to pitch this technology to Big Pharma discovery groups, instead of trying to commercialize it as a diagnostic tool to help physicians decide which cancer drug to prescribe their patients. The FDA could easily derail such a business plan, Nelsen advised.

—David McElligott, the scientific leader of Seattle-based Mirina, talked about progress this startup has made in the fledgling world of microRNA therapies. The company is pursuing an undisclosed microRNA target for the treatment of cancer, and expects to begin IND-enabling studies (the animal tests you gotta do before starting a clinical trial) before the end of 2011. The company is completing biodistribution studies in mice, which show it can deliver its microRNA drug throughout the body—a key hurdle drugs in this class need to clear.

MicroRNA is one of the hot fields of biology at the moment, and San Diego-based Regulus Therapeutics has even been murmuring about the possibility of doing an IPO, even though it hasn’t yet entered clinical trials. Accelerator president David Schubert, when asked if Mirina is rooting for a Regulus IPO so that it, too, can cash in on microRNA frenzy, would only say, “we wish the folks at Regulus well.”

McElligott gets the prize for the best deadpan wisecrack of the meeting. “We have five employees, four of whom are very dedicated,” he said. After pausing for comic effect, he added: “I’m the other one.”

—This year, I also saw the re-emergence of one of the most successful (and low profile) biotech entrepreneurs in Seattle—Todd Patrick. He was the president of Bothell, WA and Vancouver, BC-based ID Biomedical when that company was sold to GlaxoSmithKline for $1.5 billion in 2005.

Patrick’s new venture is called C3 Jian, a Los Angeles-based company that is developing an antibacterial oral rinse for tooth decay.

The company has raised $40 million to date. The idea is to bring a pharmaceutical approach to the dentist’s office, directly challenging the “drill & fill” ethic that dominates in the $100 billion annual U.S. market for dental services.

Dentists already use broad-spectrum antibiotics to fight infections that lead to tooth decay, but it kills all the good and bad bacteria in the mouth for a while, then allows the bad bacteria to come back stronger, Patrick said. C3 Jian’s scientific founder, UCLA professor Wenyuan Shi, has been working on specifically targeted antimicrobial peptides that ought to kill the bad stuff. The hope is that C3 Jian will be able to develop a 30-second mouth rinse, taken once or twice a year, Patrick said. An application to start clinical trials should be ready by the end of 2011, and if all goes according to plan, the rinse could reach the market in 2016 or 2017, he said.

Patrick gets the prize for the funniest wardrobe malfunction of Life Science Innovation Northwest. Part of his collar flipped up in a dorky-looking way, out from under his sportcoat (which come to think of it, has afflicted Xconomy founder Bob Buderi once or twice, as I recall). Anyway, one of Patrick’s board members in the audience, H. Stewart Parker, quipped that part of her job on the board is to “make sure the CEO is presentable.” I’m pretty sure I saw her wince when that collar flipped back up.