Author: Bruce V. Bigelow

Bruce V. Bigelow wrote:

It must be nice to be the CEO of a life sciences company that sells itself.

When Tina Nova stepped up to the microphone at the Roth Capital Partners Growth Stock Conference in Laguna Niguel, CA, yesterday, the Genoptix CEO was playing to a nearly full house. Investors and analysts occupied all but two or three seats, which wasn’t the case in many of the other presentations given on the last day of the three-day conference (even though it drew a record total of more than 3,000 attendees, according to organizers).

Carlsbad, CA-based Genoptix (NASDAQ: GXDX), as Nova succinctly puts it, “delivers personalized and comprehensive diagnostic services to community-based hematologists and oncologists.” Doctors who specialize in blood

Tina Nova

malignancies, such as leukemias and lymphomas, send samples of their patients’ bone marrow to Genoptix. Community-based, Nova explains, simply means that most of these patients are treated in specialized neighborhood facilities instead of hospitals. The company, which operates a variety of diagnostic equipment and currently has 33 blood pathologists on staff, helps oncologists determine the best course of treatment.

“What we return to physicians is not individual test results, but a comprehensive diagnosis that enables the doctor to get that patient on the proper cancer drug at the right time,” Nova says. The company uses FedEx to deliver patient samples within 24 hours, whether they’re from Maine or …Next Page »

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Bruce V. Bigelow wrote:

San Diego-based Sequenom (NASDAQ: SQNM) is entering a critical phase in its management of the corporate crisis that erupted in its laboratories last year. It’s stepping back into the spotlight.

As a public company, Sequenom doesn’t have much choice. The maker of genetic diagnostic equipment and supplies says in its latest annual report that as of Dec. 31, it has an accumulated deficit of $597.3 million and available cash of $42.7 million. That means, as Sequenom chairman and CEO Harry Hixson told investors and analysts Monday, the company needs to secure additional financing this year.

Sequenom has been in its bunker since last April 29, after announcing a delay in the long-expected launch of its flagship test—a non-invasive genetic test for Down syndrome—due to “employee mishandling of R&D test data and results.” A subsequent internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, senior vice-president of R&D Elizabeth Dragon, and three other employees. The CFO and another executive resigned.

After several months of additional corporate governance cleanup, including tighter R&D controls and the appointment of two new scientific advisers and two independent directors, Hixson apparently decided Sequenom is ready to come out of the bunker and begin talking again. Hixson is scheduled to make a 30-minute presentation this morning at Roth Capital’s 22nd Annual Growth Stock Conference, which is being held at the Ritz Carlton in Dana Point, CA. Next week, he is set to make an appearance at the Barclays Capital 2010 Global Healthcare Conference in Miami, FL.

But Sequenom has yet to explain the what, why, or how certain employees mishandled its R&D data—and what consequences, if any, resulted. Remember, the mishandled R&D data were intended to …Next Page »

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Bruce V. Bigelow wrote:

Sequenom (NASDAQ: SQNM) sought to assure shareholders on a variety of fronts today, nearly a year after the San Diego maker of genetic diagnostic tests canceled the launch of its flagship test for Down syndrome due to “employee mishandling of R&D test data and results.” Following an internal investigation, Sequenom announced five months later that the research data supporting its test were no longer reliable. That same investigation led to the ouster of former CEO Harry Stylli, R&D chief Elizabeth Dragon, and three other employees. Two other Sequenom executives resigned.

Sequenom, however, does not subscribe to the PR doctrine of getting all the bad news out at once. After 319 days, the company has yet to publicly disclose any details about what happened during its research and development of the Down test. Instead, as Sequenom did today, the company has sought to call attention to several of its positive developments amid a wider fourth-quarter loss that revealed higher costs and lower revenue. To wit:

—Sequenom tentatively agreed in January to pay $14 million and give a 9.95 percent ownership stake to settle a class-action lawsuit that was filed in federal court by shareholders over materially false and misleading statements the company issued about its non-invasive test for Down syndrome in the 11 months before the launch was canceled. Chairman and CEO Harry Hixson told analysts and investors during a conference call today that a final approval of the settlement, set for May 3 in federal court, will clear “the major obstacle” that Sequenom faces in raising new capital. While Sequenom has $42.7 million in available cash, Hixson added, “We need to secure additional financing this year. We don’t want to let the gas tank run too low.”

—In the press release issued today, Sequenom did not provide an update on separate federal criminal and civil investigations that are focused on potential misconduct underlying the “mishandled data” during development of the Down syndrome test. Hixson only mentioned in passing during the conference call that the government investigations (and other litigation) are “ongoing.” Hixson noted, though, that Sequenom has implemented …Next Page »

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Bruce V. Bigelow wrote:

A few years ago, news articles in Business Week, Nature, and elsewhere described a veritable stampede among big pharmaceutical companies like Roche, Eli Lilly, Pfizer, and GlaxoSmithKline to work with contract research organizations in China and India.

As it turns out, some of San Diego’s smallest biotech startups have been doing the same thing.

The reason—for big and small drug development companies alike—is that the scientific capabilities of laboratories in places like Shanghai and Mumbai are proving to be very high, while the costs are very low. As I recounted a few weeks ago, aFraxis CEO Jay Lichter said the San Diego biotech saved millions of dollars by conducting preclinical research on a drug therapy for Fragile X syndrome by working with a contract research organization in Moscow.

Ivor Royston

Recently, Ivor Royston, a founding managing partner at San Diego’s Forward Ventures, told me a similar story about TargeGen, a San Diego biotech developing drug candidates for blood-related diseases that target JAK2, a protein kinase implicated in a host of myeloid proliferative disorders that include multiple leukemias. For Royston, TargeGen’s chairman, the San Diego biotech also serves as an example of how early stage drug development can still be conducted despite an ultra-lean business operation.

The San Diego biotech began working with a Shanghai-based contract research organization, or CRO, WuXi PharmaTech, within a few years after TargeGen was founded in 2001. WuXi itself had just gotten started the previous year. But Richard Soll, who joined TargeGen in 2002 as chief scientific officer and vice president of research and development, was confident he could rely on WuXi to do important early-stage experiments because he was personally acquainted with WuXi’s founder.

“Wuxi PharmaTech was in the business of making compound libraries,” said Soll, who decided to use contract research as a way to keep his research group lean. TargeGen was initially skeptical and cautious about working with …Next Page »

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Bruce V. Bigelow wrote:

San Diego’s Tocagen, a biotech developing gene therapy treatments for terminal cancers, says it has raised nearly $7.8 million from 75 investors in a Series D round that began Feb. 2, according to a recent regulatory filing. Tocagen, which also raised about $3 million last month by selling preferred shares, says in the filing that it intends to raise a total of $8 million.

Harry Gruber, Tocagen’s founding CEO and a gene therapy pioneer, declined to comment by phone today. The company, which was founded in 2007, raised about $11 million last year.

To get some idea of what Tocagen is doing, I searched some public records for the company’s activities. It turns out Tocagen has proposed a clinical trial that would use a “replication-competent retrovirus” to carry and express a gene known as cytosine deaminase (CD) in the brains of patients with a malignancy known as glioblastoma multiforme, according to the minutes of a June 17 meeting of the National Institutes of Health Recombinant DNA Advisory Committee. Doug Jolly, Tocagen’s senior vice president for research and development, and Manish Aghi, an assistant professor of neurosurgery and principal investigator of the Brain Tumor Research Center at the U.C. San Francisco Medical Center, explained the proposed experiment in a presentation to the committee.

The CD gene functions biologically by converting flucytosine, an FDA-approved and widely used antifungal drug, into fluorouracil, which also is an approved and widely used anticancer drug. In mouse studies, Tocagen showed it could deliver a functioning copy of this gene into brain cancer cells. The brain cancer cells then act as a reservoir for the virus to multiply—and to spread in a highly selective way into other brain cancer cells nearby.

I couldn’t tell what the latest status is of the clinical trial. But it’s not listed among the active trials in the NIH’s clinicaltrials.gov database.

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Bruce V. Bigelow wrote:

Memjet, the San Diego printer technology startup that named former Qualcomm COO Len Lauer as its CEO in January, took a step toward becoming a conventional company by naming Mark W. Legg as chief financial officer, according to a statement issued today. Legg was previously the CFO at privately held General Atomics of San Diego. Lauer is in the process of reorganizing Memjet, which was founded by Australian Kia Silverbrook and did not previously have a CFO. About two-thirds of Memjet’s employees are engineers working in Australia to develop new inkjet printer technologies.

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Bruce V. Bigelow wrote:

Scientists in San Diego and Hayward, CA, have demonstrated the feasibility of using algae to produce commercial levels of human therapeutic proteins that are currently being used to treat emphysema and other diseases, or are in clinical trials for use to boost the immune system.

“The bottom line from the study is that the algae expression platform is ready for prime time,” UC San Diego biologist Stephen Mayfield writes in an e-mail to me over the weekend. “We can express a very high percentage of recombinant genes (at least as good as the best system out there) and they are soluble and bioactive.”

Mayfield says the findings substantiate something he told Denise in December—that algae could dramatically cut the costs of making complex proteins, including interferons, antibodies, and growth factors that already are being used to treat cancer and other diseases. Such complex drugs are currently produced from mammalian or bacterial cells. Algae, though, is much less expensive to work with, and algae cells grow much more quickly—doubling in number ever 12 hours.

“Obviously the scalability and cost of algae make the system attractive, but if you can’t make a high percentage of proteins then costs don’t really matter that much,” says Mayfield, who led the study. The research, published online this week in Plant Biotechnology Journal, included scientists from The Scripps Research Institute (TSRI), San Diego algae biofuels company Sapphire Energy, and Protelica, (previously known as ProtElix) a Hayward, CA-based startup that specializes in protein engineering. Mayfield joined UCSD in November from TSRI, where he had worked since 1987.

Mayfield said a few months ago that a factory that uses algae to produce biotechnology drugs would be significantly cheaper to build than a traditional facility, and drug production costs would be about 75 percent lower. He contends that pharmaceutical companies could use such savings to dramatically cut the costs of some drugs that now cost consumers tens of thousands of dollars a year.

The process the scientists used to genetically modify a …Next Page »

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