VentureBeat

TODAY’S HEADLINES:

• Breathe Tech raises $15M for respiratory disease (release)
• Protein-drug maker Pieris takes in €25M (release)
• Apthera takes in $2.1M toward cancer vaccine (VentureWire)

Breathe Tech raises $15M for respiratory disease – Breathe Technologies, a Fremont, Calif., medical device maker, raised $15 million in a second round of funding. Investors included Kleiner Perkins Caufield & Byers, Synergy Partners International, Delphi Ventures and Life Science Angels.

Breathe is developing “compact” and “lightweight” respiratory systems for the hospital and home markets, and estimates that annual sales of the devices its equipment could enhance or replace amount to $2 billion. The Breathe ventilators could be used by patients with chronic obstructive pulmonary disease, cystic fibrosis, and other lung disorders.

Protein-drug maker Pieris takes in €25M – Pieris, a German biotech pursuing a new form of protein-based drug, raised €25 million ($38 million) in a second funding round. Investors included OrbiMed Advisors, Novo Nordisk, Global Life Science Ventures, Gilde Healthcare Partners and Forbion Capital Partners.

Pieris is the latest biotech to think it can improve on monoclonal antibodies as drug candidates by developing its own engineered protein structures. The startup calls its protein structures Anticalins — they’re derived from a class of human proteins called lipocalins — and says they’re smaller and simpler than monoclonals with similar power to selectively bind to particular molecular targets.

Pieris joins a number of other companies pursuing similar strategies, including Adnexus Therapeutics, which sold itself to Bristol-Myers Squibb for $430 million, and Molecular Partners, a Swiss biotech working on modular proteins it calls DARPins. Although these are all interesting ideas, none have yet proven themselves, and all have to address a potentially significant hurdle — the fact that none of these engineered proteins are likely to engage the immune system’s disease-fighting elements the way monoclonal antibodies often do.

Apthera takes in $2.1M toward cancer vaccine – Apthera, a Scottsdale, Ariz., biotech working on therapeutic cancer vaccines, raised $2.1 million of an expected $3.9 million second funding round, VentureWire reports. Investors included the University of Texas M.D. Anderson Cancer Center, Blackmont Capital, Land Ventures and individuals.

Apthera is developing a vaccine intended to stimulate an immune response against breast-cancer cells. The startup plans to start a late-stage, phase III trial of the vaccine in the fourth quarter of this year, and hopes to raise another $10 million later this year to finance the test.

Redwood City, Calif.-based Satoris, a biotech developing a blood test for Alzheimer’s disease, raised $5 million in a second funding round, VentureWire reports. The deal values Satoris at $13.8 million after the financings. The company had previously raised $1 million from individuals, and said it will seek another $15 million this year.

Satoris plans to use the funding to begin commercialization of its protein-based blood test for Alzheimer’s disease, which the company expects to make available in the first half of this year. It looks like Satoris initially plans to market the test as a tool for clinical research, not as a general-purpose diagnostic, as the VentureWire story says the company plans to target pharma/biotech companies and Alzheimer’s research groups.

That’s definitely a good idea. The test itself certainly has the potential to break some important ground — Alzheimer’s can’t currently be diagnosed except by neurobehavioral testing of already-sick patients or via a post-mortem autopsy, whereas the Satoris test appears to detect the disease at a much earlier stage. But its error rates remain quite high, despite what the company touts as a 90 percent accuracy rate. I explained why in this post, which unpacked the numbers and showed why even that level of accuracy would produce a tremendous amount of life-altering misinformation if used to screen the general public.

The VentureWire story doesn’t say so, but to make the test commercially available that quickly almost certainly means Satoris will offer it as a “home brew” diagnostic, which allows it to sidestep the FDA approval process. Home-brew tests are performed by companies themselves in state-regulated laboratories — doctors or hospitals send patient samples into the lab, which then sends back the results. These sorts of diagnostics are permitted under a federal law known as the Clinical Laboatory Improvement Amendments, or CLIA. Traditional diagnostics, which usually involve the marketing of test kits and associated equipment to reference laboratories, hospitals or individual physicians, require explicit FDA approval.

Satoris says the funds will allow it to devote additional resources to further development of the test, and expects its cash cushion to last “well into next year.” CEO Cris McReynolds told VentureWire that he expects to begin fundraising again at the end of the year. VentureWire didn’t name investors in the current round, but previously reported that they would include Life Science Angels and Brain Trust Accelerator Fund.

Satoris, a Redwood City, Calif., biotech developing a diagnostic test for Alzheimer’s disease, is close to raising $5 million in a second funding round, VentureWire reports (subscription required). The funds will allow the company to make its test available to outside researchers.

Satoris made a big splash in mid-October, when researchers identified 18 proteins they said could be used to identify people with Alzheimer’s disease via a simple blood test. What’s more, the test also appeared to detect incipient Alzheimer’s in people with mild cognitive impairment, meaning that it could theoretically be used to predict who is most likely to eventually develop the often devastating disease.

An Alzheimer’s blood test would be a major development, since there’s currently no good physical way of diagnosing, much less predicting, the condition. The disease is typically identified — often imprecisely — via cognitive testing. In fact, the only certain way to diagnose Alzheimer’s is via brain autopsy, which isn’t a particularly attractive option to most people.

Satoris says successful development of its test should help accelerate the development of new Alzheimer’s treatments. Which would be great, because at the moment, early diagnosis of the degenerative condition wouldn’t actually do anyone much good, even though the disease can cause brain damage well in advance of actual symptoms. Current treatments for the disease do little more than delay the onset of memory loss and other cognitive symptoms.

What’s more, the Satoris test may still be of limited usefulness simply because it is likely to produce huge numbers of mistaken diagnoses, at least in its current form. In the Nature Medicine paper that heralded the test’s discovery, the research team found that the 18 proteins correctly identified 90 percent of the blood samples from Alzheimer’s patients and 88 percent of the non-Alzheimer’s samples.

That sounds pretty good until you imagine trying to use that test as a widespread screening tool. An estimated five percent of Americans aged 65 to 74 have Alzheimer’s, according to this NIH fact sheet. Now imagine testing all of the roughly 20 million people in that age group with the Satoris test. It will correctly detect Alzheimer’s in 900,000 of the one million people that actually have it, which is great. At the same time, though, it will incorrectly diagnose more than twice as many people — 2.3 million — who don’t actually have the disease. That doesn’t even get into its possible predictive uses, where the potential errors — and their consequences — are even worse. (Hat tip to Derek Lowe, who recently crunched similar numbers over at In the Pipeline.)

All of which goes to underscore why diagnostic tests are actually a lot trickier than people frequently realize. While many of us would be more than willing to undergo surgery or take a drug that had a 90 percent chance of curing us, that sort of success rate is pathetically low in the diagnostic area, since false-positive and false-negative results can have such outsized consequences. No doubt insurers will be asking some hard questions if Satoris tries to bring the test to market without refining it a great deal further.

Which it looks like it intends to do. Satoris previously raised $1 million from individuals in 2004, and will be looking for another $15 million next year to launch a “home brew” version of the test — a tactic in which Satoris would test blood samples mailed to it by doctors, potentially allowing it to sidestep FDA regulation. The company’s current investors, however, appear unconcerned; Life Science Angels and Brain Trust Accelerator Fund are expected to participate in the current round, according to VentureWire.

Featured companies: BioVex, FullTurn Media, Humanetics, N Spine, Novitas Capital, Reliant Technologies, Symbios, Vaxart, Virtual Radiologic, Winston Laboratories, Zosano Pharma

EXPANDING ITEMS: Stay tuned.

Vaxart receives $3.3M for oral vaccines — San Francisco’s Vaxart, a biotech developing novel adenovirus-based vaccines, raised $2.7 million in a first funding round. Vaxart also received a $600,000 small-business innovation grant from the NIH to assist in developing the company’s vaccine platform.

Vaxart’s vaccine technology involves a non-replicating adenovirus engineered to produce a particular bacterial or viral protein, or antigen, which stimulates an immune response. The vaccine, which consists of the adenovirus and an “adjuvant” designed to enhance the immune response, is packaged in a capsule that can be taken by mouth.

Vaccines that depend on viral “vectors” like adenovirus are promising because they can produce immunity without the need to rely on attenuated or killed disease virus. When injected, however, such vaccines frequently stimulate an immune reaction to the adenovirus itself, which can negate the effect of the vaccine or subsequent booster shots. Vaxart believes that oral delivery can sidestep that problem.

The company’s early candidates include vaccines against avian flu, seasonal flu, and biowarfare agents. Investors in the round included Quantum Technology Partners, Life Science Angels, Bay Partners and Sand Hill Angels.

Reliant Tech postpones IPO — Reliant Technologies, the Mountain View, Calif., maker of laser skin treatments, postponed its IPO indefinitely, PE Hub reports. The medical-device maker had previously filed to raise up to $86.5 million in an offer of 5.4 million shares.

Reliant Tech’s postponement comes just a day after EnteroMedics, a maker of obesity-control devices, almost halved its IPO pricing. Until recently, device makers had lived a charmed life where IPOs were concerned, but it’s beginning to look as though market turmoil may be taking its toll on this sector as well. Our previous coverage of the company is here and here.

On the other hand, at least IPO investors won’t get the company confused with Reliant Pharmaceuticals anymore.

N Spine acquired by Synthes for $30M — N Spine, a San Diego maker of spinal devices, was acquired by Switzerland’s Synthes for $30 million. The release is here. N Spine shareholders also stand to receive an additional $45 million in milestone payments if development of the company’s products proceeds as planned. Our previous coverage of N Spine’s fundraising is here.

Zosano Pharma raises $45M for needle-free drugs — Fremont, Calif.-based Zosano Pharma, a specialty pharma working on needle-free drug delivery, raised $45 million in the second half of its initial venture funding. The company said it has now raised a total of $90 million. Our previous coverage of the company, which used to be called Macroflux, is here (last item).

Investors included New Enterprise Associates, Nomura Phase4 Ventures, HBM BioVentures and ProQuest Investments. Zosano’s lead candidate is a patch for delivering the drug PTH through the skin to treat osteoporosis.

OTHER HEADLINES OF NOTE:

• Virtual Radiologic prices IPO mid-range, raises up to $78M (IPO Home)
• Cancer-drug maker BioVex closes $35M round (release)
• Humanetics gets $3.8M grant for radiation countermeasures (release)
• Symbios raises almost $2M for pain-drug delivery (VentureWire, sub req’d)
• FullTurn Media launches medical-education videos, seeks $5M (VW)
• PA Early Stage Partners changes name to Novitas Capital (release)
• Specialty pharma Winston Pharma goes public via reverse merger (release)

Featured companies: Akermin, Fluxion Biosciences, iCardiacTechnologies, Wellocities

UPDATED: Expanded items on Fluxion, Akermin, and Wellocities.

Fluxion Bio draws in $6.9M for cell-analysis tools — Fluxion Biosciences, a San Francisco developer of cellular-analysis tools, raised $6.9 million in a second funding round, VentureWire reports (subscription required). Investors included Kodiak Venture Partners, Claremont Creek Ventures and Life Science Angels.

Fluxion takes the idea of running chemical reactions against living cells — a key step in screening and analyzing the activity of drug candidates — to its logical conclusion with a system designed to measure biochemical changes involving, and sometimes within, a single cell. The company’s first microfluidic system is intended to allow researchers to study cells that adhere to surfaces, such as platelets that stick to arterial walls in the formation of plaque, and biofilms, which are drug-resistant sheets excreted by bacteria for protection.

Fluxion is also working on tools for studying electrochemical signaling within cells, which the company hopes to launch next year. The current financing may also make it possible for Fluxion to launch a third instrument that will image individual cells while they float in solution. Existing cell-imaging systems only work when cells are anchored in place.

The company could be profitable as early as 2010, Fluxion executives told VentureWire. It has raised a total of $7.4 million since its founding in 2005.

Bioenzyme-catalyst co. Akermin raises $5M — Akermin, a St. Louis developer of new biocatalytic enzymes, raised $5 million in a second tranche of its first funding round. Investors included Prolog Ventures, OnPoint Technologies, Chrysalix Energy and the St. Louis Arch Angels.

Akermin works with catalytic enzymes — molecules that speed particular chemical reactions — made via biotechnology that could replace precious-metal catalysts now used in fuel cells. The company is developing prototype “biofuel cells” and thin-fuel cells the company refers to as “bio-batteries.” Enzymes should theoretically be cheaper and more environmentally friendly than metal catalysts.

Fuel cells, which could theoretically replace conventional batteries and engines in some applications, are one of those clean technologies that have been on the table for decades in one form or another. However, existing technologies generally aren’t considered cost- or energy-effective when compared to burning fossil fuels or using traditional batteries.

Akermin is part of a wave of startups working on overcoming the difficulties in making fuel cells. Another is Bloom Energy, a secretive Silicon Valley startup that has nevertheless received plenty of press.

Akermin’s technology is a polymer “stabilizer” for these enzymes that’s designed to immobilize them, stabilize them and enhance their operating lifetime. The company has raised a total of just under $8.5 million since its founding.

Online health service Wellocities draws $1M — Toronto’s Wellocities, a diabetes-focused health-information site, raised $1 million in seed funding to create a more general online health service for Canadians. XDL Capital Group provided the funding.

The company didn’t say much more about its online strategy or how it would differ from a host of new, mostly U.S.-based sites that offer everything from detailed health information to physician directories to patient communities. In diabetes, Wellocities provides an online community and ways for diabetics to track their progress in maintaining control of their weight and blood-sugar levels.

OTHER HEADLINES OF NOTE:

• iCardiac raises undisclosed round for electrocardiogram cardiac-risk systems (release)

Coda Genomics, a Laguna Hills, Calif., biotechnology company founded in 2005, concentrates on a thorny but little-realized challenge in biotechnology: Genetic engineering is easy. Protein manufacture is hard.

The biotech industry was founded on the science of recombinant DNA, which is essentially the trick of taking a gene from one species (such as a human) and inserting it into the genome of another (say, the microbe E. coli). Since many genes are essentially templates for producing proteins, this has been a handy technique for making, or “expressing,” vast quantities of natural human proteins such as insulin by harnessing the production facilities already found inside cells.

Inserted genes, however, don’t always behave as expected. Among other things, their protein-production engines can stutter and sometimes stop when incompatible genetic signals encoded in the transplanted genes clash with the host cell’s own internal machinery. Coda aims to ameliorate such problems by smoothing out the effect of one particular set of crossed signals that control when and for how long cells “pause” the protein-producing activity of individual genes.

The company doesn’t go into a lot of detail as to how it accomplishes this, but it lists an impressive array of blue-chip customers including Genentech, Eli Lilly and Invitrogen, all of whom are keenly interested in ways to improve the manufacture of recombinant proteins as drugs or diagnostics. Coda also sells kits that allow customers to “optimize” synthetic genes — that is, stretches of artificially assembled DNA designed to produce particular proteins — to improve their output once inserted into host cells.

Now, however, it appears that Coda has higher ambitions. The company today announced that it raised $7 million in a third funding round, and hinted that the proceeds will allow it to shop for a drug candidate of its own. (The company’s release calls this “obtain[ing] new high value intellectual property positions, including a therapeutic development candidate.”) I doubt it’s going too far out on a limb to suppose that Coda plans to acquire a cast-off or otherwise “failed” protein drug that’s proven difficult to manufacture in order to make it more cost-effectively.

If so, it’s certainly hard to blame them; the lottery mentality of biotech investors — VCs most certainly included — tends to reward companies that pursue their own drugs while punishing those that might otherwise concentrate on offering useful but unexciting services to other drug manufacturers. I’m not convinced this is the most efficient use of the industry’s resources, but given how little economic logic actually underpins biotechnology in the first place, it seems pretty much par for the course.

There’s more detail on Coda’s early history in this March 2006 VentureWire story (subscription required). OVP Venture Partners led the round, joined by Monitor Ventures, Tech Coast Angels, and Life Science Angels.