Paypal cofounder Peter Thiel doesn’t shy away from making risky bets in disruptive technology and research.

Today, the Thiel Foundation announced it would grant $350,000 to two of Breakout Labs’ teams: SkyPhrase and Stealth Biosciences. Both startups are working to bridge the gap between technology and the biological sciences.

SkyPhrase is working on making computers understand human language with greater precision. It’s creating a platform to search, access, and monitor data that relies on natural language processing. The company is already viewed as a potential competitor to Apple’s Siri, which struggles to understand complex-language questions.

Stealth Biosciences is developing a device that can exert control over biological processes at the level of single cells. The technology is the brainchild of Stanford University professors Nick Melosh and Craig Garner. These devices could be a new toolset for research and diagnostic applications; it will initially use the funding to develop a “Nanostraw” device that can reprogram human T-cells for the purposes of cancer therapy.

Thiel is funneling the millions he made through early investments in Facebook, Yammer, and Yelp into potentially life-saving research. Through the nonprofit Breakout Labs, which was founded in 2011 and received financing through the Thiel Foundation, he kick-starts ideas that most traditional venture capitalists wouldn’t touch.

Last year, Breakout Labs’ funded a dozen startups, including a venture to produce bioengineered animal products — lab-grown meat — with about $4.5 million. Breakout Labs awards grants from $50 to 350,000 on a rolling basis, but the funded companies retain their intellectual property.

Many of the companies admitted into Breakout Labs go on to win government and academic grants, and many of the founders are university professors. This reflects “a growing and much welcome interest from the academic community in commercialization,” said Breakout Labs executive director Lindy Fishburne.

Peter Thiel image via Kenneth Yeung/Flickr

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Today Fenwick & West released a study stating that the number of life science financings continued to decline in 2012, falling by more than $5 billion over the past five years.

This sector reached a high in 2008. However, venture capital for life sciences “fell off markedly” after the 2008 recession and has not yet recovered. Fenwick & West estimates that fundraising fell from an average of $7.8 billion a year in 2007 and 2008, to $2.5 billion in 2012, and the percentage of venture capital fundraising allocated to life sciences declined from 19 percent in 2009 to 12.5 percent in 2012.

“The life science venture financing environment remains challenging, with an increasingly short supply of capital, despite factors such as aging world populations and rising living standards in developing countries that will help support long-run demand for life science innovation,” said partner Matt Rossiter. “While funding from corporate investors, wealthy individuals and disease foundations is helping to fill some of the gap, entrepreneurs that plan to seek venture capital financing would do well to carefully consider factors, such as capital efficiency and a faster path to exit, that can increase the odds of raising scarce funding.”

The shortage of venture capital has led to a few key trends that Fenwick & West identified in the market. First, life science venture capitalists are making fewer new investments. Pricewaterhouse Cooper and the National Venture Capital association reported that 2012 saw the fewest “first time” investments in life sciences companies of any year since 1995. Those who are investing are more likely to back companies with less technological or development risk, such as those involving smaller clinical trials or an accelerated regulatory pathway, or that require less capital to reach commercial markets.

With venture capital lagging, large life sciences companies are playing an increasingly significant role in supporting startups through partnerships, funding, and/or mergers and acquisitions. M&A activity remained fairly consistent in 2012, although a majority of life sciences companies that went public were priced below their target range. In its analysis, Fenwick & West found that companies and investors are taking steps to achieve earlier exits as a result.

The good news is that valuations for the venture-backed companies continued to “trend modestly upward” from 2011. “Up rounds” outpaced “down rounds” 52 percent to 17 percent, which partner Barry Kramer said suggests that while raising venture financing is becoming more difficult, those companies that do raise additional money are doing so at improved valuations.

Interestingly, the decline in life sciences funding occurred at the same time as funding for digital health shot up dramatically. in 2012,  digital health and healthcare IT companies attracted $1.4 billion in venture funding, representing a 46 percent increase in dollars and a 56 percent increase in the number of deals from 2011. While investments in biotech, biopharmaceuticals, and medical devices may be dwindling, the same is not true for companies working in health consumer engagement, data analytics, or technology to make practicing medicine more efficient.

Shifts in national policy, cultural attitudes, and mobile technology has changed the way people relate to their bodies and the way clinicians practice medicine. Along with these shifts comes a change in the business surrounding healthcare, and the types of companies that attract investor and consumer attention. However, Rossiter said this survey has an important subtext, begging the question of whether venture capitalists are “over-correcting.”

“Has Life Sciences Venture Capital swung too far the other way, pulling out when we need drugs and treatments that are effective and reduce the overall system cost?” he asked in an email. “In a few years, VCs may look back and ask, ‘Did we miss an opportunity?  Did we pull out just when there were a lot of good companies to invest in and make a lot of money, when we could have had our pick?’

Read the release. 

Should human genes be patented? The Supreme Court is weighing in today in a landmark case,  Association for Molecular Pathology v. Myriad Genetics, Inc., 12-398., that will have an enormous impact on the future of science, technology, and medicine.

At the center of the debate is Utah-based Myriad Genetics. Scientists at the biotech company discovered two genes — BRCA 1 and BRCA2 — that are associated with hereditary breast and ovarian cancer. Since then, it claims its tests have been used by more than one million women to determine if they have an increased risk of developing these cancers.

The company patented these discoveries — the “synthetic molecules we isolated and created in the lab to provide life-saving tests,” the company’s CEO explained in an op-ed in USAToday.

But Nobel Prize-winning geneticists argue that the patent will stifle research and medical diagnostic testing. Because of its patents, Myriad can prevent other researchers from testing, studying, or even looking at these genes, and it also holds the exclusive rights to any mutations along those genes, according to the American Civil Liberties Union (ACLU).

The U.S. patent system’s rules stipulate that you can’t patent a product of nature or a law of nature, even if research took years and proved costly. For this reason, Albert Einstein did not patent the law of relativity.

A parallel can be made with a rare East African plant, which has a variety of medicinal uses. It might be plausible to patent a drug that comes from the plant, but it would be unreasonable to patent the plant.

“Over the past 20 years, at least 41 percent of our genes have become the intellectual property of corporations,” genomics professors Christopher E. Mason and Jeffrey Rosenfeld argue on the ACLU’s blog. “These patent claims contradict an intuitive sense that our DNA is no less ours than our lungs or kidneys,” they continue. The ACLU also claims that the patent has allowed Myriad to charge patients exorbitant rates for its test.

Until recently, the medical profession largely shunned patents. A favorite quote that has been liberally used by Myriad’s opponents is from Dr. Jonas Salk, who invented the polio vaccine. Rather than file a patent on the vaccine, he reportedly said, “There is no patent … could you patent the sun?”

Dietrich Stephan led a research team that identify the genetic causes for Autism, ALS, Alzheimer’s disease, and more.

Human geneticist Dietrich Stephan says he’s been following this debate closely since 2006. Stephan is the cofounder of Navigenics, a genetics diagnostics company acquired by Life Technologies Corp. in 2012. Stephan agrees with the ACLU, and is concerned that patenting genes will be detrimental to patients.

“You should be able to give patients gene sequencing information that will benefit their health,” he said in an interview. “Patents may prevent that.”

According to Stephan, the likelihood of the Supreme Court siding with Myriad Genetics is low. Myriad will still own the brand and have the highest-precision test in the market. So even if three competitors emerged tomorrow, Myriad will still out-perform in sales.

“Even so — competition is a good thing,” he asid. Collaboration is another issue as many of these genes will be used together to form the basis of a test — “more and more it’s not a single gene that is diagnostic,” said Stephan.

Efrat Kasznik, an intellectual property lecturer at Stanford University, said the patent system offers inventors a limited monopoly (20 years from filing) in return for public disclosure for their innovation. But not every finding can be patented. Similarly to a mathematical equation, the Supreme Court may rule that our human genes can never be owned.

Dietrich Stephan will speak at HealthBeat, VentureBeat’s upcoming healthcare and innovation conference in San Francisco on May 20-21. 

Top image via Shutterstock 

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Third Rock Ventures is a venture capital fund that supports companies working on health IT, science, biotech, and medicine. Fund III will invest in up to 16 companies with a particular focus on the “going convergence” of diagnostics, therapeutics, information technology, and data.

The firm gets deeply involved in the process of building its portfolio companies. Step one is to discover breakthrough research and technology, and then help build “dream teams” of scientists, researchers, and executives to carry out that vision. Third Rock provides its own leadership team during the early stages of a company’s life and then helps recruit more experienced teams down the road.

Since its inception in 2007, Third Rock has raised more than $1.3 billion and invested in 31 companies to date. The firm plays an instrumental role in launching “transformative” companies, “advancing pipelines to the clinic,” and developing/bringing new products to market. Third Rock not only provides financial support but also works closely with industry partners in many different areas: academia, pharmaceutical corporations, genetic researchers, and so on, “to make this visionary science a business reality.”

Third Rock is headquartered in Boston and its team includes more than 40 people. Fund III will also help expand the team. Read the press release.

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Of all the noble causes out there, the prevention of infectious disease is high on the list. This is certainly part of the mission for biotech company Visterra, which has completed a $26 million round of funding to support technology that discovers and develops antibodies used in the prevention and treatment of major diseases. The company’s lead product, VIS410, targets multiple types of influenza, and the investment will contribute to widening the scope of the platform.

The Bill & Melinda Gates Foundation and Omega Funds contributed $13 million, in addition to a $13 million previously raises from Polaris Venture Partners, Flagship Ventures, and Lux Capital. Visterra is based in Cambridge, Mass. Read the press release.

Cigarettes, chemicals, and sunlight are well-known causes of cancer, and people can respond accordingly to these risk factors by abstaining from smoking, buying organic, and slathering on the sunscreen. But what about the causes that can’t be mediated?

Genetics (and family history) play a significant role in cancer detection and treatment as well, and Foundation Medicine has raised $42.5 million for its technology that investigates the genetic makeup of cancer patients and uses this knowledge to match patients with the best treatments.

The flagship product, FoundationOne, is a genomic profiler that uncovers genetic alterations in a patient and reports them to the physician. With a deeper understanding of each particular case and the ways the cells are working, physicians can better prescribe drugs, clinical trials, and other medical regimens.

FoundationOne is available for all solid tumors, and results can be gleaned from just 50ng of DNA. The platform can easily be integrated into an oncologist’s practice and with this funding, will continue to develop and scale the product commercially.

Investors include Deerfield Management Company, Casin Capital, Redmile Group, Roche Venture Funds, and WuXi Corporate Venture Fund. Previous backers Google Ventures, Kleiner Perkins Caufield & Byers, and Third Rock Ventures contributed again, following last year’s Series A of $33.5 million.

Foundation Medicine is based in Cambridge, Massachusetts. Its mission is to create products and services based on genomic analysys that can be used in cancer diagnosis and treatment. Read the press release.

In yet another reminder of the current storm of biotechnological innovation, California-based Life Technologies is the first team to sign up for the $10 million Archon X Prize, a race to sequence 100 entire human genomes for $1,000 or less each.

The ultimate goal is to create the “world’s first clinical standard” that will make genome sequencing useful in treating and diagnosing patients, instead of just being something you read about on the news. The low cost and speed demanded by the X Prize competition would be an entirely new milestone for genetic sequencing.

100 people over the age of 100 have offered up their DNA for the race, with the hope that the X Prize teams will discover unique genetic changes that have led to their old age.

The Ion Torrent team from Life Technologies is led by Dr. Jonathan M. Rothberg, a geneticist and entrepreneur who has received several notable accolades, including being named the World Economic Forum’s Technology Pioneer for three of his companies. The team will use its Ion Proton Sequencer, which can directly translate chemical signals into digital information.

“It would have cost $100 million and taken 33 years to meet this challenge when the competition was announced in 2006,” Dr. Rothberg said in a statement. “The new Ion Proton sequencer is designed to sequence a human genome for $1,000 in just a few hours. Semiconductor technology is transforming sequencing just as it has transformed every other industry it’s touched, driving research and, ultimately, improving health.”

Registration for the Archon X Prize race is open until May 2013, and the competition will kick off in September 2013. The teams will have to sequence 100 genomes within 30 days and will be judged across three categories: accuracy, completeness, and haplotype phasing.

Via The Verge; Photo: “The Fountain”/20th Century Fox

Personalized medicine takes a hit — Scientists have spent more than a decade scouring the human genome to identify genetic alterations that might predict your risk of developing, say, heart trouble or cancer. Now, however, a new study (subscription required) Wednesday in the Journal of the American Medical Association suggests that many of these disease “biomarkers” identified so far may be little more than junk. (For a lay review of the report, click here.)
The main problem here is that “personalized medicine” — a future in which doctors anticipate medical problems and prescribe tailored treatments based on your individual genetic profile — was supposed to be one of the revolutionary consequences (not to mention big businesses) of decoding of the human genome project. If biomarkers, which are effectively the building blocks of personalized medicine, don’t actually tell us what we thought they did, that’s not particularly encouraging.

In the JAMA study, a research team led by Washington University’s Thomas Morgan re-tested 85 biomarkers that previous studies had identified as risk factors for heart attacks and other problems related to atherosclerosis and other forms of coronary artery disease. To do so, the team scanned the genes of 811 heart patients and 650 healthy people in order to confirm the purported links between disease and particular genetic variations. Of the 85 variations retested, however, the researchers found that only one — a mutation in the gene for a protein called beta-fibrinogen — appeared to qualify as a true risk factor.

The problem seems to be that many biomarkers are “discovered” in small studies, where it’s difficult to tell the difference between a real gene-to-disease association and an imposter that appears in the data by random chance. Heart-disease specialists now face the disheartening task of starting all over with larger, more rigorous and more expensive trials. Since scientists claim to have identified dozens of biomarkers for other conditions — cancer in particular — in more or less the same way, it’s entirely possible that the current edifice for personalized medicine may be much shakier than just about anyone had imagined.

The little drug that could, and did, too much — Hands down, the most successful biotechnology drug in the world is erythropoietin, or EPO, a genetically engineered version of a natural human protein that stimulates the production of red blood cells. EPO and its next-generation cousin racked up $6.6 billion in 2006 sales for Amgen, helping make it the world’s biggest biotechnology company. EPO is primarily used to treat anemia in patients with kidney failure or those undergoing chemotherapy, and has long been a major cost item for Medicare, which in the U.S. pays for most of its use in kidney disease.

All, however, is not well in EPOland. Since late last year, the EPO-related drugs have started to pile up safety concerns, with studies showing that they may increase the risk of heart attacks and strokes in kidney patients at high doses and cut short the lives of cancer patients (some of whom were receiving radiation therapy and others who weren’t). Amgen’s travails with the drug are ably recounted by Marilyn Chase in this recent WSJ article (subscription required).

Although the WSJ notes concerns related to Amgen’s support for higher EPO doses and its advertising strategy, it stops short of accusing the company of engaging in Big Pharma-style overpromotion of its drugs. For that, you have to turn to a recent editorial in Nature Biotechnology (hat tip: Derek Lowe), which, among other things, blasts the company for a “massive marketing blitz” aimed at getting oncologists to use more of its drugs despite increasing fears that EPO-related drugs might actually promote tumor growth. As the editorial notes:

Amgen does not come out of this well. Although seeking new indications for existing medicines is clearly a valid strategy, the company appears to have miscalculated the balance between expansion and the risks to its existing business—and potentially opened itself to charges that it has recklessly endangered patients’ lives.

This is not territory any biotech — nor any drug company, for that matter — wants to find itself in.

By way of contrast, commercial hopes were high last year when Pfizer launched Exubera, the first inhalable form of insulin for diabetics. Co-developed by biotech Nektar Therapeutics, Exubera was supposed to relieve diabetics of the inconvenience associated with injecting insulin multiple times a day. Pfizer predicted the drug would eventually pull in blockbuster annual sales of $2 billion.

That, of course, hasn’t happened. The Exubera inhaler, it turns out, is cumbersome to use, the drug costs more than regular insulin, and patients appear spooked by lingering concerns about its impact on lung function. Not to mention the fact that new insulin-injection systems now use smaller needles and are far less painful than they used to be. Pfizer last week re-launched Exubera with a new marketing campaign. The moral here: Sometimes fear itself isn’t the only thing to fear in drug development.

Non-profit drugs? — Makers of drugs for HIV/AIDS have reluctantly started to embrace the notion that they can’t sell drugs intended for use in the developing world at First World prices, sometimes with the assist of an activist government like that of Thailand. Now comes news that GlaxoSmithKline plans to launch a combination vaccine called Globorix for use only in Africa from which it “never expects to make money”. A detailed but somewhat wishy-washy analysis (from a Fleishman-Hillard “consultant,” to boot) follows at Ethical Corporation, a self-described independent publisher and conference organizer in the U.K. that focuses on “how companies relate to the world around them” (hat tip: Pharmalot).

This is a tough one to puzzle out at this point. GSK may just be doing the right thing, as it appears to insist, or it may be trying to buy goodwill with drug activists and international NGOs to gain leverage in some other controversial area, which seems more likely. Given increasing drug-pricing pressures on pharmas and biotechs alike, though, it’s certainly intriguing and a trend worth watching.