by MARIE DAGHLIAN

Top executives at technology companies saw their 2009 total cash compensation drop slightly, but comparable executives at life sciences firms experienced an average increase of 3.5 percent, according to a study of private businesses from the executive search firm J. Robert Scott and Ernst & Young. It was the first time in the ten year history of the study that tech executives saw a drop in cash compensation.

CEOs at the more than 200 emerging, private life sciences firms surveyed received an average base salary of $273,000, up 3.2 percent from 2008. CEOs at these life sciences firms, however, received average bonuses of $48,000 in 2008 or 44 percent of their target bonus, down from 73 percent in 2007.

In an effort to prepare for the increased competition from generics as key patents expire, Eli Lilly CEO John Lechleiter told an annual meeting of investors that the company will focus on developing and acquiring new medicines, including biotechnology-based molecules, which now represent over one-third of its clinical-stage pipeline.

“Many companies are seeking to lower risk by reducing their focus on innovative medicines. This is not our path,” says Lechleiter.

Federal funding intended to advance 19 biorefinery projects is flowing again from the U.S. Departments of Energy and Agriculture. Together, the two agencies will spend $564 million to accelerate the construction and operation of pilot, demonstration, and commercial scale facilities, according to the government. Private companies in 15 states will get the funds, which are meant to help validate refining technologies and help lay the foundation for full commercial-scale development of a biomass industry in the United States.

Says DOE secretary Steven Chu:

by Marie Daghlian

A smattering of deals and financings marked the relatively quiet days before Thanksgiving. San Diego-based biotech Receptos closed a two-tranche $25 million series A financing. The company is focused on identifying and developing best- and first-in-class therapeutic candidates that target a family of membrane receptors known as G-Protein coupled receptors or GPCR. Investors include ARCH Venture Partners, Flagship Ventures, Lilly Ventures and Venrock.

Receptos’ technology comes from the labs of co-founders and Scripps researchers Raymond Stevens and Hugh Rosen. They joined forces at Scripps Research to develop a powerful GPCR technology platform and clinical candidate. Several Biogen Idec (BIIB) veterans are also co-founders of the company, including CEO William Rastetter, a former executive chairman at Biogen Idec.

Receptos will initially target the Edg family of receptor proteins, including sphingosine-1-phosphate receptor 1 (S1P1), for structure-based drug design. The company will also expand efforts into additional, select high-value GPCR targets independently and with corporate partners where structural insight is anticipated to elucidate receptor-ligand interactions and deliver both best- and first-in-class GPCR therapeutic candidates. Receptos expects its best-in-class S1P1 agonist candidate for autoimmune indications to enter the clinic in 2010. The S1P1 program is supported by the company's recently determined and proprietary protein crystal structure of the S1P1 receptor.

Finally, U.K. biotech Oxagen, a drug discovery and development company specializing in inflammation, completed a $26.7 million series C round led by Novartis Venture Funds, with participation by existing investors MPM Capital, SV Life Sciences, Advent Ventures, Bessemer Venture Partners, Omega, Abingworth, IBT, Red Abbey and The Wellcome Trust. Proceeds of the funding will be used primarily to advance Oxagen’s CRTH2 antagonist program in inflammatory and respiratory diseases, including the completion of an ongoing phase 2b clinical study of lead molecule OC000459 in moderate persistent asthma. This follows the successful completion of proof-of-concept (POC) studies in both asthma and allergic rhinitis. CRTH2, also known as DP2, is a cell surface receptor for prostaglandin D2 and is implicated in allergic inflammation. The funds will also be used to expand the therapeutic indications for CRTH2 antagonists using the lead molecule as well as back-up compounds.

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Novartis (NVS) and the U.S. Department of Health and Human Services will invest nearly $1 billion to build the first large cell culture-based flu vaccine manufacturing center in the United States. The new North Carolina manufacturing facility will be capable of producing up to 150 million doses of flu vaccine within 6 months of a pandemic declaration should an emergency warrant it, but not until 2011, Novartis says.

Bristol-Myers Squibb (BMY) will sell its last non-biopharmaceutical holding, a majority stake in Mead Johnson Nutrition (MJN), the company said. The pediatric nutrition company produces Enfamil baby formula and is a leading supplier of children’s nutritional products globally. Bristol-Myers’ move, part of a wider healthcare divestment strategy, will help the company improve its overall financial position and open the door to the pursuit of strategic business development opportunities, says CEO James Cornelius.

By Marie Daghlian

Chris Viehbacher, CEO of Sanofi-Aventis (SNY), said his company will establish a venture capital fund, joining an ever-growing queue of pharma venture capital funds seeking to gain better access biotech innovation. Viehbacher confirmed the French drugmaker’s plans in comments made at an event at Sanofi’s R&D campus in Cambridge, Massachusetts, the online publication Xconomy reported. The company also announced a significant expansion and extension of its collaboration with Regeneron Pharmaceuticals (REGN). The deal comes a month after Sanofi-Aventis struck a partnership deal with Merrimack Pharmaceuticals focused on the biotech's experimental antibody drug for cancer, and continues Sanofi's strategy of looking outside the company for what Viehbacher calls "right brain activity" that leads to creativity and innovation.

By Marie Daghlian

If the past week is any indication, big pharma is showing that it is willing to pay for biotech innovation. On the receiving end this week, Alder Biopharmaceuticals stands to reap more than $1 billion from collaboration with Bristol Myers Squibb (BMY) for the development and commercialization of ALD518, a novel biologic that has completed phase 2a development for the treatment of rheumatoid arthritis. Bothell, Washington-based Alder is granting Bristol-Myers Squibb worldwide exclusive rights to develop and commercialize ALD518 for all potential indications except cancer, for which Alder will retain rights and grant Bristol-Myers Squibb an option to co-develop and commercialize outside the United States. In return, Bristol-Myers Squibb will pay Alder an upfront cash payment of $85 million, potential development-based and regulatory-based milestone payments of up to $764 million across a range of indications, and potential sales-based milestones that may exceed $200 million and royalties on net sales. Alder also has an option to require Bristol-Myers Squibb to make an equity investment of up to $20 million in Alder during an initial public offering.

Pharmaceutical giant Eli Lilly (LLY) opened a new state-of-the-art biotechnology center in San Diego, part of an ongoing effort by the drugmaker to transform itself into a biotech titan. The move follows a relocation of its ImClone headquarters to a new biopharmaceutical research cluster in New York and construction of its biotechnology research and development complex at company headquarters in Indianapolis, Indiana a year ago.

Lilly's latest biotechnology center is located within an extensive hub of life science activity near the University of California, San Diego and other prominent biomedical research institutes, which the company says is consistent with its strategy to leverage external resources and knowledge to advance its pipeline.

The Swiss pharmaceutical giant Novartis (NVS) said it will invest $1 billion in China over the next five years including a significant expansion of the company’s biomedical research institute in Shanghai. On the heels of the announcement, the company also said it agreed to acquire an 85 percent stake in the Chinese vaccine maker Zhejiang Tianyuan Bio-Pharmaceutical for $125 million in cash.

Demand for healthcare in China is growing rapidly. As the country’s standard of living has risen with increased wealth so too has the burden of chronic diseases associated with lifestyle choices. The government is working to expand access to affordable, basic medical services to all citizens by 2020, and recently announced that it will spend approximately $124 billion over the next three years to further build the nation's health system. Novartis says it aims to support the government's health reform by sharing knowledge and best practices.

Administrative inefficiencies, medical errors, unnecessary treatments and fraud contribute to between $600 and $850 billion of wasteful spending within the U.S. healthcare system annually according to a new report by Thomson Reuters. The report, based on a review of published research and analyzes of proprietary data, identifies the most significant drivers of wasteful spending.

Basel, Switzerland-based Lonza Group (LZAGF.PK) said it would take steps to cut costs by as much as $79 million including the elimination of 450 jobs in response to unexpected events in the third quarter that included cancellation and delays in large-scale biopharmaceutical custom manufacturing that will hurt its operational earnings. Lonza warned of continued volatility in the company’s markets, which it said it expects to continue for the next few years. The news sent shares of Lonza down 18 percent.

Richmond, California-based Transcept Pharmaceutical (TSPT) tumbled nearly 50 percent on news that the U.S. Food and Drug Administration issued it a Complete Response Letter regarding its application for approval to market Intermezzo, a treatment for people suffering from a form of insomnia that involves difficulty falling asleep after waking up in the middle of the night. The company originally filed for approval to market Intermezzo in September 2008. The FDA requested additional data demonstrating that Intermezzo, when taken as directed in the middle of the night, would not present an unacceptable risk of residual effects, with particular reference to next day driving ability. The FDA also expressed two concerns regarding the possibility of patient dosing errors in the middle of the night that could lead to next day residual effects. The agency FDA has asked Transcept to address methods to avoid inadvertent dosing with less than four hours of bedtime remaining, and inadvertent re-dosing in a single night. The company says based on the content of the letter, it is possible that it will need to conduct one or more additional safety studies. Transcept will request a meeting with the FDA to discuss specific requirements for approval.

The last week of October was appropriately marked by treats and tricks. The stock market gyrated from investor ebullience over numbers showing a 3.5 percent growth of the U.S. GDP in the third quarter of 2009, to investor dismay over worries that a drop in consumer spending signals an unsustainable recovery. Meanwhile, life science companies were busy raising money and striking deals. Durham, North Carolina-based Aldagen (ALDH) took its place in a growing queue of companies hoping to go public in the coming months as the IPO window begins to open. The company, which develops regenerative cell therapies, had initially filed to go public in May of 2008 but withdrew those plans last October when the stock market crashed.

Finally, Ligand Pharmaceuticals (LGND) is buying struggling Metabasis Therapeutics (MBRX) for the fire sale price of $3.2 million and contingent value rights. The La Jolla, California biotech, which has a pipeline of drugs to treat metabolic diseases, went public in June 2004 at $7 a share. Today its stock trades below 50 cents. The company burned through more than $200 million without getting any drugs to market and cut its staff down to seven people earlier this year as it ran low on cash. Under the agreement, Ligand will pay Metabasis’ shareholders $1.8 million and take over more than $1.3 million in liabilities. Metabasis shareholders will receive contingent value rights that entitle them to cash payments as frequently as every six months as cash is received by Ligand from proceeds from the sale or partnering of any of the Metabasis drug development programs, among other triggering events. Ligand has committed to spend at least $8 million in new research and development funding on the Metabasis programs within 42 months following the closing of the transaction.

by MARIE DAGHLIAN

Following a week of little activity, venture financing for life science companies got hot. Even General Electric (GE) is getting into venture investing, announcing a $250 million venture fund midweek that will invest in small companies developing “disruptive technologies” in the healthcare arena (see story). GE is spending $6 billion to revamp its GE Healthcare division, one of its fastest growing divisions until recently. However, uncertainty surrounding healthcare reform and a lower demand for medical devices and imaging services have cut into profits. GE hopes its venture efforts will result in greater exposure to a wider array of innovative technologies, any one of which could be a winner, while maintaining a flexibility it would not have if it buys companies outright.

Several companies closed large financing rounds. Lux Biosciences, a privately held New Jersey biotech, focusing on the development and commercialization of therapies for serious ophthalmic diseases, closed a $50 million Series B venture financing by current investors HBM Bioventures, Novo A/S, Prospect Venture Partners and SV Life Sciences, as well as SVLS' publicly traded fund, International Biotechnology Trust. Lux is anticipating U.S. Food and Drug Administration approval for its lead product Luveniq, oral voclosporin, a next generation calcineurin inhibitor, in 2010. The funds will support the completion of the New Drug Application in the United States and the Marketing Authorization Application in Europe, based on positive pivotal data in non-infectious uveitis. Lux Biosciences received Fast Track Designation for Luveniq in August 2007 and will request priority review from the U.S. Food and Drug Administration. If granted, the company could potentially gain U.S. approval for Luveniq in 2010. The proceeds from the financing will also help the company prepare for commercial launch of the product for non-infectious uveitis. Lux Biosciences also has several earlier stage projects based on its mixed nanomicellar ocular formulation technology, and its proprietary product-enabling bio-erodible polymer technologies that facilitate targeted and sustained delivery of molecules to the eye.

Privately held GlycoMimetics, which is developing a new class of glycobiology-based therapies for a broad range of indications, raised $38 million in its latest round of venture financing. New investors in the Maryland-based company include Genzyme (GENZ) Ventures, which joined returning investors New Enterprise Associates, The Novartis (NVS) Venture Fund, Anthem Capital and Alliance Technology Ventures in the round.

The new investment will be used to fund a phase 2 trial of GlycoMimetics’ lead drug candidate GMI-1070 in vaso-occlusive crisis, the main clinical feature of sickle cell disease. The company also intends to use proceeds to fund a phase 2 study of GMI-1070 in a second clinical indication. GMI-1070 is a rationally-designed glycomimetic inhibitor of E-, P- and L-selectins, and inhibits a key early step in the inflammatory process leading to leukocyte adhesion and recruitment to inflamed tissue.

Massachusetts drug development startup Flexion Therapeutics raised $33 million in Series A funding led by Versant Ventures with participation by founding investors 5AM Ventures and Sofinnova Ventures. The funds will be used to advance a number of promising drug candidates through clinically meaningful proof of concept and beyond.

By providing expertise and risk-sharing, Flexion effectively expands the development capabilities of its partners. Flexion was established in 2007 by Mike Clayman and Neil Bodick, the founders of Chorus, Eli Lilly’s (LLY) in-house proof-of-concept drug unit, which they say demonstrated a level of productivity far greater than the industry standard. The Flexion team has evolved the Chorus model and expects to be able to take preclinical compounds into their initial clinical trials in half the time and slash the costs to one fifth what it normally takes, by using novel types of licensing deals with pharmaceutical and biotech partners and maintaining a small team with low overhead. Flexion soon expects to announce deals with three major pharmaceutical companies.

Biotech pioneer Lee Hood’s new company, Integrated Diagnostics, was officially launched on October 14 with more than $30 million in venture capital from InterWest Partners, U.K.-based Wellcome Trust, and Germany-based dievini Hopp Biotech holding, part of a collaboration with the government of Luxembourg and the Institute for Systems Biology. The Seattle-based company will focus on developing personalized and preventive diagnostics based on breakthroughs using genomic and proteomic technologies to identify organ-specific proteins. The idea is to develop diagnostics to detect the earliest stages of disease when they are the most treatable.

“Just as the DNA sequencer allowed us to decode the human genome, the technology behind Integrated Diagnostics will allow us unprecedented insight into preventing and treating diseases like cancer, diabetes, and Alzheimer’s by analyzing the proteins that appear in their earliest stages,” says Hood, current president of The Institute for Systems Biology and inventor of the DNA sequencer. “By taking a systems approach to monitoring an individual’s health we will be able to provide physicians and patients an early warning system for preventing and treating diseases.”

Integrated Diagnostics will have access to Hood’s research at Institute for Systems Biology investigating protein blood markers that can report on the physiological state of the body's 50 major organs. It is the first commercial enterprise to emerge from a $200 million public-private partnership announced in 2008 between Luxembourg and three American research institutions including the Institute for Systems Biology.

Other founders of Integrated Diagnostics are Jim Heath, professor of chemistry at Caltech; David Galas, professor at Institute for Systems Biology and CSO of the Battelle Memorial Institute; and Paul Kearney, scientific director of special projects at Institute for Systems Biology.

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The industrial giant GE plans to boost its already sizable presence in the healthcare arena with the establishment of the “GE Healthymagination Fund,” a $250 million equity fund that will make investments in healthcare technology companies. The fund will invest in companies globally that have innovative diagnostic, information technology, and life sciences technologies that fit with the strategic objectives of the company’s Healthymagination initiative, a $6 billion effort to deliver better healthcare to more people at lower cost.