VentureBeat

BioNanomatrix, a Philadelphia developer of genome-analysis systems, raised $5.1 million in a first funding round. Investors included Battelle Ventures, Innovation Valley Partners, KT Venture Group, Ben Franklin Technology Partners and21Ventures.

BioNanomatrix is developing a single-molecule imaging and analysis system that the startup says is ideal for reading DNA sequences. The startup still isn’t divulging many details about its system, although the Philadelphia Inquirer suggested that the company’s “nanofluidics” technology could potentially read all three billion bases from a single DNA molecule without chopping it up first — a common step in most sequencing setups these days, albeit one that also increases the complexity of reassembling the fragmented sequences into a coherent whole.

According to that article, in fact, BioNanomatrix has produced a nanofabricated chip with more than a mile of tiny channels that can accomodate the full DNA molecules from all 46 chromosomes of 200 people at a time. That’s pretty spectacular if true, although of course the challenge with this sort of technology is always proving that it does what the company says it should.

We previously covered BioNanomatrix last October, when the company formed a joint venture with Complete Genomics of Menlo Park, Calif. The two companies, which shared an $8.8 million grant from the National Institute of Standards and Technology last year, are aiming to sequence an entire human genome in eight hours for $100, although they haven’t set a date by which they hope to accomplish that feat. It’s a nice bragging point, since that’s about an order of magnitude faster and cheaper than anyone else is predicting at the moment, but it’s also little more than an unsubstantiated claim for the moment.

For more coverage of the high-speed genomics race, see my previous posts onPacific Biosciences and its nanowell technique, Intelligent Bio-Systems’ $5,000 genome challenge, and VisiGen’s promise of a $1,000 genome by the end of 2009. Don’t miss my Q&A with MDV’s Bill Ericson about the medical promise of fast, cheap genome scans.

Mohr Davidow Ventures partner Bill Ericson, who helped fund high-speed genome-sequencer Pacific Biosciences, is a big believer in the emerging Age of Genomics and its potential to transform medicine, health insurance and our understanding of ourselves.

Check out my recent Q&A with the venture capitalist over at VentureBeat Life Sciences for a conversation that also features digressions on the likelihood that we’ll end up living in a Gattaca-style dystopia and why most people taking cholesterol-lowering statins should chuck them instead.

Bill Ericson doesn’t see much cause for pessimism about the dawning Genomic Age. The Mohr Davidow Ventures partner, who’s helped resuscitate the firm’s life-science practice since he came aboard in 2000, believes the widespread dissemination of genetic information will be a virtually unalloyed good, opening up a wealth of opportunities for more effective medicine, lower healthcare costs and individual empowerment — not to mention investment opportunities for those prescient enough to seize them. (See here and here for my own take on the subject.)

Ericson, of course, has plunked down some serious cash in service of his convictions. He played a significant role in funding the genome-sequencing startup Pacific Biosciences, which announced itself with a splash last weekend, and previously backed Tethys Bioscience, a biotech with a test it says will predict your diabetes risk with high precision. I spoke with him recently about the PacBio investment, and somewhat to my surprise soon found myself in a broader conversation about the impact genomic data will have on the world. (I’ve edited the transcript for clarity and brevity.)

VentureBeat Life Sciences: Makers of biological tools like gene-sequencing equipment have been out of favor with VCs for almost a decade. How did you get involved with a genome sequencer like PacBio?

Bill Ericson: Back in the mid-1990s, it became clear that we were entering a period in which we could measure biological functions and patterns in ways that we hadn’t previously been able to do. When I joined Mohr Davidow, I wanted to focus on where measuring biology in more systematic, quantitative ways would lead. It was just the beginning of a period of rapid technological advances and of rapidly improving understanding of fundamental biology. I was convinced that all sorts of goods and services would flow out of that.

One area we considered greatly underinvested was sequencing. Other nucleic-acid measurement techniques are surrogates for sequence information, which we thought was the gold standard. At the end of the day, if you could do fast, accurate sequencing, you’d probably end up dominating the field.

One technology that got us really excited was at a company then called Nanofluidics [now PacBio], where three Cornell postdocs were working on zero-mode waveguides and using them to do sequencing. We convinced them to move their group to the Palo Alto area, where they incubated with us for the better part of a year. We wanted to invest in people and technology that could really take you to the next, next level of sequencing — as close as possible to the end state of sequencing technology. These guys had at least the theoretical ability to do the full human genome for $1,000 or less.

VBLS: What consequences do you expect from the advent of such high-speed sequencing?

BE: This is an information-generating technology, one that’s faster, cheaper and more powerful than anything else. Any number of new applications could flow from that. For instance, everyone believes that genetics plays a role in predisposing you to various diseases. If we do the population studies [that reliably link genetic differences to disease], you can arm physicians, patients and consumers with a better way of looking at health. Human health turns into much more of an information system that can be understood and proactively addressed, in sharp contrast to medical practice today, which is tremendously reactive and wasteful.

Once you shine the spotlight of sequencing on large populations, you’ll identify patterns that are invisible today. I would love to see genetic studies show that only five percent of the population actually needs to go on a drug that today is prescribed for 40 percent to 50 percent. That’s a tremendous win — no drug has no side effects. Sequencing could also be very useful in an area that frankly ought to scare all of us to death, which is the emergence of drug-resistant infectious disease. You could see the mutations [that confer resistance] happening in real time. In real time, you could be measuring somatic mutations [that give rise to cancer].

I think all these tools are going to give rise to new applications. It’s a lot like watching the computer industry — once PCs were adopted to the point of being cheap and readily available, people created applications for them. I honestly wish I could tell you precisely what will be valuable and what won’t, but we’re still in the early innings.

(More after the jump.)

Read the rest of this entry »

(UPDATED: Expanded items on LineaGen, BG Medicine. Pelikan Tech is described in a standalone item here.)

TODAY’S HEADLINES:

• Pelikan Tech raises $69M for diabetes glucose tests (release)
• Utah’s LineaGen draws $6M for genetic diagnostics (VentureWire, sub req’d)
• Beijing’s IKang Healthcare gets $25M for medical-service centers (VW)
• BG Medicine drops IPO price range, seeks up to $52M (Edgar)
• Sepragen completes acquisition of Cyto Biologic Tech (release)

Utah’s LineaGen draws $6M for genetic diagnostics — LineaGen (no Web site), a Salt Lake City biotech focused on genetic diagnostics, raised $6 million in a first round of funding, VentureWire reports. Investors included
Sanderling Ventures, vSpring Capital and Mesa Verde Partners.

The company aims to identify genomic markers — presumably the single-letter DNA variations known as single-nucleotide polymorphisms — for a variety of diseases, including autism, multiple sclerosis, cancer and lung disease. LineaGen is using detailed databases on Utah’s predominately Mormon population, which keeps careful genealogical records, to identify markers that it can then turn into diagnostic tests for those conditions.

A variety of other companies have been embarked on similar projects, most notably DeCode Genetics, which has been conducting genetic analyses on the Icelandic population for years. VentureWire notes that Genzion Biosciences has been doing the same for French Canadians.

BG Medicine drops IPO price range, seeks up to $52M — Waltham, Mass.-based BG Medicine, a developer of molecular diagnostics, dropped its IPO price range and now plans to raise no more than $52 million. The company, which had previously sought to offer up to 5.2 million shares at a price between $14 and $16, now aims for a price between $8 and $10. Its latest SEC filing is here.

The company’s setback is but the latest in its unusual IPO history. It first reported plans to go public on Amsterdam’s EuroNext exchange, then apparently scrapped that idea and filed to list on the Nasdaq Stock Exchange. At its previously price range, BG Medicine stood to raise as much as $83 million, so its latest decision represents a fairly significant haircut to its earlier hopes.

Featured companies: Mawell, OpGen, Vital Therapeutics

Optical genome-mapper OpGen raises $23.6M in a restart — OpGen, a Madison, Wisc., biotech developing a genomic test for identifying disease-causing microbes, raised $23.6 million in what the company is billing as a first funding round. In fact, however, the funding is more of a restart for the company, which was founded in 2001 and previously provided genomic services to researchers.

OpGen is now focused on developing speedy genome-based tests that can help identify and track infectious disease microbes. The company has set its sights on clinical microbiology laboratories as potential customers; such laboratories now try to identify the source of a patient’s infection by growing up the responsible bacterial in culture, a process that can take days. OpGen’s technology, which identifies patterns in single molecules of DNA to identify particular microbial strains, can deliver answers within two to three hours, the company says.

Investors included CHL Medical Partners, Highland Capital Partners, Versant Ventures and Mason Wells.

Vital Therapies gets $28.1M for artificial liver — San Diego’s Vital Therapies, a device maker developing an “artificial liver,” raised $28.1 million in a third funding round. Investors included Versant Ventures, Delphi Ventures, HBM BioMed China, DFJ DragonFund China, MedVenture Associates, Valley Ventures, Toucan Capital and Heights Capital.

Vital’s main focus is on a cartridge-style device that mimics the toxin-breakdown and waste-filtering function of the liver. The device, which contains artificially grown human liver cells, is intended for use while patients await a liver transplant. The device has completed four early-to-mid-stage trials, two of them in China, where prevalent hepatitis frequently contributed to liver failure.

Finland’s Mawell draws €8M for healthcare IT — Helsinki’s Mawell, a bioinformatics company providing software and services to drug companies and hospitals, raised €8 million ($11.1 million) from the private-equity firm CapMan, VentureWire reports (subscription required). CapMan will become Mawell’s largest owner.

(UPDATED: See below.)

For some reason, biotechnology is rife with chameleons — companies that suddenly and radically alter their scientific strategy, disease focus or business model, sometimes to recover from a major failure, and sometimes just to be whatever faddish investors want them to be.

Today, for instance, Quark Pharmaceuticals — now a Fremont, Calif., developer of drugs that work via a new mechanism known as “RNA interference” — said in an SEC filing that it now hopes to raise as much as $80.5 million in an IPO. (That SEC document is here).

Quark, which is backed by Larry Ellison’s Tako Ventures, describes itself in the filing as a “clinical stage biopharmaceutical company” with an “initial focus” on drugs that work via RNA interference, or RNAi — a Nobel Prize-winning technique for “silencing” particular genes using carefully engineered snippets of RNA. It has two RNAi-based drugs already in human testing — RTP-801i, for a form of blindness called age-related macular degeneration, and AKIi-5, for kidney failure. RNAi drug development is getting a lot of big-money attention these days, as witnessed by Merck’s $1.1 billion acquisition of the RNAi biotech Sirna Therapeutics last year. (Pfizer has signed on to co-develop Quark’s RTP-801i.)

Quark, however, is a relative newcomer to RNAi, although that fact isn’t exactly clear in its filing. It acquired both of its leading drug candidates from Atugen AG, now a unit of Silence Therapeutics (which, confusingly enough, was formerly known as SR Pharma). The name Quark Pharmaceuticals is also new; until this month, the company was known as Quark Biotech, and before that as Expression Systems.

In other words, Quark’s conversion to RNA interference, or RNAi, looks like a classic chameleon move, made possible by its ability to quickly in-license drug candidates based on a hot new technology, thus allowing it to tout itself to investors as a cutting-edge biotech.

Based on what I know at the moment, I can’t say one way or another if Quark’s RNAi work is truly cutting-edge. I do, however, know that the company has an interesting and unusual pedigree that for most of its history had nothing to do with RNA interference.

Although founded in California in 1994 as Expression Systems — the name presumably refers to gene output, or “expression” — the company has long maintained its principal research facilities in Israel. Over much of its history, in fact, the company has frequently been classified more as an Israeli biotech than an American one. Consider, for instance, its listing on the Israeli Life Science Industry Web page. In addition, Quark’s SEC filing lists among its risk factors the fact that “[w]e have significant operations in Israel, which may be adversely affected by acts of terrorism or major hostilities.”

In 1997, the company renamed itself Quark Biotech and began to focus on genome-based drug development — that is, on identifying genes linked to specific diseases and then finding drugs that turn off those genes or otherwise mitigate their effects. In general, this sort of strategy hasn’t worked out so well, both because most of these disease-gene links have been faulty and because most genes have only a limited impact on disease.

Like other companies at the time — most notably Lexicon Genetics and Deltagen — Quark apparently thought it could identify these genomic drug targets by breeding mice in which important genes had been “knocked out.” A multi-year genomics research collaboration with the Cleveland Clinic Foundation led it to take the unusual step of moving its headquarters to Cleveland in 2001. Just two years later, however, when the company announced that it had created a mouse that totally lacked cholesterol — a discovery momentous enough for Science to publish it — the Cleveland Clinic wasn’t among its collaborators, and the company’s headquarters had moved again to Fremont, Calif.

Quark’s involvement with RNAi seems to date only back to 2004, when it licensed RNAi technology from the Silence Therapeutics unit Atugen. That collaboration pertained specifically to a gene called RTP-801 that appeared to play a major role in inflammation. The next year, the two companies expanded their agreement to cover RNAi drugs for five other undisclosed genes. Silence Therapeutics revealed that AKIi-5 was one of them in this press release:

SR Pharma expects to begin the clinical development of its proprietary AtuRNAi therapeutic molecules for systemic cancer indications in 2007. SR Pharma has sublicensed the AtuRNAi compound RTP-801i to Pfizer through its collaboration partner Quark Biotech Inc. for the treatment of Age-related Macular Degeneration (AMD) and a number of other indications. This compound entered the clinic in early 2007. In addition SR Pharma has licensed a further AtuRNAi compound, AKIi-5, to Quark Biotech Inc. This compound has been granted an IND for acute kidney injury and is expected to enter the clinic in 2007.

That’s just part of Quark’s interesting history. It has long worked with several Japanese pharmaceutical companies, which explains why its second and third-largest shareholders are two Japanese investment partnerships, the Trans-Science Global Bio-Technology Fund and Asuka DBJ Investment LPS. (Ellison’s Tako Ventures is the largest investor, with 42.3% of the company.)

Quark hopes to price up to 5.75 million shares between $12 and $14 apiece, which would make Tako’s 5.6 million shares worth as much as $78.4 million. Overall, the company could have a market capitalization of as much as $256 million following the offering.

Biotech chameleons like Quark are fascinating because of the ease with with they shed their skin and morph into something new, often without ever looking back. Some, of course, do so for perfectly legitimate business reasons, while others seem most eager to catch new trends and to ride them as hard as they can.

It’s often hard to tell which is which, though, which is one reason I hope to occasionally spend some time looking at particular biotech chameleons to see how far their public image diverges from their actual history. After all, there’s nothing wrong with making a fresh start — at least so long as potential investors know exactly what they’re getting into.

UPDATE: Turns out Silence wasn’t such an authoritative source on the details of its partnership with Quark. I revisited the subject and laid out the company’s obfuscatory language and how it Quark’s actual role in developing its RNAi drugs in this post.