VentureBeat

(NOTE: Apologies — especially to RSS readers — if you’ve seen this post before, but an apparent server error ate it late yesterday and I was only able to recover it this morning. Enjoy, or ignore, as seems most fit.)

Featured stories:

• Stem-cell science, money and death
• Gene tests: Out of control?
• Clinical-trial data wants to be free
• Drug, biotech industries face uncertainty
• Short takes

Clones, regrown hearts, money and death — Last week, the San Diego biotech http://www.stemagen.com/ announced that it had cloned human embryos by transplanting the nuclei of adult skin cells into oocytes, or human egg cells. The cloned embryos reportedly into blastocysts, the five-day-old clumps of roughly 100 cells from which researchers can, if all goes well, extract stem cells. (The research isn’t aimed at creating cloned babies.) Although not of immediate practical use, the ability to use embryo cloning to make genetically matched stem cells would be a big step forward for the field, since the technique could be used to produce stem-cell lines specifically for the study of particular genetic disease. The Stemagen embryos, however, didn’t actually yield any stem cells, leaving some researchers skeptical that the company had actually achieved what it claimed. The NYT has more.

Another team of researchers at the University of Minnesota recently created a beating rat heart in the laboratory, although the work didn’t grow the heart from scratch and didn’t specifically use stem cells. The team used detergents to clear living cells from a dead rat heart, leaving the outer structure and valves as a scaffold that cold be “repopulated” by injected cells from newborn rats, which eventually developed into working heart muscle that pumped blood and conducted electrical signals. Eventually it may be possible to do the same with hearts taken from human cadavers and stem cells extracted from a patient’s bone marrow, potentially yielding a newly transplantable heart.

Meanwhile, stem-cell pioneer James Thomson, a University of Wisconsin biologist, argued for a major boost in state stem-cell funding, saying that Wisconsin needs to hand out $50 million a year in order to compete with California’s $3 billion program. And in sad news, a 9-year-old girl with a fatal genetic condition called Batten disease died after being treated in a clinical trial with neural stem cells intended to correct a brain-enzyme deficiency in Batten patients. Preliminary results suggested the death was a result of her disease and not the stem-cell therapy, developed by the Palo Alto, Calif., biotech Stemcells.

Test, genes and politics — A federal advisory panel raised concerns over the proliferation of genetic tests, complaining of misleading or false marketing as well as the possibility that patients could be harmed by basing medical decisions on inaccurate tests. Unsurprisingly, many tests fall through loopholes in federal regulation, partly as the result of divided responsibilities between Medicare and the FDA. No agency even knows how many such tests are currently on the market. New tests — or the prospect of them — are popping up all the time, such as a recent finding that five specific DNA variations may help predict a man’s risk of prostate cancer, a test that, predictably enough, will be commercialized within the next few months by a startup called Proactive Genomics. The panel doesn’t appear to have addressed personal-genomics services like 23andMe or deCODEme, but chances seem good that Washington will want to weigh in sooner or later.

Making the most of clinical data — Reported results of drug trials and other medical interventions tend to be heavily skewed toward “positive” trials that appear to demonstrate the effectiveness of whatever therapy is being studied. Efforts to encourage reporting of “negative” results — that is, those that show no effect, which can also yield useful information — have faced an uphill battle. Over at Fierce Biotech, the founder of Raven Biotechnologies — a company best known around here for its attempt to swallow the corpse of VaxGen — cites her personal experience to argue that neither drug companies nor scientific journals are inclined to publish negative results. “The publishing industry and pharma reinforce each other’s biases” toward positive news, Jennie Mather writes. Meanwhile, in the NYT, Memorial Sloan-Kettering Cancer Center biostatistician Andrew Vickers bemoans the culture of secrecy that discourages even academic cancer researchers from sharing their data from clinical trial more openly. Allowing others access to the data could not only improve clinical trial designs, but potentially point the way to new diagnostic tests and treatments.

Pharma, biotech under fire — Politicians are turning up the heat on the drug industry, the WSJ notes, listing efforts to allow reimportation of cheap Canadian drugs, force Medicare to negotiate drug-price discounts, permit generic forms of biotech drugs and enact healthcare reform as among the major threats to Big Pharma and Big Biotech. In California, a recent report from the California Healthcare Institute raises similar concerns about the biotech industry, arguing that increased government oversight could crimp drug development. New drug approvals are already at a 24 year low, the In Vivo blog noted recently, although research productivity at drug companies seems to be the major culprit.

Short takes:

• Pfizer last year won approval for the first drug to treat fibromyalgia, a chronic pain condition whose existence still isn’t well accepted by doctors — including the one who first defined it in 1990, but has since changed his mind. (NYT)
• California’s plan to become the first state to require electronic tracking of prescription drugs — a measure designed to thwart drug counterfeiting — may be delayed another two years, to 2011, as the drug industry upgrades its computer systems. (SF Chronicle)
• Northstar Neuroscience brain-stimulation device fails in stroke-rehabilitation trial, highlighting the hit-or-miss efforts to treat brain and nerve disorders with neuromodulation. (NYT)

TODAY’S HEADLINES:

• Autonomic Technologies raises $3M for neurostimulators (PE Hub)
• Canopy Financial raises $15M for outsourced healthcare management (release)
• Cancer-drug developer AmpliMed draws $5M (PE Hub)
• Caprotec Bioanalytics receives €6M for protein-analysis tech (release)
• ProtAffin draws additional €1.4M for anti-inflammatory drugs (release)
• Toxicology-services firm Bridge Labs takes in $18M (release)
• Dental-compound maker NovaMin takes in $2.2M (TechJournal South)
• Aushon Bio takes in $4M for microarrays (PE Hub)
• Treatment Online receives $750K for Web behavioral healthcare (PDF release)
• IPO the Hospitalist aims to raise $60M with IPO for inpatient care (Edgar)
• Clinical diagnostics maker Laboratory Partners pulls in $16M (VentureWire, sub req’d)
• SynDevRx targets $11M for cancer drugs (VW)

Autonomic Technologies raises $3M for neurostimulators — Menlo Park, Calif.-based Autonomic Technologies (no Web site), a medical device company developing some sort of neurostimulator, has raised $3 million of an intended $5 million first round of funding, PE Hub reports, citing a regulatory filing. Kleiner Perkins Caufield & Byers provided the cash, while the Cleveland Clinic is also listed as a shareholder.

The company appears to be pretty well stealthed, as so far I haven’t managed to turn up any telltale traces outside of this single report. Among other things, the Kleiner site, unsurprisingly, doesn’t even list Autonomic in its portfolio. One potential clue lies in the company’s name, as the phrase “autonomic technology” generally refers to software or a network that manages and corrects itself (IBM has been a big proponent of the idea, although it’s hard to tell from here if it’s classic IT hype or something real). So presumably the startup is pursuing neurostimulation that engages a “self-healing” response of some sort in the brain or central nervous system.

If anyone knows anything about what Autonomic is up to, feel free to give us a shout in comments or by email.

Cancer-drug developer AmpliMed draws $5M — Amplimed, a Tuscon, Ariz., biotech focused on cancer drugs, has raised $5 million of a planned $22 million third funding round, PE Hub reports, citing a regulatory filing. Investors included BioMed Venture Partners, Biotech Insight Ventures, Solstice Capital and Valley Ventures.

AmpliMed is working on a new type of chemotherapy drug — technically, a cytotoxic chemotherapy that targets all rapidly dividing cells in the body — that it claims may be substantially less toxic that most such drugs. The company’s lead candidate, which it calls Amplimexon, inhibits a compound called glutathione that appears to protect cancer cells from damage by “free oxygen” radicals, or single-atom oxygen ions that typically wreak havoc within cells. AmpliMed suggests that non-cancerous cells that also divide rapidly, such as those lining the gut, appear to weather the suppression of glutathione more hardily than tumor cells, which theoretically should accumulate loads of oxygen radicals and then self-destruct.

Amplimexon is currently in mid-stage human tests against pancreatic and skin cancer. The company also has two other cancer compounds in earlier stages of development.

Canopy Financial raises $15M for outsourced healthcare management — Canopy Financial, a San Francisco developer of healthcare information systems, raised $15 million in a first funding round. Granite Global Ventures provided the funding.

Canopy sells systems for managing “consumer-oriented” health plans such as health savings accounts or flexible spending accounts. These are plans that purport to reduce healthcare costs by making individuals “responsible” for their medical spending, in effect by requiring them to pay for doctor and hospital visits out of a pre-established and often tax-exempt account to which employers may or may not contribute.

Clinical diagnostics maker Laboratory Partners pulls in $16M — Palo Alto, Calif.-based Laboratory Partners (no Web site), a provider of diagnostic tests to hospitals and other healthcare providers, raised $16 million in a fourth funding round, VentureWire reports (subscription required). The company said the funding will allow it to pursue acquisitions in the field.

Investors in the round included Primus Capital Funds (which put up $10 million), Oxford Bioscience Partners, Chrysalis Ventures and Fort Washington Capital Partners Group. Lab Partners has previously raised $26 million in venture funding, VentureWire reports.

SynDevRx targets $11M for cancer drugs — SynDevRx, a Cambridge, Mass.-based biotech developing new cancer drugs, is looking to raise $11 million in a first funding round, VentureWire reports. The company is pursuing an anti-angiogenic compound — that is, a drug candidate intended to block the growth of new blood vessels in tumors — originally developed in the lab of Children’s Hospital researcher Judah Folkman.

SynDevRx, founded in 2007, says this family of compounds may also be useful in other disease, including age-related macular degeneration, endometriosis and fluid retention (edema). The funding will allow the company to move its lead candidate, Caplostatin, into clinical trials. The compound caused side effects in previous clinical trials, but has since been re-engineered in hopes of mitigating that toxicity.

(UPDATED: See below.)

(NOTE: This item was originally published as part of today’s life-sciences briefing.)

EnteroMedics, a St. Paul, Minn., device maker working on a neuromodulation implant for treating obesity, slashed its expected IPO pricing by half, lowering it to a range of $8 to $9 instead of its earlier estimate of $14 to $16. The company’s latest SEC fliing is here; under the new terms, EnteroMedics can raise at most $51.8 million, down from the $92 million it had previously planned on.

Needless to say, this sort of thing is never a good sign, particularly for a company whose potentially transformative technology still lacks convincing evidence that it really works. The EnteroMedics device, which it calls Maestro, is still in late-stage clinical trials in Australia, Mexico, Norway and Switzerland, but isn’t terribly far along yet. The company says it has so far implanted the Maestro device in 76 patients, of which it has followed 11 for a full year. Its “pivotal” late stage trial, however, only began in the third quarter and will involve 220 patients, all of whom will have the device implanted, although only 145 or so will have it turned on. In fact, EnteroMedics wants to expand the trial to 300 patients.

When EnteroMedics initially filed for its IPO, it wasn’t very clear about exactly how the VBLOC “neuroblocking” technology in the Maestro is supposed to work. In subsequent months it has launched a Web site and added diagrams (see, for instance, the thumbnail image at left; click it for a larger version) and other information to its filings in order to explain the technique in more detail.

EnteroMedics now describes Maestro as a device that uses short electrical pulses to interfere with signals along the vagus nerve, in turn — and in theory — limiting stomach expansion, reducing the intensity and frequence of stomach contractions and inducing feelings of fullness. The device involves an implanted, radio-controlled “neuroregulator” whose electrodes extend to the vagus nerve near the junction of the stomach and the esophagus. A separate external unit controls the pulse frequency and wirelessly recharges the neuroregulator.

Given the severity of the obesity “epidemic” and the desperation of many overweight people, you’d think investors would be falling all over themselves to invest in a technology like VBLOC, which — again, in theory — offers the advantages of gastric-bypass surgery with a much less invasive procedure. The obvious drawback, of course, is the possibility that the device doesn’t work or, worse, that it might actually harm patients. EnteroMedics says it has observed seven adverse events to date, but adds that all were resolved without surgery or permanent effects.

Of course, it doesn’t help that the experimental evidence that this sort of technique should work is in relatively short supply. EnteroMedics itself notes that severing the vagus nerve, or vagotomy, used to be a common treatment for ulcers, after which many patients temporarily absorbed fewer calories from fat, lost weight and had decreased appetite. VBLOC attempts to mimic these effects of vagotomy without blocking all signals, yet EnteroMedics cites no studies to suggest that the technique works, and doesn’t appear to have published any of its research to date in patient studies.

EnteroMedics, of course, isn’t the only startup to see investors turn up their noses during a roadshow. About a month ago, the adult stem-cell company Bioheart also halved its IPO terms, and hasn’t yet managed to get its offering off the ground. (See our recent coverage here and here.) Like EnteroMedics, Bioheart is pushing ahead with a risky, largely unproven technology that’s only tenuously grounded in hard scientific findings. Perhaps it’s no wonder that investors are starting to get cold feet in both cases now that they’re finally getting a better look at these companies’ underpinnings. Or maybe it’s just one more sign — as if we needed it — that risk of any sort, particularly given the subprime-mortgage meltdown, is increasingly out of favor.

UPDATE: EnteroMedics went public later in the day at a price of $8 a share, limiting the company’s maximum IPO take to $46 million. That’s better than a poke in the eye with a sharp stick, but generally speaking, still not so hot.

Featured companies: Allozyne, Arteriocyte Medical Systems, Arthrosurface, Bay City Capital, EnteroMedics, OncoVista, Novotech, Power Medical Interventions, Reliant Technologies

UPDATED: Expanded items on Allozyne, Reliant Tech, Power Medical and Bay City Capital.
UPDATE REDUX: Added item on EnteroMedics IPO.

Seattle’s Allozyne draws $30M for new interferon — Allozyne, a Seattle biotech focused on tweaking existing protein-based drugs to improve their properties, raised $30 million in a second round of financing. Investors included MPM Capital, OVP Venture Partners, Amgen Ventures, ARCH Venture Partners and Alexandria Real Estate Equities.

Allozyne’s twist on improving protein-based drugs — i.e., most biotech drugs — is to substitute “non-natural” amino acids into the proteins themselves. (Recall that a protein is essentially just a long chain of amino acids.) By swapping out natural amino acids with synthetic versions at key points in the protein, Allozyne hopes to improve the effectiveness and safety of protein drugs. The company’s description of it’s approach is here.

The company’s first drug candidate is a modified version of interferon beta, which is currently used to treat multiple sclerosis. The funding will support the first early-stage human trials of the drug, and will also “accelerate” development of a second candidate.

In addition, Allozyne will prepare to exit Accelerator, a Seattle biotech incubator connected with the Institute for Systems Biology. We previously wrote about Accelerator here.

Med-device maker Reliant Tech sets IPO terms, aims for $86M take — Not to be confused with Reliant Pharmaceuticals, which set its IPO terms yesterday, Mountain View, Calif.-based Reliant Technologies set its price range today and now hopes to raise up to $86.5 million in an offering of as many as 5.4 million shares. Reliant hopes to price those shares between $14 and $16 apiece.

Reliant makes medical lasers for “skin rejuvenation” treatments. Our previous coverage of the company is here.

Power Medical IPO falls short, raises up to $49M for robotic-surgery systems — Power Medical Interventions, a Langhorne, Pa., maker of computer- and power-assisted surgery tools, fell short of its IPO hopes and now stands to raise no more than $49 million from its offering. Its latest SEC filing is here.

The company priced its shares at $11 apiece, well under the $12 to $14 range it previously established. (Our coverage is here.) Power Medical could sell as many as 4.4 million shares in the offering.

The result is a sharp disappointment for Power Medical, which had originally hoped to raise as much as $100 million in its offering. The company’s lackluster start contrasts with the soaring welcome spinal-implant maker TranS1 received earlier this month (our coverage here). If it’s any consolation, though, Power Medical shares staged an early recovery, rising 60 cents, or 5.5 percent, to $11.60 in early trading today.

Bay City Capital closes $500M life-science fund — The San Francisco-based VC firm Bay City Capital, which focuses on life-science investments, closed a $500 million fifth fund, VentureWire reports (subscription required). The fund is significantly larger than its predecessor, which closed at $350 million in 2004.

Bay City intends to back 15 to 20 biotech, medical-device and diagnostics companies with the fund, which suggests it will tend to favor later-stage deals — now a long-standing VC trend. The firm told VentureWire that it will invest at all stages, including “seed-stage bets on start-ups launched in-house and structured investments in publicly traded companies.”

EnteroMedics sets IPO terms, looks for $92M to support obesity-control implants — St. Paul, Minn.-based EnteroMedics, a device company developing a neuromodulation implant designed to regulate appetite, set its IPO terms and now aims to offer up to 5.75 million shares at a price of $14 to $16 apiece. The offering could value the company at as much as $261 million while raising up to $92 million.

EnteroMedics is one of several companies angling to introduce new obesity treatments that don’t rely on drugs or invasive surgery. Although its technology is still being tested to assess its effectiveness, EnteroMedics has launched a spiffy new Web site with lots of pictures and animations to illustrate how it believes its implant will work. For our previous coverage of the company, see here and here.

OTHER HEADLINES OF NOTE:

• Arteriocyte Medical Systems spins out, gets $10M for med devices(release)
• Arthrosurface raising $5M for knee implants (VW)
• Contract researcher Novotech raises $8M for expansion(release)
• OncoVista goes public via reverse merger (release)

Innovative Metabolics, a Boston developer of neuromodulation systems for “chronic disease,” raised $5.5 million in a first funding round, VentureWire reports (subscription required). The round was led by Morgenthaler Ventures, which was joined by Foundation Medical Partners.

Although the company apparently still wants to keep a low profile, it’s not too hard to make an educated guess at what it might be up to. In January, Innovative Metabolics paid $500,000 and an unspecified number of preferred shares to Critical Therapeutics to license technology for stimulating the vagus nerve.

From the Critical Therapeutics press release:

Innovative Metabolics is a privately held company founded by two of Critical Therapeutics’ co-founders, Kevin J. Tracey, M.D. and H. Shaw Warren, M.D. In 2002, Dr. Tracey and a team of researchers at The Feinstein Institute for Medical Research (formerly the North Shore-Long Island Jewish Research Institute) discovered a pathway for the anti-inflammatory signal between the brain and major organs such as the heart, stomach, liver and small intestine. As part of this discovery, the Feinstein Institute secured intellectual property directed to both therapeutic and device approaches of stimulating this anti-inflammatory pathway. The discovery of this pathway was published in the December 2002 issue of Nature. Critical Therapeutics licensed patent rights related to the modulation of this pathway by pharmacologic agents and vagal nerve stimulation from the Feinstein Institute in 2003.

In addition, there’s this recent abstract from a paper Kevin Tracey published earlier this year in the Journal of Clinical Investigation:

Cytokine production by the immune system contributes importantly to both health and disease. The nervous system, via an inflammatory reflex of the vagus nerve, can inhibit cytokine release and thereby prevent tissue injury and death. The efferent neural signaling pathway is termed the cholinergic antiinflammatory pathway. Cholinergic agonists inhibit cytokine synthesis and protect against cytokine-mediated diseases. Stimulation of the vagus nerve prevents the damaging effects of cytokine release in experimental sepsis, endotoxemia, ischemia/reperfusion injury, hemorrhagic shock, arthritis, and other inflammatory syndromes. Herein is a review of this physiological, functional anatomical mechanism for neurological regulation of cytokine-dependent disease that begins to define an immunological homunculus.

Translated, this excerpt suggests that Tracey — presumably, along with the company he co-founded — believes he’s discovered a way to tamp down inflammatory disease of the organs by stimulating the vagus nerve in a particular way. Of course, it’s not at all clear which conditions Innovative Metabolics is hoping to treat — if I had to guess at this point, I’d probably pick something that’s not even among the conditions listed in that abstract, such as inflammatory bowel disease.

In any case, all this is further proof that neuromodulation is a pretty hot area. For instance, I wrote about another company planning to use vagus-nerve interference to curb obesity here. Others are at work on related devices that could treat epilepsy, sleep apnea or hypertension.

EnteroMedics, a St. Paul, Minn., developer of obesity-treatment implants, filed to raise up to $86.25 million in an IPO. Its S-1 filing with the SEC is here.

The company is developing a neuromodulation implant called VBLOC that is designed to intermittently disrupt signals sent along the vagus nerve, which regulates many functions of the stomach, intestines and pancreas. Ideally, the implanted device will limit stomach expansion, reduce the frequency and strength of stomach contractions, and induce a sense of fullness in patients. The company envisions the device as a safer and less invasive obesity treatment than drug therapy or interventions such as bariatric, or stomach-reduction, surgery.

EnteroMedics plans to test VBLOC in a large 220-patient trial starting in the third quarter. This trial will actually be placebo controlled, which in this case means that roughly one-third of the patients will have the device implanted, but never turned on. That sort of trial design should produce more reliable data than most device trials, which often don’t employ placebo comparisons. If all goes well, the company believes it may bring VBLOC to the market in 2010.

The company has so far raised approximately $64 million in venture funding, according to VentureWire (subscription required). Major shareholders include MPM Capital, Bay City Capital, Aberdare Ventures, InterWest Partners and Onset Ventures.

Apnex Medical, a Minneapolis maker of implants for the treatment of obstructive sleep apnea, raised $16.1 million in a first round of funding. Participants included Domain Associates, New Enterprise Associates, Polaris Ventures Partners and Apnex Chairman Michael Berman.

VentureWire reports that Apnex is using “neurostimulation” technology, presumably involving timed electrical pulses to open upper-throat muscles that can close during sleep and choke off the airway, interrupting breathing for a period of up to 10 seconds — an episode known as an apnea. A number of neuromodulation companies have recently received funding, including NeuroVista, a Seattle epilepsy-treatment company, and CVRx, another Minneapolis firm with a hypertension-regulation device.

The company’s announcement is here.

(CORRECTED: See below.)

Seattle-based NeuroVista, a developer of devices for the treatment of epilepsy, raised $33.8 million in a second-round funding and left behind its former name, BioNeuronics.

The company, founded in 2002 by whiz kid Daniel DiLorenzo, has been quiet about its technology and commercial direction. In April, however, DiLorenzo received a patent for a “neurological control system” using “closed-loop intracranial stimulation” for the “optimal control of neurological disease.” In other words, given NeuroVista’s public interest in epilepsy, it sounds very much like it’s working on implantable neuromodulation devices that could monitor and perhaps counteract the early signs of an oncoming seizure. (Hat tips: VentureWire and Neurotech Business Report).

VentureWire also reports that one other venture-backed company, NeuroPace, and two established device makers, Medtronic and Houston-based Cyberonics, may also be researching epilepsy devices.

Here’s NeuroVista’s vaguely worded announcement. The round was led by Advanced Technology Partners and Delphi Ventures, who were joined by Three Arch Partners, Sprout Group and Foundation Medical Partners.

CORRECTION: An earlier version of this item stated that Dan DiLorenzo “co-founded” NeuroVista. He’s informed us that he was the sole founder, and I’ve corrected the item to reflect that.

CVRx, a Minneapolis-based developer of an implantable device for the control of high blood pressure, raised $65 million in a fourth round of funding that will support a “pivotal” clinical trial of the device. The round was led by Johnson & Johnson Development, and also included existing investors New Enterprise Associates, Thomas Weisel Healthcare Venture Partners, InterWest Partners, ABS Ventures, Frazier Healthcare Ventures and SightLine Partners. CVRx has so far raised a total of $125 million.

The company’s Rheos Baroreflex device is designed to stimulate the body’s own blood-pressure regulation system — known as the baroreflex — to control hypertension. It consists of an implantable pulse generator and two lead wires that are attached to the left and right carotid arteries. Using timed electrical stimulation, the device triggers the baroreflex, which in turn signals the brain to lower blood pressure throughout the body. This sort of “neuromodulation” approach is an increasingly hot area in medical-device development, although it remains largely unproven.